FAIR GAME GOLF UNIQUE EXPERIENCE AT EVERY COURSE GAME FOR LIFE EXCITING FRIENDSHIP BONDING
To provide world-class golf shopping, learning and playing experience OUR MISSION To support and promote the golf industry by connecting people, places and ideas To build a more sustainable golf culture and community together Be Proud Be Strong Walk Together Be Sustainable Be Happy To serve the best in everything golf OUR CORE VALUES OUR VISION
Built on a solid foundation of 35 years in the golf industry, MST Golf is a leading golf retail and service provider in Malaysia and Singapore, delivering world-class golf retail experiences to customers. In line with our regional expansion plans, we aim to expand our retail presence in Indonesia and make our foray into Thailand and Vietnam within the next two years. As we continue to innovate, expand and serve our customers with unparalleled dedication, we invite our stakeholders to embark on this exciting journey with us. Together, let’s golf towards a future of excellence and shared success. Basis of This Report 2 ABOUT MST GOLF Who We Are 4 What We Do 6 Our Key Strengths 8 Financial Highlights 10 2023 Year in Review 12 Corporate Structure 14 Corporate Information 15 Section 1 COVER RATIONALE For more information, visit our official website at mstgolfgroup.com
INSIDE THIS REPORT OUR STRATEGIC CONTEXT Joint Leadership Statement 16 Management Discussion & Analysis 21 Sustainability Statement 30 • Introduction • Sustainability Governance • Stakeholder Engagement • Material Matters • Better Business • Better Environment • Better People Bursa Malaysia Indicators 104 Section 2 OTHER INFORMATION List of Properties 227 Analysis of Shareholdings 228 GRI Content Index 231 Notice of Annual General Meeting 240 Statement Accompanying 245 Notice of AGM Administrative Notes 246 • Proxy Form MST Golf Store Locations 255 Section 5 OUR GOVERNANCE Board of Directors’ Profile 106 Key Senior Management’s Profile 112 Corporate Governance 114 Overview Statement Statement on Risk Management 133 and Internal Control Additional Compliance Information 137 Directors’ Responsibility Statement 139 Section 3 FINANCIAL PERFORMANCE Financial Statements 140 Section 4
BASIS OF THIS REPORT 2 BASIS OF THIS REPORT MST Golf’s 1st Annual Report seeks to provide insights on the Group's performance for the financial year ended 31 December 2023.
3 ANNUAL REPORT 2023 MST GOLF GROUP BERHAD The aim of this Report is to transparently deliver relevant and thorough information to our stakeholders of our achievements and challenges, facilitating their ability to make a fair assessment of our performance over both short and long-term periods. MST Golf’s AR 2023 also shares future-oriented information on our business objectives and focus areas, demonstrating how we generate sustainable value for our customers, employees, suppliers and communities. SCOPE AND BOUNDARY The scope of this Report covers all primary aspects of MST Golf’s operations, including our retail, wholesales, and other golfrelated business segments. It summarises key financial metrics, operational highlights and strategic developments. This Report also delves into our sustainability practices and community engagement efforts, reflecting our dedication to responsible business conduct. REPORTING SUITE For a comprehensive understanding of MST Golf’s ESG performance, stakeholders are encouraged to explore the accompanying Sustainability Statement on pages 30 to 105 in this Report to obtain a more comprehensive perspective on the Group's sustainability commitments. APPLIED FRAMEWORKS The Group adheres to the following reporting/governance frameworks and guidelines (applied in part or full) in the development of this Report: • Malaysian Code on Corporate Governance (“MCCG“) • Main Market Listing Requirements (“MMLR“) issued by Bursa Malaysia Securities • Companies Act 2016 (“CA 2016“) • International Financial Reporting Standards (“IFRS“) • Malaysian Financial Reporting Standards (“MFRS“) • Corporate Governance Guide – 4th Edition issued by Bursa Malaysia Securities FORWARD-LOOKING STATEMENTS This Report includes forward-looking statements reflecting our current outlook on the Company’s future performance. Keywords such as “might,“ “forecast,“ “anticipate,“ “project,“ “may,“ “believe,“ “predict,“ “expect,“ “continue,“ “will,“ “estimate,“ “target“ and similar expressions are utilised. These statements are based on various assumptions and are subject to numerous risks, uncertainties and contingencies beyond MST Golf’s control. More importantly, they are not to be construed as a guarantee to our operating performance or financial outcomes. Unexpected events and actual results may significantly differ from current expectations, impacted by factors such as emerging business opportunities, changes in Group priorities, global and national economic conditions, government policies and other considerations. FEEDBACK We welcome feedback, enquiries or suggestions on our business operations or on this Report. Stakeholders can reach out to us at investor.relations@mstgolf.com. MST Golf Group Berhad (“MST Golf“ or “the Group“) presents its Annual Report 2023 (“Report“ or “AR 2023“) for the financial year ended 31 December 2023 (“FYE2023“ or “FY2023“). This Report details the Group’s financial performance, strategic initiatives, operational advancements and Environmental, Social and Governance (ESG) commitments.
