Dear Valued Shareholders,
I am proud to represent the Board of Directors of Kumpulan Perangsang Selangor ("Perangsang Selangor” or "the Company”) to share with you the notable highlights of the past year, as we reaped bountiful rewards from our efforts to grow beyond borders.
2017 marked numerous milestones which underpinned our growth trajectory.
For one thing, Perangsang Selangor recorded maiden inclusions of full-year financial contributions from new businesses acquired in 2016, namely Century Bond Bhd, and Kaiserkorp Corporation Sdn Bhd, the holding company of United States (“US”) based King Koil Licensing Company Inc. These acquisitions transformed the breadth of our reach to effectively capture the vast potential in regional and international arenas, in addition to creating a well-diversified revenue base.
Furthermore, Perangsang Selangor remained true to our guiding principle to be in the driver’s seat to steer the direction of our investee companies. Underscoring this, Perangsang Selangor sought to hold the majority equity in KPS-HCM Sdn Bhd, a subsidiary company involved in infrastructure works in the year under review. These actions aim to generate improved bottom lines and subsequent returns to shareholders.
We are committed to further catalysing long-term value creation of our investment portfolio, to deliver sustainable returns in financial, strategic and societal terms.
Backed by this ethos, we are now resolved to propel Perangsang Selangor well into the next stage of expansion by “Creating Possibilities, Enhancing Value”; reinforcing our pledge to attain greater fulfilment for all stakeholders.
I am pleased to state that the strategic initiatives implemented by Perangsang Selangor enabled us to ride the positive momentum of the global economy in 2017, whose growth pace exceeded expectations to rebound by 3.6%. The improvement, which far outpaced the 2.4% achieved in 2016, was supported by a host of factors including accommodative policies, firmer commodity prices, as well as recovery in investment, manufacturing and trade.
On the domestic front, the Malaysian economy outshone its peers in the Southeast Asian region to record robust Gross Domestic Product (“GDP”) expansion of 5.9% in 2017, quicker than the 4.2% increase reported a year ago. While buoyed by global sentiment, this performance was also lifted by strong exports, healthy capital spending and steady consumer demand. Unsurprisingly, the Ringgit strengthened against the US Dollar and rose to be the second-strongest currency in Asia. The strengthened domestic economy and subsequent positive sentiment in by businesses and consumers contributed to stronger financial performances across the Perangsang Selangor Group’s (“the Group”) locally-operated segments.
Indeed, the export-oriented manufacturing sector leveraged on the favourable macro environment to post quicker-than-GDP growth of 6.3% in 2017. This led to the sector retaining its position as one of the nation’s key growth drivers, sustaining its development and progression through capacity building, product innovation and extensive global market penetration. In fact, in recognising this, Perangsang Selangor has taken bold steps to leverage on this momentum, by further expanding our footprint into this sector in organic and inorganic means.
The International Monetary Fund has projected for global growth to continue its rise by 3.9% in 2018, reflecting the sturdier financial footing expected in developed and emerging economic regions, anticipated pickup in commodity pricing, favourable labour markets, and accelerated demand in general. The supportive macro environment, although still susceptible to adverse shocks, should augur well for the Group’s prospects in the coming year.
The uptick in global economic activity are expected to have a spill over effect on the export-focused Asian region which is estimated to grow by 6.5%, which is considered to be an upside growth surprise. Correspondingly, Malaysia is primed for a year of growth, fuelled by conducive global macroeconomic conditions and domestic demand, on the back of improvements in income levels and overall labour market conditions. Bank Negara Malaysia has opined GDP growth of between 5.0% and 5.5% in 2018. This encouraging outlook will continue to spur the Group’s high growth core businesses to achieve better financial performance.
That said, global activity may still be tempered by disorderly market movements such as abrupt tightening of global financing conditions, which may trigger financial turbulence by tipping the balance in corporate balance sheets. Escalating trade protectionism or higher geopolitical risks may also negatively impact overall confidence and economic activity.
Even so, we at Perangsang Selangor have utmost confidence in our future outlook, undergirded by our strategy of investing in and nurturing companies with proven expertise, strong fundamentals and operating within high-growth sectors. With this, we will endeavour to take the next leap of faith to create new possibilities and enhance value, for the benefit of all stakeholders.
