D’nonce Technology looks to diversify, names new CEO

KUALA LUMPUR (July 26): D’nonce Technology Bhd, with a new chief executive officer (CEO) come Sept 1, has proposed to diversify its business to include property development and construction.

In a filing with Bursa Malaysia yesterday, the industrial packaging company said it had entered into an agreement for the exclusive rights to develop a 6,774 sq m piece of land in Seberang Perai Tengah, Penang for RM10 million.

The deal with the two vendors — Tan Than Kau and Tan Tiang Yang — was entered into via its wholly-owned subsidiary D’nonce Properties Sdn Bhd, providing D’nonce an opportunity to diversify its earnings base and establish its maiden property venture.

D’nonce will pay the vendors RM5 million each in cash, to be financed by bank borrowings (60%) and internal funds (40%).

In April 2016, the land was approved by Majlis Perbandaran Seberang Perai for the development of a 19-storey affordable apartment building of 281 units, and a block of seven-storey car park. D’nonce said it is currently evaluating the existing building plan’s viability and the terms of the original development order.

The group observed that revenue contribution from its three operating segments — the supply of packaging and other materials, an integrated supply chain of products and services, and contract manufacturing — fluctuated from RM223.77 million in the financial year ended Aug 31, 2015 (FY15) to RM176.02 million and RM192.24 million in FY16 and FY17 respectively.

The group attributed the revenue fluctuation to changes in demand for packaging solutions from end-customers mainly involved in the electronic and electrical sector.

“From the perspective of segmental profit, save for contract manufacturing which had been negatively affected by low demand from customers in the hard disk drive industry, the other two business segments had generally been contributing profit to the group over the past three financial years,” said D’nonce.

It anticipates the new business activities in property development and construction will contribute 25% or more of the group’s net profit or cause a diversion of 25% or more of its net assets. The proposals are expected to be completed by the fourth quarter of 2018.

In a separate Bursa filing, D’nonce said its executive director Kuah Choon Ching will be redesignated as the company’s CEO effective Sept 1, replacing Law Kim Choon who resigned as its CEO and group managing director to pursue personal interest.

According to D’nonce’s annual report 2017, Law, 61, joined the group’s board of directors on Oct 23, 2000. He was the group’s CEO since 2002 and was appointed group managing director (MD) on Feb 1, 2008. He started his career working at a bank in 1977 before leaving in 1991 to join D’nonce Group.

Kuah, 33, joined D’nonce board on May 2. He is currently group MD of CCK Petroleum Group.

D’nonce returned to the black in the third financial quarter ended May 31, 2018 (3QFY18), mainly due to a RM1.6 million gain recognised from the disposal of its investment property.

It recorded a net profit of RM526,000 in 3QFY18 compared to a net loss of RM1.41 million a year ago. Quarterly revenue, however, fell 1.73% to RM47.6 million from RM48.44 million.

For the cumulative nine months, it saw a net profit of RM1.25 million compared to a net loss of RM1.5 million a year ago. Revenue rose 3.05% to RM145.9 million from RM141.57 million.

This article first appeared in The Edge Financial Daily, on July 26, 2018.

For more stories, download EdgeProp.my pullout here for free.