SECTION 1: ABOUT MST GOLF 4 1991 Opened first retail store WHO WE ARE 1989 - 1990 Started business in trading used golf clubs as Masinthai Marketing Sdn Bhd 2000 First overseas expansion to Singapore 2001 - 2002 Started golf coaching, event management and planning services for golf tournament-related events THE MST GOLF STORY Opened first Super Store at Wisma UOA, Kuala Lumpur Secured our first major brand distributorship of DAIWA (now known as ONOFF and GIII) 1999
5 ANNUAL REPORT 2023 MST GOLF GROUP BERHAD Launched online e-commerce platform mstgolf.com Secured several brand distributorships 2023 Started corporate golf merchandise sale business Started custom fitting business with Golf Tech Shop Launched ilovegolf loyalty programme 2007 - 2009 Opened big format Pro Shop at KLGCC Opened MST Golf Academy at KLGCC Moved into head office and warehouse at MST Golf Plaza in Subang Jaya 2016 - 2021 Listed on Main Market of Bursa Malaysia Securities Berhad Formed joint venture with Erajaya Active Lifestyle for Indonesia operations Opened first retail outlet in Indonesia Opened first 3-in-1 store concept with MST Golf Arena Launched MST Golf App Opened first The Golf Lab 2005 2010 2022
SECTION 1: ABOUT MST GOLF 6 WHAT WE DO Promoting the play of better golf Our golf academies educate and train golfers of all skill levels from beginners to national level players. We have a team of internationally certified, highly experienced and skilled coaches providing the most comprehensive player development programmes down to the basic fundamentals of the sport. We also employ stateof-the-art golf technology for assessments and club optimisations. Golf Academy Providing the latest and best in golf product selection, service and value We provide the latest golf products from more than 95 golf brands to the South East Asian market ranging from equipment, apparel, footwear to accessories. Offering world-class golf retail excellence, we deliver the brands' experience to golfers and offer quality services to guide customers in purchasing the right products that best match their needs. As a leading distributor in the region for many global golf brands, we also serve other retailers in other countries through our wholesale and distribution channels to reach a wider consumer base. Golf Retail & Wholesale Scan the QR code to find out more about Our Services on our website. Building the largest golf community in Malaysia and Singapore With more than 140,000 active members and growing from Malaysia and Singapore, our ilovegolf loyalty programme rewards our customers with various exclusive benefits, offers and events to promote the play of golf. In partnership with brands, ilovegolf has also ran exclusive golf tournaments both outdoors and indoors (MST Golf Arena) for our members to build relationships within the golf community. Loyalty Programme
7 ANNUAL REPORT 2023 MST GOLF GROUP BERHAD Elevating the game of golf through corporate and professional tournaments As a leading golf specialist, we offer a comprehensive solution for both corporate and professional tournaments. We specialise in customising merchandise to elevate the golf experience for companies to build deeper relationships with internal and external stakeholders and tap into our relationships with golf clubs and associations to deliver a holistic golf event management service. Corporate Merchandise and Event Management Building equipment that fits the player’s needs We offer club-fitting services to help people play better golf with equipment that suits their needs, physique and swing profile. We have a team of internationally certified and highly experienced club fitters catering to our customers' needs. We believe players will enjoy the game longer and more thoroughly with better-fitting clubs. Golf Tech Shop Providing news and insights to everything golf Our golf media hub is at the fingertips of golfers. We keep them abreast on the latest golf news focusing on the South East Asia region from gears and style to professional tournaments. We want to champion existing players and help beginners transition into the game. Golf Media Lowering the barrier to golf In 2022, we started MST Golf Arena with our pioneer outlet at The Gardens, Mid Valley boasting a 40,000 square feet modern and high-tech indoor golf centre that incorporates retail, golf academy and club fitting (The Golf Lab) coupled with F&B. By making golf accessible and convenient, we aim to bring in new golfers with our beginner-friendly golf playing and learning environment. It is also a one-stop destination where golfers and non-golfers, individuals and groups can Shop, Play, Learn, Fit, Eat and Drink under one roof. Indoor Golf Centre
SECTION 1: ABOUT MST GOLF 8 OUR KEY STRENGTHS Perak 1 store Johor Bahru 5 stores Melaka 1 store Negeri Sembilan 1 store Pahang 2 stores Selangor 12 stores Kuala Lumpur 8 stores Putrajaya 2 stores Penang 4 stores Singapore 8 stores Jakarta 2 stores Total No. of Stores: 50 STORES (as of March 2024) GEOGRAPHICAL PRESENCE 40 stores in 2 stores in 8 stores in
9 ANNUAL REPORT 2023 MST GOLF GROUP BERHAD No.1 and largest golf specialist retailer and service provider in Malaysia and Singapore one of the best golf retailers Acknowledged by global golf brands as in the region Extensive networking, track record and solid reputation in the global golf industry for over 30 years Established brand among consumers in countries we operate and expanding regionally omnichannel business strategy Online store (mstgolf.com) and digital platforms as part of Sarawak 3 stores Sabah 1 store Over 140,000 active ilovegolf loyalty programme members in Malaysia and Singapore
SECTION 1: ABOUT MST GOLF 10 FINANCIAL HIGHLIGHTS 2019 2023 2020 2021 2022 70.0^ 69.6 84.0 129.1 142.9 Gross Profit (RM Mil) FYE’19 - ‘23 CAGR* 19.5% 2019 2023 2020 2021 2022 177.7^ 170.2 206.5 300.9 325.4 Revenue (RM Mil) FYE’19 - ‘23 CAGR* 16.3% Profit Before Tax (RM Mil) FYE’19 - ‘23 CAGR* 2019 2023 2020 2021 2022 14.1^ 18.3 26.5 38.8 31.61 22.5% Profit After Tax (RM Mil) 10.5^ FYE’19 - ‘23 CAGR* 13.7 20.3 29.1 21.82 20.1% 2019 2023 2020 2021 2022 * Compounded Annual Growth Rate (“CAGR“). ^ The figures presented in FYE2019 are before transition to Malaysian Financial Reporting Standards (“MFRS“). (1) Normalised Profit Before Tax excluding the one-off impact of RM4.4 million related to the share listing expenses. (2) Normalised Profit After Tax excluding the one-off impact of RM4.4 million related to the share listing expenses.
11 ANNUAL REPORT 2023 MST GOLF GROUP BERHAD One-off listing expenses of RM 4.4 million 2019 2023 2020 2021 2022 Earnings Before Interest, Tax, Depreciation and Amortisation (“EBITDA“) (RM Mil) FYE’19 - ‘23 CAGR* 19.8^ 30.5 39.1 57.7 58.33 31.0% Profit after Tax and Minority Interest (“PATAMI“)(RM Mil) 9.6^ FYE’19 - ‘23 CAGR* 12.9 18.2 26.7 22.04 23.2% 2019 2023 2020 2021 2022 REVENUE RM325.4 million (FYE2022: RM300.9 Million) GROSS PROFIT RM142.9 million (FYE2022: RM129.1 Million) Normalised PATAMI RM22.04 million (FYE2022: RM26.7 Million) * Compounded Annual Growth Rate (“CAGR“). ^ The figures presented in FYE2019 are before transition to Malaysian Financial Reporting Standards (“MFRS“). (3) Normalised EBITDA excluding the one-off impact of RM4.4 million related to the share listing expenses. (4) Normalised PATAMI excluding the one-off impact of RM4.4 million related to the share listing expenses.
