KUALA LUMPUR (Sept 2): SNS Network Technology Bhd made a modest debut on the ACE Market of Bursa Malaysia on Friday (Sept 2) as it saw a mere 1.5 sen or 6% premium against its initial public offering (IPO) price of 25 sen.
The counter had traded between 23 sen and 27 sen intraday with a total volume of 368.14 million shares. At the opening bell, the stock was flat at 25 sen with 19.54 million shares exchanged.
SNS Network was the most-active stock on the local stock exchange on Friday.
The group, principally involved in the sale of information and communications technology (ICT) products, has raised RM90.7 million from the listing exercise with desire to fulfil its expansion plans in the short and medium term.
SNS Network managing director Ko Yun Hung said the group believes there are many opportunities in the commercial segment of the local market, including government agencies and educational institutions, with digitalisation plans for hybrid working arrangements and e-learning options as the pandemic eases.
“In 2020 and 2021, many corporations cut down on spending which includes the ICT (side). This year, when the economy reopened, we are seeing two years of delayed sales coming, including from classrooms that want to upgrade their infrastructure,” Ko told the press after the listing ceremony.
Ko highlighted that the commercial segment is SNS Network’s core revenue generator, as it had contributed 70% of the group’s revenue in the past four years.
For the financial year ended Jan 31, 2022 (FY22), SNS Network’s profit after tax stood at RM35.92 million, compared with RM23.81 million in FY21, RM7.78 million in FY20, and RM9.1 million in FY19.
Meanwhile, revenue totalled RM1.11 billion in FY22, RM721.47 million in FY21, RM675.28 million in FY20, and RM594.14 million in FY19.
Ko said based on the RM1.11 billion revenue in FY22, SNS Network commanded only a small market share of 1.47%, and he further emphasised that there is a lot of room to grow.
In terms of overcoming the ongoing supply chain disruptions that the industry faced, Ko said the group is working closely with suppliers on product roadmap and forecasting.
“We used to give forecasts for sales on a quarterly basis. But since the pandemic, we expanded to six months for a longer forecast.
“We also seek to understand customers' consumption objective and inform them on the options they have to meet both expectations to mitigate these shortages. I think all ICT players have a similar strategy,” Ko said.
The company has earmarked RM33.4 million from the proceeds of the IPO for capital expenditure, of which RM30.9 million is to be allocated towards growing its device-as-a-service (DaaS) subscription-based service, while RM2.5 million will be used to open 10 new retail stores in Klang Valley, Johor and Penang.
DaaS is a model for device leasing offered to customers based on monthly subscription payments. To date, SNS network said it has 82 DaaS subscriptions with a total subscription value of RM225.86 million.
It added that the company received 75 enquiries from which SNS Network has entered into contracts with 26 governmental bodies amounting to RM247.49 million and three public listed companies amounting to RM550,000.
Ko also noted that the 10 new retail stores envisioned will be established within the next three years.
Another RM18 million of the proceeds will be used to part finance the construction of the company’s new regional hub in Petaling Jaya to support its nationwide expansions, while RM20 million will be used for repayment of bank borrowings, RM13.1 million for working capital, RM1.5 million for marketing of its JOI smart classroom framework, and RM4.7 million to defray listing expenses.
“For our house brand JOI, we positioned it as an affordable device for the market. There is always good demand for entry-level devices, which is a form of usage for the education sector. Parents buy entry-level devices for young school kids.
“We want to align with that and come out with more JOI products to cater to the affordable segment,” he said.
Having said that, Ko noted that JOI brand only contributes to 2% of SNS Network overall revenue.
SNS Network, which started in 1998, carries a total of 33,633 stock-keeping units (SKUs) of third party ICT products and 363 SKUs of JOI products.
Rakuten Trade has rated SNS Network a “buy” at 26 sen with a target price of 36 sen and said coupled with rising demand for ICT solutions due to workplace digitalisation, it expects SNS Network to register net earnings of RM31.8 million for FY23 and RM38.8 million for FY24.
In an investment idea note on Friday, Rakuten said the target price of 36 sen was premised on 15 times price-earnings ratio (PER), 50% discount to its listed peer on Bursa Malaysia due to smaller market capitalisation.