PETALING JAYA: CIMB Securities Research is optimistic about Yoong Onn Corp Bhd
’s (YOCB) growth prospects as demand for linen products continues to grow.
The research house noted YOCB is a leading integrated end-to-end manufacturer and retailer of home linens in Malaysia.
The group owns 13 different brands that cater to numerous market segments, ranging from mass market to premium clientele.
Over the years, YOCB has established various distribution channels, including 37 of its own retail outlets which accounted for 38% of the group’s revenue in the first half of the financial year ending June 2024 (1H24), CIMB Securities said.
The linen retailer also has over 260 consignment counters nationwide, contributing to 53.5% of 1H24 revenue.
It added the company’s recent acquisition of a 60% stake in a Singapore-based home linen retailer, T.C. Homeplus Pte Ltd (TCH) offers revenue growth prospects. TCH is a Singapore-based company that retails, trades and distributes home linens and homeware.
CIMB Securities added YOCB aims to tap into potential synergies between both businesses while leveraging TCH’s established presence and growth potential in the Singapore market.
YOCB also hopes to grow its business operations in Singapore by leveraging TCH’s existing customer base and supply/distribution network there.
The research house noted YOCB expected TCH to have significant development potential to increase its total number of retail locations and market share in Singapore’s home linens and homeware industry.
According to CIMB Securities’ channel checks, the lion’s share of products that TCH retails are under brands owned by YOCB.
TCH operates 11 retail outlets and engages in house-brand manufacturing and mainly serves customers like hotels, cruise liners, government units and major departmental stores in Singapore.
The research house listed three major long-term factors that will sustain the need for its products – population growth, new property sales and rising urbanisation.
Sales of home linens are driven by both replacement and new-usage demand, it added. CIMB Securities said YOCB is well-positioned to leverage new property launches and population growth.
According to YOCB, its products are in constant demand as home linens such as pillows, towels and bed sheets are considered daily essentials. Leveraging the demand, YOCB aims to add 17 to 18 new outlets in FY24.
YOCB consistently sells an average of one million pillows annually, indicating that roughly one in every 30 people in Malaysia uses its pillows each year. This demand remained steady even during the 2020-2022 period and the Covid-19 lockdowns.
CIMB Securities noted demand for linens and bed products are expected to grow as the National Property Information Centre’s (Napic) forecasts the property market to expand by 4%-5% in 2024.
Meanwhile, the implementation of low-value-goods (LVG) tax in January will benefit YOCB by reducing competition from overseas online retailers, the research house said.
“In our view, YOCB stands as a key beneficiary of the LVG implementation. LVG addresses the tax-treatment disparity between goods sold by retail and online businesses, enabling YOCB to compete on a more level playing field with online competitors, especially foreign ones,” CIMB Securities stated.
