This article first appeared in The Edge Malaysia Weekly on October 2, 2023 - October 8, 2023

MOST retail counters have been trending downwards since the beginning of the year, impacted by valuation contractions amid rising operating costs and weaker consumer spend, but one low-profile retailer continues to surprise with its perky performance.

Little-known home linen and bedding accessories retailer Yoong Onn Corp Bhd (YOCB) has been outperforming its peers. The share price of the Main Market-listed company has gained 19% year to date to close at RM1.53 last Wednesday, giving the company a market capitalisation of RM244.8 million.

In contrast, several other retail stocks have borne the brunt of a weaker economy and poorer consumer and investor sentiment. For instance, consumer electronics retailer Senheng New Retail Bhd is down by a significant 39%, and food and beverage retailer Berjaya Food Bhd by 28%.

Other counters notching up marked drops include home improvement retailer Mr DIY Group (M) Bhd and personal care products retailer InNature Bhd (both slipping 24%) as well as fashion retailer Bonia Corp Bhd, which fell 21%.

Their weaker performance could have a bearing on ACE Market-bound furniture and home décor retailer SSF Home Group Bhd, which is slated to be listed on Oct 10. SSF Home has fixed its initial public offering (IPO) price at 25 sen per share, or a valuation of 12.5 times its historical price-earnings ratio (PER).

SSF Home currently operates 41 retail outlets and plans to expand by another 18 outlets to 59 by the end of 2026. It reported a net profit of RM16 million for the financial year ended April 30, 2023.

Although YOCB has fewer retail outlets (31 stores in Malaysia) than SSF Home, it recorded a net profit of RM38.07 million for the financial year ended June 30, 2023 (FY2023) — more than double SSF Home’s. Furthermore, YOCB is trading at a historical PER of about six times — less than half of SSF Home’s.

YOCB managing director Roland Chew Hon Foong says although the group aspires to achieve an annual revenue of RM300 million in the coming years, it is more important to grow its earnings while maintaining a decent profit margin.

“We want our bottom line to expand in tandem with our top line. If you look at our PER, you’ll find that our counter is only trading at about six times. This is because our company has maintained a low profile over the years. In fact, many people recognise our brand, Jean Perry, more than they do our company, Yoong Onn,” he tells The Edge in an interview at YOCB’s marketing office in EkoCheras Office Tower in Kuala Lumpur.

Headquartered in Nilai, Negeri Sembilan, YOCB is an integrated designer, manufacturer, distributor and retailer of home linen, homewares and bedding accessories. The group operates a state-of-the-art manufacturing and warehouse facility, which has a built-up area of 303,500 sq ft.

YOCB owns over 13 popular foreign-sounding home linen brands — including Jean Perry, Louis Casa, Genova, Sarah Miller, Ann Taylor and Red Danielle — catering for all market segments. Its products include bedsheets, blankets, pillows, bath towels, tablecloths, curtains, rugs, floor mats and lifestyle furniture such as tables and sofas.

Today, YOCB operates 26 Home’s Harmony retail outlets that target the premium and mid-range markets, four Niki Cains Home fashion concept stores that serve the mid-range market, and one Home’s Outlet at EkoCheras Mall to reach the mass market.

YOCB executive director Raymond Chew Hon Keong reveals that the group plans to open six to seven new Home’s Harmony outlets next year, but it does not have immediate plans to expand the Niki Cains Home stores.

“We have the intention to open more Home’s Outlet, but it’s too early to share the details at the moment. Overall, when it comes to store expansion, we are very selective on the locations. Primarily, we will be looking at the Klang Valley, but Johor and Penang are [on] our radar too,” says Hon Keong, who is Hon Foong’s younger brother.

“The increasing population means increasing homeowner base, while the rising urbanisation and income levels are expected to fuel preference for premium home linens and homewares.

