PETALING JAYA (Oct 21): Caely Holdings Bhd's new board of directors has announced plans to expand the lingerie manufacturer’s business with a total investment of US$800,000 (RM3.79 million) in Indonesia by the first quarter of next year (1Q2023).
At a press conference here on Friday (Oct 21), its directors said the ongoing lawsuits, authorities’ investigations and its frozen bank accounts will not jeopardise the operations and future developments of the group.
Caely executive director Francis Leong Seng Wui said the group is in talks for a joint venture (JV) with an Indonesian counterpart to set up a new production facility in the republic to bring in additional earnings.
“We are still in the midst of discussions on the percentage that Caely will take up (in the proposed JV). The investment could be in cash and machinery. We have sufficient (internal) funds. We won’t wait for (the ongoing) legal suits to complete,” Leong said.
He added that the expansion into Indonesia will help reduce the group's operating costs due to lower wages and abundant skilled worker supply there, as well as help Caely grow its customer base.
“We do foresee sales might be reduced during the bad retail climate. We are looking hard for new customers, and one of the reasons [for expanding] into Indonesia is to look at the Indonesian market,” Leong told The Edge later.
He said about 60% of Caely's 400-odd production workers at its factory in Teluk Intan, Perak are foreign workers, with many having returned to their home country during the Covid-19 pandemic.
“The turnover rate of locals is very low, while (many) foreign workers have gone back. The cost to bring in foreign workers is high, so this JV is a good strategy,” he said.
Apart from the 400 production workers, Caely has about 100 management staff.
Bank accounts remain frozen
Leong said the freeze on all the bank accounts of Caely and its subsidiaries -- as part of a probe by the Malaysian Anti-Corruption Commission (MACC) in April on the alleged wrongdoings conducted by a former director -- is still in place. However, the identity of the former director was not revealed.
"We have to go through a tedious process to apply to the authorities to get the funds released for operation purposes. (I can assure you that) all staff are being paid with no one owed as of now. The majority of Caely’s suppliers are also being paid on time as well,” he said.
Asked if Caely will be able to withdraw US$800,000 from the frozen accounts for its investment in Indonesia, Leong said he believes a similar process would work as the authorities have been reasonable.
During the press conference, Kenny Khow Chuan Wah, another executive director, said the group can also consider raising fresh capital via a private placement or rights issue though it has not yet decided on anything yet.
Khow said that money had still been able to enter into the frozen accounts and Caely’s main lingerie business has been self-sustaining.
The group also said it is hiring market experts in the property development segment to identify potential projects and review its existing land banks in Tapah and the Klang Valley.
The Perak-based company fully owns four subsidiaries, namely Classita (M) Sdn Bhd, Caely (M) Sdn Bhd (CMSB), Marywah Industries (M) Sdn Bhd and Caely Ecommerce Sdn Bhd, involved in the manufacturing, exporting and selling of ladies’ undergarments. It also has a business segment on property development and construction.
The group, which changed its financial year-end from March 31 to June 30, reported a net loss of RM352,000 in the April-June 2022 quarter, taking its cumulative net loss to RM6.82 million for the 15-month financial period ended June 30, 2022. This was its third consecutive year of losses.
Caely’s net assets amounted to RM79.19 million, equivalent to 31 sen per share, as at June 30, 2022. It had a net cash position of RM8.78 million as at end-June 2022, with RM25.36 million in cash and deposits, and total borrowings of RM16.58 million.
Forensic audit to complete 'soon'
Since February, Caely has been embroiled in a legal case of alleged misappropriation of funds which involves Caely's founder and former executive director Datin Fong Nyok Yoon, her husband Datuk Alan Chuah Chin Lai and 10 other former directors. Fong and Chuah are alleged to have misappropriated RM30.55 million from CMSB through 10 questionable related-party transactions.
The new board updated on Friday that it has instructed independent auditor Virdos Lima Consultancy (M) Sdn Bhd to continue with its forensic audit to look into allegations of suspicious and irregular transactions at CMSB, which it expects to complete "soon".
Asked about the exact completion date, Caely executive chairman Ng Keok Chai said the auditor now lacks only some cheque images which were critical information.
According to Keok Chai, Virdos Lima had prepared, on May 12, a letter to its banks to be signed off by former executive chairman Datuk Wira Ng Chun Hau to request for the cheque images. However, he said, Chun Hau did not sign “for reasons only known to himself”.
“We are going to write to the banks to request for the cheque images. The financial institutions need time to trace the cheque images and give [them] to us. I can’t give you an exact time (for the completion of the forensic audit), but the standard operation procedure of a bank is at least three months,” Keok Chai said.
Besides Keok Chai, Leong and Khow, Caely’s current board also has independent directors Datuk Kang Chez Chiang, Krishnan Dorairaju, Chong Seng Ming and Datuk Pahlawan Mior Faridalathrash Wahid.
Keok Chai, Leong, Kang and Krishnan were appointed to the board on Aug 26 while Khow, Chong and Mior were roped in on Sept 27.
“We strongly refute the allegations against the current board members being in cahoots with Datin Fong and Datuk Alan to cover up their wrongdoings,” Keok Chai declared.
On Oct 5, the new board had lodged a police report requesting a police investigation on the alleged misappropriation of funds amounting to RM30.55 million involving CMSB during the tenure of the previous board members. The former directors under police investigation were identified as Fong, Chuah, Chun Hau, Siow Hock Lee, Ooi Say Teik, Hem Kan @ Chan Hong Kee, Ng Boon Kang, Tan Loon Cheang, Lim Chee Pang, Lim Say Leong, Beh Hong Shien and Gok Ching Hee.
Caely had also filed a suit on Oct 19 against the former directors over the alleged misappropriation of RM30.55 million of its unit’s funds. The company is seeking, among others, RM30.55 million in special damages, as well as general damages with exemplary damages deemed appropriate to be awarded by the court.
Caely shares closed unchanged at 28 sen on Friday, valuing the group at RM72.31 million.