SECTION 1: ABOUT MST GOLF 12 Opened first premium golf concept store, MST Golf Premium at The Starhill, Kuala Lumpur MARCH JANUARY • Formed historic tripartite agreement between Professional Golf of Malaysia (PGM) as Rights Holder with UMW Toyota Motor as Naming Partner and MST Golf as Delivery Agency for the Toyota Tour MAY Renovated and opened our Pro Shop at Impian Golf & Country Club Secured Exclusive Distributorship of LA Golf for Southeast Asia APRIL JUNE Launched our IPO Prospectus Clinched Silver for the Entertainment category at the 2022 Putra Brand Awards Scan the QR code to find out more about Our Prospectus on our website.
13 ANNUAL REPORT 2023 MST GOLF GROUP BERHAD • Opened our first store in Negeri Sembilan at Seremban Gateway • Opened our third MST Golf Arena outlet in Gurney Paragon Mall • Listed on the Main Market of Bursa Malaysia Securities as MST Golf Group Berhad JULY Opened first store in Indonesia, MST Golf Arena located at La Piazza, Summarecon Mall Kelapa Gading in Jakarta DECEMBER • Named Best Golf Retailer in South East Asia in the Asian Golf Awards 2023 • Awarded Gold for Best Golf Academy in the Asian Golf Awards 2023 SEPTEMBER Opened fourth MST Golf Arena at Toppen Shopping Centre NOVEMBER AUGUST Announced joint venture with Erajaya Active Lifestyle to undertake golf businesses in Indonesia Opened MST Golf retail store at Plaza Shah Alam
SECTION 1: ABOUT MST GOLF 14 CORPORATE STRUCTURE MST GOLF GROUP BERHAD MST GOLF (SINGAPORE) PTE. LTD. 100.0% MST GOLF ARENA SDN. BHD. 100.0% MST GOLF SDN. BHD. 100.0% MST GOLF MANAGEMENT SDN. BHD. 100.0% PT MST GOLF INDONESIA 51.0% 99.9% PT MST GOLF DISTRIBUTION Malaysia Singapore Indonesia
15 ANNUAL REPORT 2023 MST GOLF GROUP BERHAD CORPORATE INFORMATION Low Kok Poh Executive Chairman Ng Yap Sio Executive Director, Group Chief Executive Officer Ng Lian Chun Executive Director Poh Ying Loo Independent Non-Executive Director Datin Suryani Binti Ahmad Sarji Independent Non-Executive Director Alice Lee Chia Yee Independent Non-Executive Director BOARD OF DIRECTORS AUDIT AND RISK MANAGEMENT COMMITTEE Chairperson Poh Ying Loo Members Datin Suryani Binti Ahmad Sarji Alice Lee Chia Yee NOMINATION COMMITTEE Chairperson Datin Suryani Binti Ahmad Sarji Members Poh Ying Loo Alice Lee Chia Yee REMUNERATION COMMITTEE Chairperson Alice Lee Chia Yee Members Poh Ying Loo Datin Suryani Binti Ahmad Sarji COMPANY SECRETARIES Tai Yuen Ling (LS0008513) (SSM Practising Certificate 202008001075) Queck Wai Fong (MAICSA Membership no. 7023051) (SSM Practising Certificate 202208000287) STOCK EXCHANGE LISTING Main Market of Bursa Malaysia Securities Berhad Sector : Consumer Product & Services Stock Code : 5316 REGISTERED OFFICE 12th Floor, Menara Symphony, No.5, Jalan Prof. Khoo Kay Kim, Seksyen 13, 46200 Petaling Jaya, Selangor Darul Ehsan, Malaysia. Tel. No. : +603 - 7890 4800 Fax No. : +603 - 7890 4670 Email : info.my@boardroomlimited.com HEAD/ MANAGEMENT OFFICE MST Golf Plaza No.8, Jalan SS 13/5, 47500 Subang Jaya, Selangor Darul Ehsan, Malaysia. Tel. No. : +603 - 5566 8666 Website : www.mstgolfgroup.com Email : investor.relations@mstgolf.com AUDITORS Grant Thornton Malaysia PLT Level 11, Sheraton Imperial Court, Jalan Sultan Ismail, 50250 Kuala Lumpur, Malaysia. Tel. No. : +603 - 2692 4022 SHARE REGISTRAR Boardroom Share Registrars Sdn Bhd 11th Floor, Menara Symphony, No.5, Jalan Prof. Khoo Kay Kim, Seksyen 13, 46200 Petaling Jaya, Selangor Darul Ehsan, Malaysia. Tel. No. : +603 - 7890 4700 Fax No. : +603 - 7890 4650 Email : BSR.Helpdesk@boardroomlimited.com
SECTION 2: OUR STRATEGIC CONTEXT 16 JOINT LEADERSHIP STATEMENT It gives us great pleasure to present to you MST Golf Group Berhad’s Annual Report 2023, following the successful listing of the Company on the Main Market of Bursa Malaysia Securities on 20 July 2023. In this inaugural report, we jointly convey our sincere thanks to all parties involved in realising this aspiration. It is a culmination of 35 years of passion and hard work in developing a trusted golf retail brand that is now the largest in Malaysia and Singapore. From right to left LOW KOK POH Executive Chairman NG YAP SIO Executive Director/ Group Chief Executive Officer Dear Stakeholders,
17 ANNUAL REPORT 2023 MST GOLF GROUP BERHAD INCREDIBLE REGIONAL OPPORTUNITIES As the first golf specialty retail chain operator to be listed on Bursa Malaysia Securities, we welcome the strong support for our listing, which reflects investors’ understanding of our unique offerings, our vision and appreciation of the value creation objectives in our business strategies to expand locally and regionally into new geographical areas. Through this report, we believe that greater insights into the public listing on the Main Market of Bursa Malaysia Securities will give our shareholders and investors a clearer picture of our long-term intentions. This includes our perspective on how the market, with more than 20 million golfers in Asia1, is evolving and how we aim to position ourselves to capture these opportunities. The fundamental reason for our listing is to fasttrack our regional growth ambitions. The brands that we represent and work with are encouraging and urging us to provide our retail solution in South East Asia and offer our world-class retail platform to deliver their brands’ experience and cater to the growing golf demand and interest. Therefore, the funds obtained from our listing will ensure that our expansion within the region continues uninterrupted and is executed at a desired pace. We have since taken our first step in this direction, through our joint venture with Indonesian retail player, Erajaya Active Lifestyle, a leading provider of multi-brand retail and distribution solutions for active lifestyle products to spearhead our foray into Indonesia. Their recent listing on the Indonesia Stock Exchange and deep understanding of the