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The not-so-great pivot

Frankie Ho
Frankie Ho • 9 min read
The not-so-great pivot
The aftermath of the pandemic has led to a pivoting of businesses across many companies. Photo: Bloomberg
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Karaoke was one of the hardest-hit businesses during the Covid-19 pandemic. KTV joints in many places were emptied overnight and ordered to close indefinitely as part of measures by governments to contain the outbreak.

With health officials insisting on being doubly sure that the plague no longer posed a public threat before they lifted pandemic restrictions, downtime for KTV operators was excruciatingly long, especially considering theirs was a business that was among the first to shutter when Covid-19 initially hit.

Along the way, some operators pivoted to other businesses. Others went bust before safe-distancing measures and other curbs were called off for good.

Interestingly, one Singapore-registered company figured karaoke would be its new lifeline after struggling for years to keep afloat its longstanding offshore and marine business, which only got worse during the pandemic.

A year after it exited a scheme of arrangement to restructure crippling debts, Viking Offshore and Marine entered the KTV trade in 2022. New investors had come on board by then, and the company went on to dispose of what was left of its offshore and marine business. It subsequently rebranded as 9R, which now owns and operates nine KTV outlets in Malaysia.

9R is one of at least a dozen Singapore-listed companies that pivoted to new businesses during or in the aftermath of the pandemic. For some of them, the jury is still out on whether their decisions have paid off. For others, however, the results so far leave much to be desired.

See also: 79% of APAC company executives expect to make two or more divestments in next 18 months: Deloitte

Consider Hatten Land PH0 -

, a property group with malls, hotels and residential developments in Melaka. After pandemic lockdowns across Malaysia cleared out its commercial properties and upended home sales, Hatten announced mere weeks before Christmas in 2021 what it called a strategic pivot.

Its new fortunes, it reckoned, would be in bitcoin mining as well as the creation and monetisation of crypto exchanges, metaverses and non-fungible tokens. It also set its sights on e-sports, offering to lease out one of its malls as a hub for major multi-player video-game competitions in Malaysia and the region.

Shareholders unanimously gave their blessing to Hatten’s business diversification at an EGM held just two days before 2021 ended.  

See also: Breakout time

All that fanfare dissipated over the next couple of years as Hatten and some of its subsidiaries started receiving legal letters from various creditors demanding full payment of outstanding loans. The highly leveraged company hired Deloitte & Touche Financial Advisory Services in March this year to iron things out with its creditors.

To date, none of Hatten’s non-property ventures unveiled during the pandemic has taken off in a way that’s enough to move the needle. The company has reverted to its Melaka-centric real estate business but is still trying to resume construction of several projects put on hold by the pandemic.

For the nine months ended March 31, Hatten generated revenue of RM24.4 million ($7 million) but incurred a net loss of RM49.9 million due to hefty general and administrative costs and finance expenses. Its current liabilities amounted to RM1.08 billion, more than its current assets of RM867.9 million.

VCPlus, formerly Anchor Resources, is another company that hasn’t had much to show since it gave up gold and granite mining to get into the fintech industry in 2021. The plan back then, which shareholders approved, was to become a blockchain-powered custodian bank safeguarding cryptocurrencies and digital tokens for anyone with such assets.

With no track record of its own in this space, VCPlus formed a joint venture with several parties to spearhead the new business, which would initially target the Singapore market. The joint venture, 55%-owned by VCPlus, first had to apply for a capital markets services licence as custodian services for securities are regulated by the Monetary Authority of Singapore (MAS).

While it waited for the licence, VCPlus became a consultant to companies looking to digitise their operations or use blockchain technology to grow their business. The joint venture finally received the licence in March 2023 and expected to commence business later that year.

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That didn’t go as planned though. Instead, VCPlus bought out the rest of the joint venture in July 2023, saying this would allow it to run the custodian business without interference from minority shareholders.

Confidence in the company took a hit not long afterwards, as two senior executives of VCPlus were hauled up by Singapore’s Commercial Affairs Department and MAS for investigations into offences under the Securities and Futures Act.

Confounding matters further, the CEO and all the board directors who had been with VCPlus since the start of the pandemic suddenly stepped down in April this year. This happened shortly after VCPlus completed a placement of new shares to an investor and formed a joint venture with the investor’s British Virgin Islands company to sell cloud-based software solutions. VCPlus has a stake of only 5% in the joint venture.

In its third year now, VCPlus’ foray into fintech has yet to pay off. Its independent auditor, Nexia, has even flagged “material uncertainty” over its ability to remain a going concern.

