Friday 29 Mar 2024
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KUALA LUMPUR: While stepping up efforts to cement a leading position in the regional cast acrylic sheets manufacturing industry, Asia Poly Holdings Bhd is branching out to e-commerce.

No, it is not joining the e-commerce rush setting up online shopping websites. Asia Poly is venturing into e-commerce supportive services for entrepreneurs.

Last month, Asia Poly announced that the company bought a 30% stake in FDL Technology Sdn Bhd (FDL Tech) for RM2.4 million cash.

The new venture into the information technology (IT) business is the first corporate exercise since the emergence of controlling shareholder Datuk Yeo Boon Leong, who is also the company’s chairman, in mid-April.

Under the share purchase agreement, FDL Tech will provide a profit guarantee of no less than RM2.5 million for the financial year ending Dec 31, 2016 (FY16), and RM3.5 million for FY17.

When contacted, Asia Poly chief executive officer Teoh Cheng Chuan said the company had seen the potential of FDL Tech, which provides the fulfilment of e-commerce business.

“Everyone tries to sell goods online ... who will deliver [the goods] to the end users? FDL Tech is the one linking up sellers [online], warehouses [to store their goods], delivery as well as software,” Teoh told DigitalEdge Daily in a recent interview.

FDL Tech was established in 2011 as a warehousing company before transforming into an e-commerce fulfilment solutions provider last year.

As an e-commerce newbie, some quarters have raised their eyebrows, wondering why FDL Tech is confident in guaranteeing an accumulated net profit of RM6 million for FY16 and FY17 — an amount more than double the purchase price.

Over the past five financial years, Asia Poly’s net profit shrank to merely RM687,000 for FY15 ended March 31, 2015, from RM4.25 million for FY10.

To FDL Tech director Then Ikh Choo, the company’s prospects are bright simply because of the mushrooming of online shopping sites, which increases the number of consumers opting to shop online.

“I believe e-commerce will become a norm in the next five years, and there is huge potential growth in e-commerce,” Then added.

Should things go as planned, Then’s ultimate plan is to list FDL Tech on Bursa Malaysia to expand to Southeast Asian markets, including Thailand.

“However, it is still in a preliminary stage and it could be changed. Our aim is to float the company within 24 months to 36 months,” he added.

FDL Tech offers its customers a service package entailing a back-end IT system to support the online sales platform, coupled with warehouse and product dispatch services equipped with trackers, which allow the consumers to track their purchases’ status.

Then stressed that FDL Tech does not own any e-commerce websites; the company’s core activities are provisions of back-end IT services to its clients in managing the online ordering, inventories and delivery of goods.

“We charge our clients per click (every item purchase) and then charge them again for goods delivery to the consumers,” he added.

“On top of that, we charge them a ‘reasonable rate’ for renting our warehouse space,” said Then.

The service was developed based on Then’s observation of the disconnection among sellers, warehouses and order fulfilment (delivery).

He added that the company had kick-started its business in the Klang Valley this year, and plans to branch out to Penang next year.

Currently, the company is handling some 300 orders per day. It plans to grow the transaction volume to at least 1,000 orders per day in the near term, specifically after the introduction of its 60,000 sq ft E-Commerce Fulfilment Centre.

Then said the centre would provide total fulfilment solutions to enable offline operations for e-commerce companies in Malaysia.

“We will increase the spacing to 100,000 sq ft by 2016,” he added.

Then said: “Our mission is to consolidate all potential e-commerce companies in Malaysia, and improve the overall offline fulfilment experience in order to provide the best online shopping experience to the consumers.”

Currently, FDL Tech has three warehouses in Shah Alam, with a total space of 300,000 sq ft. The utilisation rate stands at 100%.

Its client base remains small at about 30 local and multinational companies, including Karangkraf Mall, Sime Darby Bhd and Newell Rubbermaid.

This month, the company expects a new major client, which will boost its earnings significantly.

“We are also actively looking for new clients to enlarge our client base,” he added.

Then said parcel volume in the country registers a 30% year-on-year growth, and dispatchers may not be able to cope with the growth.

Hence, he said the company may soon be looking for “individual dealers” to help with delivery. “We may also consider to work with taxi companies to help us deliver our products,” he said.

Despite the good prospects, Asia Poly has no plan to raise its shareholding in FDL Tech.

“We think 30% is good enough for us to share their profits. We don’t need to consolidate, as we have other plans which will benefit Asia Poly’s shareholders,” Teoh said.

“Going forward, we [have] also decided to diversify our sources of income at the holding level. This will help to ensure us continuing enjoying reasonable profits,” he added.

Asia Poly recently proposed a two-call rights issue to raise fresh capital to pare down borrowings. Asia Poly shares (fundamental: 0.55; valuation: 0.5) closed 1.5 sen lower at 64 sen, with a market capitalisation of RM56.3 million.

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The Edge Research’s fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations. Go to www.theedgemarkets.com for more details on a company’s financial dashboard.

 

This article first appeared in digitaledge Daily, on August 10, 2015.

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