This article first appeared in The Edge Malaysia Weekly on March 25, 2019 - March 31, 2019
TO beef up its earnings, premium cookware manufacturer Ni Hsin Resources Bhd aims to regain some of its Japanese clients and win new ones. Management is focused on turning around the company in the financial year ending Dec 31, 2019 (FY2019).
Khoo Chee Kong — Ni Hsin’s single largest shareholder and managing director of wholly owned subsidiary Ni Hsin Corporation Sdn Bhd — tells The Edge that the group is set to return to a growth path with new Japanese clients after the challenging business environment in the last three years. “We are beginning to win back some customers that we lost to our competitors, especially from the Japanese market. We are also seeing some new Japanese clients coming to us,” he says.
Khoo explains that the premium cookware market worldwide has been very competitive as the prices of main raw materials such as stainless steel and aluminium fluctuated significantly while selling prices of cookware stayed unchanged (they are usually locked in for a certain period after the acceptance of the purchase order).
He adds that the company also struggled with its high fixed costs as well as the loss of some Japanese clients after he emerged as a substantial shareholder in 2016. He has a 9.55% stake.
“We still cannot break even. We have to reach operational economies of scale. We need to jump above a certain threshold. The fixed costs are already there and many of our employees have been with us for very long. We must have a certain amount of sales to break even. Our break-even level is about RM40 million. Anything above that will be profit.”
The group’s financial performance had been on a decline in the last three years. For perspective, while Ni Hsin recorded a net profit of RM2.17 million for FY2018, the bulk of it came from other operating income, mainly due to a net gain in fair value of investment in quoted shares. On the other hand, group revenue fell 16.2% to RM33.2 million, its worst performance since its listing in 2005.
It is worth noting that one of the investments Ni Hsin made last year was in Caely Holdings Bhd, a lingerie manufacturer-cum-property developer. The decision raised eyebrows because of Caely’s very different nature of business. Khoo explains the decision. “We bought into Caely because it was undervalued. We also see some synergy with Caely because it is a direct-selling company. Then, there is also its customer base that we can tap.”
The investment has proven to be beneficial as Ni Hsin sold a 10% stake to businessman Datuk Seri Goh Choon Kim for RM9.6 million at the end of last year, netting a gain of RM1.5 million. It currently holds 8.36% in Caely.
Hoping for operational profit in FY2019
For FY2019, Khoo hopes the group will hit the RM40 million sales target so that it will return to the black.
Ni Hsin will also focus on creating brand awareness for its in-house cookware brand Pentoli through e-commerce platforms such as 11Street.com, Lazada.com and Shopee.com.
“The collaborations include undertaking promotional activities and additional advertisements via the platforms to create brand awareness and instil product knowledge in potential customers,” explains Khoo.
“The company has also set up its own website for Pentoli to expand and strengthen its online presence.” He adds that the website offers a wide range of Pentoli products at different price ranges to cater for the needs of different customers.
Khoo adds that Ni Hsin will collaborate with various food and beverage cookware and equipment suppliers for its products to be used at restaurants, cafés and bistros in Malaysia and Singapore.
Group executive director Rizvi Abdul Halim explains that some of the marketing initiatives include participation in various trade exhibitions abroad, discussions with potential local distributors and suppliers and undertaking various online marketing initiatives to generate awareness and market acceptance.
China is one of the countries the group is trying to expand into. It has limited exposure there despite an exclusive distributorship agreement with Mingkeda Group Holding Co Ltd inked in 2017.
Both Rizvi and Khoo stress that the key challenge is finding the right distributor in China. “The key challenge is in looking for the right distributor for our Pentoli products. There is a lot of room to grow,” Khoo adds.
Apart from the cookware business, the development of a new version of its coated convex mirror is also in the pipeline. Currently sold in Malaysia, the mirror is environmentally friendly with scratch-proof, heat-resistant, antibacterial and anti-fog features.
Khoo believes that the segment will be another area of growth in FY2019 as its marketing and promotional activities in Southeast Asia are gaining traction.
Ni Hsin closed last Thursday at 28.5 sen a share, giving it a market capitalisation of RM90.4 million.
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