This article first appeared in The Edge Financial Daily, on October 29, 2015.

KUALA LUMPUR: Xin Hwa Holdings Bhd was granted a bonded warehouse licence by the Royal Malaysian Customs for its newly established warehouse in Pasir Gudang, Johor, yesterday, which is expected to widen its clientele.

In a filing with Bursa Malaysia yesterday, Xin Hwa said bonded warehouses are highly sought after following the implementation of the goods and services tax (GST).

A bonded warehouse is a warehouse authorised by the Customs for storage of goods with payment of duties deferred until the goods are removed.

Therefore, local importers and proprietors who are entitled to claim back GST input tax would be able to place their goods in such warehouses and defer payment of the GST and import duty, thereby improving their cash flow position.

Xin Hwa managing director Ng Aik Chuan said the warehouse would enhance the competency of the company as an integrated logistics service provider.

“Since the implementation of the GST in April 2015, we have been receiving requests for a bonded warehouse and I think this is in line with our plan to continue bidding for more storage contracts to maximise the utilisation of our new warehouse storage.”

The newly established warehouse, measuring 220,000 sq ft, is the company’s third warehouse, and costs RM30 million.

With the establishment of the new warehouse, Xin Hwa’s total warehouse space will be increased to 464,600 sq ft from the current 244,600 sqft.

Based on the company’s financial year ended Dec 31, 2014 (FY14) results, its warehousing and distribution operations recorded the highest gross profit margin of 80.49%, followed by other services at 37.07% and land transport operations at 28.70%.

Ng said the unique integrated model and expansion portfolio coupled with the niche expertise in the over-sized cargo transportation will give Xin Hwa the competitive edge to maximise potential returns from projects which will drive the long-term sustainability of the company.

Moving forward, the group is looking to expand its market presence to the East Coast of Peninsular Malaysia by setting up new branch offices in Kemaman, Terengganu.

It is expected to commence its operations at this location in the fourth quarter of 2015.

Xin Hwa’s shares closed one sen or 0.81% higher at RM1.24 yesterday, with a market capitalisation of RM223.2 million.