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Rebuilding MUI

JUN 30, 2018, The Star
Malayan United Industries Bhd (MUI) CEO Andrew Khoo

Second generation ownership accelerating efforts to revive company

THE days of it being a conglomerate, trying to cover as many business sectors as possible, are over.

As far as Malayan United Industries Bhd (MUI), which is currently undergoing a corporate restructuring and business transformation process, is concerned, the way forward is to focus on its core competencies and build a sustainable organisation that brings value to all its stakeholders.

MUI chief executive officer Andrew Khoo Boo Yeow, who is now in the driver’s seat to revive the loss-making company, says the main goal is to ensure that the group is positioned to be sustainable in the long run.

“My approach is, let’s be strong and good at certain aspects of the business, the ones that we feel we can add value, and where we have the expertise to make a difference, then we can move forward,” Andrew says.

“There is no point in trying to cover everything. We don’t want to do that; we need to be more focused,” he tells StarBizWeek in an exclusive interview.

Andrew, 45, took over the helm of MUI from his tycoon father, Tan Sri Khoo Kay Peng at the start of this year.

The change in leadership saw senior Khoo, 78, being elevated to the role of executive chairman of MUI, after making way for his son to be the group’s CEO on Jan 1.

Khoo remains the largest shareholder in MUI, which is primarily engaged in retailing, hotels, food & confectionery, and properties, with a deemed interest of 47.58%.

Importantly, the shift to second-generation ownership raises hope of a revival of the fortunes of MUI, whose business empire stretches from Malaysia to London, and own strong brand names such as Laura Ashley and Metrojaya in the retail sector; Corus Hotel in the hospitality sector; Bandar Springhill in the property segment; and Kandos and Tudor in food and confectionery business.

In its heydays in the 1980s, MUI used to be counted as one of the leading corporate powerhouses in Malaysia. But over the years, as business conditions evolved and the operating environment became increasingly harsh, the group began to underperform, which consequently resulted in the group falling off the investment radar.

At present, MUI has two of its subsidiaries listed on the local bourse, namely MUI Properties Bhd and Pan Malaysia Holdings Bhd.

Besides that, the company is the single-largest shareholder in UK-listed Laura Ashley Ltd.

Three-pronged approach

By his own admission, Andrew is an impatient man.

Despite being the CEO only six months ago, he hopes to see the result of the group’s turnaround efforts fast. He reckons the first 12-18 months since taking over the reins from his father as critical for him to prove himself.

“Everything is time sensitive, we don’t want to wait too long to see results,” Andrew says.

Having taken stock of the group’s business organisation and assets, Andrew says he will accelerate the three-pronged approach adopted by MUI to turn the company around and put it in a more stable footing to weather the challenges ahead.

The three-pronged approach involves corporate restructuring, business transformation and deleveraging, or reducing its debt.

“We need to look carefully at our corporate structure, which at the moment, is quite complex due to the way we have been structured all these years,” Andrew notes.

“So, in our corporate restructuring exercise, we will look at how to streamline the business, reduce redundancies and improve efficiencies. We believe this initiative will help the group to be more focused, efficient and strong,” he explains.

As for the business transformation part, Andrew reveals the group is steering all the brands under its umbrella towards a “lifestyle concept”.

“To me, it is not just about owning a collection of established brands, and not just about being in the retail, hospitality, property or food space. We want to start becoming a lifestyle business, and tranform our brands in line with that direction,” he explains.

Assets for sale

As for the deleveraging exercise, Andrew concedes that the process will involve rationalising the group’s assets.

“We want to reduce our gearing, so as to put ourselves in a more stable footing to weather any kind of challenges ahead,” he says.

“And by deleveraging, it means we will look at our entire asset portfolio, and will continue to selectively make the right choices in terms of what to divest at the right time and and at the right price... our overarching goal is to deleverage to a comfortable level,” he adds.

