Eco-Shop rises 10% in Main Market debut

KUALA LUMPUR: The trading stock of Eco-Shop Marketing Bhd rose 10.62% from its initial public offering (IPO) price as trading of its shares commenced on the Main Market of Bursa Malaysia on Friday.

Shares in the dollar-store retailer put on 12 sen to RM1.25 and charted at the top of the most actively traded counters on Bursa Malaysia.

At the time of writing (9.25am), the share was trading seven sen higher at RM1.20 after 87.64 million shares done.

Creador-backed Eco-Shop's IPO was the largest in Malaysia over the last eight months - raising RM419.87mil from the public issue of 347 million new shares.

It plans to allocate RM56.27mil (13.4%) of the IPO proceeds to the expansion of its retail footprint nationwide, and another RM200mil (47.6%) to expand its distribution centres.

Another RM10.9mil will be invested in information technology hardware and software.

Of the remainder, RM100mil (23.8%) will be used to repay bank borrowings and RM52.7mil (12.6%) for working capital purposes and to defray the cost of the IPO and listing.

According to an IPO note by Rakuten Trade, Eco-Shop's aggressive expansion plan in the next two to three years is expected to raise net profit to RM200.4mil and RM246.5mil in FY5/25 and FY5/26 respectively,

"We peg a fair value of RM1.20 based on 28x PER (similar to its regional peers with similar scale) over FY5/26 EPS," it said.

UOB Kay Hian, meanwhile initiated coverage on the stock with a "buy" call and target price of RM1.45.

"Eco-Shop, Malaysia’s most established fixed-price retailer, offers a compelling three-year earnings CAGR (FY24-27) of 17.7% which is unrivalled relative to that of its large-cap retail peers.

"The earnings growth is underpinned by expansion off a long growth runway coupled with robust organic and resilient demand owing to its unique business model that offers  affordability yet captures higher-margin discretionary purchases," it added.