What does Eddie Ong see in SWS Capital?

TheEdge Tue, Feb 02, 2021 04:00pm - 3 months ago


WHEN Datuk Eddie Ong Choo Meng makes an entrance — especially as a substantial shareholder of a Bursa Malaysia-listed company — things tend to perk up. A slew of corporate actions tends to follow him wherever he goes.

The companies at which he has emerged include chemical firm Hextar Global Bhd, glove maker Rubberex Corp (M) Bhd, diversified group SCH Group Bhd and, more recently, furniture and plastic ware manufacturer SWS Capital Bhd.

Despite having substantial shareholdings in a number of public-listed firms, Ong is better known as a chemical businessman as he runs Hextar Holdings Sdn Bhd, the country’s largest pesticide producer, founded by his father Datuk Ong Soon Ho.

Towards end-December, Ong emerged as a substantial shareholder of SWS Capital with a 6.55% equity interest. The 43-year-old businessman has continued to actively mop up SWS Capital shares on the open market over the past four weeks, doubling his shareholding to 13.15% last Thursday.

According to SWS Capital executive director and chief operating officer Dr Loh Yee Feei, the group’s immediate focus will be on a restructuring and turnaround plan to improve the performance of its existing businesses. “Moving forward, SWS Capital will also look at potential mergers and acquisitions (M&A) to expand its existing businesses, especially in the furniture industry,” he tells The Edge.


Loh says Ong will be working closely with the management team to introduce and execute a turnaround plan strategically to improve the businesses and earnings of SWS Capital by leveraging his experience, expertise and networks. “Despite the changes in the board of directors, there will be no changes to the position of managing director or CEO and no substantial changes to the management team of SWS Capital,” he stresses.

The two directors who recently joined the board of directors are Teh Li King, who is currently chief corporate officer of Hextar Group, and Kelvin Khoo Chee Siang, former director of SCH. They are believed to be the board representatives of Ong.

Loh acknowledges Ong’s right to acquire a bigger stake in SWS Capital when the time is right. “As per the announcements made, the previous major shareholders have merely disposed of part of their shareholdings in SWS Capital, but not entirely. It is worth noting that they still remain as substantial shareholders.”

As it is, Ong is the single largest shareholder of SWS Capital, followed by executive chairman Tan Sri Tan Khoon Hai and his wife Puan Sri Chan Mei Cheng (collectively 10.37%), managing director Teoh Han Chuan (6.28%) and independent non-executive deputy chairman Datuk Seri Serm Juthamongkhon (5.02%).

It is worth noting that Tan also sits on the board of EKA Noodles Bhd as a non-independent non-executive chairman and at Muar Ban Lee Group Bhd (MBL) as an executive director. Interestingly, MBL managing director Chua Heok Wee holds a minority stake of 1.04% in SWS Capital, where he was an independent non-executive director until he resigned on Jan 6, saying it was “due to other personal commitments”.

Two core businesses

SWS Capital operates its furniture business in Muar, Johor, and its plastic ware business in Simpang Ampat, Penang. Poh Keong Industries Sdn Bhd manufactures and exports furniture, while Ee-Lian Enterprise (M) Sdn Bhd is its plastic ware company, which carries the brand Elianware.

SWS Capital generated a profit of RM165,000 for the nine months ended Sept 30, 2020 (9MFY2020) on revenue of RM97.29 million. The group reported a net loss of RM9.82 million for the 16 months ended Dec 31, 2019 (16MFY2019) and a smaller loss of RM1.03 million in FY2018 ended Aug 31.

Loh attributes the losses in FY2019 to the abolition of the Goods and Services Tax and the introduction of the Sales and Services Tax, plus the provision of an employees’ share option scheme. The first half of 2020 was bad because of the outbreak of Covid-19. “Nevertheless, SWS Group returned to the black in 4Q last year and will be profitable for FY2020,” he says confidently.

As a long-time player in the furniture industry, SWS Capital is expected to benefit from the US-China trade war as the US demand shifts to manufacturers in Malaysia and elsewhere. “US consumers are shifting their spending spree from leisure-related services to discretionary spending like furniture as more people are homebound,” says Loh.

As a group, SWS Capital expects substantial growth in both revenue and profitability of about 50%, to be generated from its furniture division, he adds.

Its plastic ware business will remain one of the key pillars of the group. “Indeed, we are exploring M&A opportunities to acquire other renowned plastic-ware brands for market share and profit synergies,” says Loh.

The share price of SWS Capital has tripled since the market crash in March last year. The counter closed at 94 sen last Friday, giving the company a market capitalisation of RM198.88 million.

Loh is confident that the group will deliver in 2021. “Investors may expect a surge in growth in terms of its business and financial performance. The fact that the counter is gaining traction is a clear indication of increased interest and confidence in the company as the market and investors find value and potential growth in it,” he says.

 






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