This article first appeared in The Edge Malaysia Weekly on February 12, 2018 - February 18, 2018

TWO years ago, in a move to broaden its income base and reduce reliance on its core business, ACE Market-listed Focus Dynamics Group Bhd ventured into the food and beverage (F&B) business.

During the financial year ended Dec 31, 2016 (FY2016), the group opened whisky luxe lounge, Chaze, and resto-lounge and wine atelier, Lavo, at Menara Lien Hoe in Persiaran Tropicana, Petaling Jaya. Popular among the corporates in the Klang Valley, the two F&B outlets seem to have done well, sustaining combined average monthly sales of RM1 million.

Focus Dynamics’ business diversification is already bearing fruit. For the nine months ended Sept 30 last year (9MFY2017), the F&B segment generated profit before tax of RM1.4 million. The revenue of RM16.8 million made up almost three quarters of the group’s top line.

At the group level, Focus Dynamics, which had been reporting losses since 2009, finally returned to the black with a net profit of RM4.6 million in 9MFY2017, as revenue more than doubled to RM23 million.

Chaze offers alcoholic beverages and wines in a luxurious and comfortable environment suitable for casual gatherings and business meetings. A floor below, Lavo offers the same, as well as pork-free Western and fusion cuisine.

Although they are popular among businessmen, deal makers and bankers, certain quarters are sceptical about the mid to long-term prospects of Focus Dynamics’ F&B business.

“The corporate crowd moves around. Once the crowd shifts, you will be going down. I have yet to come across anyone who can last more than three years,” says an F&B industry veteran. “Overseas, they have pubs and lounges that can last for a long, long time, whereas Malaysians tend to go for value. That’s our way of life.”

A local restaurateur points out that it is relatively easier for Chinese restaurants to build customer loyalty compared with F&B outlets that focus more on drinks than food.

“A drink is a drink, be it coke, whisky or stout. You can have the same drink at other places. But people will always come to the same place for certain foods prepared by certain chefs,” he says.

However, Focus Dynamics executive directors Benson Tay Ben Seng and Edward Leung Kok Keong are unfazed. “We have crossed into an area where our revenue is growing and the profitability is there. To set the right tone for Focus Dynamics, we are building a solid business that we have experience in. Therefore, we should continue to see healthy numbers going forward,” Leung tells The Edge.

Tay acknowledges that the corporates move around frequently, but he stresses that it is the F&B operator’s job to entice them to come back. “These days, people move around every week because there are so many new places opening up. It is our job to maintain our outlets. We need to be aggressive and show them something new every time they come,” he says.

Tay, 34, was appointed to the board in February last year. He has more than a decade’s experience in event management, F&B operations and conceptualising new start-ups.

Leung, 51, who trained to be an investment banker, has been on the board since October 2015. He was an executive director and founding member of Newfields Advisors Sdn Bhd, a boutique financial and corporate advisory firm.

Before its venture into the F&B business, the group — formerly known as Focus Dynamics Technologies Bhd — was a specialist in energy efficiency systems, LED lighting, industrial control systems and related distribution products.

Focus Dynamics is 19%-owned by ACE Market-listed business incubator and strategy advisory group Fintec Global Bhd, which was previously known as Asia Bioenergy Technologies Bhd. Asia Bioenergy had said it holds a strategic stake in Focus Dynamics as it believes the F&B operations have potential to grow through collaborations and cross-selling of products and services between the group’s investee companies.

Leung highlights that as Focus Dynamics’ original core businesses have been slowing down, the group aims to expand its F&B segment — its main contributor over the last 18 months.

Riding on the success of Chaze and Lavo, Focus Dynamics is continuing to create and develop new brands for its F&B portfolio. Last year, it opened Maze, a gin parlour and coffee saloon also located in Menara Lien Hoe.

“People are coming here (Lavo) for dinner and then moving on to Maze or Chaze for after-dinner drinks. It is quite a unique experience,”

Leung explains.

“We create a lifestyle. We look into all users’ experiences. We look into every aspect, we are very detailed. Our price is reasonable. We offer nice food with a good atmosphere. We cater for the right crowd,” says Tay.

Now, Focus Dynamics is replicating its success by developing a new F&B and lifestyle hub called The Arch, which is expected to open its doors by the end of the year. The building will be constructed at a highly-strategic location in Jalan Tun Razak, adjacent to the Tun Razak Entertainment Centre Kuala Lumpur. A budget of RM60 million has been allocated for the construction.

Last week, Focus Dynamics launched Ministry of Wine, a one-stop wine e-commerce and warehouse hub. The website, believed to be one of the largest wine e-commerce platforms in the country, aims to list more than 5,000 wines in the coming months.

Tay says the beauty of selling alcoholic beverages and wines is that their value does not depreciate. “For wines, if you don’t sell them today, their value will appreciate 3% to 5% every quarter. That means you either sell it today, or sell it next year at 20% more.”

The turnaround at Focus Dynamics sent its share price to 39 sen last Friday, giving it a market capitalisation of RM305.6 million. The counter has more than quadrupled in the last 12 months.

“We would like to think that the investor interest is due to the fact that we are turning around. We have not seen this kind of positive numbers since our listing, and F&B is the business that gives us long-term stability,” says Leung.

As at Sept 30 last year, Focus Dynamics’ net cash stood at RM9.3 million.

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