A maker of masking tapes since 1972, Central Global Bhd (CGB) (previously known as Central Industrial Corp Bhd) ventured into the construction business in 2019 and aimed to make the segment another engine of growth for the group.
In February, CGB strengthened its position in the construction industry with the acquisition of the remaining 49% equity interest it did not own in Proventus Bina Sdn Bhd. The group also saw the entry of new board members earlier this year to help reinforce its tape manufacturing business as well as to expand its construction business.
While the tape business remains challenging, CGB non-independent executive chairman Datuk Faisal Zelman Abdul Malik acknowledges that it is still relatively stronger than the construction segment.
“We do not intend to turn CGB into a construction-driven company. To us, both tape manufacturing and construction are equally important. But it is our intention to make sure that the construction business will no longer be our weaker segment,” he tells The Edge in an interview.
According to him, under the new management’s leadership, CGB will be leveraging its strengths as well as putting in a lot more effort and attention to improve on its weakness.
“We came in as new management. We went through all the processes of seeing how the company had been doing over the years and subsequently, came up with our own strategies and new direction in terms of how things should be done in the coming years,” says Faisal, who was appointed at end-February.
The 48-year-old previously served as an independent non-executive director on the boards of public-listed companies such as Avillion Bhd (2016 to 2019), Ire-Tex Bhd (now known as Iqzan Holding Bhd, 2018 to 2019), Scomi Group Bhd (2020) and Vizione Holdings Bhd (2020 to 2021).
Two other new board members who joined CGB in February are Tobby Tan Yeang Tze and Lee King Loon. The 47-year-old Tan is the former CEO of Ire-Tex and former executive director of Vizione, while the 50-year-old Lee is the co-founder of Meridian Care Capital Bhd, which primarily invests in healthcare and life sciences businesses.
CGB is 26.96% owned by Chew Hian Tat, who emerged as a major shareholder of the company with an 18.56% stake in February. The outgoing shareholders were Datuk Lim Chee Meng and Lim Chin Sean of the LGB Group, which is behind Taliworks Corp Bhd, a water treatment, toll concessionaire, construction and engineering company.
CGB is one of the country’s largest masking tape manufacturers. Its factory in Sungai Petani, Kedah, currently employs about 120 workers and 30 executive personnel.
Meanwhile, its construction arm Proventus Bina has been undertaking property projects, mainly in Penang, since its inception in 2017. Its clients include prominent developers such as Eco World Development Group Bhd and Singapore-listed Aspen (Group) Holdings Ltd.
CGB reported a net loss of RM3.6 million in the financial year ended Dec 31, 2018 (FY2018), RM600,000 in FY2019 and RM2.29 million in FY2020. Year to date, its share price had more than tripled to close at RM2.30 last Thursday, giving it a market capitalisation of RM207 million.
Expanding export markets
On the tape manufacturing business, Faisal says CGB is investing in new machines to improve its production efficiency as its existing machines are quite old. “There is value in our tape business. We have some really good product brands and our factory continues to provide employment. So, we have to keep going.
“Overall, it is still a good business. We just need to fine-tune it a bit.”
Nevertheless, he admits that in the current economic climate, Malaysia remains a saturated market. Hence, CGB needs to look for more opportunities outside the country.
“We have some established product brands and good clientele, but we have to expand our export markets and we hope to increase our overseas sales. It makes good sense for us to do that because when we have sufficient capacity to supply to our local clients, we can increase our volume and sell the capacity surplus to overseas clients,” he explains.
Most of CGB’s local clients are distributors, although the group also supplies directly to mom-and-pop and do-it-yourself stores. As for the export markets, it is relying on distributors to sell its products. Currently, export markets make up about 16% of its total revenue while the other 84% is from the local market.
“Our main export markets are New Zealand, Australia and Greater Asia. We have some exposure in the US too,” says Faisal.
“Moving forward, we will try to expand to the Middle East. I would also really like to see us go into Europe. The new management has strong connections in these regions.”
He adds that if CGB’s masking tape can sell well in the Oceania region, there is no reason why the group cannot replicate the same in Europe and the Middle East.
“If everything goes according to plan, with our new machines and the new export markets, we expect our export business to absorb about 60% to 70% of the additional production output arising from our new line,” says Faisal.
“We expect to get the new machines in the next six to seven months. But we will probably need another couple of months to do a dry run before they can be commissioned.”
On its construction business, Faisal says Proventus Bina has been focusing on building houses and other properties for developers. But going forward, it will undertake more civil works and infrastructure projects.
“Proventus Bina is a relatively new company. But so far, it has completed four major property projects worth RM300 million to RM400 million. We still have an ongoing project,” he says.
“Obviously, the construction business is not very appealing at the moment. But if we look at the long term, there is room for exponential growth.”
Notably, under the new management in April, CGB (via Proventus Bina) secured a RM100.54 million contract to upgrade the water supply system in Lahad Datu, Sabah. Its job scope includes supply of labour, materials, machinery and equipment relating to the upgrading of the water supply infrastructure that connects Kg Belacon to the water treatment plant in Jalan Dam and to the main water reservoir in Lahad Datu. The contract is from April 28 to June 24, 2023.
Source: The Edge Markets