SYNAGIE CORPORATION LTD.
SGX:V2Y
Synagie Corp Ltd - Automating E-commerce For Global FMCG Brands
- Synagie is one of the fastest-growing providers of e-commerce services in Singapore. It offers one-stop services to global FMCG (fast-moving consumer goods) clients such as Kimberly-Clark.
- We expect Synagie to ride on robust e-commerce growth prospects; Frost & Sullivan projects online BBB (body, beauty and baby) industry in SEA to expand by 25.2% CAGR in 2017-22F.
- Revenue growth drivers for Synagie could come from its expansion in other product categories, beyond its core BBB segment and outside Singapore.
- Synagie currently trades below its IPO price of S$0.27 and at CY19F price-to-sales (P/S) ratio of 2.2x, a 60% discount to its global e-commerce peer average of 5.4x.
One-stop shop for e-commerce services for FMCG brands
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- Established in late 2014, home-grown Synagie now provides e-commerce services to more than 250 fast-moving consumer goods (FMCG) brands – mostly in the body, beauty and baby (BBB) sector. Its suite of services includes setting up a brand’s multi-channel online retail presence on popular marketplaces such as Lazada and Qoo10 and helping to manage its customers’ e-logistics and fulfillment processes via its Synagie Platform, a cloud-based e-commerce and fulfillment platform.
- We initiate coverage on Synagie with an ADD call and target price of S$0.34.
Creating a scalable ecosystem with Insurtech
- Synagie acquired its profitable Insurtech subsidiary, 1Care Global, in Apr 2018 to enter the third-party administrator (TPA) business. This is Synagie’s third business segment, which would work synergistically with its other two segments – e-commerce and e- logistics.
- Synagie’s Insurtech business could help Synagie expand into the computer, communication and consumer electronics (3C) segment, moving beyond its core BBB space and fits into its asset-light business model, which allows for rapid scalability.
Fastest-growing e-commerce start-up
- Frost & Sullivan rates Synagie as one of the fastest-growing e-commerce start-ups in Southeast Asia, given its historical revenue CAGR of 551.8% over 2015-17. Although the group is currently loss-making, we project Synagie to deliver c.70.7% revenue CAGR over FY17-20F and achieve positive net profit in FY20F, benefiting from economies of scale.
Riding on robust e-commerce growth prospects in the region
- According to Frost & Sullivan, the online BBB industry accounted for 13.3% of the e- commerce gross merchandise volume (GMV) in Southeast Asia in 2017 and is expected to grow by 25.2% CAGR over 2017-22F, underpinned by mass-market brands adopting a direct-to-consumer digital strategy comprising online sales channels and high turnover rate for BBB products.
- We think other revenue growth drivers may come from Synagie’s expansion into other product categories beyond BBB and outside of Singapore.
Initiate with Add and target price of S$0.34
- Given that Synagie is still in an early high-growth stage, we project that it would achieve normalised EBITDA of S$4.8m by end-FY23F. With its global peers trading at CY19F EV/EBITDA multiple of c.24x, we apply that multiple and a 10% WACC to our discounted FY23F EBITDA to derive a target price of S$0.34. This implies potential upside of 44.7% at FY19F P/S of 3.1x – c.43% discount to its global peers’ average of 5.4x.
Key risks and potential re-rating catalysts
- Downside risks include prolonged net losses and cessation of relationships with key brand partners. Pote from faster-than-expected increase in profitability.
Colin TAN
CGS-CIMB Research
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https://research.itradecimb.com/
2018-09-05
SGX Stock
Analyst Report
0.34
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0.34
