IH RETAIL (01373.HK): Singapore Business to Transform to Master Franchise Model for Three Years
NewTimeSpace News: On 13 August 2026, International Housewares Retail Company Limited (stock code: 01373) announced that the Group's subsidiary formally entered into a master franchise agreement and a transition agreement with a Singapore master franchisee, pursuant to which the Group will transform its Singapore market into a "master franchise" operating model, granting the master franchisee the exclusive right to operate the retail brand business in Singapore for a period of three years.
According to the announcement, the franchisor (Japan Home (Retail) Pte. Limited, an indirect non-wholly-owned subsidiary of the Company, held as to 70% by the Group and 30% by Radha Japan) entered into the master franchise agreement with the master franchisee (Radha Exports Pte. Ltd., wholly owned by the Gangaram family), with a term of three years from 13 August 2026 to 12 August 2029, extendable for a further three years upon expiry of the initial term. The handover of existing stores in Singapore will commence on 19 August 2026, with all relevant stores expected to complete the "franchise model" transformation on or before 31 December 2026, and all operating expenses relating to the stores will be borne by the master franchisee.
In respect of royalties, the master franchisee is required to pay, for the first and second years, an annual fee of SGD 100,000 or an annual fee calculated at a fixed rate (0.35% of annual total sales) based on the aggregate annual sales of all franchise stores on a 12-calendar-month basis, whichever is higher; for subsequent years after the second year, the annual fee is calculated at the fixed rate based on the aggregate annual sales of all franchise stores. Under the transition agreement, the master franchisee is required to pay the franchisor renovation costs of SGD 325,000 for the relevant stores and an amount not exceeding SGD 2,000,000 in aggregate, equivalent to the rental deposits, and to provide a corporate guarantee and a bank guarantee of SGD 1,000,000 on the effective date.
In respect of the annual caps, the maximum aggregate transaction amounts for transactions contemplated under the master franchise agreement are: SGD 15,270,000 for the nine months ending 30 April 2027 (including SGD 4,970,000 of distribution of existing store inventory sales), SGD 12,300,000 for the financial year ending 30 April 2028, SGD 14,200,000 for the financial year ending 30 April 2029, and SGD 4,700,000 for the three months ending 31 July 2029, with the annual caps including a buffer of approximately 5% to 10%. The Group expects the new model to bring significant benefits to the long-term development and profitability of the Singapore market: focusing on the Hong Kong core business to optimise resource allocation, transitioning to a capital-light and efficient model in response to Singapore market trends, securing stable royalty income while accelerating inventory clearance and cash flow recovery, and leveraging the master franchisee to expand the value of the Singapore retail brand.
In terms of the implications under the Listing Rules, as the Gangaram family holds 30% of the franchisor through Radha Japan, it is a substantial shareholder of the franchisor and a connected person of the Company at the subsidiary level; as the master franchisee is wholly owned by the Gangaram family, it is also a connected person of the Company at the subsidiary level under Chapter 14A. Accordingly, the transactions contemplated under the master franchise agreement and the transition agreement constitute continuing connected transactions and a connected transaction of the Company respectively, subject only to the reporting, announcement and, where applicable, annual review requirements, and are exempt from the circular, independent financial adviser's opinion and independent shareholders' approval requirements under Rule 14A.101 of the Listing Rules.
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