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This article first appeared in Corporate, The Edge Malaysia Weekly, on May 2 - 8, 2016.

IF you are old enough to remember what happened to Artwright Holdings Bhd during the 1997/98 Asian financial crisis, the memory may still send a shiver down your spine.

Twenty years ago, the manufacturer of office furniture floated its shares on the Second Board of the then Kuala Lumpur Stock Exchange at an initial public offering price of RM3.90 apiece. At one point, its share price shot up to RM20, before trading at the RM15 level for about a year.

In 1996, Artwright built the largest office furniture factory of its kind in Asia outside Japan. It was fully automated, with robotics and conveyors. Then came the infamous Asian financial crisis.

With millions in debt, Artwright was hit hard as interest rates went through the roof. Its vulnerable balance sheet also made it difficult for the company to respond to the downturn.

In 2013, local businessman Datuk Tiong Kwing Hee, through his company Dexx Technologies Sdn Bhd, emerged as the single largest shareholder in Artwright — which was by then known as AHB Holdings Bhd — with a 19.43% stake. Tiong, who is known as a “turnaround specialist”, is currently the CEO of EcoFirst Consolidated Bhd, a locally listed mall operator and property developer. He is also executive director of Mercury Industries Bhd, a car paint maker and construction firm.

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In August last year, Tiong ceased to be a substantial shareholder of AHB after offloading 28 million shares.

Today, the counter is only trading at 20 sen apiece, giving the company a market capitalisation of RM32 million. At the moment, it is hard to see the penny stock revisiting its peak level.

AHB CEO and managing director Yong Yoke Keong tells The Edge that he is apologetic about the stock’s performance. However, he stresses that it is now time to move on as the company aims to be the largest premium office furniture firm in the country by 2020.

“I’m sorry [for what happened] but that event was beyond my control. The show must go on, and it went on. I did what I could to get back, and I’m back. This time, I’m not going to make the same mistake,” says Yong, in his first media interview in 15 years.

Yong, 56, was appointed as director in 1994. However, he has been guiding the group since 1988, when it was a small operation. He saw it through its debut as a public listed company in 1996 and is now at the helm as AHB tries to make a comeback.

“The local office furniture market accessible to us is worth about RM200 million annually. If we want to be the largest player, we should get at least 25% [of the domestic market share], and I think this is achievable within five years from now,” says Yong, who is a substantial shareholder of AHB with an 18.97% stake.

“After we achieve our local market share goal, the next big thing would be to be the largest regional player. We will enhance our market presence in India and Asean.”

Yong points out that the potential of the furniture industry is evidenced by the global production volume, which is about US$400 billion a year.

The group currently exports office furniture to the Middle East, Americas, Asean and India. Its clients around the world include American Express, Nestlé, Gillette, GlaxoSmithKline, DHL, IBM and British Gas.

Interestingly, Yong acknowledges that it could be difficult for AHB to regain investors’ confidence. But it is “a different game in the same industry”, he says.

“We know how to do it and we will do it again. I’m committed because the market is still out there and I want to prove that. I want to prove to people that I will do this one more time. That’s where we are today. Whether they (the investors) are confident or not, I can’t speak on their behalf, but I am confident.”

It is worth noting that AHB is no longer a Practice Note 17 (PN17) company as at April 18, as Bursa Malaysia has approved its application for a waiver of the regularisation process.

Yong clarifies that AHB fell into PN17 status in November 2014 because of an unexpected technicality in relation to its auditor’s opinion of consolidation uncertainties which, in the management’s opinion, were not uncertain at all.

“Now, we have resolved all the uncertainties, which we had thought were certain in the first place,” he reiterates.

However, being a PN17 company was a serious matter, says Yong. Hence, the group had to put its various expansion plans on hold until now.

Headquartered in Puchong, AHB also has an assembly and quality control plant in Seri Kembangan.

As the company is now on a firm footing, with a strong balance sheet, it plans to build a state-of-the-art production facility in Port Klang in 2017 or 2018.

“Most of our capacity will continue to be outsourced. We are not trying to build a huge manufacturing plant. We just want to be able to be more responsive to clients’ demands,” says Yong.

He adds that AHB will now be looking at a low-risk, high-return structure, as he still has a “phobia” of bank borrowings.

“Before 1997 happened, I was much younger. It is important to learn our lesson, and we have learnt it well. Going forward, we won’t do that again.”

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Yong admits that AHB’s balance sheet is still relatively small, but it is “very strong and healthy”. The company has zero bank borrowings and, more importantly, it is profitable.

Its shareholders’ funds stood at RM28.7 million as at Dec 31 last year, up from RM4.1 million as at June 30, 2013.

“This is a financial position that we wanted to get ourselves into, and this is where we are now. All bank debts have been settled. Of course, we have the normal amount of creditors and receivables, but it’s all good,” Yong comments.

On AHB’s financial results, he says the company has recorded 10 consecutive quarters of net profit, and he is confident that it will not slip into the red again in the foreseeable future.

In the nine months ended Dec 31, 2015 (9MFY2016), the group saw its net profit increase 29.8% year on year to RM1.31 million. Revenue grew 13.7% to RM12.14 million.

For FY2017, AHB is looking at double-digit growth in revenue and profit.

“In the recent past quarters, we had been posting double-digit growth. We expect this to continue. The Malaysian furniture industry has come a long way to become one of the leading furniture exporters in the world. We hope our growth plans will gain more traction soon, and then we will set higher growth targets,” Yong concludes.

 

 

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