KUALA LUMPUR: Senheng New Retail Bhd, one of the largest consumers electrical and electronics (E&E) chain retailers in Malaysia, is valued at RM1.21 per share by TA Securities.
This is higher than Senheng's initial public offering (IPO) price of RM1.07.
TA Securities believes Senheng should be valued at 20 times calendar year 2023 (CY23) price to earning ratio (PER)
The firm said this was lower than the traded PER of big capitalised regional home improvement retailers but higher compared to Malaysian retailers under its coverage.
"We reckon such valuation is justified considering the population of Indonesia, Thailand and the Philippines are several times bigger than Malaysia, suggesting that the addressable market could be larger. We also consider Senheng's robust store expansion plan compared to Malaysian retailers under our coverage," it said.
According to TA Securities, Senheng had set aside RM160.5 million of IPO proceeds to enhance its retail presence for the financial years 2022 (FY22) to FY24.
The company plans to have 61 newly set up or upgraded physical stores (11 units of Grand Senheng Elite, 35 units of Grand Senheng, eight units of Grand senQ and seven units of senQ stores).
"Based on such an expansion plan, we estimate the number of stores operated by end-FY22 would be 10 per cent more than FY21 whereas floor space may increase as much as 25 per cent in FY22. We deem this a strong move to ride on yearly growth expected in the consumer E&E industry," it said.
TA Securities expects Senheng to record earnings growths of 11.8 per cent, 24.5 per cent and 17.7 per cent to RM62.2 million, RM77.4 million and RM91.1 million for FY21, FY22 and FY23 respectively.
"This shall be supported by top line growth resulting from expansion of large format stores and sales traction over its online platform," it added.