Senheng’s seamless retail model driving growth

Its sales are backed by its strong PlusOne loyalty programme of about 90% of its FY21 revenue 


SENHENG New Retail Bhd’s move to grow its physical retail area by 18%, steady same-store sales growth and robust growth in online sales are all set to provide a boost to its earnings potential. 

CGS-CIMB Securities Sdn Bhd has thus initiated coverage of Senheng New with an ‘Add’ rating and a target price of RM1, while projecting a net profit compound annual growth rate (CAGR) of 13% for the financial year of 2021 (FY21) to FY24. 

“Despite a highly competitive operating environment in the consumer electrical and electronics (E&E) retail space, Senheng’s key advantage is its ‘seamless retail model’ with full integration of its physical, online and backend operations, in our view,” CGSCIMB analyst Walter Aw wrote in the report on Senheng last week. 

He added Senheng has used business intelligence to drive business decision-making since 2014, while providing uniform pricing across all sales channels (omnichannel marketing). 

“Its sales are backed by its strong PlusOne loyalty programme of about 90% of its FY21 revenue,” he wrote. 

Senheng is at present the largest consumer E&E retailer by revenue, according to a report by Smith Zander in 2021, in the country with a total of 105 outlets nationwide at the end of 2021. 

Besides physical stores (89.2% of FY21 revenue), Senheng retails products via online retail channels, including its self-operated app and the online store and third-party marketplaces such as Shopee and Lazada. 

Aw stated 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. 

“In our view, this is a differentiating factor, as it is able to cater to consumers’ E&E needs via a wide product offering,” he added. 

Thus, Aw projects Senheng to post 12.7% revenue and 13.4% core net profit CAGR over FY21 to FY24, backed by an 18.1% CAGR in retail floor space and 10.1% CAGR in online channel revenue. 

“Our forecasts are based on its nearto medium-term strategies including upgrading or expanding its physical stores, growing its exclusive and own-brand product portfolio and better membership stickiness by enhancing PlusOne, as well as upgrading its physical and digital backend infrastructure leading to better operational efficiencies,” he said. 

CGS-CIMB has applied a discount to Senheng to account for the competitive nature of the retail E&E sector and its low barrier to entry. 

Nevertheless, the broker sees a strong recovery in Senheng’s footfall as a key potential re-rating catalyst, while the downside risks would be supply disruptions, a slowdown in consumer E&E sales and intensifying competition.