entire local retail ecosystem, makes them a valuable partner as we plan to drive the MST Golf presence in the world’s fourth most populated country. We are humbled to share that the strong partnership has led to the opening of the first MST Golf store in Indonesia located at La Piazza, Summarecon Mall Kelapa Gading, Jakarta in December 2023 followed by a second store at Pondok Indah Mall, Jakarta in February 2024 - ahead of our plans. We will employ this strategy of partnering with strong retailers that possess extensive knowledge of the local retail and supply chain landscape, human resource management and regulations in the other target countries, Thailand and Vietnam. Our negotiation with potential joint venture partner in Thailand is on track and we aim for our presence by the fourth quarter of 2024 and expedite our entry into Vietnam by 2025. With our leadership position, strong retail and distribution management processes, and long-standing relationships with brands, MST Golf is well-positioned to expand our golf retail business into new geographical areas in the region. 1 https://www.golfindustrycentral.com.au/golf-industry-news/ asia-golfs-popularity-in-asia-pacific-surging MST Golf Arena in Indonesia is the first in Asia to be equipped with the Trackman iO technology.
SECTION 2: OUR STRATEGIC CONTEXT 18 GROWING THE GAME OF GOLF Throughout our journey, what has ultimately driven us is our desire to get more people to play golf. While the interest in the game remains strong for the existing golf community, we are also acutely aware of the barriers to entry for those looking to pick up the sport. We had the opportunity to introduce our innovative and unique 3-in-1 store that houses our retail, golf academy and club fitting (The Golf Lab) and indoor golf facilities coupled with F&B through MST Golf Arena. This financial year, we launched MST Golf Arena at Gurney Paragon Mall in Penang, Toppen Shopping Centre in Johor and La Piazza, Summarecon Mall Kelapa Gading in Jakarta, Indonesia. This follows the maiden store of this type that was opened in The Gardens Mall in Kuala Lumpur, followed by our second outlet at Tropicana Gardens Mall in Selangor in 2022. One of the objectives for us to invest into indoor golf is to lower the barrier of entry and bring in more new golfers especially the younger and female consumer groups who are generally higher spenders. We are also pleased that many other indoor golf centres are opening across the region to cater for the growing new generation of golfers. We are also leveraging the latest golf technologies namely Foresight Sports, Gears Golf, Swing Catalyst, K-Motion and Trackman to enhance the golf and retail experience further. At The Golf Lab centres, customers have access to state-of-the-art technology that can assess body mechanics when taking a swing to diagnose and determine areas which golfer needs to work on to play better, as well as equipment best suited for them. This allows the customers to enjoy golf better, play more golf and subsequently buy products at our retail stores. We have built a golf ecosystem including golf event and tournament management, ilovegolf loyalty programme, driving range management, golf media, and online e-commerce store with the underlying objective to encourage consumers to play more golf. We also take interest of growing professional golf through local grassroots programme to develop young talents for a career in professional golf through our academy. In promoting and growing the game of golf for the long-term sustainability of the industry, we take a more proactive role to work with brands and the industry to drive more activities and excitement towards golf. JOINT LEADERSHIP STATEMENT One of the objectives for us to invest into indoor golf is to lower the barrier of entry and bring in more new golfers.
19 ANNUAL REPORT 2023 MST GOLF GROUP BERHAD GETTING TO KNOW OUR CUSTOMERS BETTER As we expand, we are cognisant that data about our customers and our ability to translate that into actionable insights will be key to our business continuity. In this context, we introduced our ilovegolf loyalty programme more than 18 years ago and have since built our membership base to more than 140,000 across Malaysia and Singapore. The programme tracks purchasing history and customer preferences, which are crucial to ensuring that our marketing efforts and the products and services we offer are aligned. As 70% of our retail sales from our Malaysia and Singapore operations originate from ilovegolf members, this database is a key asset to MST Golf. Part of the proceeds of the listing will in fact be used to upgrade our systems to cater for future growth and to leverage data analytics to obtain more insights into consumer trends. DELIVERING RESULTS This financial year saw companies adjusting to post-pandemic realities such as geopolitical upheaval, moderating economic growth and higher inflation. It was no different for the golf retail industry, as we had to navigate a slight moderation in demand following the incredible boom in business that occurred during the COVID-19 period. We were fortunate that social distancing rules and travel lockdowns turned golf into the game of choice for many, including celebrities and their followers, which have also increased the number of younger people playing the game. Therefore, although topline growth may not have been as impressive as previous years, we are of the view that it is a solid performance and that the higher base we are operating from bodes well for the future. The continued expansion of MST Golf both locally and regionally will also provide further upside going forward. REWARDING SHAREHOLDERS WITH DIVIDEND The Company has a dividend payout commitment of 30% of net profit for the year attributable to the shareholders as dividends. The first interim single-tier dividend of 0.5 sen per share was declared in the third quarter and the second interim single-tier dividend of 0.5 sen per share in the fourth quarter in respect of the financial year ended 2023. The total dividend payout amounted to 1.0 sen per share, or RM8.2 million, was declared for the reporting period. This payout translates to about 46.6% of net profit for the year attributable to the shareholders. FY2023 HIGHLIGHTS GROUP REVENUE RM325.4 million +8.2%* GROSS PROFIT RM142.9 million +10.6%* DIVIDEND PER SHARE 1.0 sen NORMALISED PATAMI RM22.0 million * FY2023 vs FY2022
