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Wong-Eng-Su_MD-Line-Clear-Express-Logistics_34_1074_theedgemarketsLOSS-MAKING ICT solutions provider Ingenuity Consolidated Bhd, which saw changes to its top management early this year, has ventured into the logistics business to nurture the company back to health.

“If the team can bring up the productivity [in Line Clear Express & Logistics Sdn Bhd and the existing business segment of the group] by 40% within a year, I think we could turn around in less than one year,” managing director Wong Eng Su tells The Edge. The business, he adds, would contribute 10% to revenue over the next one to two years.

Line Clear Express is the company’s wholly owned subsidiary set up in 2013 as its in-house distribution channel.

Ingenuity has been bleeding since June last year, except for a brief recovery in its third quarter ended Dec 30, 2014. Wong’s 15 years of experience in the local logistics business makes him a suitable candidate to spearhead Ingenuity’s new venture.

He emerged as a substantial shareholder in March this year after acquiring a 9.22% stake from former managing director Chin Boon Long, a month before he was  appointed managing director on April 3.

“If all the plans are in order, definitely we are looking forward to  progression. I just came on board and I will give myself a year to realign the businesses,” he says.

The logistics business complements the company’s ICT distribution supply chain. “Job redundancies will be reduced and productivity will go up. With this second engine coming in, it complements the entire flow,” Wong says.

Ingenuity’s traditional ICT distribution business has been posting losses on the back of lower profit margin due to the competitive business environment.

“The profit margin is not that attractive or substantial and we need another service as a supplement to bring down the cost.”

For its financial year ended March 31, Ingenuity (fundamental: 0.95; valuation: 0.90) incurred a net loss of RM24.71 million, from a net profit of RM1.71 million a year earlier. Revenue fell 34% to RM407.03 million from RM616.7 million due to lower contribution from its ICT distribution businesses, while lower profit margin resulted in net losses, it said in an announcement dated May 28.

Ingenuity’s wholly-owned subsidiary Line Clear Express, which owns a fleet of 30 vehicles, aims to be fully operational within weeks. It plans to expand to 50 vehicles by the end of the year.

The company has allocated RM5 million as capital expenditure for its logistics business for FY2016, ending March 31. The company is also looking to acquire another tract to expand its warehousing facilities.

For now, the ACE Market-listed company is focusing on deliveries in the Klang Valley.

On competition, Wong says, “We don’t go all out to compete but more towards complementing each other.” Ingenuity will provide logistics services to all industries, especially small medium enterprises. “These are the companies that drive the economy.”

He reveals that the company is in the midst of setting up a new outlet at Low Yat Plaza to provide logistics services for customers buying ICT products.

On the ICT side, the company is involved in four core businesses: business software solutions, systems integration and services, ICT hardware and software distribution and services, and telecommunications products and distribution services.

Telco products and distribution services will be handled by CEO Jeff Chong, who was appointed in March. Chong was formerly Maxis Bhd’s vice-president of mobility products and international service.

Ingenco is also planning to set up a new e-commerce platform to ease the process of ordering products in bulk by retailers and resellers. It aims to deliver the goods within one day in the Klang Valley.

Apart from ICT products, the e-commerce platform will enable orders to be placed for all sorts of products, including food and pharmaceutical items.

Wong, 44, was chief operating officer of GD Express Carrier Bhd before he resigned on April 1 to join Ingenco.

Ingenco’s former managing director Chin sold his 9.22% stake to Wong after resigning on Feb 13, citing “health reasons and other personal commitments”.

Chin had, three years ago, refused Ninetology Marketing Sdn Bhd’s offer of 55 sen per share. Ingenco’s share price skyrocketed to a multi-year high of 51 sen following the offer, when it was hovering at the 10-sen level a few months before that. Back then, Chin held 29% of Ingenco.

Wong declines to reveal the price he paid, saying: “I look at the future value of the company.” Assuming it was done at a market price of 9 sen during that time, this would work out to about RM7.9million. He adds that he will bump up his shareholding if the business grows.

The apparent interest the company has drawn has also sparked questions. Following Chin’s disposal of his stake to Wong, Ingenco director Lim Boon Hong had sold 20 million shares, or a 2.1% stake, via a private arrangement at 17 sen per share — a premium of almost 100% premium to its share price at that time.

Wong says he is unaware of who the buyer was and points out that the shareholding is rather fragmented. Bloomberg data shows  that Ingenco has a free float of 82.49%.

Acknowledging the speculative nature of  trading in the company’s shares, Wong says he can’t stop people from speculating “but we will strengthen the financial position of the company. Action speaks louder than words.”

Ingenco closed unchanged at 6.5 sen last Thursday, giving it a market capitalisation of RM61.99 million.


Note: 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. Visit www.theedgemarkets.com for more details on a company’s financial dashboard.

This article first appeared in The Edge Malaysia Weekly, on July 6 - 12, 2015.

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