PRG Holdings Berhad Annual Report 2019

PRG HOLDINGS BERHAD 18 REVIEW OF OPERATIONS & STRATEGIES 1. Manufacturing Division The Manufacturing Division is a long-established elastic textile and webbing manufacturer in Malaysia and Vietnam. During the year, the Manufacturing Division had diversified its products to Polyvinyl Chloride (“PVC”) related products through the Acquisition of the Meinaide Group which was completed on 28 June 2019. The PVC related products had contributed positively to the Group’s revenue and bottom line. To streamline its Manufacturing Division, the Group disposed off the non-profitable entity, PEWA subsequent to year end for a total consideration of USD2,945,911 (equivalent to approximately RM12,028,155). With the disposal, the Group is able to allocate its resources to other products of the Group such as elastic textiles, webbing and rubber tapes. As for the existing products, elastic textile and webbing products, the performance was better than previous year, as a result of securing a few new customers’ orders as well as increased orders from existing customers. 2. Property Development & Healthcare Divisions The Property Development division will be playing a more prominent role in the group with the realignment of the strategies for both property development and healthcare during FY2019. We have shifted our focus in the property development business to target affordable housing development as seen by the launch of Embayu @ Damansara West project. While we anticipated the property market to remain slow given the current economic environment, demand for properties priced at RM500,000 and below remains strong as properties priced at this range is affordable for the middle- income households. It is also worth noting that most of the oversupply properties in the country is in the high-end segment. Our view is that properties with the right pricing, location and amenities will remain attractive to genuine house buyers. Embayu @ Damansara West Project Embayu is an affordable condominium project with three towers of condominium blocks that comprises 650 units with a unit’s floor area ranging from 800 to 1,000 sq ft in size and priced below RM500,000. The total GDV for the project is approximately RM260 million and the Group is optimistic on the demand for this project as the pricing is targeted at middle-income households, which is in line with the government’s increased efforts to enable people to buy homes for own occupancy. While the project is at its initial stage, we have seen a lot of interest despite of the sluggish property market. We will continue with our aggressive marketing approach through various platforms as we believe that home buyers are likely to remain cautious and take a wait-and-see approach given the uncertainty in the domestic economy. The low interest rate environment is also likely to persist and given the recent rate cuts by most of the central banks, we are positive that our marketing and branding initiatives will encourage some of the interested home buyers into making their purchase. As for the Healthcare Division, our partner has recently opened a new confinement centre. With the increase in awareness among Malaysian public on the importance of postpartum confinement period for mothers and babies in order to facilitate rest and recovery, demand for such services has been on the rise. 3. Agriculture Division The Group had ventured into the harvesting/ logging of teak trees through the acquisition of 2 parcels of land in Kelantan which was completed on 29 November 2019. The Group will endeavour to finalise and secure demand for our teak wood. Amidst the economic slowdown the Group expects this division to contribute additional revenue to the Group in the coming years. 4. Retail Division The Group has opened the first flagship store in Singapore in April 2019 followed by second store in Bangkok, Thailand in July 2019. Being the first flagship store in South East Asia in Marina Bay Sands, Singapore, the grand opening event was attended by the German designer, Philipp Plein, which created a powerful and strong momentum to the store. The Group believes the association with a famous global apparel brand will bring new elements and dimension to the Group’s profile and businesses. As this was the first year the Group commenced its retail business, the Group was still adjusting its product mix, understanding market trends, profiling customers preference and cautiously managing its inventories at a healthy level, in particular, minimising its slow-moving items. The expansion plan for opening new stores will be at a slower pace in view of the recent outbreak of COVID-19 pandemic. The Group will evaluate the feasibility of the new stores or locations in a more cautious manner. MANAGEMENT DISCUSSION AND ANALYSIS cont’d