RegistrationRegistration No.No. 202101019079202101019079 (1419379(1419379--T)T)

7. BUSINESS OVERVIEW

7.1 GROUP OVERVIEW

We are the largest consumer electrical and electronics chain retailer in Malaysia by revenue, with total sales of RM1.29 billion for the FYE 2020. Our Group retails consumer electrical and electronic products through our chain of 103 physical stores as at the LPD which are located throughout Malaysia as well as via online platforms. We aim to provide a convenient and comfortable shopping experience to our customers under our seamless retail model through the integration of physical and online stores and by offering home deliveries and in-store pickup for products purchased.

As at the LPD, our stores carry about 10,000 SKUs from over 280 different brands. We offer a wide range of digital gadgets, audio visuals, home appliances and other related products from major international and local brands. We have also recently ventured into direct importation and distribution of branded kitchen appliances, home electricals, personal and beauty care appliances, and are currently in the midst of launching our own range of cookware products under our own “Delighto” brand.

We are able to leverage on the large scale of our retail operations as well as our established relationships with our suppliers with whom we have maintained longstanding relationships with, to obtain beneficial commercial terms and supply priority from them. This allows us to price our products competitively which contributes positively to customer satisfaction and our financial performance.

As at the LPD, we operate approximately 768,000 sq ft of physical retail space under 4 store concepts, namely “Grand Senheng Elite”, “Grand Senheng”, “Senheng” and “senQ”. Moving forward, we continue to expand and upgrade our network of physical stores by opening new “Grand Senheng Elite” stores, “Grand Senheng” stores and “senQ” digital stations and upgrading certain existing “Senheng” stores to “Grand Senheng” stores or “Grand Senheng Elite” stores. We intend to also introduce a new store concept, namely “Grand senQ” through opening new “Grand senQ” digital stations and/or upgrading certain existing “senQ” digital stations to “Grand senQ” digital stations. Our physical stores are operated either directly by us or via franchise agreements or our incentive programme with long-serving store managers who participate in our franchise programme or our incentive programme, respectively.

As at the LPD, our retail operations are supported by our centralised logistics model and established logistics network which comprises our CDC and regional hub in Klang, Selangor, 8 other regional hubs located throughout Malaysia and a fleet of both in-house and third-party transportation service providers. Through the WMS, our procurement, warehousing and logistics teams are able to optimise product availability at our physical stores as well as ensure goods ordered by our customers are delivered in a timely manner.

We have our own loyalty programme known as PlusOne, which has 2.88 million paid registered members as at the LPD. A majority of our sales are contributed by PlusOne members and we actively recruit new members. Our members enjoy benefits such as additional PlusOne extended warranty coverage of up to 24 months on top of the manufacturer’s standard warranty. The PlusOne extended warranty is offered to all our paid PlusOne members and is 100% insured by a third-party insurance provider which then reinsures 70% of the warranty liabilities to our subsidiary, namely Senheng Captive.

Moving forward, we intend to further entrench our position as the largest consumer electrical and electronic products chain retailer in Malaysia. Further information on our business strategies and future plans are set out in Section 7.3 of this Prospectus.

48 48 RegistrationRegistration No.No. 202101019079202101019079 (1419379(1419379--T)T)

7. BUSINESS OVERVIEW (CONT’D)

7.2 OUR COMPETITIVE STRENGTHS

(i) Largest chain retailer of consumer electrical and electronic products in Malaysia

We are the largest consumer electrical and electronics chain retailer in Malaysia by revenue. Since the opening of our first outlet in 1989, we have grown to a chain of 103 physical stores occupying approximately 768,000 sq ft of physical retail space across every state in Malaysia. As at the LPD, we operate 4 store concepts, namely “Grand Senheng Elite”, “Grand Senheng”, “Senheng” and “senQ”. “Grand Senheng Elite” stores, “Grand Senheng” stores and “Senheng” stores are typically located in commercial areas in close proximity to residential housing areas while our “senQ” digital stations are typically located in shopping malls.

Through our extensive retail presence which we have built up over the past 30 years, our “Senheng” and “senQ” brands are recognisable and reputable in the consumer electrical and electronic industry in Malaysia. In recognition of the strength of our brands, we have received many awards and accolades, examples of some recent awards and accolades are the “Malaysian Business of the Year Award, 2020”, “Best Brand (Platinum Award)”, “Best Employer (Platinum Award), 2020”, “Best Use of Technology (Platinum Award), 2020” and “Best in Marketing (Platinum Award), 2020” from the Star Outstanding Business Awards (SOBA) and “Revolutionary Hero Brand Award – Outstanding Performer, 2017” award from Lazada Malaysia.

The following map depicts the locations of our physical stores in Malaysia as at the LPD:-

Further information on our retail platforms is set out in Section 7.6.3 of this Prospectus.

49 49 RegistrationRegistration No.No. 202101019079202101019079 (1419379(1419379--T)T)

7. BUSINESS OVERVIEW (CONT’D)

(ii) Seamless retail model enables an offering of a wide range of products

Our seamless retail model was introduced in 2017 to align the 9 key aspects of our business, namely, product, pricing, promotions, inventory, loyalty programme, logistics, payment mode, repairs & services and sales promoter benefits. Since then, we have built a strong online presence which is integrated with our network of physical stores to offer a seamless shopping experience to our customers. In addition to our network of physical stores, we also sell our products via online retail platforms, namely the “Senheng” online store, “senQ” online digital station as well as selected third-party online marketplaces.

Through our seamless retail model, we provide a cohesive and consistent shopping experience offered via our physical and online stores. To that end, the products, prices and promotions that we offer are standardised across our physical and online stores. This standardisation simplifies the decision-making process for customers and prevent sales cannibalisation among stores.

Through the Senheng mobile application and websites, customers can compare products, see latest promotions, contact customer service agents, make purchases, access purchase history and warranty information, request for after-sales service and keep track of the reward points and credit tokens earned by our PlusOne members. As part of our seamless retail model, instead of requesting for direct delivery of products purchased on online stores, customers may opt to inspect and collect the ordered goods at physical shops before accepting delivery and many customers prefer to do so.

Since the introduction of our seamless retail model in 2017, revenue had increased from RM0.89 billion for the FYE 2017 to RM1.29 billion for the FYE 2020, representing a CAGR of 13.2% despite a decrease in the total number of physical stores, from 121 stores as at December 2017 to 103 stores as at December 2020. Our average annual sales per store also increased from RM9.80 million for the FYE 2018 to RM11.45 million for the FYE 2020. We believe the average sales growth per store is mainly due to the improved sh