KUALA LUMPUR, June 19 (Bernama) — The retailer for Mothercare outlets in Malaysia, Kim Hin Joo (Malaysia) Bhd, en route to a listing on Bursa Malaysia’s ACE market this July 8, has set its sight on tapping the potential of the toy segment to become a major earnings driver for the company.
At the same time, it has also laid out plans to grow its presence in the baby, children and maternity (BCM) segment through the opening of more Mothercare outlets throughout the country.
Chairman Pang Kim Hin deemed the toy segment as an unexplored segment for Kim Hin Joo, with contribution from the segment to the company’s revenue stood at only seven per cent, despite the obvious vast potential of the sector.
As part of its effort to tap the potential of the toy segment, the company is in the midst of finalising a development agreement with UK toy retailer, The Entertainer UK, with both parties expected to ink a development agreement in the second half of this year.
The agreement would grant Kim Hin Joo, an exclusive rights to open and operate The Entertainer UK toy outlets in Malaysia.
He said the first The Entertainer UK store in Malaysia is set to open in the first quarter of 2020.
“Every sector is important for me, and of course the main contributor at present is Mothercare but going forward, I think the toy segment would be significant.
“Once we take-off (open the first the UK Entertainer store), I can say that three to four outlets are not what I envisaged for this business, we must grow this business to be bigger than Mothercare,” he told Bernama, adding that Kim Hin Joo would be the master franchisee of the UK Entertainer for Malaysia going forward.
Comparing the BCM and the toy segment, Pang said that total import of BCM products under the Mothercare brand is worth RM270 million versus RM730 million in the toy segment, however, the company’s revenue contribution by the latter segment is currently limited as it was involved more in baby’s toys.
“We only sell baby toys, and a meagre seven per cent of the group revenue is derived from the toy segment and it is such a small sum because we are not in the older kids segment, “he said.
For the financial year ended Dec 31, 2018, the retail segment contribution to the group’s revenue stood at RM80.25 million, while distribution business contributed RM17.43 million.
For the period under review, home and travel’s contribution to the revenue stood at RM48.55 million, followed by clothing segment (RM42.66 million) and toy segment (RM6.48 million).
As for its BCM expansion, Kim Hin Joo is looking at adding four to five new Mothercare stores to the current 17 stores available.
It has also secured two premises located at Sunway Velocity Mall and Empire Shopping Gallery, scheduled to be opened in the third quarter of 2019.
Meanwhile, in conjunction with its prospectus launch today, Shariah-compliant Kim Hin Joo said its initial public offering (IPO) entails a public issue of 76 million new shares or 20 per cent of the group’s enlarged share capital, offering the sale of 57 million existing shares or 15 per cent of its enlarged share capital at an issue price of 43 sen per share.
Of the total public issue, 19 million shares will be made available to the Malaysian public via balloting, 10 million shares for eligible persons and the remaining 47 million new shares are earmarked for private placement to selected investors.
Pang explained that the company is expected to raise RM32.68 million through the IPO, of which RM20 million is set aside for business expansion.
The allocated fund would be utilised for opening more Mothercare branches, The Entertainer UK’s stores, revamping and upgrading its Information and Technology structure, improving e-commerce platform as well as expanding its distribution business.
Kim Hin Joo’s market capitalisation upon listing would be RM163.4 million based on its enlarged share capital of 380,000,000 shares.
Asked on the current market condition, Pang believed that market condition has been shaky, despite the market sentiment turning better.
“Market is definitely improving and hopefully we will be back at good normal trading once we go live on July 8,” he said.
To a question on restructuring exercise at Mothercare UK and the impact on investors’ sentiment, Pang noted that the stability of Mothercare has improved following the restructuring.
“If you ask me on the impact (of restructuring on investors’ sentiment), if we look at this two years ago, the impact is very high but today the stability of Mothercare has greatly improved due to a number of reasons.
“They have restructured and recapitalise the whole company and they have also distinguished themselves into different units, so now all the international business is under different company, hence, whatever happens at the international market doesn’t affect them anymore, not to mention they have pared down their debts and closed all loss-making stores,” Pang said.
The UK baby goods chalked up wider losses of £87.3 million for 2018 as compared with £72.8 million in the previous year, on top of shutting down more than 40 per cent of its physical stores to 79 stores from 134 previously.
Citing that growth prospect in Malaysia is higher, Pang said the scenario in the UK retail scene will not affect Malaysia due to the country’s better demographics and spending habits.
“The Mothercare UK is now embarking on e-commerce, while for us, we have two channels of revenue namely retail, distribution, whilst e-commerce is parked under retail segment.
“E-commerce and retail is grouped together and contribute 82 per cent to our earnings. Our sales via online platform stood at two per cent, which is similar to the national ecommerce average sales, of which the national average of e-commerce business in Malaysia is around 2.5 per cent, “ he said.
As of today, the company group sells a total of 184 brands of clothing, home and travel and toys as well as distributes 22 brands of home and travel products to local retailers, as well as overseas retailers and distributors. — BERNAMA
