A showcase of Synergy House’s design hub.

‌Ever since its IPO, Synergy House Berhad (“Synergy”) has caught the eye of retail investors, especially those keen on innovative business models. With its shares now trading at a PE of 13.33 and an impressive ROE of 20.71%, Synergy’s financials paint an optimistic picture. Here’s why the company’s unique approach has investors talking.

‌From Manufacturing to New Retailing

What sets Synergy apart is its remarkable evolution over the years. Initially starting as a furniture manufacturer in 1990, the company has transitioned to a pure-play furniture distributor. This shift allows Synergy to concentrate all its resources on design and development (D&D). In 2019, the company boasted a catalogue of 360 designs, but fast-forward to June 2023, and that number has soared to an astonishing 2,155 designs.

‌A Digital First Approach

Synergy operates on an asset-light model that keeps the operation lean. By focusing on lower-cost Asian nations like Malaysia for its outsourced manufacturing, the company can channel all its energy into D&D. This innovative approach has enabled Synergy to position itself as Malaysia’s only cross-border e-commerce furniture distributor, hence the high ROE as compared to other peers.

‌Going Global with RTA Furniture

Synergy isn’t just a local hero; it’s an international player. By offering ready-to-assemble (RTA) furniture, it has successfully entered markets in the United States, United Kingdom, and the United Arab Emirates. These RTA products are considered fast-moving consumer goods (FMCGs), offering affordability and quick turnover.

‌Supported by Strong Financials Performance

For the 6-month period ending on 30th June 2023, Synergy posted a revenue of RM110.2 million and a PBT of RM12.1 million. The B2B and B2C sales segments contributed almost equally, indicating a balanced approach to revenue generation.

‌Conclusion

Synergy’s future plans include expanding its B2C segment by listing products on more e-commerce platforms, investing in advertisements, and building new e-commerce fulfilment centres. Despite global economic uncertainties, the company’s affordable product range and strong online presence offer a cushion against potential downturns.

‌For investors who are seeking exposure to the USD’s rally, yet asset-light business model,and had exposure to the international markets, Synergy is definitely a stock to watch.