Synergy House chief financial officer Kenneth Ng
PETALING JAYA: The Hillsdale debt issue will not be detrimental to Synergy House Bhd
as the business-to-consumer (B2C) segment will still be its focus, going forward.
On July 17, the group’s share price tumbled 36 sen or 26% to RM1.02, triggering a suspension in intraday short selling. This marked the stock’s lowest point since April 12.
There were concerns over the group’s ability to collect the US$2.9mil owed by its US customer Hillsdale Furniture LLC, which was acquired by Asia-based Green River Group.
In a reply to Bursa Malaysia following a query about unusual market activity, the group said Hillsdale is a customer of its wholly owned subsidiary Synergy House Furniture Sdn Bhd (SHF) via its business-to-business (B2B) segment.
Synergy House clarified that Mellow River, a division of Green River Group, had acquired Hillsdale’s assets, excluding its liabilities.
The furniture exporter said Hillsdale owes SHF US$2.9mil for furniture sales transacted from January to May this year.
Chief financial officer Kenneth Ng said the group is still assessing the impact of the matter, adding that it is difficult to determine the percentage of recovery of the US$2.9mil debt.
“It is a bit subjective to quantify (the expected impairment) at this time but according to the announcement, the maximum exposure is US$2.9mil, which is the gross amount and not net of any potential recovery from insurance or other sources.
“This is a temporary hiccup within the ordinary course of business operations, which is an inherent risk for B2B dealings.
“We believe the growth plan of the group is not largely impacted by this matter,” he told StarBiz in a virtual briefing with fund managers and analysts.
Notably, Hillsdale’s revenue contribution to the group was 9% as at the first quarter of financial year 2024 (1Q24) compared with 13% last year.
Synergy House recorded total revenue of RM270.2mil and RM83.7mil in FY23 and 1Q24, respectively.
Ng said the B2B revenue contribution towards total revenue has declined mainly due to the growth of the B2C division.
“The B2B business is not the targeted segment of growth for the company. The B2C division is our focus and has seen positive growth.
“Revenue contribution of the B2B segment was at 74%, 55% and 48% in FY22, FY23 and 1Q24, respectively,” he said.
Ng also stressed there is revenue continuity as the group is able to continue a major portion of its sales previously made with Hillsdale, with Mellow River.
“The volume remains the same and we were able to negotiate for better pricing. The renegotiated portion of this particular business segment makes up about 65% of the sales transacted with Hillsdale in 1Q24.
“Synergy House was able to transact with Mellow River for the outstanding orders of this business segment to be scheduled for delivery in the second, third and fourth quarters of FY24,” he said.
Executive director Tan Eu Tah said the group is confident of delivering a good top line this year and meeting the earlier planned budget for its top line.
On whether its bottom line will take a hit if the provision becomes a bad debt, Tan said: “It depends on how much we can deliver for our top line. Our B2C business is growing as expected and we have been opening up more B2C channels this year than the last. Everything is on track.”
RHB Research and Rakuten Trade are the only two research houses covering the stock and both have issued “buy” calls with the consensus 12-month target price of RM2.01, representing an upside potential of 56% from the last close of RM1.29.
The counter’s year-to-date peak is RM1.78 a share.
