This article first appeared in The Edge Malaysia Weekly on December 20, 2021 - December 26, 2021
MAIN Market-listed Jade Marvel Group Bhd — formerly JMR Conglomeration Bhd — was a Penang-based property developer and asphaltic concrete manufacturer. Following the emergence of new shareholders and a board reshuffle over the past 12 months, it is changing course to be a business incubator-cum-money lender.
Joint managing director (MD) Datuk David Khoo Yik Chou says Jade Marvel is not particularly keen to invest in start-up companies in the manner of venture capital (VC). Rather, the group’s ideal is profitable local companies that have good potential for growth but face obstacles in expanding their businesses.
“Of course, there are a lot of similarities between VC, private equity (PE) and incubators like us. Our unique proposition is that we are coming in not only as a business incubator, but we are also offering money lending services to the incubatees,” Khoo tells The Edge in an interview.
He observes that many asset-heavy companies were weighed down during the Covid-19 pandemic but, at the same time, many have growth potential.
“That’s why we intend to make Jade Marvel an investment holding company and business incubator. We want to provide the potential incubatees with the technology, finance and marketing support. Our ultimate goal is not only to help them jump-start their performance, but also assist them in getting listed on the stock exchange,” he elaborates.
Khoo, 34, was appointed executive director of Jade Marvel in April, before being redesignated to his current position in June. He began his professional career in 2010 as an audit associate in KPMG, involved in internal and external audits for companies.
Jade Marvel currently has two incubatees: in the money lending business and frozen seafood business. Joint MD Dennis Chung Vui Ming believes both businesses have good potential for fast-track listings.
Interestingly, in its money lending business, Jade Marvel is collaborating with Sri Guan Teik Credit Sdn Bhd, a prominent money lender and pawnbroker in the Northern Region.
“The beauty of our business model is that when we invest in our incubatees, we could also lend them money. That means we are collecting the loan interest income every month. In other words, if our investments ever go wrong, at least our interest income could partly cover the losses, whereas for other investors, be they VC, PE, or PLC, when they make a failed equity investment, they would have zero return,” Chung explains.
Earlier this month, Jade Marvel signed a shareholder’s agreement with YHL Foods Sdn Bhd (YHLF), to set up a joint venture (JV) company called YHL Jadem Frozen Sdn Bhd (YHLJF) to provide services linked to frozen seafood processing and cold storage facilities as well as sales. Under the agreement, Jade Marvel will hold 60% of YHLJF, and YHLF will hold 40%.
Chung says the JV represents a strategic opportunity for Jade Marvel to expand the group’s business into the frozen seafood segment and provide an additional revenue stream.
For the next incubatee, Jade Marvel may be looking at a food distribution and logistics company. In fact, Chung says, the group is already in negotiations with potential targets that could bring synergistic value to YHLJF.
“You can imagine that YHLJF could tie up with our next incubatee, and they could complement each other in the future. From our observation, the food industry is one of the very few industries that are not badly affected by the pandemic. It is a very resilient business. We feel the food market will only grow, because there is an increasing demand and shortage of supply,” says Chung, 59.
Chung was appointed executive director of Jade Marvel in March 2018 and then redesignated as group MD in February 2019 and joint MD in June 2021.
Director Vincent Chong Wei Liang stresses that Jade Marvel’s net cash position stands at RM21 million, of which RM15 million to RM16 million have been allocated as a war chest for the incubator.
“Subject to regulatory approvals and depending on our share price performance, we plan to undertake another corporate exercise to raise an additional RM55 million to RM60 million next year,” he says.
Vincent, 37, has 10 years’ management experience in providing top sales training, team management, coaching and developing business development strategies. He is the brother of Datuk Seri Chong Wei Chuan, the deputy chairman, executive director and substantial shareholder of Jade Marvel.
Vincent acknowledges that, according to Bursa Malaysia’s rules, a PLC is not allowed to raise money from a corporate exercise without a specific usage. And given its limited resources, Jade Marvel has to be selective when choosing incubatee projects.
“We need to identify the right incubatee before we even tap into the capital markets. In fact, a memorandum of understanding doesn’t count. We must sign the actual agreements so that we can state the utilisation of proceeds. The regulator has been very strict about that,” he says.
In the long run, says Vincent, assuming that Jade Marvel successfully raises additional funds of RM55 million to RM60 million next year, the group hopes to have at least five to eight incubatees in its diversified portfolio.
“We will try to find companies that can complement our existing incubatees, so that we can add value to these companies, but we don’t expect all five to eight of them to have synergy with each other,” he adds.
X Infinity Group Bhd, a financial technology company involved in blockchain and digital wallet businesses, owns almost 10% of Jade Marvel. X Infinity is ultimately controlled by Wei Chuan. Global Legacy Partners Sdn Bhd, controlled by Hong Kong fund Legacy Trust Company Ltd, is the single-largest shareholder of Jade Marvel, with a 15.5% stake.
So far this year, shares in Jade Marvel have dropped 33% to close at 67 sen last Wednesday, giving it a market capitalisation of RM215.75 million.
The group returned to the black with a net profit of RM4.25 million in the financial year ended March 31, 2021, against a net loss of RM7.12 million a year ago. The turnaround was mainly attributed to stronger performance from its property development division, owing to recognition of revenue from a JV project in Simpang Ampat.
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