Tuesday 19 Mar 2024
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KUALA LUMPUR (Jan 25): Consumer electrical and electronics retailer Senheng New Retail Bhd faltered on its maiden trading day on Bursa Malaysia’s Main Market on Tuesday (Jan 25).

It opened at 90 sen and rose to as high as RM1.01 before closing at 85.5 sen, representing a 21.5 sen or 20.09% discount from its initial public offering (IPO) price of RM1.07.

At 85.5 sen, the retail group had a market capitalisation of RM1.28 billion.

Senheng was also the day's second most actively traded stock on the local bourse, with 163.55 million shares changing hands. The trading volume was equivalent to 10.9% of its issued share capital of 1.5 billion.

The IPO, which raised RM267.5 million, involved a public issue of 250 million new shares and an offer for sale of 139.5 million existing shares.

Senheng is the largest consumer electrical and electronics chain retailer in Malaysia with a chain of 105 physical stores — operating under four different store concepts, namely Grand Senheng Elite, Grand Senheng, Senheng and senQ — which are located throughout Malaysia and online platforms, while carrying around 10,000 stock-keeping units from over 280 different brands, according to its prospectus.

At a virtual press conference following the listing ceremony on Tuesday, Senheng executive chairman Lim Kim Heng said that Senheng's plan to grab a further 30% market share is not too difficult to achieve after the IPO as it had seen double-digit growth before the Covid-19 pandemic.

“[If] you look at the global business environment, it seems like our timing is not very right and, of course, we cannot demand a premium valuation. 

“But the fundamentals of our business are on the right track. We will be announcing our fourth-quarter results next month and we hope that our investors will be happy. Our focus for the next two to three years will remain on growing revenue, net profit and the return on investment for our investors,” Lim replied when asked if the IPO timing was optimal.

He added that Senheng does not have plans to expand overseas but instead plans to focus exclusively in Malaysia by becoming the “territory champion” within five kilometres of its outlets.

When asked by theedgemarkets.com about the impact of inflation and its plans to manage its inventory, Lim noted that the effect of inflation can be felt across the board from electrical and electronics products to food and consumer goods. 

“We are a bit lucky as we have good relationships with our business partners, and we managed to stock up on our inventory to try and offer the same prices for as long as we could until our inventory runs out. 

“It seems like the trends, such as logistics and chip shortages, could not be solved by anyone now, so we have to pay a premium for the products. We expect prices to increase in the second half of the year,” Lim admitted.

However, the excess inventory held by Senheng would not be a big issue and would not affect the group’s bottom line as it is able to market and sell its products better than its competitors despite taking slightly longer to deliver the products to customers, according to him.

FY21 financial performance remained 'respectable' despite lockdowns

The retail group on Jan 3 reported its financial results for the cumulative nine months ended Sept 30, 2021, with a 21.22% increase in net profit to RM34.05 million, versus RM28.09 million a year ago, on the back of a 12.29% improvement in revenue to RM987.72 million from RM879.6 million despite facing almost two months of store closures caused by Covid-19 pandemic-related measures.

Meanwhile, TA Securities initiated coverage of Senheng in a research note on Jan 6, with a target price of RM1.21, representing a 13.08% or 14 sen premium to its IPO price of RM1.07.

The research house added that the IPO price of RM1.07 would value the consumer electrical and electronics retailer based on a trailing price-earnings ratio of 28.8 times based on its calendar year 2020 earnings.

Edited BySurin Murugiah
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