Thursday 28 Mar 2024
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This article first appeared in The Edge Malaysia Weekly on February 20, 2023 - February 26, 2023

Loss-making CSH Alliance Bhd (formerly KTG Bhd, and before that DWL Resources Bhd, Spring Gallery Bhd, PFCE Bhd and App Industries Bhd) announced a surprise disposal last week that caused its share price to dive as much as 31% — although it was from only 6.5 sen to 4.5 sen.

It is selling its electric vehicle (EV) distribution business, Alliance EV Sdn Bhd, for RM20 million to glove maker Hong Seng Consolidated Bhd despite the fact that EV is one of the hottest spaces to be in now.

Notably, Hong Seng’s share price hovered in a tight range. However, its daily trading volume has increased since the start of the year. Some 195 million shares changed hands on Feb 2 — the highest in five years. After the announcement, 155.9 million shares were traded on Feb 14 and 191.5 million shares on Feb 16.

The EV venture seemed to be a catalyst that lifted CSH Alliance’s share price. The company’s announcement in January about obtaining a manufacturing licence pushed its share price up to as high as 7.5 sen, before sliding down again.

Last year, the share price started to climb from 9.5 sen a few months before the announcement of its distributorship deal with BYD last April, reaching as high as 19 sen before tapering off to as low as three sen last October.

The EV unit, set up in December 2021, secured a contract last April from BYD Malaysia Sdn Bhd, a subsidiary of the world’s top EV maker BYD Co Ltd, to distribute the latter’s commercial electric vans from April 1 this year.

It is worth noting that the company was setting up its EV unit while it was in the midst of undertaking a cash call to raise fresh capital for its rubber glove venture — which the company said would allow it to diversify away from its ceramic business, which has been facing challenges due to lower demand amid a competitive market environment.

The unit owns a 55-acre parcel in Perak, which it bought from Minetech Res­ources Bhd for RM12 million last May to build a plant for EV battery manufacturing and the local assembly of EVs. At the time, CSH Alliance envisioned that its money lending business would also get a boost from the new venture as it would be able to offer a financing scheme to EV purchasers.

The unit has also secured a manufacturing licence from BYD Co for the assembly of the latter’s compact electric van, according to CSH Alliance. Alliance EV also owns a 1.07-acre land in Petaling Jaya valued at RM10.38 million.

Yet, despite all it owns and has going for it, CSH Alliance is selling the business and exiting a venture whose grand prospects it was touting less than a year ago — because it now realises the extensive resources and substantial working capital required for the operation.

The curious deal even prompted Bursa Malaysia to seek clarification on the rationale behind it.

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