Rising population to lift Eco-Shop's prospects
PETALING JAYA: Eco-Shop Marketing Bhd (Eco-Shop), en route to a listing on the Main Market of Bursa Malaysia, is valued at an initial public offering (IPO) price of RM1.21 per share, implying a price-earnings ratio (PE) of 39.2 times based on the earnings per share (EPS) for its financial year ended May 31, 2024 (FY24) .
TA Research said it is benchmarking Eco-Shop against large-scale, store-based domestic retailers in Malaysia.
'Accordingly, we derive a target price of RM1.28 per share, based on a target PE of 25.4 times 2026 EPS, in line with local industry peers,' the research house said.
Eco-Shop is the largest chain of affordable household goods in Malaysia, with all products (excluding products at Eco-Plus format stores) priced at RM2.60 for stores in Peninsular Malaysia and RM2.80 for stores in Sabah and Sarawak.
The group currently operates 358 stores across the country.
The IPO entails a public issue of 347 million new shares and an offer for sale of 515.1 million existing shares, at a retail price of RM1.21 per share, or an institutional IPO price, whichever is lower.
Collectively, the share offering represents 15% of the group's enlarged issued share capital, TA Research said.
The research house said the group continued to pursue aggressive yet disciplined expansion, supported by positive same-store sales growth over the past two years and a short payback period of approximately one and a half years for new stores opened in the first half of FY25 (1H25).
Operational efficiency remains strong, with 98.5% of stores profitable at the earnings before interest, taxes, depreciation and amortisation (Ebitda) level and an average store Ebitda margin of 14.5% in 1H25.
Based on an annualised revenue for last year, Eco-Shop commands a dominant 67.8% market share within the segment in Malaysia.
Citing independent market research by Frost & Sullivan, TA Research said the affordable-retail segment in Malaysia has experienced significant sales growth, rising from around RM1mil in 2016 to RM4mil last year, growing at a rate of 19.6%.
Looking ahead, the affordable-retail segment is projected to grow by 14.2% from 2024 to 2029.
'Furthermore, the Malaysian population grew from 31.6 million in mid-2016 to 33.5 million in mid-2024 and is forecast to reach 35.3 million by mid-2029, reflecting a positive economic outlook.
'Additionally, the store-based retail sector in Malaysia has experienced remarkable expansion,' TA Research said.
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