KUALA LUMPUR (Feb 16): Wong Engineering Corp Bhd, a manufacturer of high precision metal parts, plans to develop new sources of revenue by diversifying into the construction, property development and trading of construction materials.
In a filing with Bursa Malaysia yesterday, Wong Engineering said it will leverage, among others, on major shareholder and managing director Yong Loy Huat’s expertise and experience to tender for construction and property development projects, as well as supply construction materials for these projects.
Yong has over 36 years of experience in the construction and property development business and is currently the managing director of Tajukon Sdn Bhd, which is principally involved in building, general contractor works and property investment since 1984.
According to Wong Engineering, the proposed diversification will provide it with an additional stream of income and improve its financial performance in the future.
It noted that its existing principal business has been experiencing a competitive business environment, which has affected the group’s revenue and profitability for the past four financial years ended Oct 31, 2013 (FY2013) to FY2016.
The group returned to the black in FY2016, with a net profit of RM715,000 compared to a net loss of RM3.45 million. Revenue rose 11.7% to RM33.09 million from RM29.62 million in FY2015.
To facilitate the proposed diversification, two new subsidiaries have been incorporated, namely WEC Construction Sdn Bhd and WEC Development Sdn Bhd to undertake the group’s construction and property development projects respectively.
The supply of construction materials, meanwhile, will be undertaken by an existing subsidiary, WEC Marketing Sdn Bhd.
“The board anticipates that the construction and property development projects, as well as the trading of construction materials to be undertaken by the group may contribute more than 25% of the group’s net profit in the future,” said Wong Engineering.
As such, it will be seeking approval from shareholders for the proposed diversification at the forthcoming extraordinary general meeting.
“Barring any unforeseen circumstances, the proposed diversification is expected to be completed by the second half of 2017,” said Wong Engineering.
Wong Engineering shares were untraded yesterday. It last closed at 64 sen, with a market capitalisation of RM58.59 million.
This article first appeared in The Edge Financial Daily, on Feb 16, 2017.