AT CHASEN’S investor briefing on 16 Aug, managing director Justin Low and independent director Eric Ng provided an update on how the economic outlook is impacting business and strategy going forward.
As background, Chasen has three business segments:
1. Specialist relocations, involving turnkey solutions for the relocation of sophisticated equipment such as those used wafer fabrication, TFT LCD panel production, chip testing and assembly, solar panel and pharmaceutical manufacturing.
2. Third-party logistics (3PL), involving packing/ crating, warehousing, transportation, freight forwarding, customs brokerage and other logistics supply chain services.
3. Technical & engineering, involving facilities management, supply and installation of steel fabrication, electrical and instrumentation works, parts refurbishment, and process engineering for oil waste and water treatment facilities.
Group revenue in 1Q2013 was down 30% at S$20.1 million. This was partly due to relocation projects for several TFT-LCD plants in China being delayed as customers waited for domestic consumption demand and export demand to Europe to recover.
Net profit, impacted by higher overhead costs and the expiry of tax incentives, was down 72% at S$864,000.
“We are working on securing relocation contracts directly from the global headquarters of clients like HP for work in the western hemisphere," said Mr Low.
”Once we have a specialist relocation project from a client’s headquarters, we can cross sell services from other segments. To support this, we intend to beef up our reputation and track record for 3PL and technical & engineering services,” he said.
Currently, Chasen is the leading relocation specialist in Singapore, where contracts for projects within the Asia Pacific region are awarded.
It has been making headway in providing technical & engineering services too.
On 8 Aug, it announced that it had secured a S$9.3 million contract to build 90 units of two-storey terrace houses in Selangor.
By the way, Chasen has just announced the x-date of 24 Aug for its FY12 dividend of 0.6 cent a share. The dividend shall be paid on 6 Sept 2012.
The 0.6-cent dividend is unchanged for the third successive year, translating into a yield of 2.86% based on its recent stock price of 21 cents.
Braving frontier markets
Chasen is trying to secure jobs in Timor Leste, a frontier market suffering the after-effects of a decades-long independence struggle against Indonesia.
The civil war had damaged its infrastructure and displaced thousands of civilians but its impoverished condition improved rapidly after it finally managed to reap benefits from its petroleum reserves about 7 years ago.
”Timor Leste has urgent infrastructure needs and is a promising market for our technical engineering service,” said Mr Ng.
“Myanmar is another market with potential because of the extent of its infrastructure deterioration,” he added.
NextInsight file photo
Below is a summary of questions raised at the meeting and the management’s replies.
Q: Is there any particular niche you are strong in?
Our specialist relocation service is well established in Southeast Asia and China. In Singapore, we have a strong foothold with wafer fabs like HP and Intel.
In China, we are strong with TFT LCD panel plants.
In Malaysia, we are establishing ourselves in solar panels plants.
Q: Is there recurring income from your specialist relocation segment?
A significant amount of our revenue is recurring. For example, machines need to be moved during repair and maintenance
Assets idling in warehouses need to be moved occasionally.
We are also called in during upgrading or downsizing of manufacturing operations, or when machines change with change in product line or manufacturing technology.
The Group’s consolidated recurring revenue was about S$3m in 1Q2013.
Q: Why have your accounts receivables increased even though your revenue has decreased?
There are a few reasons. Firstly, there is a drag from a retention sum of $1 million plus $6.2 million under arbitration.
Secondly, we accrue sales, which is revenue recorded but not invoiced. This is an accounting issue that we intend to address.
Also, when times are bad, we don't give a discount but we extend credit terms. This helps us to maintain gross margins.
Related story: STX OSV, SERIAL SYSTEM, SAMKO, CHASEN: Latest Happenings…
