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This article first appeared in The Edge Financial Daily on February 21, 2018

KUALA LUMPUR: Paper box and plastic packaging service provider Versatile Creative Bhd may see a “low double-digit” revenue growth rate for the financial year ending March 31, 2018 (FY18), driven by higher sales volume.

The group’s managing director and chief executive officer Datuk Wong Kong Choong @ Leong Kong Choong said he expects FY19 revenue growth to be much higher as management continues its effort to improve production efficiency, and with higher order volumes from the food and beverage and pharmaceutical segments.

“Our major customers today are mostly in manufacturing [businesses] like rubber gloves and electronics. The food market is big, but our penetration is still very low. This segment only contributes about 2% to 3% of our total revenue. We hope to increase that to about 20% to 25% within one or two years,” he said in an interview with The Edge Financial Daily last week.

“We are confident [of achieving the company’s aim]. We are already in discussions with some sizeable food companies for more orders. I think we will be getting them in the second quarter of this year. Another segment that we are looking at is pharmaceutical; this part forms about 5% of our total revenue. We hope to double it by the middle of this year as well,” he added.

For the nine months ended Dec 31, 2017 (9MFY18), Versatile Creative booked a revenue of RM40.86 million, which was already 15.9% higher than the RM35.25 million it recorded in the previous corresponding period.

The group posted a net profit of RM125,000 in 9MFY18, versus a net loss of RM1.31 million in 9MFY17.

While Wong declined to share any profit guidance for FY18, Versatile Creative executive director Andy Yap Jee Wye, who was also present at the interview, said the group’s fundamentals have been strengthening since the new management took over.

“Our fundamentals are actually very strong. If you refer to our past records in 1QFY18 (the first quarter of FY18) and 2QFY18, there has definitely been some progression,” he said.

Versatile Creative, which were posting losses from FY14, returned to a profit in FY17, the same fiscal year when Wong was appointed to the board towards the end of 2QFY17.

For FY17, the group posted a net profit of RM70,879 versus a net loss of RM2.06 million in FY16, while revenue grew 6.78% to RM47.48 million from RM44.47 million over the same period a year ago.

Yap said the management’s current focus is to proactively secure more orders and reduce cost by investing in newer technology and machineries.

“We really sit down to get things to work out in the right way. There’s no point talking about the past. Now, since the new management has taken over, the group’s marketing and sales activities have been increasing,” he said.

“We put in the right and quality people in the company to push through what we want to achieve. In terms of cost, we put in the right operation people to manage it, [and for] things that we can do better, we do it. We are upgrading our equipment to focus on production efficiency. So, it’s not like we are just sitting down there and waiting for orders to come,” he added.

Yap said these upgrades in capacity will be partially funded by proceeds from the group’s disposal of the entire 3.37% stake it holds in Iris Corp Bhd.

Versatile Creative shareholders approved the proposed disposal last week to raise some RM19.19 million, based on the indicative disposal price of 23 sen per Iris share.

“But most of the proceeds will still be used in paying down Versatile Creative’s debt because we have a lot of assets which are collateral for these debts. So, now we can free up these assets and perhaps monetise them and upgrade to new ones,” Yap said.

Wong said proceeds raised from the sale of the Iris shares will not be sufficient to buy new machineries in the future, so he does not rule out the possibility of a cash call.

“Internally, we have our business plan for Versatile Creative over the next one or two years, which we cannot reveal today. But I think we are going to need more funds to fuel the growth. For example, one of the machines that we are interested now is [of] a German brand, and a single unit of that is going to cost somewhere around RM25 million,” he said.

Since he believes in Versatile Creative’s future prospects, Wong said he might increase his shareholding in the company “should the opportunity arise”.

As at Dec 28 last year, Wong owned 10.31 million shares or an 8.79% stake in the group, while Yap owned 2.09 million shares or 1.79% as at Oct 6 last year.

Yesterday, Versatile Creative shares rose half a sen or 0.84% to close at 60 sen, giving it a market capitalisation of RM70.4 million.

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