Perangsang Selangor is single-minded in its intent to advance from strength to strength each year; as evidenced by our Business Transformation Plan and Value Creation Plans implemented in recent years.
We are entrenched in our desire to move beyond merely being a good organisation focused on operations efficiency, to become a great corporation possessing clear leadership in sectors with exponential growth, standing in the forefront of superior innovation and delivering superior returns to all stakeholders.
Therefore, I am very heartened to report that Perangsang Selangor has proven itself capable of identifying key growth opportunities and sectors to accelerate our journey of expansion for the long term.
Perangsang Selangor continued to align our strategy to hold majority stake in investee companies, so as to secure the driving seat in its operations and steer its future direction from a position of influence.
This was the motivation behind the announcement on 22 June 2017, where the Group increased its stake in KPS-HCM by 21% to hold majority stake of 51%, entailing a consideration of RM1.7 million. KPS-HCM, primarily involved in road and highway construction as well as road maintenance and rehabilitation in the State of Selangor, had been awarded a contract of RM174.4 million by Central Spectrum (M) Sdn Bhd to undertake infrastructure works for the development of Phase 3C, Lot 74079, Pulau Indah Industrial Park, Pulau Indah.
As the main driver of KPS-HCM, and mindful of the rapid infrastructure development nationwide, we envisage for the entity to move beyond its existing scope of road construction, maintenance, refurbishment and rehabilitation, to provide general civil engineering works, building construction and maintenance for both public and private sector.
The dynamics of the bedding market in the US witnessed tremendous evolution in the past two years, driven by changing consumer shopping habits, new online players that blur the line between manufacturer and retailer, and the growing spending power of millennials. In aspiring to boost our leadership on home ground, Perangsang Selangor adeptly demonstrated its ability to be nimble and agile in response to the operating landscape.
The Group kickstarted the 2018 with a high note announcing on 11 January 2018 the new strategic approach in KKLC to improve our position in the US market. The new direction entails KKLC gradually taking over product distribution throughout the country upon expiry of its current license agreements over the next three years, while embarking on in-house manufacturing for enhanced control of exacting product standards.
On 22 January 2018, Perangsang Selangor’s indirect 60%-owned subsidiary Kyco Industries, Inc (‘’Kyco’’) formed a wholly-owned subsidiary named King Koil Manufacturing West, LLC (“KKMW’’) that would undertake the production, sale and distribution of mattresses and related bedding and sleep products. Subsequently, a members’ agreement was signed on 29 January 2018 with a US-based partner on a 60:40 equity based on a total initial capital contribution of USD3.3 million (approximately RM13 million).
The new direction is anticipated to result in Perangsang Selangor enjoying a larger revenue base, enhanced earnings quality and sustainable growth.
Our outstanding 2017 financial performance effectively validated the Group’s strategic approach of investing into market players whose strong expertise enabled them to capture convincing leadership in high-expansion industries. I am pleased to report that we will continue to stick to this Business Transformation Plan going into 2018 to pursue similar opportunities.
On 14 February 2018, the Group announced the acquisition of a fully-integrated Electronic Manufacturing Services (“EMS”) player CPI for RM250 million, marking our entry into the high-growth sub-sector within the manufacturing segment. CPI’s competitive edge against peers lies in the plastic injection moulding division, which focuses on engineering thermoplastics (“ETP”) with higher-performing thermal and mechanical properties.
The acquisition of CPI was completed on 27 March 2018. Perangsang Selangor is committed to maintaining CPI’s superior quality and being a conduit to CPI’s growth trajectory in the EMS sector.
Perangsang Selangor holds an unwavering belief in maintaining the highest standards of corporate governance, compliance, business conduct, safety and environmental management – all of which are vital to the Group’s performance and business sustainability. We trust that good corporate governance will not only safeguard and support long-term value creation for all our stakeholders but also foster business sustainability and growth.
We aim to set the tone at the top by promoting a strong culture of integrity and ethical behaviour. This is further expounded through a well-defined framework containing comprehensive policies and procedures to enhance business efficacy, performance and accountability in the entire organisation.
