THE MENTION of Chasen Holdings Limited (Chasen) amidst coffee talk among investors will probably invoke notions of speculative play – given its history as a half-cent stock with high trading volume before a successful share consolidation exercise in December 2008.
Yet the astute investor will probably highlight, since listing in 2007, Chasen’s top and bottom lines have been moving in only one direction -- up.
In fact, Chasen reported an exceptional jump of 127 per cent in total revenue to $54.9 million in its 2009 financial year following significant contributions from new businesses acquired last year.
Beginnings of a big mover
Chasen is an Investment Holding Company that was incorporated in the Republic of Singapore on November 2, 1999 and listed on SESDAQ (now known as Catalist) of the Singapore Exchange in February 2007 via a reverse takeover of China Entertainment Sports Ltd.
The group and its subsidiaries provide specialist relocation solutions, facilities for packaging and warehousing of machinery and equipment for the region’s manufacturing industries, as well as, technical and engineering services.
Its business is broadly classified into three main segments: Relocation Services, Third Party Logistics Services, and Technical/Engineering Services.
Under their Relocations Services business, Chasen provides relocation services of sophisticated machinery and equipment to, within, and from one country to another.
Some of these machinery and equipment include, water fabrication, TFT display panel production, chip testing and assembly, and solar panel assembly.
As such, out of the total 200,000 square feet of warehouse space owned by their subsidiary, Chasen Logistics Services Limited, 120,000 square feet is air conditioned and specially catered to store machinery and equipment requiring precise humidity control.
One of the noteworthy projects that have been pocketed recently is the moving-in of the capital equipment and facilities for Norway’s Renewable Energy Corporation’s complex in Tuas.
To set the record straight, this new complex is touted to be the world’s largest integrated solar manufacturing complex.
One of Chasen’s subsidiaries, Chasen Sinology (Beijiing) Logistics Co., Ltd is involved in the provision of artifact packaging and transportation for both domestic and international art exhibitions and cultural exchanges.
In fact, it involves a complicated bundle of processes, including a digital scanning process to collate historical information material composition and fragile areas of the relic so that additional steps can be taken to reinforce protection against any shocks or impact incurred during packaging and transportation.
Complementing the Relocations Services business is Chasen’s Third Party Logistics Services division, which comprises packing, warehousing, transportation, freight forward, customs brokerage and other supply chain services.
Technical/Engineering Services, on the other hand, make up the Group’s third and last business segment.
Under the Technical side of this business segment, Chasen owns operational facilities in Singapore and the People’s Republic of China to provide parts fabrication and cleaning sales activities to institutions and research facilities in semiconductors, disk media, thin-film transistor LCD, pharmaceutical and back end packaging industry.
As for the Engineering side of this business segment, Chasen is actively involved in construction projects of customers in the marine, property development, oil and gas and other energy-related industries.
The inclusion of Engineering Services by incorporating local construction names such as Goh Kwang Heng Group and Hup Lian Engineering into the earlier standalone Technical Services was a deliberate strategy executed by the group’s management in year 2008.
Some notable projects completed by the group’s subsidiaries include the Ministry of Education headquarters at North Buona Vista Road, Biopolis, National Library and Changi Terminal 3.
Healthy revenue amidst crisis
On hindsight, the management’s decision to diversify beyond its original relocations business into high growth industries has enabled Chasen to emerge largely unscathed from the global economic tsunami.
With most of Chasen’s customers coming from the high tech electronic industry previously, Chasen would surely have been adversely affected, had they not diversify their revenue base quick enough last year.
The Group’s latest announced first quarter results for April to June, 2009 (1Q2010) recorded revenue of $16.5 million, a 47 per cent jump from $11.2 million in 1Q09.
This from third party logistics and delivery of engineering contracts, partly offset by a decrease in relocation business in Singapore and China.
In tandem with higher revenue, net profit after tax leapt an impressive 71 per cent to $1.2 million, despite incurring higher general and administrative expenses from the start-up of the relics packaging and handling business, and share plan expenses that were not accounted for in the previous corresponding period.
Looking at their balance sheet, the group continues to maintain a healthy level of cash and cash equivalents even after a busy 2008, which saw the Group invest actively into new businesses for its Technical/Engineering services and Third Party Logistics services.
Cash generated from operations in 1Q2010 stood at a commendable figure of $1.3 million.
Given the continuing contraction in relocation activities in the electronic industry in the region, I am proud to say that Chasen has done relatively well during such difficult times.”
Indeed, Mr Low’s comments bear a strong element of truth; revenue from the Engineering business accounted for 55 per cent of revenue in 1Q2010 as compared to 40 per cent in 1Q09.
This is hardly surprising given how the Technical/Engineering services business segment usurped the position of top revenue generator from Chasen’s traditional core business of Relocation services in the Group’s financial year 2009 results.
Exploring the Australian gold mine
With the group’s top and bottom lines on the ascension for the past few years, the group’s future now hinges heavily on the management’s forward going plans.
Giving a glimpse into the group’s next course of action, Mr Low said, “To take advantage of growth opportunities in the current economic climate, the Group will continue to expand and diversify our revenue base to other industrial sectors through acquisitions and establishment of new businesses in all the regions that we operate in.”
For those concerned that the group may be expanding beyond its means, Mr Low was quick to assuage their fears, “However, a major consideration in new acquisitions would be their effect on the resources of the group. We continue to develop a balance between entrepreneurial and professional talent through business acquisitions and personnel recruitment to complement the existing management capabilities of the group.”
For the unaware, Chasen’s latest investment have struck gold, literally.
Through a private placement, the group acquired 13.5 million shares of Great Bendigo Goldmines Ltd (GBM), a junior gold mining company that is listed on the Australian Securities Exchange (ASX).
This represents a 12.2 per cent of the enlarged shareholding in GBM.
However, what makes the acquisition remarkable is not the business nature of GBM, but rather, how Chasen nimbly shifted funds originally intended for a proposed investment in an Intermodal Logistics Hub in Queensland, Australia that was eventually called off.
On June 5, 2008, the Group informed shareholders that it agreed in principle to invest in the Intermodal Logistics hub project through a New Zealand investment holding company, Far Pacific Capital Ltd (FPC), in which the group holds a near 20 per cent stake.
However, due to changes in the credit market and land valuation brought about by the global financial crisis late last year, FPC could not conclude a definite agreement with the promoters of the Intermodal Logistics Hub and as such, the investment into the Project was called off and quickly, an opportunity to invest in the Australian resource industry was identified.
With such a quick thinking management at the helm, Chasen Holdings Limited’s prospects look set to be clear and rosy.
This story was recently published in Smart Investor magazine and is reproduced here with permission.