This article first appeared in The Edge Financial Daily on June 5, 2017 - June 11, 2017

KUALA LUMPUR: Khind Holdings Bhd, which recently entered the Indonesian market, is revving up its expansion plans abroad, setting its sights on other Asean countries.

The household electrical-appliance maker believes that its brand identity is finally taking off, especially in the export markets, and it is placing bets that this will help give its earnings a firm boost going forward.

Khind group chief executive officer (CEO) Cheng Ping Keat is of the view that the group has done considerably well despite intense competition in the home appliance space.

One thing going for the group is the ringgit’s weakening, which has made its products more competitive abroad.

“We are putting more efforts in growing our export markets so that we don’t put all our eggs into one basket,” Cheng told The Edge Financial Daily after the group’s annual general meeting last Tuesday.

“In the past, the local market contributed 60% to 70% to the group’s revenue and exports, the rest. But since last year, exports’ contribution has grown to slightly over 50% of total revenue,” he said.

Based on its present growth rate, Cheng expects to see the group’s revenue and earnings from exports rapidly overtaking contributions from the local operations.

“Malaysia and Singapore have remained as the primary markets while businesses in the Middle East countries continue to grow, thus contributing to the group’s profit over the years,” Khind deputy CEO Boh Boon Chiang said.

“We are putting a lot of focus on the Asean market, which will be the group’s focus for the next few years, where the great potential lies ahead,” he added.

In the first quarter ended March 31, 2017 (1QFY17), overseas sales accounted for 55% of the group’s revenue.

Khind slipped to a net loss of RM303,000 in 1QFY17 compared to a net profit of RM 1.41 million a year ago on lower contribution from its trading and service division and higher expenses incurred by its investment holdings division.

Quarterly revenue was also lower at RM82.22 million in 1QFY17, down 2.1% from RM83.98 million in 1QFY16.

Khind on Feb 2 completed the incorporation of a 60%-owned subsidiary in Indonesia, PT Khind Environmental Solutions (KES), which Cheng expects will start operations within this month.

“The company will be distributing our key main product, the high volume low speed fan. We want to become a specialist in fans, ranging from the smallest to the biggest as we believe there is a huge market opportunity in hot climate countries such as Indonesia,” said Cheng.

However, international expansion comes with a variety of risks, including competition, currency volatility and funding.

Recognising this, the group is careful in selecting its business partners when expanding into new markets.

Cheng said to address competition, Khind will position itself as a quality product and service provider with a single product venture before widening its product mix to mitigate competition risk.

“In terms of funding, we have allocated sufficient funds to support KES’ operation in Indonesia,” he said.

The group has been expanding aggressively in the Middle East through Khind Middle East FZE (KME), a wholly-owned subsidiary of Khind Mistral Industries Sdn Bhd, which in turn is wholly-owned by Khind.

“The company (KME) is doing very well [in the Middle East] and we hope to replicate the success in Asean,” said Boh.

The business model that Khind refers to in Dubai is one of setting up an office there and sourcing all products from Malaysia and using the products to deal with customers from countries in the Middle East and Africa.

“Using a central office servicing the surrounding countries has become a good model operation to us. Now, we are duplicating this model in Asean to provide good products and services for the customers,” noted Boh.

Cheng’s father, Cheng King Fa, who is the chairman of Khind, founded the group in 1961. Under his vision and guidance, the business has grown in leaps and bounds, with operations now in Malaysia, Singapore, Hong Kong, Fushan in China and Dubai for the Middle East and African markets.

Khind products are mainly distributed via outright sales to dealers, departmental and chain stores and supermarkets. Some are also distributed via e-commerce channels due to the increasing Internet-savvy consumers.

On prospects, Cheng said the group expects outlook for the year to remain challenging.

“For this year, I think there are still a lot of uncertainties as the market has slowed down. Definitely, we need to work harder in terms of promotional activity and, also, the introduction of new products.”

Cheng said efforts to grow the international market take time and for the local market, Khind is still working hard to recover lost ground.

“We are in the process of securing a few more new agencies for overseas that will bring a new opportunity to us,” he said, adding that the company has also initiated some cost-down exercises to control expenses.

Khind shares were untraded last Friday. The stock last closed at RM2.42 last Tuesday, bringing a market capitalisation of RM96.94 million. Year-to-date, its share price has risen 10% from RM2.20 on Dec 27, 2016.