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Gefung seeks local projects post-listing
The Edge, 11 September 2006
For marble and granite supplier Gefung Holdings Bhd, venturing into China after the Asian financial crisis brought success. It started out as Syarikat Bukit Granite Sdn Bhd (SBG), which was founded by Jeffrey Seo in 1994. Specialising in the supply of high-end marble to the construction sector, SBG managed to bag a few big contracts after it was wet up. One of its jobs was to supply marble to the Kuala Lumpur International Airport project.
But during the economic meltdown in 1998, when the local construction sector was going into a slump, Seo decided to set up base in Shanghai under the name of Shanghai Ge Fung Marble & Granite Co Ltd (SGF) to capitalise on the growth opportunities in China. "It was a case of not being able to survive if we didn't move. So after scouting around for suitable sites, we finally opened our factory in Shanghai in 1999," Seo tells the Edge. Now, Gefung, which is en route to a listing on the Second Board next month, has turned its focus back to Malaysian shores via its subsidiary SBG.
"With the announcement of the Ninth Malaysian plan, the construction sector is starting up again. However, we are not rushing back but re-entering the Malaysian market slowly. Our biggest project last year was supplying marble to the CIQ [Custom, Immigration and Quarantine] complex in Johor Bahru," says Seo. At present, about 80% of Gefung's total revenue is derived from its operations in China, where margins are healthier, he adds. The company's completed projects in Malaysia include the Putra Mosque, Mid Valley Megamall and Tower Block and KLCC. Elsewhere in Asia, Gefung has supplied marble to Hangzhou International Airport and Grand Hyatt in China, and the Grand Hyatt and Takanawa Building in Japan.
Gefung will seek more Malaysian projects, post-listing, says Seo. The company is taking over the listing status of Jin Lin Wood industries Bhd in an exercise it initiated in February 2004. Seo says the company opted for a reverse takeover (RTO) was due to Malaysian auditors going through the company's books, Seo explains. "Our auditors for SGF are from China. The Securities Commission wants to be careful. so we had to have our auditors here go through our operations with a fine-tooth comb, which takes a long time," he says. When listed, Gefung will have a total paid-up capital of RM 91.8 million. It is also applying for a transfer tot he Main Board post-listing as it already meets the requirements.
"Once we are listed, we will have access to more trade facilities from the banks. However, we are primarily interested in trade lines, not any other type of borrowings," Seo says. When asked why Gefung choose to list in Malaysia and not Singapore, he explains: "If we were to list in Singapore, we would be just one of the many China-linked companies there. In Malaysia, we will hold a unique position." Seo is also looking to expand his business empire after the listing.
"We have plans to expand our existing 10-acre factory in China by adding a couple of new machines. We are also considering extending our reach to and around Beijing. At present, there is more development in the western part of China than in the east," he says. Although there are no immediate plans to enlarge Gefung's four-acre plant in Taiping, Seo says SBG has in hand some nice marble.
"We are hoping that with our proximity to Singapore, we will get a chance to bid for its upcoming casino projects," he says. Gefung supplied marble to the Venetian Casino in Macau. The company is also looking to move upstream by acquiring its own marble quarries. At present, our raw materials is sourced from Iran and Turkey, but mainly from Turkey. So we are on the lookout for a suitable quarry to acquire in that region. If we manage that, it will help us overcome any raw material shortage, which remains our biggest challenge. It will also allow us to control the quality of the marble we use." Seo says.
Gefung's goal is to purchase q quarry latest by the first quarter of next year. If successful, Seo says the company may consider building a factory in Turkey, which will give it access to markets in Europe and the US and thus enhance eaernings. Revenue growth has been steady at the company over the past three years. In the financial year ended Dec 31, 2003, Gefung posted a turnover of RM 37.9 million. Revenue grew to RM 40.8 million and RM 44.3 million in FY2004 and FY2005 respectively.
Profit before tax also grew in those three years but at a more uneven rate. FY2003's net profit was RM 9.5 million, which spiked in the subsequent year to RM 16.7 million. In FY2005, however, PBT receded to RM 11.6 million.
Seo says that for the first six months of FY2006, Gefung had already pulled in projects worth RM 44 million. It also has a profit guarantee of RM 21.6 million, RM 28 million and RM 28.3 million for FY2006, FY2007 and FY2008 respectively.
