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Singapore Investment


 Will  MSTGOLF 5316 MST GOLF GROUP BERHAD IPO hit a hole-in-one?

There is probably much excitement over the imminent listing of MST Golf Group Bhd.

The gold equipment retailer is the only golf specialist to be listed ont he Main Market of Bursa Malaysia and this should attract a slew of investors.

As the company embarks on a golf retail footprint and product offerings across the region, particularly in Indonesia, Thailand and Vietnam, it would need fresh funds to do so.

Currently, it is the market leader with more than 52% of market share in Malaysia, and is the largest specialised retailer of golf equipment in Malaysia and Singapore.

MST Golf derives almost 80% of its revenue from retail sales and the remaining from wholesale, golf-related services and indoor golf services segments.

As more new players are coming to the game, rounds played on a roll, equipment sales setting a historic pace, investors may think what could go wrong, right?

Problems of longer waits for items and across-the-board price increases are already taking place.

This is due to rising costs of manufacturing and distributing products in the current COVID-19 environment that has led to shortages, frustration and uncertainties.

The difficulties of the COVID-19 pandemic have led to significant shutdowns in the shaft and grip component part of the industry.

Factories that make everything from titanium driver heads to cabretta leather golf gloves in China, Taiwan, Malaysia and Vietnam have been shut down for several periods due to Covid.

But even without factory shutdowns or raw material shortages, shipping costs and delays have provided their own headaches.

Some golf companies have seen container costs increase tenfold at one point.

This has hurt some of the golf’s premier publicly traded companies, Callaway and Acushnet, which repeatedly mentioned supply chain challenges on earnings calls.

For MST Golf, its range of golf clubs, golf balls and accessories, and golf apparel are mainly imported goods.

As a result of its reliance on imports of finished goods, it is exposed to the risk of foreign exchange fluctuations.

About 63% to 75% of its total purchases of input materials and services were transacted in foreign currencies, mainly USD.

These imported goods are mainly for our retail and wholesale operations in Malaysia and Singapore where all the sales transacted through our retail operations in Malaysia are in RM.

While the sales transacted through our retail operations in Singapore as well as exports of golf equipment to other foreign countries are mainly in SGD.

As such, any unfavourable and adverse changes in exchange rates between RM and foreign currencies such as SGD and USD would have a negative impact on its financial performance.

The recent depreciation of RM against foreign currencies have resulted in the increase in its product cost and would be challenging to pass on the higher cost to customers.

For the FYE 2019 and FYE 2020, MST Golf recorded net gains on foreign currency exchange while we recorded a net loss in FYE 2021 and FYE 2022.

As exciting as it sounds, these challenges including possible slowdown in demand could crimp sales and affects its bottomline.

Certainly, it would have to contend with rising competition be it offline or online golf equipment business.

But as it expands to other markets with increasing appetite for the elite game, MST Golf may indeed be in a sweet spot.


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