Finally, A Buying Opportunity Emerged for Synergy House?

Figure 1.0: Share Price Chart of SYNERGY

In an announcement, SYNERGY attributed the sudden plunge in its share price to the acquisition of Hillsdale Furniture, a client, by Green River Group. Concerns have arisen regarding SYNERGY's ability to collect the USD 2.9 million owed by Hillsdale for furniture sales transacted in 2024.

Logically, when a customer is acquired, their liabilities remain. If selling a company could eliminate debts, many companies would simply do so to wipe off any obligations. Therefore, SYNERGY anticipates minimal or no impact from this incident.

Figure 2.0: Sample Product Snippet of SYNERGY

I have been following SYNERGY since their IPO. This company specializes in cross-border e-commerce within the furniture industry and has been delivering substantial growth to its shareholders.

In FYE2022, which was highlighted in their prospectus as their best year, SYNERGY recorded RM194.1 million in revenue and RM16.6 million in Profit After Tax (PAT). However, in the past two quarters alone—Q4 FYE2023 and Q1 FYE2024—SYNERGY achieved RM90.8 million in revenue and RM10.3 million in PAT, and RM83.7 million in revenue and RM9.0 million in PAT, respectively.

On 29 April 2024, RHB Investment Bank published a report titled “Going All Out; Keep BUY” for SYNERGY, with a revised target price of RM1.610, up from the initial target price of RM1.080 in their first report.

The re-rating was largely driven by strong business-to-business (B2B) sales, investments in artificial intelligence and data analytics to enhance internal operations and external sales, and a new business model announced in June/July, aiming to collaborate closely with local furniture makers to onboard them on Wayfair, one of SYNERGY's key platforms.

This indicates significant upside potential for SYNERGY's earnings.

Despite SYNERGY’s share price rebounding, we believe there is still ample room for growth, at least to the revised target price of RM1.610 from the current level.

Do you see this as an opportunity too?

The information provided in this article is for educational and informational purposes only and should not be considered financial advice. Investing in stocks involves risks, including the loss of principal. Always conduct your own research and consult with a qualified financial advisor before making any investment decisions. The author holds no responsibility for any investment decisions made based on the information provided.