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Company Background

The Company was incorporated in Malaysia under the Companies Act, 1965 on 26 January 2016 as a private limited company under the name of SNS Network Technology Sdn Bhd. On 30 July 2021, it converted into a public limited company and adopted the present name.

The company's principal activity is that of an investment holding company. The company’s Group structure at LPD is as follows:

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Use of proceeds

1. Capital expenditure
   1. Expansion of Daas subscription-based service - 34.1% (within 36 months)
   2. Set up new retail stores - 2.8% (within 36 months)
2. Construction of Regional Hub - 19.8% (within 36 months)
3. Marketing activities for JOI - 1.7% (within 36 months)
4. Repayment of bank borrowings - 22.0% (within12 months)
5. General working capital - 14.50% (within 24 months)
6. Estimated listing expenses - 5.1% (Immediately

Capital expenditure

The company distributes and sells its ICT products through the physical store channel, online store channel, and commercial channel. They intend to utilise RM33.40 million of the proceeds to expand the business presence via the physical store channel and commercial channel respectively.

    1. Expansion of Daas subscription-based service - 34.1% (within 36 months)

For the commercial channel, the company plans to utilise RM30.90 million to expand the DaaS subscription-based service. DaaS is a model for device leasing which generally consists of:

1. Leasing of hardware devices such as desktops, laptops, interactive smartboards, workstations, digital signages, printers, servers, and accessories;
2. Configuration, deployment, commissioning, provision of software/hardware solutions, and provision of on-site installation and deployment services;
3. Centralised enterprise IT asset management and IT repair services including but not limited to system updates and patching, remote diagnosis and maintenance, live technical support, extended warranty, data backup, and data migration;
4. Management of old devices such as the return of equipment after lease expiration and refurbishment or disposal of old equipment; and
5. Certification training to customers’ IT personnel on hardware specifications, if required.

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Customers that subscribe to DaaS will be able to reduce their overall IT expenditure in the following manner:

1. The upfront cost of device purchases and deployment;
2. IT lifecycle costs such as software upgrade and device maintenance; and
3. End-of-life devices cost.

Based on inquiries from potential customers such as governmental bodies, public listed, and private companies (located in the Central, Northern, and East Coast regions) which have generally enquired on desktops, laptops, and workstations, the company intends to utilise its proceeds from the Public Issue to purchase the following devices to support the expansion of the DaaS subscription-based service for the existing DaaS subscription agreements and/or future Daas subscription agreements to be entered with them:

    2. Set up new retail stores - 2.8% (36 months)

As at LPD, the company has 56 brand-specialty stores (with additional 5 brand-specialty stores which are expected to commence operations by September 2022) and 7 multi-brand concept stores in Klang Valley.

For the physical store channel, the company plans to utilise RM2.50 million to set up 10 new stores in Malaysia, particularly 8 stores in Klang Valley, 1 store in Johor Bahru, and 1 store in Penang. The Group’s strategy is to lease and set up self-operated stores in shop lots located within established residential areas or prominent locations in shopping malls in the above-mentioned regions. As at LPD, they have sufficient in-house trainers and supervisors to manage its employees in the new stores. As and when the stores are set up upon Listing, the company will employ additional sales staff to facilitate the operations of the stores.

The proceeds will be used as set-up costs and to purchase various machineries and equipment for the new stores, details as follows:

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The set-up cost in the table above was estimated based on costs from the past experiences and quotations of various machineries of its existing stores. In the event the allocated proceeds are insufficient for the set-up cost of the stores, any shortfall will be funded via internally generated funds and/or additional bank borrowings.

Construction of Regional Hub - 19.8% (within 36 months)

With the ongoing growth and development of the business, the company intends to build a Regional Hub comprising a storage facility, an experience center for customers, live video areas, training centres, workshops, and office facilities. On 31 March 2019, the company completed the acquisition of freehold land measuring 35,929.93 sq ft located in Petaling Jaya, Selangor for a cash consideration of RM21.56 million, which is earmarked for the Regional Hub.

The approximate construction costs of the Regional Hub are as follows:

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The indicative timeline for constructing the Regional Hub is expected to be as follows:

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Marketing activities for JOI - 1.7% (within 36 months)

The company has allocated RM1.50 million for marketing activities to enhance the product awareness for its house brand of ICT products, JOI, throughout Malaysia as follows:

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Repayment of bank borrowings - 22.0% (within 12 months)

The company has allocated RM20.00 million to partially repay its term loans from firstly, CIMB Islamic Bank Berhad amounting to RM14.65 million. The balance after which will be used to repay RHB Islamic Bank Berhad. The repayment is proposed to reduce the financing cost, details of which are as follows:

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The expected annual interest savings from the proposed repayment is approximately RM0.70 million based on the interest rate of 3.5% per annum for the banking facilities. However, the actual interest savings may vary depending on the then applicable interest rate.

The total outstanding borrowings (excluding lease liabilities arising from right-of-use assets of RM12.74 million) as of 31 January 2022 is RM49.96 million. After the proposed repayment, the Group’s total borrowings will amount to RM29.96 million. The proposed repayment of bank borrowings coupled with the increase in total equity from the issuance of new Shares under the Public Issue will reduce its pro forma gearing level from 0.27 times (after the Public Issue and Offer for Sale but prior to utilisation of proceeds) to 0.17 times (after the utilisation of proceeds).

General working capital - 14.50% (within 24 months)
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A total of RM13.12 million of the proceeds from the Public Issue has been earmarked to supplement the general working capital requirements of the Group.

The following is a breakdown of the utilisation of proceeds for the working capital:

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Business model
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The company is principally involved in the provision of ICT products, services, and solutions;

1. Sale of ICT products comprising hardware, devices, and related peripherals, as well as the provision of ICT services and solutions; and
2. Provision of device repair and related services, as well as the sale of broadband services.

The group’s business model, by principal business activities, is as illustrated below:

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    A. Sale of ICT products comprising hardware, devices, and related peripherals, as well as the provision of ICT         services and solutions

The company is involved in the sale of third-party ICT products and the house brand ICT products JOI.

1. The third-party branded ICT products that the company sell comprise:
2. Hardware such as desktops, laptops, monitors, printers, storage devices, networking equipment, and servers;
3. Devices such as smartphones, tablets, and smartwatches;
4. Related peripherals such as earphones and audio devices, visual projection equipment, uninterrupted power supply systems, and other related accessories; and
5. Software such as document editor, document viewer, internet security, and computer-aided design programs.
   

For customers who purchase ICT products for their own use, the Group may also provide ICT services and solutions to these customers, depending on their needs and requirements. The ICT services and solutions are broadly categorized into complementary ICT services and solutions, value-added ICT services, and solutions, JOI smart classroom framework, DaaS subscription-based service, and managed ICT services, details are as follows:

1. Complementary ICT service and solutions
2. Value-added ICT services and solutions
3. JOI smart classroom framework
4. DaaS subscription-based service
5. Managed ICT services

    B. Provision of device repair and related services, as well as the sale of broadband services

The group is also involved in the provision of device repair and related services, as well as sales of broadband services as follows    :

    1. Device repair and related services

The company is an Apple Authorised Service Provider authorized to provide in-house service and onsite support service for Apple products such as software troubleshooting and hardware components replacement.

    2. Broadband service

The company is a TM Authorised Dealer appointed to resell, distribute and promote TM branded products and services, where the TM stores operate are branded under “TMpoint”.

Click here to continue on the IPO - SNS Network Technology Berhad (Part 2)

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