This article first appeared in The Edge Malaysia Weekly on June 7, 2021 - June 13, 2021

SINCE Singaporean technopreneur Cheong Chia Chou came on board in April 2016, ACE Market-listed technology firm PUC Bhd has carried out six rounds of private placement exercises to raise funds for merger and acquisitions, and for upgrading its digital infrastructure.

Despite over 1 billion of new shares being issued and tens of millions of ringgit raised over the past five years, PUC still incurred losses in three of the past five financial years. At its close of 15 sen last Thursday, the company had a market capitalisation of merely RM133.3 million.

Cheong, who took over the reins from his late elder brother Jack Cheong Chia Chieh about five years ago, is now PUC’s group managing director and CEO.

As much as minority shareholders may have been impressed by Cheong’s ability to attract new investors again and again, certain quarters must be wondering when these corporate exercises, perceived as heavily dilutive, will end.

Cheong admits that PUC needs to raise fresh capital to develop its digital businesses, but is hopeful that it can be turned around by this year.

“Currently, our digital businesses have seen gradual improvement in terms of financials, where we see a positive Ebitda (earnings before interest, taxes, depreciation and amortisation) in certain quarters. If we can maintain the gradual improvement trend and when all the components of our digital businesses are in place, it will certainly help PUC, as a group, to return to profitability,” he tells The Edge in a phone interview.

According to him, the digital businesses of PUC, mainly e-commerce and e-wallet, have been doing quite well since the Covid-19 outbreak last year.

Cheong, however, acknowledges that if PUC intends to perform even better, it has to be differentiated from its bigger competitors in the marketplace such as Lazada and Shopee.

“As we took over the management of 11street, now rebranded as PrestoMall, we moved forward to adopt the supply chain model. Today, PrestoMall is one of the top 10 e-commerce platforms in Malaysia,” he claims.

He says PrestoMall’s model is quite similar to that of JD.com Inc, whereby PUC collaborates closely with its logistics and warehouse partner FMX (M) Sdn Bhd, the express delivery arm of Freight Mark group.

“We can use their warehousing and pick-and-pack facilities in Shah Alam. Additionally, we are also working together with Parcel Hub. As far as Presto’s retailers and brand owners are concerned, they don’t have to worry about product listings, photography, and all that. All they need to do is ship their goods consigned to our warehouse, and then our Presto team will start doing all the necessary reconciliation with them,” he says.

While PUC is looking to expand its sales channel, one hurdle that it faces is marketing dollars.

“In order to make sure everyone knows you, to let people know that your prices are the best and you can offer free shipping, you need to spend a lot of money. What we have is a platform, fully-integrated payment and logistic services, as well as abundant products in our warehouse,” says Cheong.

At the end of last year, PUC conceived the idea of venturing into social commerce, which is a subset of e-commerce. Social commerce is the process of selling products directly through social media networks. Given that more people are buying things online during the pandemic, he says PUC sees huge potential in this space.

Hence, the group will be launching PrestoDirect — a customisable e-commerce platform tailored to its customers’ needs that will help kick-start their businesses with zero inventory costs.

“Essentially, we allow the vendors to adopt the drop-shipping model like Shopify Inc (a Canadian multinational e-commerce company that offers online retailers a suite of services). Malaysia will be a home ground for us, and we will be expanding it to other Southeast Asian countries. Hopefully, by the end of this year, PrestoDirect can break even. We strongly believe that it will be a key element to turning around our digital businesses by this year,” Cheong explains.

He points out that nowadays, any aspiring entrepreneur who wants to start and own an e-commerce business, regardless of the size, will need to invest at least RM30,000 to pay for subscription fees to set up a website in addition to sourcing for products, and even buying in advance.

“Many people are struggling because they need to worry about their businesses’ cash flow, and they do not have sufficient logistics support. If you need to pick and pack yourself at your own house every day, it would be very difficult for you to scale up your business,” says Cheong.

“Presto, on the other hand, has all the facilities for you. With the full online-business infrastructure in place, we basically created a need, and the perfect platform for sales channels. That’s exactly where these small retailers could come in to partner with us,” he adds.

He reiterates that by joining PrestoDirect, the customers would become part of its network and have access to millions of stock-keeping units (SKUs) directly from the factory, which they could sell instantly to their target customer groups and followers.

He says PrestoDirect will be the most powerful e-commerce platform for its customers to build their online businesses, as it enables anyone to set up an e-commerce business within five minutes.

“In fact, we have been working with a few key opinion leaders (KOL), online celebrities and individuals to set up their own stores. So far, the feedback has been rather positive, as they appreciate the concept of us allowing them direct access to our suppliers,” says Cheong.

Currently, PrestoMall has close to 10,000 SKUs available in its warehouse. In total, it has about two million available SKUs to be sold.

Cheong says the main objective of PrestoDirect is to allow small and mid-size retailers to focus on selling and marketing their products, without worrying too much about warehouse, logistics, and e-commerce platforms.

“They can just focus on promoting and selling the products. We will work together with them to resolve all the typical operational requirements or issues of an e-commerce business,” he says.

He highlights that PrestoDirect has a scalable business model, which means it can easily venture out of Malaysia in the near term.

“We hope to do that by early next year. If you think about it, we have a lot of SKUs in Malaysia. The moment we engage KOL from Thailand, Singapore or Hong Kong, they can immediately help us sell the Malaysian products in their countries. The only thing we need to sort out is currency acceptance and logistics flow. Otherwise, generally, this model can be scaled much bigger than we did with PrestoMall,” he says.

In Malaysia alone, PrestoDirect is targeting to rope in 50 to 100 brand owners and 500 to 1,000 retailers by the end of this year.

It is worth noting that at an extraordinary general meeting (EGM) last Thursday, PUC received shareholders’ approval to issue 256 million shares at 12.5 sen apiece to Cheong, Tan Pee Tee and Cheow Sook Mei.

This is to settle RM32 million owing to the trio arising from the acquisition of a 33% stake in Pictureworks Holdings Sdn Bhd for RM52.8 million in 2017.

Upon issuance of the settlement shares post-EGM, Cheow, Tan, and Cheong will be substantial shareholders of PUC with 8.82%, 8.46% and 5.09% equity interest respectively.

As a result, Dara Burgers owner Wan Hazreek Putra Hussain Yusuf, who is believed to be the single largest shareholder of PUC with a 5.29% direct stake and 3.46% indirect stake held through Darabif Sdn Bhd, may see his total equity interest being diluted to 6.84%.

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