In tandem with our strong commitment to making a positive impact on the communities we have a presence in, the Group has firmly entrenched the principles of business and operations sustainability into various aspects of our business. This allows us to cultivate an integrated ecosystem that is conducive and beneficial to all segments of society.
The Group’s sustainability efforts are focused on three pillars, consisting of Economy, Environment and Social aspects. These forms a holistic approach encompassing wide-ranging facets including our investment strategy in ethical and sustainable businesses, operational methodologies including product quality and production methods, as well as fundamental corporate principles of employee diversity and talent management.
Performance Driven Culture
The core of Perangsang Selangor’s commitment to “Creating Possibilities, Enhancing Value” lies in our relationships with our employees and subsidiary companies, recognising that our people are the precursor to realise the Company’s vision and mission.
The Group focuses on good employment practices to nurture and enhance the wellbeing of our team members, while also establishing meaningful relationships with our partners, customers and stakeholders. Perangsang Selangor advocates equal opportunities by employing, developing and rewarding employees and those of subsidiary companies through the principles of performance, meritocracy and fairness.
To further enhance employee performance development group-wide, we remain committed towards their professional development through formal learning, on the job training and providing opportunities for industry exposure. At the same time, we foster positive employee engagement at all levels using multiple avenues, including employee bonding activities to promote team building and harmonious work relationships
We are proud that our employee advancement initiatives were given due recognition from industry bodies, where Perangsang Selangor was honoured amongst the Employers of Choice (Private Sector) in 2017 by the Malaysian Institute of Human Resource Management (“MIHRM”). The accolade encourages us to continue setting benchmarks in employee development to propel Perangsang Selangor toward greater excellence.
Ranked In The Top 100 Companies Of ASEAN Corporate Governance Scorecard
I am further delighted to report that Perangsang Selangor was ranked the top 69 among 100 public listed companies (“PLCs”) in the ASEAN Corporate Governance Scorecard assessment, a joint initiative by the Minority Shareholder Watchdog Group (“MSWG”) and the ASEAN Development Bank, benchmarked against international best practices.
The assessment also takes into account total shareholder return and return on equity (“ROE”) of which Perangsang Selangor – with ROE of 6.02% - ranked 96 among 802 Main Market-listed PLCs, surpassing the qualifying criterion that the Company should achieve a minimum ROE of 3% for the past 3 years, as MSWG believes that good corporate governance should ultimately reflect financial performance. While pleased with our positive progress, the Board and Management have taken note of the various areas of improvement and will continue its efforts in evaluating its governance disclosure in response to the evolving best practices and the changing requirements.
We are pleased to inform that Kumpulan Perangsang Selangor has been awarded with Silver Award - 2017 Employer of Choice (Private Sector) category by MIHRM during its 17 Malaysia Human Resource Award Ceremony held at Subang Jaya. The prestigious award was received on behalf of Perangsang Selangor by Puan Suzila Khairuddin, the Chief Operating Officer, and witnessed by over 500 delegates comprising corporate leaders and human resource professionals.
MIHRM is the sole professional and independent body in Malaysia to certify Human Resource practitioners in Malaysia and is also affiliated to other associations namely the World Federation of People Management Association (USA) and Asia Pacific Federation of Human Resource Management (“APFHRM”).
The award carries significant impact to Perangsang Selangor as it is a translation of our commitment and dedication in the development of human capital and culture towards achieving the business strategy and organisational goals.
Perangsang Selangor through its Selangor Sports Stimulus Programme “Sports for All” under Corporate Social Responsibility (“CSR”) initiative have been shortlisted among the top 10 in Asia for the “Best Sports CSR Initiative of the Year” category in the Asia’s Sports Industry Award for year 2017. The competition recorded a total of 400 entries coming from 47 countries across Asia. The gold, silver and bronze trophies were presented to the winners during a gala dinner held in Bangkok attended by more than 300 delegates and representatives.
On behalf of the Board, I would like to thank the Directors, management and all employees of the Group for their dedication, concerted efforts and contributions to the Group in the past year. I would also like to take this opportunity to thank the shareholders and business associates for their support to the Group.
The Group values and looks forward to this continued support as we continue to create possibilities and enhance value of new opportunities ahead.
RAJA DATO' IDRIS RAJA KAMARUDIN