(Stocks Discussion) SGX: Synagie Corp (SGX: V2Y)?

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SGX-listed Synagie Corporation (SGX: V2Y) has signed an agreement with Amer Sports Malaysia Sdn Bhd, a subsidiary of NASDAQ Helsinki listed Amer Sports Corporation (a leading sporting goods giant with a robust portfolio of internationally recognised brands) to manage its e-Commerce platform business and expand online sales of its branded goods in Southeast Asia.

Deal Highlights

• Amer Sports-owned sales organisation covered 34 countries as at 2018 and its net sales exceeded EUR2.6 billion in the same year.
• Synagie to maintain and promote Amer Sports' online distribution and expand the online sales of its brands products in Southeast Asia.
• Synagie to manage all its authorised online channels and online stores as well as provide integrated services from promotion to customer service.
• To help Amer Sports and/or its appointed distributors to grow their e-Commerce businesses in Southeast Asia

Additionally, the Asia-Pacific Sports Apparel market is expected to generate a revenue of $62.6 billion by 2020, registering a CAGR of 8.1% during 2015-2020. The sale of sports apparel through online stores is also expected to register a CAGR of 14.5% during the same period.

About Amer Sports (HEL: AMEAS)

It has a presence in all major markets offering a broad portfolio of sports equipment, apparel, footwear, and accessories that covers a wide range of sports. Its internationally recognised brands include Suunto, Wilson, Salomon, Arc’teryx, Peak Performance, Atomic, Precor and more. It sells its technically advanced products to consumers through brand stores, distributors, factory outlets, e-Commerce and trade customers in sporting goods chains, specialty retailers, mass merchants and fitness clubs. In late 2018, an Investor Consortium formed by ANTA Sports Products Limited, FV Mascot JV, LP., Anamered Investments Corporation and Tencent Holdings Limited made a cash tender offer for the entire issued and outstanding share capital of Amer Sports, which valued the company at EUR4.6 billion.

About Synagie Corporation (SGX: V2Y)

Synagie is Southeast Asia’s leading e-commerce enabler that assists brands to execute their e-commerce strategies using its cloud-based platform. It currently manages the online businesses for more than 280 brand partners in Southeast Asia. Synagie has a successful model managing Amer Sports' e-Commerce business in Malaysia and will continue to replicate this successful model across different markets to help it further expand its online distribution and sales in the region.

TL;DR The firm has weak financials and poor valuation. This is probably due to Synagie still being in the early growth stage phase. Without a very compelling growth story, I would not bother with investing here at all.

Source: Aspire Shares Investment

Business Profile

Synagie provides e-commerce solutions in Southeast Asia (“SE Asia”) in the Body, Beauty and Baby sector. They help Brand Partners to execute their e-commerce strategies by selling their goods or services to consumers online. They do this by providing one-stop services and integrated technology to manage their multi-channel e-commerce operations.

Source: The Straits Times

Income Statement

For 2018 itself, the profitability is quite low, where earnings were negative. These margins have seemed to worsen since 2017 as well, painting quite a bleak picture for the firm. Despite an increase in revenue, earnings have largely decreased as well.

Balance Sheet

All in all, the balance sheet of the firm looks pretty healthy, with fairly good liquidity ratios as well as no debt to pay off. Furthermore, these ratios have improved since 2017. In short, the balance sheet is strong.

Free Cashflow Analysis

For 2018 itself, free cash flow looks rather bleak, as it was negative. Moreover, free cash flow has also reduced over time. This is quite an unhealthy sign too. This was caused by a decrease in earnings as well as an increase in capital expenditures. Working capital management had improved, however, which helped to improve cashflows. The firm did not pay any dividends, most likely because of the weak cash flows of the firm.

Efficiency Metrics

The firms are very inefficient in their use of assets, and needless to say, this is a very bad sign overall. Their very weak ROE is caused not only by weak earnings but also by a low equity multiplier.

Valuation

The shares of the firm are trading at very low multiples. However, this could be due to the very weak companion variables which accompany these multiples. Hence, I wouldn't bet that the shares of the firm are undervalued at all.

Cost of Capital

As the firm does not hold any debt, there is no cost of debt associated with the firm. Without an estimated beta, it would be quite hard to determine the cost of equity for this instance. Regardless of the WACC, even if we give Beta a value of 0,1, it would be much higher than the ROIC because earnings are negative. This suggests that the firm is destroying value for shareholders.