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Broker's take: CGS-CIMB initiates coverage on Synagie, issues 'add' with S$0.34 target price

BROKERAGE CGS-CIMB has initiated coverage on Synagie Corporation with an "add" call and a target price of S$0.34 as the e-commerce player is set to ride the wave of e-commerce growth.

Synagie, which provides e-commerce services to more than 250 fast-moving consumer goods brands, listed on the Singapore Exchange’s Catalist board on Aug 8. It's clients operate mostly in the body, beauty and baby (BBB) sector. 

Synagie shares currently trade below its initial public offering price of S$0.27. As at 10.41am, its shares were trading up one Singapore cent or 4.7 per cent to S$0.225. 

Analyst Colin Tan cited market researcher Frost & Sullivan’s findings that “the online BBB industry is poised to grow on mass-market brands adopting a direct-to-consumer digital strategy comprising online sales channels and high turnover rate for BBB products”.

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The market researcher also rated Synagie, which had a revenue compound annual growth rate of 551.8 per cent from FY2015 to FY2017, among South-east Asia’s fastest-growing e-commerce startups. 

Mr Tan said: “We think other revenue growth drivers may come from Synagie’s expansion into other product categories beyond BBB and outside of Singapore.”

It recently acquired insurtech firm 1Care Global in April 2018 in a move that Mr Tan added “could help Synagie expand into the computer, communication and consumer electronics segment, moving beyond its core BBB space and fits into its asset-light business model, which allows for rapid scalability”.

While Synagie is currently loss-making, Mr Tan projects the startup to be in the black in FY2020, benefiting from economies of scale from expansion.

Downside risks to CGS-CIMB’s call include prolonged net losses and cessation of relationships with key brand partners. 

The brokerage added that potential re-rating catalysts could come from a faster than expected increase in Synagie’s profitability.