Food caterer Neo Group to diversify into property business

Singapore

NEO Group is looking to make its foray into property development, investment and management.

This will mean expanding its existing core business of providing end-to-end food and catering solutions, the Catalist-listed firm announced on Friday.

Neo Group has four main business segments - food catering, food manufacturing, food retail, and supplies and trading.

It plans to form a Singapore-incorporated joint-venture (JV) company with construction firm Boldtek Holdings to carry out the new property business.

Catalist-listed Boldtek and Neo Group on Friday inked a JV agreement to this end.

Operating in Singapore and Malaysia, Boldtek provides general building services, runs a precast manufacturing plant and has a property development and investment business.

It also has interests in soil investigation and treatment.

Neo Group noted that it believes the proposed property arm will bring additional and recurrent revenue streams, such as rental fees and management fees, and enhance shareholder value.

It will also result in a more diversified business and income base, which would lower the group's reliance on its existing food business.

Besides, there are potential synergies as the property-related assets under the new division may be leased to its existing food businesses in order to reduce possible rental disruption with third-party landlords.

Neo Group will also be able to cater to a wider range of customers, including venue partners and tenants in its property-related assets.

"The group can leverage its current networks, experience and knowledge in the operation of food-and-beverage businesses, such as cafeterias, restaurants, bistros and bars, providing quick service and event-management solutions," Neo Group said.

It added, however, that it would venture into the property business "prudently".

It does not plan to restrict the property business to any geographical market.

In a separate filing on Friday, Boldtek's board of directors said the proposed JV will help widen Boldtek's involvement in the property development business and expand it beyond its core business of general building and construction.

Boldtek did not have any property development projects in the pipeline as at Friday, and the segment accounted for just 1.8 per cent of group revenue in FY2019.

Boldtek's board added that the JV would enable the company to leverage Neo Group's business networks and resources while maximising existing revenue streams.

Boldtek and Neo Group were independent and unrelated parties with no prior business, commercial or trade dealings before the JV agreement was signed.

Neo Group will convene an extraordinary general meeting to seek shareholders' approval for the proposed diversification, which is expected to change the company's risk profile.

The JV agreement will terminate if shareholders do not approve the diversification.

Neo Group shares rose 3.5 Singapore cents or 6.3 per cent to close at 59.5 cents on Friday. Boldtek shares last traded at 9.7 cents on Aug 21.