MST Golf misses fairway in Main Market debut, down 13% to open at 70.5 sen

(Left to right): Ganesh Sabaratnam, managing director and chief executive officer (CEO), RHB Investment Bank Bhd; Tan Sri Ong Leong Huat, non-independent non-executive director, RHB Bank Bhd and chairman of RHB Investment Bank Bhd; Heng Kok Wee, chief financial officer, MST Golf Group Bhd; Ng Yap, executive director and group CEO, MST Golf Group Bhd; Low Kok Poh, executive chairman, MST Golf Group Bhd; Benny Ng, executive director, MST Golf Group Bhd; Alice Lee Chia Yee, independent non-executive director, MST Golf Group Bhd; and Poh Ying Loo, independent non-executive director, MST Golf Group Bhd, at the Main Market listing ceremony of MST Golf Group Bhd on Bursa Malaysia on Thursday, July 20, 2023.

KUALA LUMPUR (July 20): MST Golf Group Bhd’s share price opened at 70.5 sen on Thursday (July 20) in its debut on Bursa Malaysia’s Main Market, 12.96% lower than its initial public offering (IPO) price of 81 sen.

At 11.10am, the counter traded higher at 78 sen, after hovering between 69 sen and 79 sen. It continued to trade actively. From an opening volume of 3.46 million, MST Golf saw its trading volume increase to 53.45 million and became the second most active stock on the local bourse.

In a press conference following the listing ceremony, MST Golf executive director and group chief executive officer Ng Yap, in response to the weak opening price, said he understands the current weak market sentiment.

“The whole reason for this IPO is to raise enough funds to accelerate expansion. As for us, we’re just focusing on our fundamentals. We’ve put ourselves in a position to grow our company to the next stage. Obviously, we hope for better (share price performance) but that’s okay,” he said.

At 78 sen, MST Golf has a market capitalization of RM640.28 million.

Based on the enlarged share capital of 820.87 million shares, MST Golf expects to have a market capitalization of RM664.9 million upon listing. It values ​​the company at 27 times its price-earnings ratio (PER) — based on its earnings per share of three sen in the financial year ended December 31, 2022 (FY2022).

The end previously reported that the majority of brokerage firms are positive on the IPO and suggest that investors subscribe for shares, as they (the brokerage firms) believe that MST will command a premium when the stock begins trading on July 20.

However, the valuation is higher than the Bursa Malaysia Consumer Index’s PER of 20.02 times, according to Bloomberg. MST’s closest listed retail competitors, such as InNature Bhd, Padini Holdings Bhd and AEON Co (M) Bhd, trade at lower PERs of 18.97 times, 10.62 times and 14.58 times respectively. Mr DIY Group (M) Bhd has the highest PER at 31.02 times.

TA Securities Research values ​​MST Golf at RM1.20 per share. It said MST Golf saw a return on equity (ROE) of 40% in FY2022 compared to Mr DIY’s ROE of 36.6%. Apex Securities set a target price of 97 sen, which is a PER of 21.9 times the firm’s FY2024 earnings per share (EPS) estimate of 4.4 sen for MST.

The golf equipment retail chain operator plans to raise RM129.6 million from the public issuance of new shares, while the proceeds will be used mainly for local and regional expansion.

Established in 1989, MST Golf has a total of 44 retail locations in Malaysia and Singapore, and intends to fuel its growth in the retail golf equipment segment in other regional markets, namely Indonesia, Thailand and Vietnam.

Earlier, in an exclusive interview with The endNg said the group has mapped out internally, to open 19 outlets in Indonesia in the next three years.

He also said that the Malaysian market is still lacking. MST Golf wants to open 10 new outlets — five with indoor golf centers — in Malaysia and Singapore over the next three years, and upgrade 10 existing outlets.

The group intends to venture into Thailand next year, where it plans four retail outlets and two others with an indoor golf center; while Vietnam will follow in 2025, with two retail outlets starting and another two retail outlets with an indoor golf center later.

When the group launched its prospectus, it said RM62.76 million of its IPO proceeds would be earmarked for expansion in Malaysia and Singapore, while another RM53.55 million for expansion into new geographical markets.

Meanwhile, RM3 million will be allocated for upgrading digital technology facilities, RM3.23 million for its working capital, and the remaining RM7.04 million for listing expenses.

After the listing, MST Golf will adopt a dividend policy of 30% of its earnings to shareholders.

MST Golf recorded a profit after tax of RM29.1 million in FY2022, compared to RM10.2 million for FY2019, representing a three-year compound annual growth rate (CAGR) of 41.8%. Revenue increased to RM300.9 million from RM176 million, with a three-year CAGR of 19.6% over the same period.

The group posted a net profit of RM8.79 million for its first quarter ended March 31, 2023 (1QFY2023), on revenue of RM86.29 million.

Malaysian Issuing House Sdn Bhd, on behalf of the company, said the total demand for the group’s 228 million IPO shares, comprising 160 million public issue shares and 68 million shares offered for sale by existing shareholders, represented a subscription rate of 5.28 times.

RHB Investment Bank Bhd is the lead adviser, sole underwriter and sole placement agent for the IPO exercise.

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