Chasen eyes opportunity in shifting manufacturing hubs

Singapore

ENCOURAGED by its record revenue and steep jump in earnings in FY18, and determined to exit the Singapore Exchange's (SGX) minimum trading price (MTP) watch list, relocation specialist Chasen Holdings is mounting a three-pronged expansion strategy.

First, it is to scale up its presence in China, Malaysia, and the US; second, to grow its cross-border land freight business in China and South-east Asia; and third, to consolidate its weak technical and engineering segment in Singapore to reduce operational costs.

Also on Chasen's plans are potential spin-offs of its subsidiaries, which it believes will be able to unlock their value, as the sum of its parts is currently worth more than the whole, non-executive chairman Eric Ng told media and analysts in a Wednesday briefing.

The logistics company helps firms relocate large-scale production machinery and equipment within the country and across borders. It believes that recent shifts in manufacturing hubs from China to South-east Asia, particularly rural Thailand and Indo-China, due to rising wages and operating costs, will create demand for its services.

Similarly in the US, where President Donald Trump's economic policies have encouraged US firms to move previous manufacturing and business activities in China and South-east Asia onshore to enjoy favourable taxes and a more pro-business regulatory regime, this again requires services from relocation experts.

In China, to meet the higher demand for relocation services and capture new market share, the group is building an 110,000 sq ft warehouse in Chuzhou, Anhui Province, targeted for completion in the second half of 2018.

In Malaysia, Chasen is looking to expand its relocation business in the Klang Valley and Nilai corridor this fiscal year, while in the US, it is in talks with several Asian-based US customers, including at least one multinational corporation, that are planning to move some manufacturing operations back onshore.

Meanwhile, with increasing cross-border deliveries going into Cambodia, Laos, Myanmar, Vietnam and China due to the lower cost of land freight compared to air and sea, Chasen has also recently set up operations and offices in Thailand and Vietnam, thereby connecting Singapore through Malaysia into Thailand, Indochina and ultimately, China.

It is further planning a transport hub at the Malaysia-Thailand border to provide truck docking services to smaller land freight companies in Thailand, and mulling setting up another transport hub in Laos to coordinate cross-border traffic in the Indo-China states.

In Singapore, it plans to consolidate the operations of its engineering and construction related subsidiaries at a single location in Senoko, given that Singapore's construction and property development sectors have been trending downwards in recent years, and the group's revenue and earnings from this segment had also fallen in FY18. At the same time, Chasen is planning a S$25-30 million redevelopment of its existing Japan Besut premises, whose lease will expire in 2024, to a multi-storey warehouse-cum-office complex.

Asked if it is pursuing these strategies to lift its six-month volume-weighted average stock price to at least 20 Singapore cents - one of the requirements before it can exit the watch list, Mr Ng said the company also has other ways to boost its value, either by finding investors for its subsidiaries, or listing them.

"We are probably looking at both ways. This year, we will focus on this and probably you can look forward to some announcements. We have three potential subsidiaries to do this with - two in China and one in Malaysia. We are looking at the Hong Kong Stock Exchange Gem board."

The news failed to lift Chasen's shares which closed flat at S$0.07 on Wednesday, still a far way off from its net asset value of S$0.183 as at end-March.