Synergy House (0279) is a leading cross-border e-commerce seller and furniture exporter, specializing in affordably designed ready-to-assemble (RTA) home furniture. Serving both B2B and B2C channels, Synergy reaches customers through online retailers, chain stores, wholesalers, and third- party e-commerce platforms. BUY with a TP of RM1.05 based on FY24F PE of 15x, in line with industry peers.

Synergy House distinguishes itself in the furniture industry with its asset-light model, prioritising design and online sales while manufacturing is outsourced. As Malaysia’s primary cross- border e-commerce furniture distributor, Synergy exports affordable RTA furniture globally, including to key markets like the US, UK, UAE, Germany, and Canada.

Despite global furniture e-commerce sales forecasted to reach US$110.71bn by 2023, with the USA and Europe combined reaching US$67bn, Synergy's FY23 B2C sales were only US$0.026bn, capturing a mere 0.04%. This highlights significant growth potential for Synergy to expand its presence in the thriving furniture e-commerce market.

Synergy emphasizes leveraging technology and artificial intelligence ("AI") to acquire up-to-date information and enhance efficiency in expanding the B2C sales segment. In line with its continuous upgrades in AI, enables the company to streamline operations and achieve significant milestones.

As part of its growth strategy, Synergy aims to strengthen its B2C segment which enjoy better margins. For FY23, this segment made up of 55% of revenue from 25.6% in FY22. By FY24, it plans to expand its B2C offering to over 2000 SKUs. Synergy will enter the French market, replicating its successful UK model. With operations in five markets and 11 platforms, including Wayfair US, it targets a 70% B2C revenue share by FY25. Prioritising expansion into top global importers, Synergy will onboard >4 new platforms in 2024, such as Amazon Germany, Canada, France, and Mano-Mano France.

As such, we forecast a strong FY24F-FY26F earnings growth averaging around 30%, supported by the exponential expansion of the B2C division and a resilient B2B segment. Furthermore, Synergy House maintains a solid balance sheet, with a gearing ratio of 0.6x as of 4QFY23.

Source: Rakuten Research - 18 Mar 2024

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