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Synergy House - An AI Driven Furniture Exporters via B2C

Publish date: Sun, 21 Apr 2024, 09:17 PM
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Synergy House Berhad is a Malaysia-based furniture designer and exporter via online sales. The Company operates through the trading of all types of furniture and related products. The Company's products offer bedroom furniture, including wardrobes, study desks, chest drawers, nightstands, and cabin beds; living room furniture, including television cabinets, sideboards, and coffee tables, and dining room furniture, including dining tables, dining chairs, and benches. Its distribution channel includes an in-house online store and third-party e-commerce platforms. 

Financially, Synergy House Berhad had been delivering remarkable QoQ growth since their IPO. The company registered PAT of RM2.62 million, RM6.19 million, RM8.07 million and RM10.27 million from Q1FY23 to Q4FY23 respectively. 

Recently, cross-border e-commerce and Ready-To-Assemble (RTA) furniture exporter Synergy House Berhad announced outstanding financial performance, with continuous growth in revenue and net profit, reaching historic highs. Before delving into these achievements, let us first briefly understand the background and operations of SYNERGY.

Established in 1990, SYNERGY primarily engages in the design, development, and sale of RTA furniture, with manufacturing outsourced to third-party manufacturers. As a forward-thinking furniture company, SYNERGY adopts a Business-to-Consumer (B2C) model, selling furniture and home products through its own channels and third-party e-commerce platforms such as Lazada, Shopee, Amazon, and Wayfair. Additionally, the company utilizes a Business-to-Business (B2B) sales model to distribute RTA furniture to online retailers, chain-store retailers, and wholesalers.

Synergy had first started selling on Wayfair US in 2020, followed by Wayfair UK, Amazon and Amazon UK in 2022. The company is also expanding into Mano Mano, eBay Uk, Cenports US, Wayfair Canada and Wayfair Germany thereafter. These regions are relatively “fresh” for the local furniture industry, as managing an e-commerce distribution business is a completely different ball game.

Synergy House is a leading cross-border e-commerce seller and furniture exporter, specializing in affordably designed ready-to-assemble (RTA) home furniture. Serving both B2C (Business to Consumers) and B2B (Business to Business) channels, Synergy reaches customers through online retailers, chain stores, wholesalers, and third- party e-commerce platforms. 

The majority of SYNERGY's revenue comes from overseas markets. According to data from the 2022 fiscal year, the company's largest market is the United Kingdom, accounting for approximately 42.40% of total revenue, followed by the United States (39.01%), the United Arab Emirates (11.62%), and other regions (1.63%).

The company will continue to focus on increasing B2C business sales through various sales strategies, including expanding customer reach on other third-party e-commerce platforms, increasing revenue through additional advertising and promotional activities, and establishing e-commerce fulfillment centers in Malaysia.

Additionally, the company plans to leverage artificial intelligence (AI) technology to improve efficiency and obtain the latest market information, ensuring competitiveness in the rapidly evolving e-commerce landscape. Therefore, management holds an optimistic view on SYNERGY's potential in the global furniture e-commerce market and its long-term growth and expansion prospects.

Simple Maths:

Step 1: Q4 2023 result: RM0.0205 EPS

Step 2: Annualized: RM0.0205 EPS x 4 quarters = RM0.0820 EPS

Step 3: Forecast 2024. Conservatively assume each quarter will only grow by 20% flat from Q4 2023 base and stay constant. RM0.0820 EPS x 1.2 : RM0.0984 EPS

Step 4: Take Industry average PE 15

Step 5: Valuation. RM0.0984 EPS x PE 15 : RM1.48

Scenario analysis (PE 15):

20% EPS growth = RM1.48

30% EPS growth = RM 1.60

40% EPS growth = RM 1.72

50% EPS growth = RM 1.85

100% EPS growth = RM 2.46

The world is your target market!

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