Better off staying put?

The travails of VCPlus and Hatten are distinct and unique on their own. The outcomes of their pivot, however, are not dissimilar to those of most other Singapore-listed companies that also tried their hands at a different business in a bid to survive the pandemic.

They include Meta Health 5DX -

(which pivoted from mechanical manufacturing to healthcare), OIO Holdings KUX - (from mechanical and electrical engineering to blockchain development), Sevens Atelier 5EW - (from water-piping solutions to property design and construction), SMI Vantage (from travel retail to bitcoin mining and robotics) and TOTM Technologies (from telecommunications to biometric identification).

All these companies ended in the red for their last financial year. In fact, nearly every one of them posted a loss every year from 2020 to 2023. Several others that also took the plunge into another business have since been taken private or are in the process of being delisted — voluntarily or otherwise.

Neo Group, the food catering company, diversified into property development and investment in 2020 through an equal joint venture it formed with construction group Boldtek Holdings 5VI -

. Neo Group, which was profitable then, was delisted the following year after its founding shareholders launched a takeover offer for the rest of the company they didn’t already own. Boldtek is now under judicial management.

Mainboard-listed KTL Global EB7 -

, which substantially scaled down its brand management, operational support and central procurement businesses and went on to sell fruits and vegetables, was ordered last month to delist after it missed several deadlines to exit the Singapore Exchange S68 - (SGX) watchlist.

Given their less-than-stellar results over the last few years, would all these companies have been better off trying harder to turn their original business around instead of venturing into uncharted territory?

After all, some businesses that were among the worst-hit by pandemic lockdowns managed to rough it out. F&B operators, for example, quickly adapted to no dining-in rules by working with food delivery platforms to offer takeaway meals. This kept their cash registers ringing and their workers on the payroll. Hotels, instead of housing tourists and travellers, became quarantine centres for people who tested positive for Covid-19.

Still, every situation back then was unique, and companies did what they saw fit to survive at the time. To insist that they should have just pressed on with what they had and not pivoted is simplistic and perhaps naïve.

One of the rare few that has done reasonably well after heading down a completely new path is China Shenshan Orchard Holdings BKV -

, the former Dukang Distillers Holdings. In 2021, it disposed of its money-losing

baijiu (white wine) business and went into kiwifruit farming. Every year since then has been profitable, thanks to the fruit’s popularity in China.

China Shenshan ended 2023 with revenue of RMB73.2 million ($13.65); and earnings of RMB10.3 million. It generated net cash of RMB41.5 million from operations and had a cash pile of RMB138.3 million as at Dec 31, 2023.

Stakes are higher now

Could the other companies that pivoted but had little to show for it still pull it off like China Shenshan? While longsuffering shareholders will no doubt want them to succeed, the fate of these companies could hinge on a slew of factors beyond their control, even with the pandemic no longer a threat.  

Wars are still raging in Ukraine and Gaza; inflation in many places remains elevated, keeping interest rates higher for longer; supply chains are once again being disrupted following rebel attacks on commercial ships in the Red Sea last year; geopolitical tensions in the South China Sea are not letting up; and the world’s two largest economies could end up in a trade war again with each other pending the outcome of the US presidential election later this year.

Against this backdrop, these companies will need all the help they can get to rise to the occasion. Investors may still be willing to give them another chance if the sudden buzz in the market lately over a tiny, unprofitable company is anything to go by.

In June, shares of mainboard-listed Jasper Investments FQ7 -

surged on massive volumes to their highest in three years after the company said it raised more than $22 million from a bunch of deep-pocketed investors, including SGX chairman and GIC board director Koh Boon Hwee and former Trafigura Asia-Pacific CEO Tan Chin Hwee.

Placed on the SGX watchlist since June last year, Jasper Investments provides marine transport services to companies in the infrastructure sector. It hasn’t had any revenue for several years straight following a protracted downturn in the global marine industry.

This time around, it’s seeking to move up the value chain with the help of two new business partners by developing what it believes are much-needed artificial intelligence solutions for the maritime sector.

It’s early days yet for Jasper Investments but having a new game plan and being able to rope in veteran investors like Koh to back its vision says something about the company. On that same note, if the likes of VCPlus and Hatten can get their act together and show some real progress, getting investors to take heed — just as Jasper Investments has done — could just be a matter of time.

The writer is a former financial journalist and runs an investor relations consultancy practice. He is also a part-time business journalism lecturer at a Singapore university. All views expressed are solely his.

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