Despite owning a plethora of good assets, MUI remains a highly leveraged company, with a gearing level of 1.6 times as at end-March 2018, compared with 1.47 times as at its financial year (FY) ended June 30, 2017. The group’s total borrowings stood at RM866.39mil as at end-March 2018, compared with RM906.02mil as at end-June 2017.

According to the company’s latest financial notes, MUI’s total assets are collectively worth some RM1.78bil, of which RM238.33mil comprises deposits, bank balances and cash.

Separately in its annual report, MUI owned properties located across Malaysia, Singapore, Hong Kong, Australia, UK and the United States, with a total net book value of RM890.26mil as of June 30, 2017. However, most of these assets have not been revalued recently, which means they could be worth more than what was reported at current market value.

Undoubtedly, assets that have been identified as “non-core” will be on the chopping block.

For instance, speculations remain that MUI is still looking to dispose of its stockbroking unit – PM Securities Sdn Bhd – which is held through its 69%-owned Pan Malaysia Holdings, after a deal to sell the business to low-profile businessman Datuk Dr Yu Kuan Chon was called off two years ago.

However, in responding to questions on what are the assets that could potentially be sold off by MUI in the days ahead, Andrew says, “nothing is off the table, but it also doesn’t mean we are intentionally selling anything either”.

“We have a clear systematic approach: whatever asset we want to divest, we want to realise the gains. The deal has to make sense for the group,” he says.

“Our intention is to unlock certain values in our assets, so that way we can contribute back to our stakeholders,” he adds.

MUI has for a long time been underperforming, registering losses from FY2014 to FY2017. As at the nine months ended March 31, 2018, howeverm the group managed to narrow its net loss by half from a year ago to RM25.5mil, or 0.87 sen per share, despite marginally lower revenue at RM307.4mil.

The lower revenue was mainly attributable to lower contribution from the retailing division due to the closure of some specialty stores, lower sales from men and ladies, and lower concessionaire fee income. The narrower loss, on the other hand, was mainly due to unrealised foreign exchange translation gain of intragroup balances, arising from the appreciation of ringgit against major foreign currencies and exceptional losses arising from de-recognition of dissolved subsidiaries.

Growth drivers

During the period in review, retail and hospitality accounted for 25.7% and 47.8% of MUI’s total revenue, respectively, while the food and property segments contributed 18.1% and 8.4% to the group’s revenue.

According to Andrew, retail and hospitality will remain the driving engines of MUI’s business, but the way these segments grow will be lifestyle-based, as the group seeks to find a unique selling proposition that works.

For its Laura Ashley brand, for instance, the transformation towards a lifestyle concept is already evident in the United Kingdom. Besides women’s fashion and home furnishing, Laura Ashley now operates cafes and hotels business.

The next phase for Laura Ashley, Andrew reveals, is to venture into the spas business.

As for MUI’s department-store business under Metrojaya, business transformation is already gradually happening at its two flagship stores in MidValley, Kuala Lumpur, and Kota Kinabalu, Sabah.

“We’ve already started doing some renovations, as we want to refresh the concept of department store for Metrojaya, and give customers a different experience,” Andrew says.

He notes changes at Metrojaya, particularly in MidValley, will be more evident in the next six months, as the group brings in new fashion collections and introduce new food and beverage concepts.

Meanwhile, Andrew says he continues to see a lot of upside potential for MUI’s hospitality business.

MUI currently owns and operates six hotels in the UK and two hotels in Malaysia under the Corus brand. It also owns two Laura Ashley boutique hotels in the UK.

“We are in the process of transforming our existing hotel brands. We are looking at introducing new concepts that are more attuned to today’s lifestyle so that we can attract a wide range of customers, including millenials and business travellers alike,” Andrew says.

“For all our business segments, we are identifying gaps in the market, and see where we can fill those needs by introducing the products or services that we feel are unique,” he adds.

Ultimately, Andrew says, all the efforts put in place is to bring MUI’s relevance back to the market, and restore its position in the corporate world.