SECTION 2: OUR STRATEGIC CONTEXT 20 JOINT LEADERSHIP STATEMENT MST Golf beach clean up at Pantai Remis with volunteers from brands, employees, families and suppliers. OUR APPROACH TO SUSTAINABILITY Our message would not be complete without sharing our views regarding our sustainability approach and practices. Sustainability at MST Golf is all about our long-term business transformation amidst the evolving global climate and geopolitical landscape to balance our business, people, and environment needs. We steadfastly uphold the principles of sustainability as integral to our goals in building the golf industry. As leaders of the Group, we have diligently established 18 sustainability matters spanning our threepillar framework of “Better Business“, “Better Environment“ and “Better People“. Led by our dedicated sustainability team, the Group initiated a comprehensive review of our businesses, established tracking metrics and initiatives for each of these matters as well as a sustainability policy. These benchmarks will serve as the foundation for our 2024 targets and beyond, reaffirming our commitment to tangible progress in our sustainability endeavours. Furthermore, we actively engaged our employees, customers and brands in various sustainability activities, fostering a culture of shared responsibility and collaboration within our organisation and stakeholders. At MST Golf, we want to ingrain sustainability in our ethos, epitomising the triple bottom line approach where we strive to create value for people, the planet, and prosperity. Through our actions, we aspire to set an example of responsible leadership that extends beyond our operations but also to the golf industry as we propel the sport of golf collectively. We believe that when the golf industry and sport are well, our business will also be well thus contributing to building a more sustainable golf industry in the long term. In closing, we would like to extend our gratitude and appreciation as we mark a new chapter in MST Golf’s journey. We want to acknowledge the collective efforts and unwavering support of our incredible team, our loyal customers and our esteemed brand partners in the wake of our successful public listing. To our dedicated employees, we extend our heartfelt gratitude. Your unwavering commitment, innovation and passion have been the driving force behind our success. You are the heart and soul of this company and we are proud of the way you have embraced challenges and continued to raise the bar in serving the best in everything golf. As we venture into this new phase, we understand that the expectations and responsibilities have grown and therefore our commitment to integrity, transparency and sustainability remains resolute. The faith and trust bestowed upon us by our shareholders will drive us to uphold the highest standards of corporate governance and performance excellence. ACKNOWLEDGEMENTS
21 ANNUAL REPORT 2023 MST GOLF GROUP BERHAD MANAGEMENT DISCUSSION & ANALYSIS OVERVIEW MST Golf is a leading golf retail and service provider in Malaysia and Singapore with golf-related businesses in retail, wholesale, corporate merchandise, golf academy, club fitting, golf events and tournament management, driving range management and indoor golf. With 35 years of experience in the golf retail industry, MST Golf is the distributor and preferred retailer for many global golf brands and products. Our retail concept is regarded by the brands as one of the best in the world, offering a comprehensive range of products from golf equipment, accessories, apparel to footwear. Over the years, we have evolved our retail concept and are humbled to be able to deliver world-class golf retail experience to the growing golf communities across the region. We have a growing membership base of 140,000 golfers in our ilovegolf loyalty programme, a key asset of the company which serves as our direct and targeted marketing channel contributing approximately 70% of our retail sales. The golf industry witnessed a surge in interest towards the sport particularly among the younger demographic during pandemic. South East Asia is regarded by the brands as a key growth region post-Covid with vast and younger population and growing wealth. With MST Golf at the forefront and well poised to drive growth and accessibility to more consumers, we leveraged opportunities presented in line with our own plans to expand our business regionally. In 2023, we expanded into Indonesia by joint venture with PT Sinar Eka Selaras Tbk (Erajaya Active Lifestyle) and opened our first retail outlet in Jakarta with plans to open five more outlets in 2024. In addition, the use of advanced technologies in driving ranges and indoor golf centres is revolutionising the way golf is experienced and played. These technological advancements, such as sophisticated launch monitor and software for tracking golf ball flight and simulating real world golf courses are enhancing players’ experiences and performance. We can see that this trend is also evident in the rising number of indoor golf centres in the region including Malaysia. The increased popularity of golf, spurred by these technological innovations, is expected to drive demand for golf equipment and related services, presenting substantial opportunities for MST Golf in the region.
