Malaysia’s largest E&E retailer
? We initiate coverage on Senheng, Malaysia’s largest consumer E&E retailer
with 105 outlets nationwide, with an Add rating.
? We project a net profit CAGR of 13% (FY21-24F), driven by: i) 18% growth in
physical retail area, ii) steady SSSG, and iii) robust growth in online sales.
? Our TP of RM1.00 is based on 17.4x CY23F P/E (a 20% discount to CGSCIMB’s consumer discretionary sector’s 5-year mean P/E of 21.8x).
Largest chain retailer of consumer E&E products in Malaysia
Senheng New Retail Bhd (Senheng) is Malaysia’s largest consumer electrical and
electronics (E&E) retailer by revenue (report by Smith Zander in 2021), with a total of 105
outlets nationwide as at end-2021. Besides physical stores (accounted for 89.2% of FY21
revenue), Senheng retails products via online retail channels, including its self-operated
app and online store, as well as third-party marketplaces Shopee and Lazada.
Differentiating itself through a seamless retail model
Despite a highly competitive operating environment in the consumer E&E retail space,
Senheng’s key advantage is its “seamless retail model” with full integration of its physical,
online and backend operations (in-house logistics network), in our view. Since 2014,
Senheng uses business intelligence to drive business decision-making, while providing
uniform pricing across all sales channels (omnichannel marketing). Its sales are backed
by its strong PlusOne loyalty programme (c.90% of its FY21 revenue).
Strong operating scale with wide range of products
Over the years, Senheng has built a solid standing and strong operating scale, leveraging
on its economies of scale and established relationships with brand principals to offer a
wide range of consumer E&E products across all key segments (home appliances, digital
gadgets and audio-visual equipment) — it carried c.10k stock keeping units (SKUs) from >280 brands (May 2021). In our view, this is a differentiating factor, as it is able to cater
to consumers’ E&E needs via a wide product offering (vs. competitors).
Future strategies to cement its market leadership position
We project Senheng to post 12.7% revenue and 13.4% core net profit CAGR over FY21-
24F, backed by an 18.1% CAGR in retail floor space and 10.1% CAGR in online channel
revenue. Our forecasts are based on its near-to-medium-term strategies, including: i)
upgrading/expanding its physical stores, ii) growing its exclusive and own-brand product
portfolio, iii) better membership stickiness by enhancing PlusOne, and iv) upgrading its
physical and digital backend infrastructure leading to better operational efficiencies.
Initiate coverage with Add rating
We initiate coverage on Senheng with an Add and a TP of RM1.00 (17.4x CY23F P/E, a
20% discount to CGS-CIMB’s consumer discretionary sector’s 5-year mean P/E of
21.8x). Despite Senheng’s leading market position in Malaysia (2021), we apply a
discount to account for the competitive nature of the retail E&E sector and its low barrier
to entry. Downside risks: supply disruptions, slowdown in consumer E&E sales, and
intensifying competition. A strong recovery in footfall is a key potential re-rating catalyst: