WHEN former corporate advisor Kat Yong struck out with three friends to buy into Ngiu Kee Corp (M) Bhd, east Malaysia’s largest retail chain in 1999, she did not know a thing about the retail business.
Her previous experience was all in crafting deals and company secretarial work.
However, this seasoned corporate lady had to come down to soft sell and learn the nuances in retail trade.
At the same time there were tough measures that had to be taken at Ngiu Kee, a family-run business with its own management style suffering from low staff morale and a lack of proper system.
Yong, who became the company's chief executive officer in 2001, had to literally roll up her sleeves to tackle these problems.
Within three years after assuming the CEO post, she closed down nine non-performing stores, including three in Peninsular Malaysia, deployed IT in the operations, set a proper inventory system, created a centralised buying station in Kuala Lumpur and took in a new team to energise the company.
Second board-listed Ngiu Kee is now attracting the interest of some analysts who regard it as a “company with a lot of potential.’’
Yong said some analysts even regarded Ngiu Kee as “a good proxy to Jaya Jusco Stores.’’
Ngiu Kee may not be making much money now and its profits are somewhat lower than previously.
But for next year and 2006, given the streamlining that is in place, some analysts have forecast RM8mil to RM10mil, and RM10mil to RM14mil in net profit, respectively. For 2004, the forecast is RM1.6mil to RM2.3mil. Yong expects profits to improve in the future.
This company has a base of 67.2 million shares. It has 12 department stores and supermarkets which occupy 388,000 sq ft of space. After the streamlining, Ngiu Kee is now ready to enter its next phase of growth. That can be via acquisitions as growing organically will take far too long.
Yong is quick to say acquisitions are the preferred way to go if the company wants the geographical reach. Share swaps are a consideration for funding although a cash call is vital if Ngiu Kee were to acquire.
“To grow, we would need to do a cash call as we feel that is the most efficient way to raise funds. The other way to fund our expansion is through internally generated funds,’’ she said.
Yong is also talking about crossing borders and getting back into Peninsular Malaysia retail scene which, although competitive, offers bigger potential due to the greater demand compared with east Malaysia.
Ngiu Kee's earlier brief chapter in the peninsula led to the closure of three outlets.
Next is Asia. But that is still on the drawing board at this time. It may take three to five years to materialise. Buying up smaller retailers in smaller towns in Sabah and Sarawak to grow in size is on the cards.
Yong is talking about 10 to 12 new stores till 2008.
Going into the hypermarket business is another of its growth strategies. Five have been planned – the first will open its doors at the end of the month in Miri. It will take 35,000 sq ft of space initially, to be expanded to 80,000 sq ft by next year.
Kuching is the next stop and that will be in 2005, with Kota Kinabalu the following year.
For each hypermarket, it needs RM10mil. But for its first it has adequate funds after its recent cash call. Going into the hypermarket business is a long-term strategy which is necessary if it does not want its stronghold in east Malaysia threatened by any foreign retail chain.
Yong described Ngiu Kee as a “big player in a small pond (retail market) in east Malaysia’’ but was “a nobody in Peninsular Malaysia’’ which to her is a big pond.
Hence, the move to go into the hypermarket business and acquire to grow in size. But hypermarkets are sustainable only if there are more than 20,000 households in a particular area, and that is also the reason why Ngiu Kee is only targeting bigger towns (Miri, Kota Kinabalu, Bintulu, Kuching and Sibu) to locate its hypermarkets.
Expanding its merchandise range is the other way to grow. To do that, Ngiu Kee wants to work with existing Peninsular Malaysian brands that are keen to penetrate the east Malaysian market.
“We have the infrastructure and a ready market no retailer in east Malaysia can offer so quickly; that is why we want to work with any brand,’’ Yong said.
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