PETALING JAYA: Fresh from its acquisition of a 51% stake in building materials supplier Sung Master Holdings Sdn Bhd, Kanger International Bhd aims to strengthen the contribution of property investment and management business to the group’s revenue.
Executive director Steven Kuah Choon Ching (pic) said although the contribution from the segment is small currently, it is a potential growth driver, apart from the construction business, going forward.
The bamboo flooring manufacturer is exploring new revenue streams to put the group on a stronger footing to turn around its financial performance.
It hopes to return to the black in the financial year ending March 31, 2022 (FY22) after incurring a net loss of RM47.45mil in FY21.
Kuah said that in an effort to expand the contribution from the property investment and management business, it has recently purchased 126 serviced apartments in Antara @ Genting Highlands for RM142.9mil.
The development of these properties are expected to be completed by 2024, he added.
As for the rationale of this acquisition, Kuah said: “With the Covid-19 pandemic, we felt it was an opportune time for us to invest in properties at attractive prices. As it was an en-bloc purchase, we were able to obtain a discount of about 19%.”
Notwithstanding the prevalent challenges in the tourism sector, he is upbeat that the potential of these properties – located at Genting Highlands – would bode well for the group on a multi-year horizon.
“By the time these serviced apartments are completed in 2024, the tourism industry would have returned to the pre-pandemic era, and Genting Highlands is a major destination that attracts large numbers of local and foreign tourists all year round.”
Kuah is positive that the properties would bring in a steady flow of recurring income by way of rentals.
“In addition, we will benefit from capital gains when the properties are sold, given our attractive entry prices,” he added.
“All in all, we are in the midst of transforming the group into a robust and diversified business entity that generates sustainable value for its shareholders.
“The progress has been positive thus far and we expect these developments to come into fruition within the next few years.”
To bolster its revenue portfolio, Kanger has expanded its source of earnings into a new business – the construction segment.
One of the exercises undertaken is the acquisition of a 51% equity interest in Sung Master for RM94.8mil.
Kuah said this acquisition is a strategic plan for it to develop new income streams that are complementary to its construction business.
Sung Master is mainly involved in the sales and trading of building materials, which include timber flooring, tiles, bulk cement, concrete, locksets and sanitary ware. Its clients consist of property and construction players as well as engineering consultants.
“The group can source for building materials at relatively competitive prices by leveraging on Sung Master’s existing supplier network, which then leads to greater cost efficiencies for our construction segment when tendering for new projects.
“Financially, the acquisition of Sung Master is earnings-accretive and hence the consolidation of Sung Master’s financial performance will contribute positively to Kanger’s profitability and cashflow,” he noted.
Sung Master has consistently delivered profitable performance over the past three financial years from Jan 31, 2018 up to the audited 17-month financial period ended (FPE) June 30, 2020 and latest unaudited 10-month FPE April 2021.
Moreover, Sung Master paid out dividends totalling RM25mil during this period.
For the full year, Kuah expects Sung Master to deliver an estimated profit after tax and revenue of RM20mil and RM115mil, respectively.
Currently, he said Kanger is working on construction projects with an orderbook of about RM1bil, which would contribute to the group’s earnings over the near term.
On the aspirations for its new construction arm, Kuah said: “Our goal is to transform the segment into a significant business pillar of the group.
“By doing so, we intend to expand our construction business by undertaking more building construction, civil engineering and project management contracts.
“We are also aiming to obtain Grade 7 contractor licence from the Construction Industry Development Board that will enable us to undertake projects of any value.”