MBV: Malaysia's "first brother" of printable clothing, limited capacity of full inventory
MBV: Malaysia's "first brother" of printable clothing, limited capacity of full inventory
Malaysia and Singapore are Southeast Asian countries located near the equator, with typical tropical climate. With high temperature and humidity all year round, local residents generally choose T-shirts, jerseys and uniforms as their daily wear. Recently, due to the development of entertainment activities, workplace clothing and advertising demand, printable clothing has become the preferred clothing of Malaysian and Singaporean consumers.
Stable growth of printable garment market in Malaysia and Singapore
According to frost Sullivan, the revenue generated by the printable clothing market in Malaysia increased from about rm393 million in 2013 to about rm593 million in 2018, with a CAGR of 8.6%. The printable ready to wear market is expected to continue to grow in the next five years, reaching about rm885 million by 2023, with a CAGR of about 5.1% from 2019 to 2023.
Singapore's revenue from printable clothing is on the rise. Revenue from ready to wear clothing increased from about S $113 million in 2013 to about S $130 million in 2018, with a CAGR of about 2.8%. Revenue from customized clothing increased from about SGD 53.2 million in 2013 to about SGD 64 million in 2018, with a CAGR of about 3.8%.
It is expected that the revenue of customized clothing will reach about SGD 80.4 million in 2023, with a CAGR of about 2.8% from 2019 to 2023. In the next few years, Singapore's demand for customized clothing will not be less than 1 million pieces. In addition, ready to wear clothing is expected to reach about S $131 million in 2023, with a CAGR of about 0.6% from 2019 to 2023.
MBV, the largest printable clothing supplier in Malaysia, seeks to be listed
In the past few years, Malaysia and Singapore have maintained stable growth in printable clothing, which has made a number of enterprises in the industry stand out.
Recently, mbvintl (hereinafter referred to as "MBV"), a stable supplier of printable clothing, was re submitted to HKEx. The company was founded in 1995, with its headquarters in Xinshan City, southern Malaysia. It mainly engages in the business of purchasing, wholesale, supply and marketing of printable clothing and gift products in Malaysia and Singapore.
It is estimated that more than 100 and 50 suppliers are engaged in the wholesale and supply of printable garments in Malaysia and Singapore respectively. In terms of revenue, the three market players accounted for about 32.4% of the total market share in 2018, and MBV ranked first with about 25.0% market share.
According to the prospectus, MBV's business model is to purchase ready to wear products from independent OEM manufacturers in low-cost countries and sell them to downstream customers, including retail stores, clothing trade and processing companies and end consumers. During the previous record period, the company had about 14600 customers in Malaysia and Singapore.
From fy2015 to fy2019, the total revenue of MBV is RM150 million, rm156 million, rm164 million and rm178 million respectively, with a compound annual growth rate of about 6.0% in the past four years, while the net profit attributable to the owners of the company is rm1985.5 million, rm20.826 million, rm20.419 million and rm18.923 million respectively. In the last four fiscal years, the overall gross profit of MBV is about rm44.318 million, rm45.774 million, rm50.078 million and rm54.145 million respectively, with the overall gross profit margin of 29.6%, 29.3%, 30.5% and 30.4% respectively.
Need to expand capacity and storage capacity
According to Zhitong financial app, MBV's performance is stable. On the one hand, as the company's revenue mainly comes from Malaysia and Singapore, the demand for printable clothing in the two countries has maintained steady growth, but the market capacity is relatively small. On the other hand, after years of development, MBV's main production capacity and storage facilities have been difficult to meet the needs of business expansion.
According to the prospectus, in order to store a large number of inventory units to meet the immediate delivery needs of expected customers, the company has two Johor warehouses (one for the storage of printable clothing and the other for the storage of gift products) in Xinshan City, Malaysia, and storage space in sales offices in Xinshan City, Kuala Lumpur and other Selangor regions. In fy19f, the average actual utilization rate of warehouse is about 99.5%.
In addition, the Johor production facility in Xinshan city is set to have a total annual capacity of about 540000 units. During the previous record period, the actual utilization rates of the production facilities were 91.8%, 92.1%, 97.5% and 98.0% respectively.
MBV said in the prospectus that with the implementation of the expanded product portfolio plan, the company needs to establish new sales offices to expand geographical coverage and renovate existing sales offices, strengthen marketing programs and develop e-commerce sales platforms.
Thus, MBV still has expansion plans in the future. However, the company also stated in the prospectus that the cash level of the company would be adjusted to about rm12.1 million after considering the total trade and other payables of rm24.5 million as of December 31, 2019. This will only be sufficient to cover an estimated monthly expenditure of rm12.2 million for about two months. This level may not be sufficient to meet the company's significant capital needs for both organic and inorganic growth strategies.
Therefore, the listing financing may help MBV to alleviate the capital pressure and reduce the financing cost. But don't forget that MBV is in a narrow track of clothing category after all. If the company fails to further break the boundary between products and market in the future, it may be difficult to win market favor.