Property venture ends Yong Tai’s losses for years

BY SHARIDAN M. ALI

PETALING JAYA: Garment maker Yong Tai Bhd is banking on a venture into property development to end years of losing money.

A joint venture to build serviced apartment in Malacca has contributed to its turnaround. For the nine months ended March 31, net profit stood at RM1.1mil compared with a loss of RM1.9mil a year ago.

Revenue for the period nearly doubled to RM86mil.

“The recent results, although Yong Tai made just a small profit, are really meaningful for us,” executive director Ng Jet Heong (pic) said in a recent interview.

“We have seen the light at the end of our (long dark) tunnel,” he says.

Yong Tai had been making losses every year since 2008. The company now expects to register a profit in the current financial year ending June 30.

The company is now on a stronger financial footing following a capital reduction and rights issue exercise. The fund-raising exercise will pay for the company’s expanding property venture.

Following board approval for the company to diversify in 2012, Yong Tai formally inked a joint venture (JV) agreement with PTS Properties Sdn Bhd in 2014.

In it first property project, Yong Tai pumped RM4.4mil cash into the RM120mil serviced apartment project in Malacca.

The JV partners sell and lease back the property to take advantage of the lack of hotels and similar accommodations in the state.

“The conventional way of acquiring land bank is expensive and we lack expertise. Fortunately, PTS is willing to collaborate with us in the Malacca projects,” he says.

This led to Yong Tai’s second JV project with PTS, dubbed The Apple, a residential and the Marriot Hotel, to be completed in 2017.

Ng says Yong Tai will contribute about RM35mil to this project of RM240mil GDV. The return is estimated at RM80mil to be progressively realised up to its completion,

“We are mulling over drastic measures such as reducing retail outlets, renegotiating contracts apart from the usually practised cost cutting,” he says.

When ask on selling off the unprofitable business, Ng says it would be up to the board but the company wanted to try its best in turning around its core business first.

The company that produces its own apparel is also involved in retailing its products through 19 outlets. It also does fabric dying and contract garment manufacturing.

The group’s core business, however, continued to face tough competition from overseas.

“I am excited with the property venture. I want the company to be eventually known as a property player,” Ng said. “It’s not easy to find the right people while coping with the challenging apparel division.”

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