Wong Engi­neer­ing turn­ing around

The Star Malaysia - StarBiz - - Companies & Strategies - By RISEN JAYASEELAN and YVONNE TAN star­biz@thes­tar.com.my

THE name Wong Engi­neer­ing Corp Bhd may not ring a bell among most sea­soned in­vestors but the com­pany, a man­u­fac­turer of high pre­ci­sion com­po­nent parts for var­i­ous in­dus­tries, has un­der­gone some no­table changes of late.

For one, the small­ish firm has made a turn­around in its fi­nan­cials based on its lat­est quar­terly re­sults, re­port­ing a net profit of RM3.05mil com­pared with a net profit of RM82,000 for the same pe­riod, a year ago.

This marks a rel­a­tively quick turn­around, con­sid­er­ing the com­pany has been in the red for a num­ber of years, although it did re­port a small profit of RM715,000 in FY16.

Rev­enue for the most re­cent quar­ter – its third for FY17 – also stood at a higher RM11.86mil against RM8.79mil ear­lier.

Ac­cord­ing to the notes ac­com­pa­ny­ing its re­sults, Wong Engi­neer­ing’s im­prove­ment in fi­nan­cials is at­trib­uted mostly to “cost im­prove­ment” and “bet­ter op­er­a­tional ef­fi­ciency”.

Clearly this marks a change of sorts in the way the com­pany is run­ning its ex­ist­ing busi­ness. Mar­ket ob­servers also point out that in the past few years, Wong Engi­neer­ing had been on the mar­ket for po­ten­tial buy­ers as its founders - com­pris­ing broth­ers Datuk Wong Kem Woh, Kem Chew and Kam Hooi - were keen to exit.

That takeover even­tu­ally ma­te­ri­alised. So who is in con­trol of Wong Engi­neer­ing now? The Pe­nang-based com­pany is now led by the own­ers of Tiong Nam Lo­gis­tics Holdings Bhd, the RM700mil lo­gis­tics gi­ant which launched a takeover for the com­pany back in Au­gust 2016.

Back then TNTT Realty Sdn Bhd, the pri­vate ve­hi­cle of Tiong Nam Lo­gis­tics man­ag­ing di­rec­tor and founder Ong Yoong Ny­ock had launched the takeover at 65 sen a share.

TNTT and one Yong Loy Huat, who is the brother in-law of Ong, had bought 39.42 mil­lion Wong Engi­neer­ing shares or a 43.07% stake at that point for RM25.62mil via a busi­ness trans­ac­tion.

Based on Wong Engi­neer­ing’s lat­est an­nual re­port, TNTT is now the sin­gle largest share­holder in the firm via a 30.048% stake while the man­ag­ing di­rec­tor at Wong Engi­neer­ing is Yong. Wong Engi­neer­ing’s shares mean­while have gained about 45% since last Septem­ber and last traded at RM1.05 a piece. In fact, a steep rise was seen right af­ter Wong Engi­neer­ing re­ported that RM3.05mil profit less than a month ago. Since then, the stock has added over 23%. This sug­gests that some in­vestors have started to take no­tice of this low-pro­file com­pany. An­nu­al­is­ing the RM3.05mil profit mean­while would give Wong Engi­neer­ing an an­nual profit of around RM12mil, which would make its valu­a­tions at­trac­tive, points out a dealer.

In this sense, be­cause Wong Engi­neer­ing has a mar­ket cap­i­tal­i­sa­tion of a mere RM96mil, a RM12mil profit would mean the stock could po­ten­tially trade at an at­trac­tive earn­ings mul­ti­ple of eight times.

Mov­ing for­ward, ob­servers don’t rule out the pos­si­bil­ity of Tiong Nam or its own­ers pri­vately in­ject­ing new busi­nesses into Wong Engi­neer­ing.

Founded in 1975, 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.

Ac­cord­ing to in­for­ma­tion on group’s web­site, Tiong Nam owns more than 60 ware­houses in the re­gion, with a com­bined stor­age ca­pac­ity of over 3.5 mil­lion square feet.

It is also the largest truck­ing com­pany in Malaysia, with a fleet of close to 2,000 trucks of var­i­ous ca­pac­i­ties in­clud­ing open, box/ bonded and re­frig­er­ated con­tain­ers, en­abling it to trans­port goods of vary­ing tem­per­a­tures in­clud­ing dry, chilled and frozen.

No­tably, Tiong Nam man­ages one of the largest cold room op­er­a­tions in Malaysia, with ware­houses in Kam­pung Baru Hi­com, Shah Alam and in Bangi, Se­lan­gor.

In its an­nual re­port, Wong Engi­neer­ing says for the next phase of growth, the group is “ac­tively seek­ing busi­ness op­por­tu­ni­ties in new mar­kets to di­ver­sify its rev­enue streams and im­prove its fi­nan­cial per­for­mance.”

Given the com­pet­i­tive busi­ness en­vi­ron­ment in the me­tal fab­ri­ca­tion in­dus­try which it is present in, it says the group has iden­ti­fied con­struc­tion, prop­erty de­vel­op­ment and trad­ing of con­struc­tion ma­te­ri­als as new busi­ness seg­ments to di­ver­sify its rev­enue sources.

“The group will be able to lever­age on the ex­pe­ri­ence and ex­per­tise of its di­rec­tors and key man­age­ment who have proven­track records in these new mar­kets and the board is of the view that the pro­posed di­ver­si­fi­ca­tion will con­trib­ute pos­i­tively to the fu­ture earn­ings of the group.”

More ef­fi­cient: Wong Engi­neer­ing‘s plant in Kulim, Kedah. The com­pany’s im­prove­ment in fi­nan­cials is at­trib­uted mostly to cost im­prove­ment and bet­ter op­er­a­tional ef­fi­ciency.

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