SECTION 2: OUR STRATEGIC CONTEXT 22 OUR STRATEGY MST Golf’s strategy for regional expansion capitalises on the lack of golf specialist retailers in the South East Asian golf market and the urge by the brands to provide a retail solution to cater to the growing golf demand and interest. The primary driver of our listing on the Main Market of Bursa Malaysia Securities is to accelerate this regional expansion into key markets mainly targeting at Indonesia, Thailand and Vietnam with our retail presence. Our Strategy for Expansion Regional Expansion and Market Penetration Strengthening Presence in Existing Market Technology Integration and Customer Engagement Strategic Joint Ventures: Our expansion strategy involves partnering with local entities possessing established networks in the local retail industry to leverage on their expertise of importation and logistic, store location development, human resources, local laws and compliances. Our joint venture with Erajaya Active Lifestyle in Indonesia exemplifies this approach, leveraging their retail and distribution expertise to establish MST Golf’s presence in Indonesia by the end of FYE2023. Similarly, partnerships in Thailand and Vietnam are on track, aiming for store openings in key cities by 2024 and 2025 respectively. Securing More Brand Distributorships: We aim to be the brands’ regional solution and plan to secure more brand distributorships in the region especially Indonesia, Thailand and Vietnam. This is to improve the trade margins and better execution of brand strategy through our retail outlets. 1 2 Increase Retail Presence: In Malaysia and Singapore, we aim to enhance our market reach by establishing new retail outlets coupled with improving store efficiency to provide enhanced accessibility and world-class golf retail experience to the golf community. Addressing New Customer Groups: One of the key focusses in Malaysia and Singapore is to promote the play of more golf especially targeted to attract new golfers including juniors and ladies. We are also looking for new brands, especially in apparel, which will appeal and cater for the new and younger golfers. 1 2 Incorporating Advanced Technology: Leveraging technology in our retail outlets and indoor golf centres is a key component of our strategy. This includes state-of-the-art equipment to enhance the golfing experience from coaching, club testing, club fitting and baseline assessments available at our retail stores, MST Golf Arena and The Golf Lab. We will embark on e-golf tournaments in our indoor golf centres to create more excitement among social amateur and professional golfers. Upgrading of Digital Technology Facilities: Our strategy also includes significant investment in enhancing our digital technology infrastructure, in line with the Group’s expansion. This will involve a comprehensive upgrade of our Enterprise Resource Planning (ERP) and IT systems, to match our business growth and enhance operational capabilities with advanced data analytics features. 1 2 MANAGEMENT DISCUSSION & ANALYSIS
23 ANNUAL REPORT 2023 MST GOLF GROUP BERHAD The financial year ended (“FYE“) 31 December 2023 is the full post-Covid-19 year where we witnessed a golf boom and bumper year in 2022. Coming off at a high base in FYE2022, MST Golf recorded a 8.2% growth in revenue and normalised Profit After Tax and after Minority Interest (“PATAMI“) of RM22.0 million for FYE2023, a 17.4% decrease from the RM26.7 million reported in FYE2022. The decrease in PATAMI was attributed to a lower revenue growth along with an increase in operation cost and capital expenditure for our current and new facilities, as well as equipment upgrades. 2019* RM’000 2020 RM’000 2021 RM’000 2022 RM’000 2023 RM’000 Group Revenue (Total) 177,688 170,260 206,519 300,875 325,431 Y-O-Y - -4.2% 21.3% 45.7% 8.2% CAGR (2019-2023) 16.3% Gross Profit 70,037 69,565 84,031 129,195 142,929 GP% 39.4% 40.9% 40.7% 42.9% 43.9% EBITDA 19,800 30,505 39,118 57,777 58,3101 % of revenue 11.1% 17.9% 18.9% 19.2% 17.9% Y-O-Y - 54.1% 28.2% 47.7% 0.9% Profit Before Tax 14,057 18,336 26,486 38,841 31,6501 % of revenue 7.9% 10.8% 12.8% 12.9% 9.7% Profit After Tax 10,451 13,714 20,318 29,115 21,7641 % of revenue 5.9% 8.1% 9.8% 9.7% 6.7% PATAMI 9,570 12,902 18,235 26,652 22,0211 % of revenue 5.4% 7.6% 8.8% 8.9% 6.8% Y-O-Y - 34.8% 41.3% 46.2% -17.4% CAGR (2019-2023) 23.2% Revenue 2019* RM’000 2020 RM’000 2021 RM’000 2022 RM’000 2023 RM’000 By Business Segments Retail 153,089 145,965 163,649 241,308 263,556 Wholesale 15,716 17,437 37,476 47,374 42,091 Golf-Related Services 8,883 6,858 5,394 8,361 14,008 Indoor Golf - - - 3,832 5,776 By Geographical Operations Malaysia 122,128 127,500 122,110 200,112 209,915 Singapore 55,560 42,760 84,409 100,763 115,363 Indonesia - - - - 153 * The figures presented in FYE 2019 are before transition to Malaysian Financial Reporting Standards (“MFRS“). (1) Normalised EBITDA / Normalised Profit Before Tax / Normalised Profit After Tax / Normalised PATAMI excluding the one-off impact of RM4.4 million related to the share listing expenses. REVIEW OF RESULTS
SECTION 2: OUR STRATEGIC CONTEXT 24 SEGMENTAL REVIEW OF FINANCIAL PERFORMANCE The retail segment experienced a 9.2% year-on-year revenue growth compared to FYE2022, with a robust three-year Compound Annual Growth Rate (“CAGR“) of 21.8%. This growth was primarily driven by the strategic expansion of retail outlets in several locations, enhancing accessibility and convenience for golfers. The golf-related services segment witnessed a 67.5% increase in revenue compared to FYE2022, driven by golf events and tournaments, including a professional tournament. Additionally, revenue from the indoor golf segment saw a rise of 50.7% compared to FYE2022. This growth was attributed to the successful establishment of our new indoor golf facilities, with notable expansions in FYE2023 including Malaysia outlets at Gurney Paragon Mall in Penang, Toppen Shopping Centre in Johor and our first outlet in Indonesia at La Piazza, Summarecon Mall Kelapa Gading, Jakarta. The wholesale segment recorded a revenue decline of 11.2% compared to FYE2022. Despite this, the segment has demonstrated an upward trajectory when seen over the longer term with a three-year CAGR of 34.1%. The decline in the wholesale segment for the FYE2023 was primarily due to customers in Indonesia were more cautious buying in post-Covid year and with anticipation of MST Golf entering the retail market in Indonesia. Malaysia's operation remains as the primary revenue contributor for MST Golf, showcasing a steady revenue growth of 4.9% compared to FYE2022. The growth was primarily contributed by full-year operation of the stores opened in FYE2022 and new stores opened in FYE2023. Our 3-in-1 retail concept, which comprises golf retail, golf academy and indoor golf, drew more traffic into retail stores, thus contributing to overall revenue growth. The revenue contribution from Singapore's operation stems from a mix of retail and wholesale business, serving both domestic and overseas markets. In FYE2023, the Singapore market achieved a 14.5% revenue growth, resulting from the full-year of operation of the two key stores opened in FYE2022 gaining market share in Singapore. Recognising the immense growth potential in Indonesia, MST Golf plans to intensify its market presence by opening more stores in the upcoming years, aiming to establish a significant foothold and solid positioning within the Indonesian market. MANAGEMENT DISCUSSION & ANALYSIS Revenue by Business Segment (RM’000) Revenue by Geographical Operations (RM’000) Retail Wholesale Golf-Related Services Indoor Golf Malaysia Singapore Indonesia 263,556 42,091 14,008 241,308 200,112 100,763 47,374 8,361 11.2% YoY 9.2% YoY 4.9% YoY 14.5% YoY 67.5% YoY 50.7% YoY 5,776 3,832 209,915 115,363 153 2022 2023 2022 2023
