SGX Market Updates

LY Corporation – A Play on US Home Sales Market


31 January 2018

  • LY Corporation, one of Malaysia’s leading manufacturers and exporters of wooden bedroom furniture, made its trading debut on the Catalist today, being the first IPO of 2018.

  • Some of its business strategies include: 1) Expanding sales network in the PRC, 2) Upgrading machinery and technology, 3) Construction of additional facilities and 4) Exploring investments, mergers and acquisitions, joint ventures and strategic collaborations.

  • SGX lists three active stocks in the furniture-related businesses with a combined market capitalisation of about S$240 million. They are Courts Asia, Koda Ltd, and Lorenzo International.

Drivers of the Furniture Manufacturing Industry

LY Corporation believes that prospects of the Malaysian furniture manufacturing industry will remain bright, with demand projected to grow at a rate of 5.0% annually, taking into consideration the following factors from its offer document (refer to page 131 of the offer document for a full list):

  • Strong demand from the US – Demand for import furniture in the US is expected to increase and imports to the US are expected to grow at a CAGR of 3.7% from 2017 to 2020, reaching US$13.2 billion by 2020. This is underpinned by broader economic recovery, improving labour markets, consumer confidence and new home sales (furniture sales may benefit from higher home sales). US home sales have shown considerable improvement in last few months of 2017, driven by robust demand and tight supply, data from economists showed.
  • Potential demand growth from PRC – Expanding demand from PRC is expected to drive export growth as the PRC economy continues to expand and disposal income levels of consumers in the PRC rise. From 2011 to 2016, exports of furniture from Malaysia to the PRC grew more than proportionately at 297.7%.
  • Recognition as a producer of quality furniture – Malaysia is Asia’s third-largest furniture exporter and ranked 8th largest globally, exporting RM7.5 billion worth of furniture to 169 countries in 2016 with US, Japan, Singapore, Australia and UK being top buyers.

LY Corporation Limited’s Catalist IPO

LY Corporation, one of Malaysia’s leading manufacturers and exporters of wooden bedroom furniture with a track record of approximately 40 years in the furniture industry, made its trading debut on Catalist today. Some key extracts from the offer document include:

Business Strategies and Future Plans
  • Expand sales network in the PRC.
  • Upgrade machinery and equipment and acquire new technology.
  • Construction of additional facilities.
  • Explore investments, mergers and acquisitions, joint ventures and/or strategic collaborations.

Competitive Strengths by Management
  • Established track record in the furniture industry and well recognised for the quality of our furniture products.
  • Strong in-house design and development capabilities, and established subcontractor network.
  • Consistently strive to be cost-competitive, efficient and to turn around products quickly.
  • Experienced and committed management team.

Key Risks by Management (Page 35 of the offer document has full list of risks)
  • Subject to foreign exchange risks as revenue is predominantly USD while purchases are predominantly RM.
  • The business is dependent on US market (over 90% of annual revenue from customers based in US).
  • The business requires various licences, permits, approvals and certificates to operate.
  • The company may be affected by loss of business from its major customers.

Financials from Offer Document
  • According to the audited financial statements form the offer document, the company generated RM287.4 million in revenue, with profit net of tax at RM43.4 million (net profit margin of 15%) for the FY ending 31 Dec 2016 (FY16).
  • FY16 net cash generated from operating activities was at RM43.1 million (or 15% of total revenue).
  • While the company does not have a fixed dividend policy, the Directors intend to recommend and distribute dividends of at least 40.0% of its net profits after tax attributable to shareholders generated in FY18, FY19 and FY20.
  • In addition, the company’s Directors intend to recommend and distribute a special dividend of S$0.0078 per share for FY17, which represents a payout per share equivalent to 3.0% of the placement price, to be approved in a general meeting held within three months after listing.

  • According to the offer document, LY Corporation’s audited FY16 EPS was RM10.2 sens (based on pre-placement share capital) and RM9.7 sens (based on pre-placement share capital and including the service agreements) respectively. This implies a P/E ratio of 7.7x (pre-placement) and 8.1x (pre-placement and including the services agreements).

List of Home Furnishings and Homefurnishing Retail Companies (GICS®)
Name SGX
* Last Price Price Change
GICS Sub Industry
COURTS Asia RE2 160 0.310 -4.6 10.5 0.7 5.9 Home Furnishing Retail
Koda BJZ 65 0.790 -1.3 9.5 1.7 17.2 Home Furnishings
Lorenzo International 5IE 15 0.033 -5.7 N/A 1.0 -87.2 Home Furnishings
Average -3.9  1.1 -21.3

Source: Bloomberg & SGX StockFacts (data as of 30 January 2018).
Note: Cacola Furniture is part of the Home Furnishings GICS® sub-industry, the stock is currently suspended.

Additional Information from LY Corporation Ltd's IPO Prospectus (Click here to view full document)

LY Corporation - Company Background

Founded in 1976 by founder and Executive Chairman Mr Tan Kwee Chai, Lian Yu Furniture Co. started by selling customised wooden home furniture in Johor, Malaysia. LY Corporation is now one of Malaysia’s leading manufacturers and exporters of wooden bedroom furniture, operating from 15 factories and warehouses occupying a combined built-up area of approximately 1.4 million sq ft. The company’s customers are defined into two categories: 1) export sales customers and overseas dealers, and 2) domestic sales customers to third party agents.

Geographical Segments (FY 2016)
  • United States of America (US) – 77.2% of total revenue
  • Malaysia – 13.4% of total revenue
  • Others – 9.4% of total revenue

IPO Details
  • Placement Price at S$0.26
  • 75.8 million placement shares – comprising 61.1 million new shares and 14.7 million vendor shares
  • Estimated IPO market capitalisation at S$127.2 million
  • Use of IPO gross proceeds from issue of new shares (S$15.9 million)
    • S$5.0 million – upgrading machinery and equipment and acquiring new technology
    • S$4.0 million – construction of additional facilities
    • S$3.0 million – general working capital purposes
    • S$1.0 million – expanding sales network in the PRC
    • S$2.9 million – listing and professional fees, placement commission and miscellaneous expenses

Did You Know?

Malaysia’s thriving furniture industry can be attributed to its access to rubberwood as well as tropical hardwoods such as Ramin, Nyatoh and Meranti.


COURTS Asia Limited is an electrical, IT and Furniture Retailer, which started its operations in Singapore in 1974. It expanded to Malaysia and Indonesia in 1987 and 2014 respectively. Today, COURTS has grown to a chain of 92 stores across Southeast Asia and it is known for its business model of “in-house credit facilities”, allowing customers to pay for their purchases through installments.


Founded in 1972, Koda is a manufacturer, retailer and distributor of wood-based furniture and it has steadily expanded its operations to approximately 50 countries. Highlighted in its FY 2017 Annual Report, a few of the significant plans that were made during the year include “expanding its Commune’s business in China” and “building additional distribution hubs”.

Lorenzo International

Established in 1983, Lorenzo International manufactures, assembles and retails lifestyle furniture products. It also owns Builders Shop Ltd, which specializes in the supply of materials such as exquisite granite and marble. According to the upcoming plans in its FY 2017 Report, the Group is the midst of restructuring its business and will possibly divest its manufacturing business in China.

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