“Moreover, we have multiple distribution channels with proven reliability. The allocation of prominent display space for our products also indicates our strong relationship with the department store operators,” adds Hon Keong, who points out that YOCB is a strong brand in the home linen industry.

Apart from its own retail outlets, YOCB has more than 260 consignment counters nationwide at third-party retail locations, partnering with department store or speciality store operators such as Parkson, AEON, Isetan, Sogo, HomePro and Harvey Norman.

YOCB also supplies its bedding and bath linen, as well as other textile-related products, to hospitality-based institutions, including military accommodations, cruise ships, hospitals, resorts and hotels.

At the same time, the group sells its products on its own Jean Perry online store, as well as other third-party e-commerce platforms such as Lazada, Shopee, Zalora and Astro’s Go Shop.

Hon Foong observes that during the Movement Control Order and various Covid-19 lockdowns in 2020 and 2021, people still needed to buy pillows and bath towels for their comfort and well-being.

“We are not selling luxury items; we are selling essential items. That’s why we remained profitable in the pandemic years.” Hon Foong reveals that on average, YOCB sells one million pillows every year, which means that about one in 30 Malaysians is using its pillows.

“Property developers are building more houses and we are seeing more project launches every day. When there are houses, there will be demand for pillows and bedding products. To us, if the population and properties are there, our business cannot go wrong. It’s as simple as that,” he remarks.

Not surprisingly, YOCB’s strategy is to “shadow” reputable township developers, going where they are headed. “Opening stores in areas with growing communities due to township or mixed-use development projects could provide abundant opportunities for our business, as residents are likely to frequent our stores for their home needs.

“Besides, we also like neighbourhood malls in residential areas because they often offer lower rental costs. To us, this is a crucial factor,” stresses Hon Foong.

Another strategy is to be friendly to other retailers, especially if they are not competitors. Hon Foong explains: “For example, we maintain a friendly connection with a multinational retailer of consumer electrical products. When we open our new stores next to each other, we could attract their crowd and likewise, they could attract ours. That’s a win-win situation.”

In 1966, YOCB was started by the late Chew Thee Seng — father of Hon Foong and Hon Keong — to trade and retail textiles and fabrics. About 10 years later, Thee Seng’s wife began small-scale manufacturing of home linens.

In 1982, YOCB launched its own brands — Novelle for the premium market and Diana for the mid-range market. This was followed in 1998 by the opening of a maiden Home’s Harmony store in IOI Mall in Puchong, Selangor.

Two years later, in 2000, YOCB commenced full-scale manufacturing in Nilai and nine years later, it was listed on Bursa Malaysia.

Between FY2019 and FY2023, YOCB achieved a compound annual growth rate (CAGR) of 10.8% in profit after tax.

As the brothers explain, even the Covid-19 pandemic did not impede the company’s growth as net profit expanded steadily from RM14.48 million in FY2020 to RM23.12 million in FY2021, before increasing further to RM33.87 million in FY2022. In FY2023, it hit a record high profit of RM38.07 million (see table).

Another positive is its cash-rich position, which as at June 30, stood at an impressive RM136.95 million, against total borrowings of a mere RM2.55 million.

Given its healthy earnings, YOCB has been paying dividends per share of three sen to 7.5 sen over FY2019 to FY2023, with payments made even during the pandemic years.

Casatex Cosmo Sdn Bhd — controlled by the Chew family — is the single largest shareholder of YOCB with the lion’s share of 52.95%.

Other top 30 largest shareholders include Eastspring Investments Small-cap Fund (2.8%), Main Market-listed digital marketing and advertising firm JcbNext Bhd (1.82%) and former Nanyang Siang Pau business editor and savvy investor Fong SiLing — better known as Cold Eye (0.63%).

Interestingly, Lee Swee Kiat & Sons Sdn Bhd — the private vehicle of the Lee family that controls Main Market-listed Lee Swee Kiat Group Bhd, a Klang-based natural latex bedding manufacturer — also owns a 0.3% stake in YOCB. 

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