KUALA LUMPUR (May 12): Ready-to-assemble (RTA) home furniture company Synergy House Bhd, en route to list on the ACE Market of Bursa Malaysia on June 1, expects to raise RM34.4 million from its initial public offering (IPO) exercise.

Synergy House, which is principally involved in the design, development and sale of RTA home furniture, is offering 130 million shares under its listing exercise — 26% of the company’s enlarged share base — at an IPO price of 43 sen apiece.

The company has earmarked RM10 million for the purchase of inventories and RM1.5 million for the purchase of a racking system and forklifts for its e-commerce fulfilment centres in Johor, and RM10 million for repayment of borrowings.

Meanwhile, RM1 million will be used towards e-commerce advertising and promotions, RM7.7 million for working capital, and the remaining RM4.2 million for listing expenses.

Premised on the expectation of continued growth in global demand for furniture e-commerce, Synergy House executive director Tan Eu Tah said the IPO enables the group to fuel its future growth and expansion plans by tapping into the equity market for future fundraising.

“The recognition gained through our listing status will also enhance our reputation in the marketing of our products and services, retention of employees, expansion of customer base as well as attract new employees,” Tan added.

Meanwhile, executive director Teh Yee Luen said leveraging on e-commerce has enabled the group to have direct contact with end-consumers, in turn allowing it the gather first-hand information and insights on consumer preferences that are valuable for product development.

“We intend to continue to grow our business-to-consumer (B2C) segment by utilising a portion of the IPO proceeds to purchase inventories for our B2C segment and by carrying out advertising and promotion initiatives on third-party e-commerce platform,” Teh said, adding that the group also plans to grow its B2C sales through expanding to more e-commerce platforms in new markets.

Kenanga Investment Bank Bhd is the principal adviser, sponsor, underwriter and placement agent for the IPO exercise.

The IPO’s public issue involves the issuance of 25 million new shares available to the Malaysian public, 12.5 million to the group’s eligible persons, 30 million to selected investors via private placement, and 12.5 million to Bumiputera investors approved by the Ministry of Investment, Trade and Industry (Miti). Meanwhile, another 50 million existing shares are under an offer for sale via private placement to selected Bumiputera investors approved by Miti.

According to the company’s prospectus, Synergy House posted a net profit of RM16.62 million for the financial year ended Dec 31, 2022 (FY2022), higher than the RM14.39 million in FY2021, RM12.11 million in FY2020, and RM10.9 million in FY2019.

Revenue-wise, FY2022 saw the company achieve a topline of RM194.09 million, as compared to RM184.29 million in FY2021, RM122.89 million in FY2020, and RM111.43 million in FY2019.

Based on FY2022’s topline, the company’s largest geographical market was the UK with 42.4% of revenue contribution, followed by the US (39.01%), United Arab Emirates (11.62%) and others (1.63%). It is worth noting that from FY2020 to FY2021, share of revenue from the US leapt to RM63.92 million from RM8.96 million.

Synergy House does not have any formal dividend policy but noted that it is its board’s policy to recommend dividends to allow its shareholders to participate in the group’s profits — subject to factors including profitability and having excess funds.