KUALA LUMPUR: Fiamma Holdings Bhd's revenue is expected to decline by 1.5-4.3 per cent for its financial year 2022 (FY22) to FY24, weighed down by lower sales from its trading and services as well as property segment. 

Affin Hwang Capital said with Malaysia transitioning to an endemic phase coupled with rising cost of living, consumers would spend less on Fiamma's electrical and electronics (E&E) products. 

For the company's property segment, Affin Hwang expects lacklustre contribution due to unexciting new projects and tight lending conditions. 

"We forecast core earnings to shrink by 0.6 per cent to 11.1 per cent dragged by lower sales from trading and services segments influenced by shift in consumer spending behaviour as well as lower discretionary income among the consumers due to inflationary pressure.

"Earning will also fall due to declining margins from increasing costs of operations and costs of sales from weakening of the ringgit," it said in note.

On May 18, Signature International proposed to acquire a 23.67 per cent stake in Fiamma for RM180 million. 

It entered into a share sale agreement (SSA) with Fiamma as a major shareholder.

Based on Affin Hwang's channel checks with Fiamma, the company guided that over the near term, the acquisition would not have any direct impact on its financials. 

However, in the long run, Fiamma had expected high sales contributions from the new owners. 

"We believe revenue can be achieved from cross-selling, reduction of competition and access to new markets. 

"Moreover, we find that the offer price of RM1.50 is at a premium of  more than 100 per cent to our valuation. Therefore, we believe Fiamma should accept the offer," it said.

Affin Hwang has initiated coverage on Fiamma with a "Sell" rating and a 12-month target price of 53 sen. 

"We remain cautious on the uncertainty in E&E retail industry outlook that might impact the company's profitability moving forward," it added.