Involved in bakery goods, SDS Group Berhad is involved in the manufacturing and distribution of bakery products through its retail and wholesale networks. The group produces varieties of loaves, bread, buns, rolls, and cakes which are distributed across Peninsular Malaysia under the brand name “Top Baker” and “Daily’s”. It also has a retail arm that mainly operates F&B outlets under the “S.D.S” brand.
The company is poised to gain from the increase in visitors and consumers opting to consume outside food after 2 years of cooking and dining in. The group’s wholesale segment has been contributing up to 67% of revenue and 49% of EBIT to the group, thanks to its widely established distributing centre across Peninsular Malaysia. While the group is aggressively tapping into the outlying districts (which are beyond competitors’ reach), SDS has been consistently expanding its fleet base by acquiring at least 10 more new trucks on top of 269 existing ones to strengthen its distributing frequencies and coverage. However, according to Kenanga, it believes the acquisition could be delayed in consideration of the shortage of new trucks. Meanwhile, SDS has also managed to improve its distribution routes, curtailing the stock return rate down to an average of 13% as a result of longer shelf life of up to 5 days.
What makes SDS a standout among the consumer names on Bursa? In tandem with the normalisation of supply chain disruption and China’s border reopening, Kenanga gathered that SDS could be a beneficiary of the easing raw material cost while reinforcing its price advantage over competitors to be more appealing to the B40 group (which are more price-sensitive). The company can also optimise its economies of scale when its production capacity grows in line with the resilient demand for its products.
Growth prospects for the bakery business are rosy, it is currently applying for franchise licensing from the Ministry of Domestic and Consumer Affairs. Once approved it could broaden the revenue stream by providing extra growth channels, accelerating the number of its F&B outlets at lower capex outlay, and help establish a stronger brand value across Malaysia.
The key growth catalyst primarily comes from the expansion of its wholesale distribution footprint and new outlets across Klang Valley.