Friday 02 Jun 2023
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This article first appeared in The Edge Malaysia Weekly on November 7, 2022 - November 13, 2022

SMTrack Bhd has been loss-making for 10 financial years. To revive its financial health, the company has been diversifying into new businesses. The pace, however, is rather astonishing. 

The ACE Market-listed firm’s core business is providing track and trace solutions using radio frequency identification technology. In 2019, it diversified into the airfreight business. 

Judging from its earnings performance, that venture has yet to bear fruit despite the air cargo boom that many airlines have benefited from during the Covid-19 pandemic as a result of the surge in e-commerce activities. 

Fast forward to 2022, SMTrack announced in June its plan to diversify into the beauty and wellness industry by buying 30% equity interest in V Ultimate Sdn Bhd for RM18 million. 

While in the midst of completing the deal, the company unveiled another diversification exercise last month. It wants to diversify into three industries — property, provision of support services for oil and gas, and food and beverage services-related businesses.

Notably, the three industries are not at all related to its existing business. Its objective is to expand its revenue stream by diversifying into viable businesses.

SMTrack will be one of the most diversified companies on Bursa Malaysia with six core businesses should it complete all its plans. 

Diversification is part and parcel of doing business — as the saying goes, don’t put all your eggs in one basket. The rationale could be to mitigate risks, enhance income streams or have vertical integration to ensure a secure supply of raw materials.

It is usually a major exercise that the board of directors and top management need to think through as the company is entering uncharted territory.

In SMTrack’s case, before questioning the viability of its new ventures, one wonders what its focus is, apart from diversification?

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