PETALING JAYA: Egg and poultry producer LAY HONG BHD is close to buying a stake in a listed logistics company as it seeks to enter the e-grocery and same day delivery business in Malaysia.
Sources say this will be a new revenue stream for Lay Hong, as it is seeing signs that e-grocery business is gaining momentum in Peninsular Malaysia.
The move by Lay Hong is not surprising considering that it has been looking to solve its last mile delivery issue and build an e-grocery presence for its growing processed food division.
According to sources, the logistics company that Lay Hong was looking at has some 12 transhipment points within the Klang Valley, Penang and Johor.
“It also has a partnerships with convenience stores and has some 1,000 drop points throughout Malaysia,” said the source.
“The logistics company is in the process of constructing a 200,000 sq ft warehouse that will be ready by next September.
“Furthermore, this warehouse will also contain a cold room facility which is perfect for Lay Hong’s food delivery plans.”
The source added that it made more business sense for Lay Hong to buy into this logistics company which already had existing infrastructure, rather than to fork out some RM100mil to invest in a new warehouse from scratch.
“Lay Hong simply needs a platform to fulfil its last mile delivery. By virtue of this need, logistics will be a new revenue stream for Lay Hong.
“This platform isn’t just for Lay Hong and will be offered as a service to other players looking to deliver their own products,” said the source.
Lay Hong’s e-commerce ambition was noticeable when in May, Panpages bought a 30% stake in Lay Hong’s grocery unit G-Mart Borneo Retail Sdn Bhd for RM10.75mil. Lay Hong has 16 retail stores in Sabah.
PanPages had said its rationale for buying G-Mart was to build up its online e-commerce business.
“The disposal of 30% of G-Mart will allow PanPages to participate in G-Mart’s equity and collaborate with Lay Hong in this changing marketplace for its online business,” Lay Hong had told Bursa then.
Lay Hong also owns a 26.37% in Panpages, one of the leading small and medium enterprise solutions provider in South-East Asia.
PanPages helps customers publish business content on a number of platforms, including that of Alibaba’s global trade portal.
PanPages’ online product offerings have been moving to serve vertical industries such as industrial products, health and beauty and now food and beverage.
Meanwhile, since the entrance of NH Foods Ltd, which is Japan’s largest meat packing company as a substantial shareholder in Lay Hong in 2015, Lay Hong has made huge strides in its processed food division. NH Foods owns a 21.77% stake in Lay Hong.
The joint venture between NH Foods and Lay Hong via NHF Manufacturing (Malaysia) Sdn Bhd, has seen them roll out five frozen processed food products, branded as Nippon Premium Nutriplus.
Lay Hong’s growing processed food division was a big contributor for its first quarter earnings to June 30, 2017.
Earnings jumped significantly to RM4.42mil from RM419,000 previously. Meanwhile revenue jumped 15.15% to RM183.03mil. The processed food division, which is housed under retail supermarkets, contributed some 20% to its topline.
For now, the contribution from the products from the collaboration with NHF has yet to be recognised in its first quarter results. It is purely from its current processed food division business.
Nonetheless, Lay Hong has commenced the construction of its new processed food manufacturing plant in Pulau Indah, which is expected to completed in September next year. This plant is meant to cater for the export demand in Japan.
Meanwhile on Lay Hong’s core business, the company is on track with its planned expansion to increase production capacity. Its egg production now stands at approximately 2.8 million eggs per day from 1.8 million eggs as of December last year.