Aggressive acquisition act by this company. Will it work out?

Under conventional methods, there are two main paths for a company to grow into the next level. The first method being the organic growth, which as Investopedia puts it, the growth of a company achieves by increasing output and enhancing sales internally. While the other one is growth from buying other businesses, or opening new locations. Meaning that, the growth is coming externally.

There is no actual distinction between which is better, organic, or inorganic, but the spectrum of growth in both the methods which should result in ultimate growth in Total Addressable Market – TAM and increasing market share.

Which we would study deeper onto our case study – Seni Jaya Corp Berhad.

Just before the beginning of Chinese New Year, SJC had an announcement to acquire 55.0% stakes of 3 companies, namely Andaman Media Sdn Bhd, Saaktti Billboards Sdn Bhd and Tanjong Jernih Sdn Bhd, for a total sum of RM8.5 million. This is a very good example of an attempt for inorganic growth by the company.

For those who are not familiar with the industry, it is common for the outdoor media industry players to cross “assets” with others. The reason being it is the common objective for the client(s) to achieve maximum exposure, especially in the B2C world, where more exposure = more sales. Hence, it is not uncommon for them to have cross-company collaboration.

That might answer you queries as to why SJC is looking onto acquisition now when they are making loss albeit it was narrowing. Hopefully, in the upcoming quarters we could see better financial performance from the company.

Can we gauge the financial impact on the acquisition onto SJC at the current level? There is no ballpark figure to be given at this juncture, but instinctively this would increase the ability for SJC to procure new customers as well as new contracts. The goodwill value in the acquisition is beyond our speculations now.

To sum it all up, we need to monitor SJC’s profit and loss trend and determine if it will narrow in the future. If it does, then the acquisition is likely to bode well for them especially they have the largest unicorn in Malaysia Carsome as they anchor client.

I look forward for the company’s financial performance.