KUALA LUMPUR (Sept 27): PublicInvest Research has derived a fair value of 28 sen for ACE market-bound SSF Home Group Bhd, which is slated to be listed on Oct 10, based on a 12 times price-earnings multiple to its financial year 2025 (FY2025) earnings per share forecast of 2.3 sen.

The initial public offering (IPO) is expected to raise approximately RM50 million from the issuance of 200 million new shares.

“Besides utilising 10% and 3% of the proceeds for repayment of bank borrowings and marketing activities, respectively, 70.4% of the proceeds are allocated for [the] setup of new retail outlets that are earmarked for long-term future growth,” the research house said in a note on Wednesday.

SSF Home, which is principally involved in the retail of furniture, home décor and home living products via its retail and online channels, is expected to grow from further establishment of new retail outlets, and enhancement of its IT infrastructure.

Post-listing, SSF Home intends to open 18 new retail outlets: three in the central region, seven in the northern region, six in the southern region, and two in East Malaysia.

The group intends to establish six retail outlets annually for the first three years following its listing exercise, PublicInvest said.

As at Aug 10, SSF Home manages and operates 41 retail outlets with a total retail space of 1,026,504 sq ft which allow the group to reach a large base of customers across a wide geographical area.

It has 82,997 active members who contributed RM118.02 million to the group’s revenue for FY2020, RM188.59 million for FY2021, RM152.86 million for FY2022 and RM162.33 million for FY2023.

This represents a compound annual growth rate of 15.3% from FY2020 to FY2023.

PublicInvest ascribed a 40% discount to its peers’ average forward multiple of 20 times.

“We believe the discount is warranted given SSF’s relatively small market capitalisation,” it said.

Maybank Investment Bank Bhd said based on SSF Home’s pro forma financial statements and its IPO price of 25 sen, the company is trading at a trailing FY2023 price-earnings ratio (PER) of 14.5 times. In comparison, the Bursa Malaysia Consumer Index trades at prospective 2023 PER of 17.2 times and 2024 PER of 15.1 times.

The bank said SSF Home may potentially be exposed to the risks of changing trends where home décor and living products are subject to constantly evolving designs, seasonal trends and customers’ preferences.

“SSF will need to stay abreast with the latest trends to provide customers with products that are in tune with the current trends. Any possession of obsolete inventories can adversely impact its bottom line as unsellable items will be written off,” Maybank said.

Additionally, the upward inflationary pressure and rising interest rates environment could lead to a higher cost of living, impacting consumer purchasing power of Malaysian households, including for products such as home furnishing, it said.