PETALING JAYA: SSF Home Group Bhd’s revenue and core profit growth will be underpinned by its business expansion plan.
TA Research said the home living solutions provider aims to establish new retail outlets to expand its market presence in Malaysia.
SSF Home aims to set up 18 retail outlets over the next three years and enhance its IT infrastructure through the migration to a new enterprise-wide resource planning system as well as improve its eCommerce website and upgrade its SSFHOME mobile application.
The group’s effort is in line with the foreseen growth in the home furnishing retail industry in Malaysia, which is expected to expand at a compound annual growth rate of 9.3% from RM50.3bil in 2023 to RM73.2bil in 2027.
The growth will be supported by higher proliferation of smart home furnishings, recovery in the local property market and population growth.
SSF Home, which is set to list on the ACE Market on Oct 12, aims to raise RM50mil from its initial public offering (IPO), which entails a public issue of 200 million new ordinary shares and an offer for sale of 24 million shares at 25 sen each.
The proceeds will be utilised mainly for its expansion plans, with 28.5% going to capital expenditure and 41.9% for startup costs.
About 10% of the proceeds will be used for the repayment of bank borrowings and 3% for marketing activities, with the remaining 8% as general working capital and for listing expenses.
“On a pro forma basis, post-listing with utilisation of the IPO proceeds, SSF Home’s balance sheet is expected to be in a net cash position of RM60.3mil or 7.5 sen per share,” TA Research said.
The group has seen an increase in its financial performance following the drop in revenue for financial year 2022 (FY22) by 22.6% year-on-year (y-o-y) to RM161mil, due to movement restrictions, closure of certain outlets and lower sales across all product segments.
As for FY23, the group’s revenue has recovered, rising by 8.4% y-o-y to RM174.5mil, following the relaxation of movement restrictions and higher membership income.
Its core net profit, however, fell by 1.6% y-o-y to RM15.8mil due to lower margins.
TA Research estimated the group will record earnings growth of 14.1%, 20.2% and 15.8% to RM18mil, RM21.7mil and RM25.1mil for FY24, FY25 and FY26, respectively.
“This is supported by its expansion plan to open 18 new retail outlets over the next three years. We expect the domestic market will remain as the primary revenue generator,” TA Research said.
The research house said its earnings projections are premised on the opening of six new outlets each year from FY24 until FY26, as well as a gross margin of 55.1%, 56.4% and 56.5% for FY24, FY25 and FY26, respectively.
It has assigned a target price earnings multiple of 10 times for calendar year 2024 earnings per share to SSF Home, and arrive at a fair value of 26 sen per share.
This is backed by its strong presence with extensive network in Malaysia, strong product mix as well as experienced management team.