Thread by @BreakMyCoffee

Will Senheng New Retail Bhd be able to replicate MR DIY's successful IPO?

The Securities Commission Malaysia has approved Senheng's IPO, which is likely to happen in January 2022.

Lessons from the electrical retailer's history 👇

1. Established back in 1989, Senheng has come a long way from its humble beginnings.

The first outlet in Pandan Jaya was a half shop lot set up, with less than RM30K worth of stocks.

Today, Senheng has 103 outlets across both W.M. and E.M.

2. The electrical giant is helmed by three brothers - namely Lim Kim Heng (KH), Kim Chieng (KC), & Kim Yew (KY).

Kim Heng seems to be the company's prime mover, having won several accolades such as EY Entrepreneur of the Year and Male Entrepreneur of the Year in 2020.

3. KH used to work in a family-run business until the 2nd generation owners came back from abroad & clashed with KH.

It was then KH realised he needed to start on his own to gain the independence he needed. So he started SH with his siblings.

The early days were difficult.

4. Being a new player, KH started Senheng from scratch with no suppliers, salespeople, or branding. KH had to build his customer base.

Fortunately, selling came easy to him. KH believed his charm brought in the customers.

5. The shop used to have queues! Customers were soon recommending Senheng to their friends.

Within 7 months, KH made enough money to start a second branch.

KH and his family worked very hard from dawn till late night 364 days a year - except the 1st day of CNY.

6. Business was blooming in its first six years, which made the Lim brothers complacent. KH himself played golf 4 to 5 times a week.

Complacency almost killed the business as KH recalled he was paying less attention to the business. Customer service became very bad.

7. Notwithstanding, the Asian Financial Crisis was around the corner. KH was worried. Having lived through the recession in the 1980s, he doesn't want to relive the tough days.

He knew he had to change something, so he went back to look at everything.

8. KH and his team identified a few key issues:

a. Too many stores.
b. Too many unbranded products.
c. No proper SOPs in place for business processes.

Senheng was then reborn, with standardised operations and carrying better quality products.

9. Throughout the years, notable initiatives include:

- Loyalty programme which encouraged recurring business, one of the 1st in electronics retail to do so.
- Senheng stores in shopping malls, SenQ. Malaysians love shopping malls!
- Adopting a new retail model.

10. Its new retail model, based on strong online & offline presence, propelled Senheng to make RM1.29 bil revenue for FY20.

While the draft prospectus did not indicate any listing figures, Senheng New Retail Bhd's IPO will list about 25.9% of its enlarged shares capital.

11. Proceeds from the IPO will mainly be used to upgrade chain stores, logistics network & boost digital infrastructure.

The public portion is much bigger than MR DIY's public portion of a mere 15%.

PS - This is not financial advice!

12. Key facts:

- 10,000 SKUs from 280 brands
- 768,000 sq ft of physical retail space
- 1,683 employees
- Dividend policy of at least 30% of net profit.
- Concentration risk - Top 5 suppliers account for more than 64% of its purchases.

13. Sources:

optionstheedge.com/topic/people/s…’s-continuous
sc.com.my/api/documentms…
senheng.com.my/about-us
thestar.com.my/business/busin…
thestar.com.my/metro/metro-ne…
theedgemarkets.com/article/ee-ret…

14. THREE LESSONS:

1. Word of mouth marketing works. KH's good service was made known to its customers' friends.

2. Complacency kills. It always killed Senheng.

3. Crises aren't always bad. It's a catalyst to change.

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