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Darco Water: Relaunched
THYE Kim Meng, chief executive and founder of Darco Water Technologies, is one used to rolling up his sleeves for hard work. And at 64, when many of his peers are thinking of enjoying a good retirement, Mr Thye remains as involved in steering the company as when he first started it 18 years ago.
Pushing the indefatigable businessman on is the dream he had when he first took the company public in 2002: to make Darco one of the most dominant water companies in Singapore, and by extension, in the region and the world.
"The ambition is still there," he says. "We had a setback, and the fact that we decided to keep the company is so that we can have this day again and to just do it again."
Mainboard-listed Darco provides customised water and wastewater solutions, offering both industrial water systems and also investing in municipal infrastructure projects. The group, including its subsidiaries, also helps to operate and maintain the systems, as well as distribute electrical controls and instruments used in water treatment plants.
From its initial public offering in July 2002 on what was then Sesdaq (an earlier version of the Catalist Board), the group grew quickly, hitting the milestone of S$100 million in turnover in 2007, with Taiwan contributing to half of overall sales. That same year, it transferred to the mainboard of the Singapore Exchange.
The firm had also made a breakthrough in China earlier in 2005 when it secured two Build-Own-Transfer municipal projects in Deqing county in Zhejiang province.
The group's quick growth was, however, unfortunately derailed just a few years later. In 2010 it came to light that the staff in Darco's Taiwan subsidiary had embezzled some NT$186.2 million (S$8.5 million) over a period of six to seven years.
Darco suspended trading of its stock in March 2012 while it sorted out its financial statements for the 2009 and 2010 financial years with substantial restatements by a new auditor subsequently, and awaited the conclusion of investigations by the authorities.
By the time it resumed trading in 2014, the company was a shadow of its former self. Revenue had fallen to only S$30 million. But Mr Thye was not one to give up.
"I could have taken a short cut: to negotiate with the bank to take a haircut," he says. "But rather than doing that we decided to sell our assets and complete all the loss making projects the fraudster had taken up in order to cover their tracks."
Asked why he did so, Mr Thye says he has always valued relationships.
It was a hard slog, he adds, but the firm is now firmly on the road to recovery. It recorded turnover of about S$60.7 million last year, a jump of 126 per cent from the previous year, thanks to its acquisition of a 60 per cent stake in China's water treatment and management specialist Wuhan Kaidi Water Services Co Ltd. The group also reversed its S$0.8 million loss in 2015 to record a net profit of S$4.1 million.
As a result of the acquisition, China has now become the largest market for the group, contributing to 46 per cent of the group's total revenue. Malaysia, another key market, accounted for 39 per cent, while Singapore took 9 per cent. The purchase opens up the Chinese market for the firm, says Mr Thye.
Wuhan Kaidi, which has carried out over 600 projects to-date since it was set up 23 years ago, holds the relevant business permits and licences required to execute projects in China. The group currently has 22 projects covering 14 provinces in the country with a total value of 487.54 million yuan (S$98.9 million).
Besides China, the group is also bullish on business prospects in South-east Asia, especially Vietnam. "The market is very big," he says. "There's still demand for environmental solutions, whether it's water or waste."
In the waste sector, Darco has newly entered into pneumatic waste conveyance, an automated domestic waste collection system that uses high-speed vacuum technology to move domestic waste via underground pipes to a centralised bin centre.
The entire collection process, being enclosed and automated, reduces manpower requirements and minimises problems of odours and pests. Darco won S$13.1 million worth of contracts to supply and maintain these systems in Singapore last year.
This business is also important for Darco, and could even overtake the water business one day, says Mr Thye. "Singapore is doing it aggressively. Subsequently I believe a lot of countries will adopt this too."
Globally, there are only four companies that have the technology for pneumatic waste conveyance. Because of the infrastructure involved, projects like this have to be planned very early on.
"It's a big market but the lead time is very long in the sense that you have to get in early, and you need to have the experience and expertise to work with them to develop it . . . There's a bit more upfront cost for pneumatic but having less competitors we expect higher returns."
For now, however, the company has to raise more funds. The group earlier this year conducted a share placement to raise about S$3 million, and is still hoping to attract investors who believe in its story.
Says Mr Thye: "We are looking for more placements and more investors to come in. They can be financial investors, strategic investors, large companies who can be major shareholders - we are open."
With more funding, the group may then be able to achieve what Mr Thye has had in mind for so long.
"When we are very dominant in Singapore, we will be dominant in the region as well as worldwide because Singapore companies are quite big now."