THE NATURAL disasters that struck Japan recently are expected to lead some Japanese companies to relocate their business operations in Japan to places such as China.
As a result, Chasen Holdings, a Singapore-listed company, expects that its expertise in relocating sophisticated manufacturing equipment will be in demand from Japanese companies.
Such possible business opportunities for Chasen arising from post-crisis Japan were mentioned by Chasen’s lead independent director, Eric Ng, in response to a question during an investor roadshow at CIMB on Tuesrday.
By way of example, Mr Ng pointed out that several months before the crisis, Chasen had begun relocating a Japanese company’s machinery from Japan to Nanjing in China – and the project is about to be completed.
As a further example, Chasen has just begun work this month on a RMB50 million project, relocating and installing equipment for a 8.5-Generation TFT LCD factory from Japan to China over about 9 months.
Aside from TFT LCD panel producters, Chasen serves industries such as wafer fabrication, chip testing and assembly, solar panel and pharmaceutical manufacturing.
Among the key recent projects were the moving-in of capital equipment and facilities for Norway's Renewable Energy Corporation's complex in Tuas, which is the world's largest integrated solar manufacturing complex.
In their joint presentation at CIMB, Mr Ng and Chasen executive director Eddie Seah sketched how Chasen has evolved its business model to try to smooth out its exposure to business cycles.
Steady business
Chasen is shaping up to be a relatively recession-proof business: In an economic downturn, when companies seek to relocate to lower-cost countries, Chasen will be called upon to relocate their machinery or to mothball their machinery and warehouse it.
Aside from its relocation business, Chasen has two other segments: third party logistics services (which is a relatively stable business) and technical & engineering services to capture upstream business opportunities related to relocation projects.
In Singapore’s relocation market, Chasen has a share of about 80%.
The competition is stronger in China, where it faces Japanese, Korean and Taiwanese competitors.
For third-party logistics (3PL), Chasen is one of many suppliers in Singapore, Malaysia and China. For this segment, the company enjoys the benefits of cross-selling to its clients which require relocation services.
For its technical & engineering services, Chasen specializes in steel fabrication for steel structures and industrial buildings as well as machining and contract manufacturing for the telecommunications sector.
In addition, it is also tapping into opportunities in the green industry through its acquisition of a 100% equity interest in Global Technology Synergy, which deals in industrial water and waste treatment facilities in Singapore and Malaysia.
CIMB in a report yesterday (Mar 30) said that Chasen is in a “sweet spot” with growth catalysts from:
(i) relocation segment - Projects win to stem from China’s Five Year Plan, increasing trend of companies relocating to inland cities in China and Singapore’s potential growth in the wafer fabrication and clean energy industry
(ii) Engineering segment – Chasen’s US$400m build and transfer Hai An township project in Jiangsu province of China is expected to commence soon and is estimated to be completed in FY14.
CIMB has reduced its target price of Chasen (recently trading at 33 cents) to S$0.51 (from S$0.56) for a P/E of 12.7x earnings for calendar year 2012.
Recent story: CHASEN: 3Q2011 net profit leaps 5-fold to S$1.2 million, benefits from chipmaker influx into China.