25 ANNUAL REPORT 2023 MST GOLF GROUP BERHAD Review of Financial Position 2019* Audited RM’000 2020 Audited RM’000 2021 Audited RM’000 2022 Audited RM’000 2023 Audited RM’000 Total Assets 107,603 147,826 177,434 258,731 412,717 Total Liabilities 81,204 109,820 132,709 163,115 157,136 Total Equity 26,399 38,006 44,725 95,616 255,581 Net Current Assets 10,804 22,938 26,305 58,839 209,566 Inventories 63,323 48,822 73,645 113,567 150,636 Trade Payable Turnover Days 28 37 50 38 30 Trade Receivable Turnover Days 13 13 12 10 11 Inventory Turnover Days 198 203 182 199 264 Total assets of the Group stood at RM412.7 million as compared to RM258.7 million in FYE2022. The increase of 59.5% year-on-year was mainly from the share issuance proceeds received from the Initial Public Offering (“IPO“) and the increase in rights-of-use assets as well as inventories due to the Group's expansion efforts during the current financial year. Total equity of the Group stood at RM255.6 million as compared to RM95.6 million in FYE2022 showing an increase of 167.4% contributed by the IPO proceeds and retained earnings. Review of Cash Flows 2019* RM’000 2020 RM’000 2021 RM’000 2022 RM’000 2023 RM’000 Net cash (used in)/from operating activities 3,374 51,591 7,379 8,954 (8,622) Net cash (used in) investing activities (6,726) (2,016) (5,114) (24,847) (24,371) Net cash from/(used in) financing activities (2,074) (8,449) (7,183) (4,565) 89,608 Net increase/(decrease) in cash and cash equivalents (5,426) 41,126 (4,918) (20,458) 56,615 Cash and cash equivalents at the beginning of the financial year 4,788 (638) 40,466 35,967 17,585 Effect of foreign exchange rate changes 0 (22) 419 2,076 5,145 Cash and cash equivalents at the end of the financial year (638) 40,466 35,967 17,585 79,345 At the end of the financial year, the Group’s cash and cash equivalents stood at RM79.3 million, an increase from RM17.6 million in FYE2022. The decrease in cash flow from operating activities were caused by a lower Profit Before Tax (“PBT“) in the financial year and payment to suppliers for inventory purchases to support the newly opened stores in FY2023 and FY2024. The increase in cash from financing activities were primarily attributed to the proceeds from issuance of ordinary shares during the Group's IPO. * The figures presented in FYE 2019 are before transition to Malaysian Financial Reporting Standards (“MFRS“).
SECTION 2: OUR STRATEGIC CONTEXT 26 BUSINESS REVIEW MST Golf operates a few key business segments, each contributing to the company's overall performance. These segments are outlined below with key aspects and initiatives undertaken by each segment in FYE2023. MST Golf operates as a golf specialty retailer offering a wide range of golf equipment, accessories, apparel and footwear. As the primary business focus, the segment is looking to expand its retail presence and into new geographical areas. About the Segment Initiatives • Strengthen existing retail presence in Malaysia and Singapore. • Plans to replicate successful business model into new geographical areas (Indonesia, Vietnam, Thailand). • Actively pursued new brands and distributorships. Outcomes • Opened our first premium golf retail store, MST Golf Premium at The Starhill KL. • Opened two retail stores – Seremban Gateway and Plaza Shah Alam and two with indoor golf at Gurney Paragon Mall, Penang and Toppen Shopping Centre, Johor. • Opened our first store in Indonesia at La Piazza, Summarecon Mall Kelapa Gading, Jakarta. • Secured brand distributorships for LA Golf, Blue Tees, Sun Mountain and Rapsodo. 1 RETAIL As the distributor for some of the key global golf brands, MST Golf wholesales selected brands and products to key retailers in Malaysia, Singapore and Indonesia. The key wholesale market for the Group is Indonesia, where MST Golf Retail had no presence prior to our retail foray. About the Segment Initiatives • Expanding brands and product offerings to existing dealers. • Seeking more brand distributorships with wholesale potential. • Visiting and explaining to dealers in Indonesia that our wholesale business would continue as usual after opening MST Golf retail stores in Indonesia. Outcomes 2 WHOLESALE • Expanded additional apparel and footwear brands to dealers in Malaysia. • The decrease in orders from Indonesia dealers post-Covid and concerns of MST Golf opening retail stores in Indonesia are minimised. MANAGEMENT DISCUSSION & ANALYSIS
27 ANNUAL REPORT 2023 MST GOLF GROUP BERHAD MST Golf offers golf-related services such as golf coaching, club fitting and assessment and golf event management. About the Segment Initiatives • Incorporating The Golf Lab coaching and club fitting as part of our bigger format MST Golf retail stores’ services. • Securing more golf tournaments and events. • Creating more player development programmes. Outcomes • Opened three The Golf Lab housed at MST Golf’s 3-in-1 concept locations in Gurney Paragon Mall Penang, Toppen Shopping Centre, Johor and La Piazza, Summarecon Mall Kelapa Gading, Jakarta. • Appointed as the Delivery Agent of a three-party partnership with Professional Golf of Malaysia and UMW Toyota to manage and deliver Toyota Tour, a professional golf tournament in Malaysia. • Coached 259 junior golfers under our Junior Development Programme across two MST Golf Academies. • Conducted the Toyota Tour Elite Junior Programme to train 12 of the best junior golfers in Malaysia and allow them to compete alongside Tour Professionals in the Toyota Tour. 3 GOLF-RELATED SERVICES Introduced in 2022, MST Golf Arena represents MST Golf’s foray into indoor golf featuring tech-equipped simulation bays and putting greens, combined with F&B services that cater for golf and entertainment aimed at providing customers with a unique and immersive golf experience for golfers and non-golfers. This segment aims to lower the entry barrier into golf for non-golfers and in response to the rising demand for indoor golf. MST Golf Arena is always part of our total golf retail concept to drive more traffic to our retail stores. About the Segment 4 INDOOR GOLF Initiatives • Expanding offerings by introducing more indoor golf outlets within the region. • Excite golfers and non-golfers with golf and sports-related consumer activations to drive footfall. Outcomes • Redefined our indoor golf's F&B business and operations. • Opened three MST Golf Arena outlets at Gurney Paragon Mall in Penang, Toppen Shopping Centre in Johor and Summarecon Mall Kelapa Gading in Jakarta. • Hosted more than 40 indoor golf tournaments and demo days in partnership with brands and learn to golf sessions opened to public.
