BY: GURMEET KAUR AND
 |
| Victor Ong: ‘We have 260,000 sq ft of storage space for cold rooms. We want to expand this as the return on investment is attractive’. |
TIONG Nam Logistics Holdings Bhd, in preparation for new challenges, is planning a multi-storey warehouse slated to be built within three to five years.
The homegrown transportation company will also be investing in more automation to maximise efficiency and control costs, which has become more important than ever, given the tougher economic environment.
Multi-storey warehouse centres haven’t caught on in Malaysia yet, but that could change as land becomes expensive, says group executive director Victor Ong.
He says in the pipeline is a technologically advanced five-storey warehouse with one million sq ft, and facilities that allow for trucks to be parked on top of the building.
“We are looking to have one in either Shah Alam or Johor Baru within the next three to five years. The capital expenditure can be RM100mil,” Victor tells StarBizWeek.
The strategy offers several benefits. Since a multi-storey warehouse offers much more usable floor space per sq ft of land, it will allow a company to operate in a dense urban area, rather than locating miles from the population centre. This cuts transit time, which means burning less fuel.
Victor says Tiong Nam will invest in more automated storage and retrieval systems (ASRS) for its warehouses to improve efficiency.
“We have one warehouse in Shah Alam that has ASRS. The benefits include optimising storage space and reducing manpower costs by 50%. The investment in this system can be recovered within 10 years,” Victor adds. Tiong Nam has some 5,000 employees.
Founded in 1975 by Victor’s father and managing director Ong Yoong Nyock, Tiong Nam has expanded from a small-scale cargo business to a total logistics provider. Its range of services include customs forwarding, cold room facilities and express delivery as well as crane and forklift rental. The Ong family controls 46.64% of the Johor-based company, which had a market capitalisation of about RM543mil as of yesterday. At RM1.30, the stock is trading at a price earnings multiple of 8.08 times and 1.29 times book, according to Bloomberg.
According to the group’s website, Tiong Nam owns over 60 warehouses in the region, with a combined storage capacity of over 3.5 million square feet.
It is the largest trucking company in Malaysia, with a fleet of 1,900 trucks of various capacities with operations in Malaysia, Singapore and Thailand and looking to expand to Indonesia and Vietnam.
Meanwhile, Tiong Nam has one of the largest cold room services in Malaysia, with warehouses in Kampung Baru Hicom, Shah Alam and in Bangi, Selangor.
“We have 260,000 sq ft of storage space for cold rooms. We want to expand this, as the return on investment is attractive,” says Victor.
 |
| Law says Tiong Nam’s landbank is slated for revaluation next year. |
Five years ago, Tiong Nam ventured into property, focusing on industrial property. The segment contributed one-third to group revenue for financial year 2014 (FY14).
Despite the substantial contribution from property, Victor says logistics will remain the main business. “The reason we went into property is because of our logistics network,” he says.
Its flagship property projects include Tiong Nam Industrial Park 2 in Shah Alam, and Tiong Nam Business Park in Nusajaya, Johor.
Besides selling its industrial properties, Tiong Nam also leases the buildings out to secure recurring income for the group.
It is also the developer of Pinetree Marina Resort, which consists of a luxury residential and hotel project at Puteri Harbour in Nusajaya.
Victor says there was a huge jump in revenue from property development in FY14, as sales were recognised.
“We still have RM409mil in unbilled sales - so we feel cautiously positive about this segment for the next three years.”
The property development business posted a huge jump in revenue to RM178mil for FY14 ended March 31 as compared with RM26mil a year before.
This has helped group revenue grow 56.8% year-on-year to RM533mil in FY14, and net profit to RM74.6mil from RM17.35mil previously. Tiong Nam has 166 acres of vacant land in Johor Baru, Kuala Lumpur and Shah Alam, and is looking to buy more land in prime areas located near to sea ports.
This landbank was revalued in 2011 and is slated for revaluation next year, according to group financial controller Law Tik Long.
Spin off
On whether it will spin off its property assets into a real estate investment trust, Victor says the idea is being explored, along with several other corporate proposals.
In keeping pace with changing consumer trends, Tiong Nam intends to offer delivery services to e-commerce companies – a growing but largely untapped market where peers like GD Express Carrier Bhd are reaping the benefits of exposure in online retail. RHB Research in a recent report noted that save for Singapore, Internet and smartphone penetration rates in Asean countries are still lagging behind markets like China.
One concern is its high gearing of 0.84 times, although this is down from 99% in FY13. Law says at this level, gearing is still “comfortable”. Moreover, it has a high interest cover of 7.8 times. As at end-December last year, long-term and short-term borrowings totalled RM219.31mil and RM184.25mil, respectively. Cash for that period was at RM20.65mil.
Victor is confident Tiong Nam will be able to maintain its growth momentum and ride out the economic slowdown as in the past by leveraging on its strong network while adapting to changing trends.
In 2010, for example, it made a bold move to become asset-light and adopted a sale and leaseback model for its trucking services. Tiong Nam now owns only 10% of the 1,900 fleet of trucks utilised. With this, it has brought down fuel and maintenance costs, with the former currently making up 5%-30% of costs.
“There are fewer and fewer players in logistics services, due to the high capital expenditure needed. Other players have diversified their businesses, but we remain focused on this business. This is our 40th year in business.”
“We started off as a door-to-door service provider and no matter how big or how small the goods are, we will deliver them,” says Victor.
Source: The Star Online - Malaysia
http://www.thestar.com.my/Business/Business-News/2015/04/18/Upping-the-game/?style=biz
No comments:
Post a Comment