Financial Highlights

The table below sets out the historical financial information based on the audited consolidated financial statements for the Financial Periods Under Review:

• The revenue increased from RM 175 million (FYE 2019) to RM 300 million (FYE 2022), showing the demand for the golf market is still expanding in Malaysia and Singapore.
• The gross profit margin consistently remains around 40%, which also shows that when revenue increases, the management team can still control costs wisely. (Generally, a GP margin of 20% is considered high/ good).
• PAT margin increased from 5.81% (FYE 2019) to 9.68% (FYE 2022).
• The gearing ratio is 0.64 times. The gearing ratio is above the benchmark, which also means that the company's debt is considered high, and the liquidity risk will also be higher. This will also make the company less capable of facing unexpected risks. (A good gearing ratio should be between 0.25 – 0.5).

Major customer and supplier

Major Customers

The business is segmented into 2 operating trade models namely retail and wholesale trade. The customers for the retail segment comprise mainly end-users including individuals who purchased products at the retail outlets and online platform as well as corporate customers.

The customers for the golf-related services and indoor golf centres are mainly end-users who are individuals that procure the golf-related services including golf coaching, rental of golf equipment comprising golf clubs and golf accessories at the pro shops at the golf and country clubs and supply of range balls for use at the driving range that its operate. In addition, the company also serves corporate customers for event management and planning mainly for golf tournament-related events.

The customers for the wholesale segment are mainly retailers in Malaysia, Singapore and other foreign countries mainly Indonesia.

The company does not have any major customers as none of the customers contributed more than 5.00% to the total revenue for the Financial Periods Under Review. Therefore, they are not dependent on any of its customers.

Major Suppliers

The top 5 major suppliers and their contribution to the purchases for FYE 2022 and is set out below:

Based on the table, the top 5 suppliers are around 54%. The company mentioned that they are dependent on Supplier A as Supplier A represented more than 30% of the total purchases of input materials and services. Supplier A is their supplier of gold equipment including their own brand of golf clubs, golf balls and accessories, and gold apparel. The company is not dependent on the remaining major suppliers as they either contribute less than 10.00%.

The company is not worried about relying on Supplier A because they still have other brands' products to offer to customers. Furthermore, the company believes that the chances of ending its partnership with Supplier A are very low because they are still the largest golf retailer chain in Malaysia until now.

Industry Overview

Imports and exports of gold equipment

Malaysia

• Between 2020 and 2022, the export value of golf equipment in Malaysia grew at a CAGR of 19.0% to RM38.8 million in 2022. In 2022, the export value of golf equipment grew by 1.6%, contributed by 32.0% of growth from golf balls, and 4.6% and 8.7% of decline from golf clubs and other golf equipment respectively. The export value in 2022 remained high over the previous four years, where growth was mainly attributed to the gradual reopening of international borders and the global economic recovery in 2021.
• In 2022, the main exporting destinations were Singapore, Indonesia and Vietnam, which accounted for 28.2%, 22.4% and 11.9% of the export values of golf equipment respectively. In Q1 2023, the export value of golf equipment grew by 14.9% compared to Q1 2022

Singapore

• In 2022, the import value of golf equipment grew by 33.8%, contributed by 48.3%, 33.0% and 15.9%of growth from golf clubs, golf balls and other golf equipment respectively. In 2022, the export value of golf equipment grew by 18.4%, contributed by 21.6%, 88.8% and 7.8% of growth from golf clubs, golf balls and other golf equipment respectively. In 2022, Indonesia was the main exporting destination accounting for 51.1% of the export value of golf equipment. Between 2018 and 2022, export and import recorded their highest values in 2022. This was mainly due to the surge in demand for golf equipment resulting from the relaxation of domestic and international containment measures in 2021. As a trading hub in the region, Singapore needed to import more golf equipment to meet the demand from the domestic market, as well as foreign markets which resulted in an increase in export. In Q1 2023, the import and export values of golf equipment grew by 15.7% and 59.7% respectively compared to Q1 2022.

Market Size and Share

• As golf equipment (complete and components) is manufactured in foreign countries, import data is used as a proxy for market size to gauge MST Group's market share. Imports and exports of golf equipment (complete and components) in Malaysia and Singapore, as well as MST Golf Groups Import market share, are as follows:

• The golf equipment industry in Malaysia and Singapore is not controlled by any one company as most of the golf equipment is purchased from golf manufacturers and/or brand owners in countries outside of Malaysia and Singapore such as Japan, China and the US. As such, no single domestic distributor or retailer in Malaysia or Singapore has control over key trading conditions and business practices. Additionally, there are many brands of golf equipment to serve as product substitutes for buyers to choose from, and there are no regulatory or industry restrictions that discourage new market entry or expansion by existing operators in the industry.

Industry Consideration Factors

The growing popularity of golf will promote demand for golf equipment and services. Some consideration factors to sustain and grow the golf industry are as follows:

• The growing popularity of technology-driven golf facilities drives interest and serves as alternative venues for playing golf.
• Establishment of a new golf league that will increase awareness and interest in golf.
• Growing economies as the platform for sustainability and growth for the golf industry.

Source: Vital Factor Consulting

Business strategies and prospects for MST GOLF GROUP BERHAD.

The company's key business strategies and plans are to leverage its core competency in the operations of golf retail outlets and indoor golf centers to grow the business in its existing markets as well as expansion into new geographic markets. The key business strategies and plans are summarised as follows:

1. Expansion into the existing market in Malaysia and Singapore
   1. Setting up new golf retail outlets and retail outlets with indoor golf centres in Malaysia and Singapore.
   2. Upgrading and refurbishing selected existing retail outlets
   3. Expansion into new geographical markets
   4. Upgrading of digital technology facilities

MQ Trader View

Opportunities

1. The company is a golf specialty retailer providing a wide variety of golf equipment comprising golf clubs, golf balls and accessories and golf apparel, and notable brands which help sustain and grow its business. The company is a multi-brand specialised retailer of golf equipment where they sell approximately 11,000 SKUs and approximately 94 brands of golf equipment at the LPD.
2. The company is the market leader in the sales of golf equipment comprising golf clubs, golf balls and accessories and golf apparel in Malaysia. In 2022, the Group had a market share of 51.00% of golf equipment imported into Malaysia. In addition, the Group is the largest chain of golf specialty retailers with a total of 36 retail outlets in Malaysia (Source: IMR Report).

Risk

1. The company's business is subject to the risk of foreign exchange fluctuations where they rely on the imports of golf equipment. As a specialty golf retailer and wholesaler, the range of golf equipment that they carry is mainly imported goods. As such, the purchases of input materials and services are transacted in foreign currencies, mainly USD. Thus, any unfavorable and adverse changes in exchange rates between RM and foreign currencies such as USD and SGD would have a negative impact on its financial performance.

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