SECTION 2: OUR STRATEGIC CONTEXT 28 MANAGEMENT DISCUSSION & ANALYSIS KEY RISKS The Group emphasises the importance of its enterprise risk management (“ERM“) and internal control framework in managing and monitoring strategic, operational and financial risks. The Group is also subject to economic, social, political and regulatory risks in the countries where we operate in. Despite these risks or uncertainties, our resilient performance underscores the effectiveness of our risk management approach in proactively addressing challenges and seizing opportunities. In FY2023, we have identified several key risks that could impact our operations and performance. These include foreign exchange and international sales risk, where fluctuations in currency exchange rates may affect export sales, particularly in Singapore. We also face challenges related to inventory and market demand, as we must manage inventory based on shifting consumer preferences and seasonal variations, while also mitigating the risk of potential writedowns. Additionally, we address intellectual property and market integrity risks, stemming from the threats posed by counterfeit goods and parallel imports, which could diminish brand value and market positioning. Moreover, the pandemic and accessibility risk remain pertinent given the potential impact of Covid-19 or similar outbreaks on travel and access to golf facilities, thereby affecting the demand for our products and services. It is worth noting that we also face the potential impact of post-Covid where a surge in travel is observed globally, presenting both opportunities and challenges in navigating the evolving market landscape and spending behaviour. We also acknowledge the supplier concentration risk, as reliance on major suppliers exposes us to potential disruptions due to financial instability, production issues, or supply chain disruptions. Furthermore, the complexities associated with international joint ventures and the challenges of cultural and legal differences present additional risks to our operations. Lastly, in the face of rapid digital transformation, we recognise the IT and digital transformation risks as we strive to establish robust digital infrastructure which comes with substantial investment costs in order to keep pace with industry advancements. Through proactive risk management strategies, we aim to mitigate these risks and ensure the long-term resilience and success of MST Golf. Further details on risks and potential risks the Group is exposed to are listed on Section 5 - Risk Factors of our IPO Prospectus www.mstgolfgroup.com
29 ANNUAL REPORT 2023 MST GOLF GROUP BERHAD OUR 2024 OUTLOOK The Group is committed to strengthening its position as the market leader in both Malaysia and Singapore. Plans are currently ongoing to elevate some of the Group’s current retail outlets in 2024 to improve store efficiency, further expand its retail presence in these two existing markets and enhance strategic collaborations with brands to provide better retail experience to customers. Despite the challenging market condition and outlook with overall weak consumer sentiment, rising business costs and uncertainties of the current global geo-political situation, the Group remains cautiously optimistic about its growth prospects, especially in our expansion into new geographical locations where we believe that we are in a strong position with our business model and retail concept to compete with the local retailers and gain market share. Following our successful entry into Indonesia with our joint venture partner Erajaya Active Lifestyle, we opened our first retail outlet in Jakarta in December 2023 with our unique 3-in-1 total golf retail concept outlet comprising golf retail, golf academy and indoor golf and subsequently a second retail outlet in February 2024. These outlets have been well-received by the local golf consumers and the brands, as well as created a lot of hype and excitement within the Indonesian golf industry. We kept the excitement and marketing efforts going in Indonesia by bringing the regional launch of TaylorMade for its 2024 products to Jakarta in January 2024, followed by the launch of HONMA’s new series in February. In addition, as the newly appointed distributor of Honma Golf in Indonesia, we started the wholesale of HONMA to selected retailers in Indonesia through our joint venture company, PT MST Golf Distribution. Our expansion plans in Indonesia are on track as we plan to open four more retail outlets in key locations in Jakarta, which will bring the total number of outlets to six by 2024. Our regional expansion plans to enter Thailand and Vietnam remain on track. The negotiation of our joint venture in Thailand is at the advance stage with the aim to open two retail outlets in Bangkok by quarter four of 2024. We have also started to engage with potential joint venture partners in Vietnam, aiming to expedite our entry to Vietnam in 2025. In the golf services segment, we aim to grow our corporate clientele to deliver golf tournaments on course and off course (indoor golf) catering to a broader audience. We will also continue to refine and enhance cost efficiencies of our indoor golf business and operations, as well as drive more footfall to MST Golf Arena to excite new golfers, corporates and the younger demographic, thus driving more sales across our retail stores. The Toyota Tour, Malaysia’s local professional golf tournament following a three-party partnership between Professional Golf of Malaysia (PGM), UMW Toyota and MST Golf is into its second edition in 2024. In addition of hosting the tournaments for the professionals, we are excited to kickstart the Toyota Tour eGolf Championship, Malaysia's first national indoor golf tournament for amateur golfers which will run from April to August 2024. The inaugural Toyota Tour eGolf Championship tournaments will be played across all four MST Golf Arena locations in Kuala Lumpur, Selangor, Penang and Johor over five months with the grand finalist to be invited to play at a Toyota Tour event and compete against the professionals. The Championship is a first-of-its-kind, with the objective to bridge the gap between professional and amateur golfers, and is in line with our mission to promote golf and the industry to propel the sport. We are also enhancing our IT facilities, systems and processes to increase the operational and analytical capabilities and the efficiency of running and managing the business to lead the Group forward in line with MST Golf's business expansion. With the positive growth outlook by global industry players toward South East Asia, the Group is in a good position and optimistic about its geographical expansion plan in the region and financial growth moving forward. As the prominent Malaysian homegrown golf specialist, the Group is also keeping a lookout for other golf-related opportunities in Malaysia and the region.
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