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Vincent Tan’s return may signal expansion drive
F Saad 
Tan had continued to explore new business opportunities for Berjaya group during his retirement
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Tycoon Tan Sri Vincent Tan’s return to the helm of conglomerate Berjaya Corp Bhd has fuelled talk of possible major developments in the near future, including overseas expansion.

On Nov 1, after more than five years in retirement, Berjaya Corp announced Tan’s return to the board of directors as executive chairman. His son, Datuk Seri Robin Tan, 43, will relinquish his position as group chairman while retaining his position as CEO.

Tan, 65, announced his retirement in February 2012, citing his wish to focus on philanthropic work. During his time in retirement, he continued to explore new business opportunities in his capacity as adviser to the Berjaya group of companies. Some say he never really retired.

According to a fund manager, the elder Tan’s return to the company has investors excited over the prospect of future expansion plans.

“There was talk a while ago that Berjaya Corp was looking at overseas expansion, possibly within Asean or in China. Vincent Tan is the right person to spearhead talks with overseas parties. At the same time the company might be looking at some internal restructuring to improve margins,” he says, adding that Vincent and Robin will “make a good pairing”.

An observer says Tan’s return could simply be due to boredom. “Someone like him has worked his entire life and will be bored in retirement.

“This is what drives him and this is what he loves doing. He probably misses all the deal-making, and now with opportunities opening up between Malaysia and China, he wants to be part of the action,” he says.

 

Making the big decisions

Tan, in a statement, said the reason for his return was to actively participate in board decisions. “As you all know, even during my retirement I have been active in looking for new business opportunities for the group. Datuk Seri Robin has been an excellent chairman and CEO.

“However, I feel that after being away for five years, it is time I returned to the board to actively participate in the deliberation and decision-making at the board level to show my commitment and accountability to our stakeholders.”

Tan entered the business world in the 1970s, starting a car dealership and a construction equipment company while still pursuing his full-time occupation as a life insurance sales agent. In 1984, he acquired a controlling stake in Berjaya Industrial Bhd (then known as Berjaya Kawat Bhd and now known as Reka Pacific Bhd) from the founders, The Broken Hill Proprietary Company Ltd, Australia and National Iron & Steel Mills Ltd, Singapore.

Berjaya Corp assumed the listing status of Berjaya Group on the Main Market of Bursa Malaysia on Jan 3, 2006. The company grew into a diversified conglomerate known as Berjaya Corp following a major restructuring exercise in 1988. Berjaya Corp currently employs 14,000 people across various industries, including gaming, motor trading, property development, food and beverage, and telecommunications.

Its listed subsidiaries are Berjaya Land Bhd, Berjaya Food Bhd, Berjaya Sports Toto Bhd, and REDtone International Bhd, while its related companies are Bermaz Auto Bhd, Berjaya Media Bhd, 7-Eleven Malaysia Holdings Bhd, Berjaya Assets Bhd and MOL Global Inc.

 

Growth catalyst needed

The fund manager says Robin has done a decent job leading the company. “He has done a good job at maintaining revenue and profits. One quarter of losses per year is to be expected in times like this and financially, the company is doing well. However, there has to be a major growth catalyst which is what investors want to see,” he says.

Vincent Tan’s daughter, Nerine, is an executive director of Berjaya Corp. His nephew, Datuk Dickson Tan, the son of Tropicana Bhd founder Tan Sri Danny Tan, retired as non-executive director of Berjaya Sports Toto on Oct 11.

Over the last three years, revenue has remained stable for Berjaya Corp, averaging around RM2.3 bil per quarter. However, due to tough market conditions, the company has reported losses for one quarter in each financial year from FY14/15.

For the first quarter ended July 31, Berjaya Corp posted a narrower net loss of RM43.4 mil, from a loss of RM62.68 mil in the previous corresponding period, which it attributed to slowing consumer spending and lower revenue from its property project in China.

Since 2013, Berjaya Corp’s revenue has grown 25% to RM9.18 bil from RM7.38 bil. During the same period, net profit doubled to RM149.29 mil from RM74.99 mil, although the company posted losses in FY16 and FY14 of RM177.22 mil and RM74.98 mil, respectively (see table).

Since Tan’s comeback announcement on Nov 1, the company’s share price has shot up 15% to 38 sen on Nov 9. Tan holds a direct interest of 22.76% in the company, having continued to steadily accumulate shares in the company, and its subsidiaries and related companies, since July.

 

Subsidiaries’ performance

For Q1, Berjaya Food posted a quarter-on-quarter increase in revenue of 9.2% to RM154.39 mil, while net profit increased by 6.7% to RM5 mil, attributable to additional cafes operating in the current quarter. The company develops and operates the Starbucks Coffee brand in Malaysia and Brunei, the Kenny Rogers Roasters chain in Malaysia and Indonesia, and the Jollibean brand in Singapore.

REDtone International saw its revenue decline by 21.4% to RM30.23 mil from RM38.45 mil for the first quarter ended July 31. The telecommunications services company posted a net profit of RM1.1 mil compared with a net loss of RM1.16 mil previously, on the back of improved margins and better cost control.

Berjaya Land’s revenue rose by 3.2% to RM1.6 bil in the first quarter ended July 31, from RM1.55 bil. The company, which is involved in property investment, gaming, and motor vehicle retail, saw a turnaround, posting a net profit of RM11.53 mil from a loss of RM27.24 mil. The improved earnings were attributed to better car sales and higher progress billings from property development.

Berjaya Sports Toto posted a 2.5% higher revenue of RM1.47 bil from RM1.44 bil for Q1, and an increase of 26.5% in net profit to RM74.31 mil from RM58.74 mil, attributed to better foreign exchange gains from a subsidiary company.



This article first appeared in Focus Malaysia Issue 258.