WE Holdings Ltd - Which businesses will it expand into?

27/11/2013 – WE Holdings Ltd is looking to diversify its business by expanding outside its core operations of distributing electronic components, systems and power units.

It plans to "seek new markets, suppliers and customers", without specifying which industries it is targeting.

It says it has secured new distributorship agreements, without specifying who they are with and what they intend to distribute.

The company's website says it provides "value-added electronics services such as product design and development, engineering support, maintenance and sub-assembly" in "Singapore, Malaysia, Thailand, India, China, Hong Kong, Taiwan and Indonesia".

It has justified an 8% decline in H1 sales by saying a "weakening global economic climate … continued to take its toll on the Group's business since the second half of 2012".

WE Holdings Ltd announced the following earnings for H1 FY14:

Revenue: -8% to US$28.8 mln
Profit / (Loss): (US$4.4 mln) vs (US$1.1 mln)
One-off gains/(losses): (US$3.4 mln) vs (US$65,000)
Cash flow from operations: (US$0.6 mln) vs (US$2.1 mln)
Dividend: Nil
Order book: Not disclosed

While the improvement in operating cash flow appears encouraging, we were surprised when the cash flow numbers didn't add up for us.

WE Holdings' PR agency Financial PR says management declined to reply to our questions.

Investor Central. Asian insights for global investors. We ask the tough questions of Asian companies which global investors need answers to.

Question

1. Which businesses will it expand into?

WE Holdings did not say which new businesses, outside its core businesses, it would expand into, or give other salient information about timing.

The purchase of a 20% stake in a Burmese cement plant offers some clues, but WE Holdings' H1 financial statements don't mention this, which leads the reasonable observer to wonder whether other businesses are on the cards.

Question

2. What are the details of the recently-won distributor agreement?

Question

3. Why don't its previous year numbers match with the earlier announcement?

In the recently released H1 FY14 earnings report (page 1), WE Holdings Ltd says its 'Total Comprehensive Loss' increased to US$4.6 mln from US$2.6 mln same time last year.

But a quick look at its H1 FY13 earnings report (page 1) shows a 'Total Comprehensive Loss' of just S$1.3 mln.

We are not aware of any restatements.

That means WE Holdings Ltd's 'Total Comprehensive Loss' in H1 FY14 swelled about 2.5 times compared to that in H1 FY13.

That is far worse than a 0.8 times larger 'Total Comprehensive Loss' as shown in the H1 FY14 earnings report.

According to pages 1 & 9 of its H1 FY14 earnings report, WE Holdings Ltd's announcement and its content were reviewed by its sponsor, RHT Capital Pte Ltd, and the Board of Directors.

The Board confirmed that nothing has come to its attention which may render the earnings announcement to be false or misleading.

That's comforting to know.

It means there must be a good and reasonable explanation for the differences in the previous year figures in H1 FY14 earnings announcement, and the figures in the H1 FY13 earnings report.

Question

4. Is US$1.7 mln cash missing from its books?

(Total:11 questions)

We sent these questions to the company's PR manager Financial PR Pte Ltd (gabriel@financialpr.com.sg, allison@financialpr.com.sg) and Ms Amanda Chen at RHT Capital Pte Ltd (amandachen@rhtcap.com) to invite them for an on-camera interview, and/or seek their written response.

Financial PR replied: "On behalf of We Holdings, we thank you for the opportunity however, the management has decided not to proceed with the interview or Q&A at this point. Thanks for your understanding."

We have sent a couple of more questions to the company and its PR agency.

Sofar, we have not had a reply (which is why you are seeing this message).

While our purpose is to ask the questions which the man on the street would ask, and to help the everyday investor make informed investments, please note that:

Our articles and presentations ('our contents') are not investment advice nor should they be construed as investment advice or any recommendation of any kind; nor meant to cast allegations or insinuations of any kind against any individuals or entities. Before acting on the material in our contents, you should either seek independent advice tailored to your particular circumstances and intentions or rely on your own judgement.

Our articles and presentations express our observations, opinions and theoretical analysis based on the facts that we have gathered or have been provided to us. While we endeavour to ensure that our contents are accurate and are presented in good faith, we cannot and do not warrant the accuracy, adequacy or completeness of the material or that the material is suitable for its intended use; and we disclaim any such warranties express or implied that may be presumed by any party; neither do we take responsibility for the views of companies or other stakeholders or observers or sources quoted or hyperlinked in our contents. While every precaution has been taken in the preparation of our contents, we (and our principals) shall not be liable for any losses or damage or inconveniences due allegedly to errors or omissions in any facts or due allegedly to reliance on our contents in any way whatsoever; nor for any damage to any computer hardware, date information or materials allegedly caused by our contents.

All expressions of opinion and observations in our contents are subject to change without notice and we do not undertake a duty to update and supplement our contents or the information contained herein in the event we obtain any further or more complete information.

©2013 Investor Central® - a service of Hong Bao Media