Kim Hin Joo’s baby boom boost

Company to ride on Mco-induced benefits and expansion

PETALING JAYA: Baby, children and maternity product retailer Kim Hin Joo (Malaysia) Bhd is banking on the country’s expected baby boom early next year, thanks to most couples staying at home due to the movement control order (MCO).

Not only that, with babies and toddlers outgrowing their clothing size every few months, the demand for its products is also expected to sustain post-baby boom.

The company, which is the exclusive franchisee of mother and baby products chain Mothercare in Malaysia, told Starbiz that it plans to capture the increase in product demand via new expansion strategies and the speedier launch of its new website.

According to chairman and single largest shareholder Pang Kim Hin, the company is open to making new business acquisitions as “this is the best time to look for good opportunities”.

“Currently, our company has cash reserves with zero borrowings. We will not restrict ourselves geographically in our expansion plans,” he said.

As of end-2019, Kim Hin Joo had total cash and cash equivalents of Rm39.5mil, which was a sharp increase from Rm6.85mil a year earlier.

The company, which also has exposure to the toy business, said earlier that it plans to open a few new retail outlets within and outside Klang Valley this year.

Last year, Kim Hin Joo expanded its retail network with the opening of the Johor flagship retail outlet in Mid Valley Southkey Megamall on April 23, Sunway Velocity Mall on Aug 1 and Empire Shopping Gallery on Sept 1.

Pang said that the MCO, which began on March 18, has affected Kim Hin Joo’s sales as stores stopped trading.

However, he pointed out that the company was not as affected as other businesses in the fashion industry which focused on high fashion or expensive and fashionable clothes. “We mainly focus on essentials. “During the period, our e-commerce sales rose substantially. However, it was insufficient to replace the loss of store sales,” he said.

Pang was asked to comment on whether the slowing private consumption in Malaysia would take a hit on Kim Hin Joo’s sales, moving forward.

In response to this, he said that many of the company’s products were affordable.

“We have three ranges of products which are ‘good’, ‘better’ and ‘best’, depending on affordability.

“As customer trade goes down, we can still sell them at a lower cost under the ‘good’ category.

“As a brand, there is great emotional attachment to mothers as we are a trustworthy brand with value, which accounts for our huge VIP base that will help us in our recovery during the post-mco period,” he added.

Pang also said that the company was trying to reduce its operating cost to bring down product cost to sell more competitive products.

Kim Hin Joo enjoyed a strong gross profit margin of 51% for its financial year 2019 (FY19), which indicates that the company has the buffer to make its products more attractively-priced.

The company, which debuted on the ACE Market in July 2019 at an issue price of 43 sen, is currently trading at nearly half of the price at 22 sen, making it attractive for investors.

It is also worth noting that Kim Hin Joo has a dividend yield of 4.55% and a dividend policy to pay at least 40% of its net profits. The company’s price-to-earnings ratio, according to Bloomberg, is 7.9 times.

As the single largest shareholder, Pang owns a direct stake of 2.97% and an indirect stake of 62%. He has been gradually increasing his direct interest in the company post-initial public offering last year, up by about 2.7%.

In FY19, Kim Hin Joo’s revenue increased 3.77% or Rm3.69mil to Rm101.37mil on a year-on-year (y-o-y) basis.

The growth in revenue was mainly attributable to the expansion of its retail network.

However, its net profit declined by 15.3% y-o-y to Rm9.41mil largely due to, among others, the impact of the MFRS 16 accounting changes relating to leases, as well as the increase in operating expenses arising from its listing

“Our company has cash reserves with zero borrowings. We will not restrict ourselves geographically in our expansion plans.” Pang Kim Hin