Initial Public Offering (IPO)

IPO - Senheng New Retail Berhad (Part 1)

MQTrader Jesse
Publish date: Thu, 06 Jan 2022, 04:38 PM
MQTrader Jesse
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History of Company

 
Senheng was incorporated in Malaysia under the Act as a public company on 21 May 2021 under the name of Senheng New Retail Berhad, This is an investment holding company and through the Subsidiaries, the company is a retailer of consumer electrical and electronic company.
 
The Group structure as at the LPD and after the IPO is as follows:-
 
The business was founded by KH Lim, KC Lim and KY Lim with the opening of the first store in 1989. They opened the 10th store in 1994 and the 20th store in 1996. In 1998, they were recognised as the largest electrical retailer in Malaysia by the Malaysian Book of Records as they had successfully expanded their chain store network of 35 physical stores. They opened the 100th outlet in 2008. 
 
As the LPD, Senheng have a chain of 105 physical stores across every state in Malaysia under 4 store concepts, namely “Grand Senheng Elite”, “Grand Senheng”, “Senheng” and “senQ”, as well as online platforms.
 
 

Use of proceeds

  1. Enhance customer experience via upgrading and expanding the chain of retails stores - 60.00% (within 36 months)
  2. Repayment of bank borrowings - 17.20% (within 6 months)
  3. Develop new brand distribution business - 8.22% (within 36 months)
  4. Expand and upgrade the warehouse and logistics network - 7.48% (within 36 months)
  5. Boost the digital infrastructure - 3.63% (within 36 months)
  6. Estimated listing expenses - 3.47% (within 3 months)
 
 

Research of the use for capital expenditure of group

Enhance customer experience via upgrading and expanding the chain of retail stores (60.00% - within 36 months)

Senheng aims to be the territory champion within every 5-kilometer radius of their stores. They aim to be the most significant floor space and have the widest variety of products to provide customers with a wholesome retail experience. Their focus is primarily on the quality of their stores while increasing the number of stores in secondary.
 
The capital from IPO will use for:-
  1. Upgrade certain of the existing “Senheng” stores to “Grand Senheng” or “ Grand Senheng Elite” stores;
  2. Launch a new store concept known as “Grand senQ” which is intended to be larger than the average existing “senQ” store 
  3. Set up new outlets in previously underserved areas in Malaysia.
 
Estimated breakdown of utilisation
  1. Acquisition of new properties - 45.17%
  2. Rental expenses - 21.81%
  3. Set-up costs for new and upgraded stores - 33.02%
 

Develop new brand distribution business (8.22% - within 36 months)

Senheng is the exclusive distributor for two international brands, namely, “ROBAM’ kitchen appliances such as cooking hobs, cooking hoods, and ovens, as well as “JIMMY” vacuum cleaners and hair dryers (both originating from the People’s Republic of China), in Malaysia. They have been looking out to other countries to identify suitable brands, focusing on kitchen appliances, home electricals, personal and beauty care appliances, and IoT products which they believe have the potential to be accepted by Malaysian consumers. In August 2021, they also launched their range of cookware products under their house brand “Delighto”.
 

Expand and upgrade the warehouse and logistics network (7.48% - within 36 months)

The brand distribution business requires them to store a large quantity of inventory they purchase from the brand principals before distribution to other retailers and/or sale on their retail platforms. This storage requirement will increase as they secure new brands to be distributed and when their existing brands gain further market acceptance. The Group may meet such future storage requirements by expanding the current CDC or securing a new warehouse for this distribution business. They intend to use approximately RM 20.00 million from the IPO to finance the cost of acquiring new lands and the construction cost of the new warehouse.
 
For information, as at the LPD, they estimate that the warehouse storage space at their CDC and 8 other regional hubs are approximately 65% utilized and expect that their warehouse capacities will need to be expanded within the next 3 years.
 
As at the LPD, they have not finalized any plans to acquire or construct any new warehouses. The exact location and size of any land to be acquired are subject to the requirements at the point in time and is dependent on other local factors such as price and availability. Any shortfall in the allocated proceeds to fund the acquisition of land and construction of warehouses will be funded via internally generated funds and/or bank borrowing.
 

Boost the digital infrastructure (3.63% - within 36 months)

Since 2015, Senheng have undertaken a digital transformation of their business to keep pace with the growth in the scale of their business. The efforts to boost the digital infrastructure are ongoing and currently comprise the following initiatives:-
 
  1. Establishing a data lake and upgrading existing technology platforms
  • Upgrade current data repository system to a centralized data repository platform known as a data lake.
  • Establish a customer data platform, upgrade the existing marketing platform, integrate the business intelligence system and switch to a headless microservice architecture.
  1. Set up a cloud-based disaster recovery system
  • Supplement the existing physical standby disaster recovery system with a cloud-based server which backs up data in real time and enables them to recover and transfer data within a short time.
  1. Enhance the WMS and ERP system
  • Replace the existing WMS and ERP system with a new enhanced version of the same. This will improve their ability to handle more goods and simplify future software upgrades.
  1. Maintain the digital infrastructure
  • Intend to carry out continuous enhancements to the cybersecurity systems and continue optimising the online advertisements through us of business analytics
Breakdown of digital infrastructure enhancements: -
  1. Establishing a data lake and upgrading existing technology platforms - 26.80%
  2. Set up a cloud-based disaster recovery system - 8.25%
  3. Enhance the WPS and ERP system - 15.46%
  4. Maintain the digital infrastructure - 49.49%

 

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2024-04-23

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