Below is a summary of questions raised and the answers provided by Mr Sim, Group CEO Bruce Rann and Financial Controller Elvin Law.
Q: Do you intend to diversify your revenue stream in Australia?
"We have invested in Australia, have done well there and look forward to many years of increased income," said Group CEO Bruce Rann. NextInsight file photo We focus on general shipping. In Australia, most general shipping demand is on the east coast, such as Brisbane, Newcastle, Sydney and Melbourne.
We were on the east coast about 6 to 7 years ago but decided to pull out of general shipping there because it is a very fragmented and competitive market with very low barriers to entry.
Instead, we invested in facilities in the west coast of Australia, where the shipping traffic is much less. Demand on the west coast is driven by oil & gas activities.
Barriers to entry are very high there. You cannot compete successfully without the necessary warehousing, freezer and refrigeration facilities as well as a laydown area of at least 100,000 square feet.
We are now the market leader in west Australia, with facilities in Perth and Karratha on the west coast and Darwin up north.
Demand for supplies by transportation ships is very much dependent on the strength of the Australian dollar. When the Australian dollar is very strong, international shippers do not spend there. They only take what they have to on arrival and fill up elsewhere. Currently, they spend more as the Australian dollar is relatively weaker.
Transportation between Perth and Karratha takes 2 days via truck and 1,600 km on the road, unlike in Singapore which is only 47 km wide. The tyranny of distance in Australia means you can’t survive there without modern well-equipped facilities. The cost of building those premises and staffing them is very expensive in Australia.
Q: What is status of the vessel you are putting up for sale?
The board decided some years back to divest the Group's chartering business as the seismic industry was in decline. We still own one of the 3 vessels. Two years ago, we classified it as a vessel available for sale. It sits on our books at S$15 million. The asset has been fully paid for and will not affect our profitability.
We are in litigation with the former JV partner owner of this vessel. After such a long time, the case will open for hearing in March or April this year.
Q: Please provide an update on the property that you are constructing.
Financial Controller Elvin Law.
Photo by Sim KihThe lease for the property next to our HQ expired one year ago. JTC allowed us to extend our lease by 30 years on the condition that we rebuild it into a 2-storey building.
We are redeveloping the property and expect to complete construction works by September 2016. That will give us another 54,000 square feet of warehouse space for expanding our ship supply business. The additional space will enable us to have a custom-built warehouse dedicated to the supply of provisions with increased freezer, chiller and working capacity.
With the additional space, we will be looking into direct purchases of dry goods and canned meat in bulk from meat packers and butcheries from around the world. We hope to reduce our buying cost, but this will also increase our electricity and labour cost.
At the end of the day, we hope to lower the overall cost of our products, as well as provide better pricing and faster delivery to customers.
We deliver within 24 hours for orders to Singapore destinations. This is considered very fast.
Q: How much will the warehouse cost?
We started construction last October, with capital expenditure of about S$800,000 last year. Most of the construction will take place this year.
We expect to book another S$11 million in capital expenditure, including the retrofitting of the entire facility. This will be entirely financed from internal reserves.