KUALA LUMPUR (Sept 25): Senheng New Retail Bhd is acquiring its currently leased Central Distribution Centre (CDC) for a purchase consideration of RM75.8 million to strengthen the group’s supply chain.

Senheng’s wholly-owned subsidiary Senheng Electric (KL) Sdn Bhd, entered into a sale and purchase agreement with SDM Assets III Sdn Bhd (SDM), a wholly-owned subsidiary of Sime Darby Property MIT Development Sdn Bhd, to secure ownership of the CDC.

The acquisition will result in significant annual gross rental savings of RM4.2 million for the group, Senheng said in a statement on Monday.

The CDC which is located in Klang, Selangor, is the main distribution hub for Senheng, where products from suppliers are received, stored and subsequently distributed to regional hubs and customers in the central region of Peninsular Malaysia.

To finance the RM75.8 million CDC acquisition, the group will procure bank borrowings of RM45.8 million and reallocate RM30 million from its Initial Public Offer (IPO) initially designated for its Territory Champion expansion strategy.

The acquisition is expected to complete in the fourth quarter of 2023.

“The CDC is a key enabler of Senheng’s omnichannel shopping experience, enabling us to seamlessly serve our online and offline customers throughout Malaysia, while ensuring timely product deliveries and diverse offerings within our physical stores,” said executive chairman of Senheng Lim Kim Heng.

He added the CDC acquisition strengthens operational reliability, complementing the ongoing Territory Champion store expansion and upgrade strategy.

“It also supports our latest Online-Merge-Offline (OMO) initiative that provides online customers personalised service by sales personnel from across the country, as well as seamless delivery and in-store pick up options,” he added.

The CDC encompasses a built-up area of 200,035 square feet (sq ft), comprising a warehouse, offices and ancillary buildings on a 6.6-acre freehold industrial land.

As at June 30, 2023, the group had an unutilised allocation of RM117.7 million from its IPO proceeds for the Territory Champion strategy.

After the RM30 million reallocation, which had been initially intended for store acquisitions, the unutilised allocation will be adjusted to RM87.7 million.

Senheng’s ongoing Territory Champion strategy involves expanding and upgrading 61 stores nationwide from 2022-2024, providing its customers with an unparalleled brand experience.

As at June 30, 2023, the group operates a total of 121 stores nationwide.

Senheng’s shares traded unchanged at 34 sen, valuing the company at RM510 million.