Report to Shareholders

Dear Shareholders,

The Group recorded steady growth to its top line for FY2019 over the previous year (“FY2018”). Our three business segments, Specialist Relocation, Third Party Logistics (“3PL”) and Technical & Engineering (“T&E”), each saw a comfortable increase in revenue for the year in review.

The overall strong performance once again underscores our track record on reliability and safety. It also reaffirms our expertise as a leading logistics and relocation specialist that has the knowledge, understanding and capability to meet our customers’ diverse and complex needs in any market around the world.

FINANCIAL PERFORMANCE

The Group achieved its highest annual revenue of S$131.9 million since listing, due to stronger sales for our relocation services in China and Southeast Asia, cross-border land freight services between Southeast Asia and China, and technical and engineering services in Singapore and contract manufacturing in China.

Net profit attributable to shareholders declined to S$5.4 million in FY2019, 7% lower than the previous year. Had it not been for the reversal of tax provision in FY2018, the variance for net profit attributable to shareholders for FY2019 would have been lower by S$0.05 million (or 1%) as compared to a year earlier. Fully diluted earnings per share came in at 1.39 Singapore cents per share, down from 1.56 Singapore cents, in line with the lower net profit.

The Specialist Relocation business segment remains our largest contributor to our overall revenue and gross profit in FY2019. It generated S$78.0 million in revenue and S$24.1 million in gross profit, compared to S$75.1 million and S$22.3 million respectively in FY2018. The business segment saw growth due to a full order book that will keep us busy through the year ending 31 March 2020 (“FY2020”). This is in spite of a slow fourth quarter due to the Lunar New Year festive period affecting business in China, and a lack of top and bottom-line contributions from the U.S.A. as Phase 4 of the Nevada project has been delayed and expected to commence only in late 2019 or in the first half of 2020.

The 3PL business contributed S$23.5 million in revenue and S$3.7 million in gross profit in FY2019, as compared to S$22.9 million and S$3.8 million, respectively, in the previous fiscal year. The growth in revenue was driven by increased demand for our cross-border trucking services, and strengthening of our first-mover advantage by starting loose-cargo or LTL (lesser than full-load) movement across national boundaries facilitated by newly added 3PL site operations in Vietnam and China that add to the current network in Singapore, Malaysia and Thailand.

Revenue from the T&E segment rose to S$30.4 million in FY2019, up from S$29.6 million in FY2018. Gross profit grew to S$4.3 million from S$3.1 million in the previous year. The stronger performance was due to our ongoing review of the business segment’s cost structure, which enabled it to secure new construction-related projects despite the sluggish Singapore construction market. However, the industry current transition to 5G technology has caused customers to reduce inventory of 4G products reducing our China contract manufacturing subsidiary’s revenue by half.

SPECIALIST RELOCATION

Our economic cycle resilient Specialist Relocation business continues to secure significant projects in China
for the year in review. New plants manufacturing the latest generation of TFT LCD panels for the domestic television and media market continued to be set-up or existing factories expanded.

Chasen (Chuzhou) Hi-Tech Machinery Services Pte. Ltd., our PRC relocation subsidiary, clinched a contract for move-in and warehouse management services for an 8.5thGeneration manufacturing plant in its neighbourhood. The six-month project was worth RMB51 million (S$10.2 million). It had also secured another similar project for a Korean-owned 8.5th-Generation OLED plant in Guangzhou valued at RMB50 million (S$9.9 milion). Both projects only commenced in late 2018 and is still ongoing in the new FY.

Our PRC subsidiary also won a contract to provide move-in services for the pilot line of a semi-conductor fabrication plant in Kunming in Yunnan Province. This represents the start of the Chinese government strategy to manufacture chips domestically and a much larger plant would be setup on site should the pilot project proved to be viable. Together with a project to provide move-in services for Phase 1 of a 10.5th-Generation TFT LCD cell and module manufacturing plant in Wuhan in Hubei Province, our Specialist Relocation operations in PRC would be kept busy throughout the next financial year.

Taking advantage of our market leadership position in the PRC, our Relocation operation would begin to offer complementary logistics services to our Chinese clients based on its Chuzhou facility. When fully completed the facility sitting on 100 mu or 66,700 sq meters (717,953 sq feet) land would offer air-conditioned and humidity controlled storage facility for machinery and equipment warehousing, cleanroom refurbishment facility for equipment and servicing for critical operating components such as cryo pumps of these sophisticated production machinery.

The PRC operations would be a much larger scale replication of successful similar facilities currently offered to Relocation clients by Chasen in Singapore and Malaysia.

Our Specialist Relocation business in Malaysia, Singapore and Vietnam would continue to secure a steady stream of projects within their geographical markets. With the expected resumption of work at the US plant later this financial year, this business segment is expected to still spearhead the Company’s business growth in the next FY.

THIRD PARTY LOGISTICS (“3PL”)

As the cross-border trucking market continues to grow, the Group has strengthened its frst-mover advantage by bolstering its operations in Vietnam and China with the establishment of operating branches to capture the increasing demand. The expanding 3PL network in the region, which includes the current established operations in Singapore, Malaysia and Thailand, will continue to fortify our position as a leading 3PL service provider in Southeast Asia.

Chasen’s 3PL subsidiary in Malaysia, City Zone Express Sdn Bhd, had also clinched a few sizeable cross-border with complementary warehousing contracts from two MNCs operating in the region. The scope for these contracts covers cross-border land trucking operations from China to Singapore and Malaysia to Vietnam. The complementary warehousing services are located in Singapore and Malaysia.

TECHNICAL & ENGINEERING (“T&E”) SERVICES

The T&E business segment has three core operations/ services:

• Construction-related work including additions and alterations to existing building interiors and structures, scaffolding as well as mechanical and engineering works;
• Contract manufacturing of machine parts for the telecommunications and ordnance industries; and
• Engineering services for the electronic and semiconductor industries.

Following poor performances in previous years, sales for the construction-related businesses picked up in FY2018 and FY2019, due to our efforts to reorganise the subsidiaries in this sector to improve synergy in operations and reduce overall operational costs. In addition, we have reviewed the cost structure, which made our services more attractive to the Singapore market.

Unfortunately, as the global telecommunication industry awaits the arrival of 5G technology, the supply chain reduced their inventory of 4G products so as not to be caught out with obsolescent goods. This affected our PRC contract manufacturer substantially as its annual revenue fell by half compared to the previous FY.

In November 2018, our wholly-owned subsidiary, Global Technology Synergy Pte. Ltd. (“GTS”) had entered into a conditional Sale & Purchase Agreement with a third party to dispose an additional 37% of its equity interest in Eons Global Holdings Pte. Ltd. (“EGH”). EGH, the Group’s PRC industrial water and waste water treatment operator provides management consultancy services to a Chinese industrial water provider and waste water treatment company. We consider the disposal to be in line with our strategic plan to rationalise our investments. Following this sale, GTS continue to hold 3% interest in EGH.

LOOKING AHEAD

Going forward, demand for our Specialist Relocation and 3PL services remain encouraging. We continue to pick up orders from China and Southeast Asia, despite slowing economic growth. Our healthy order book for FY2020 will keep these business segments busy for the full year ahead. The ongoing review of our T&E business cost structure will enable it to enjoy more competitive pricing and raise earnings by improving operational efficiency. Barring unforeseen circumstances, the Group is focus on growth to its revenue and bottomline in the new fiscal year.

APPRECIATION

On behalf of the Group, I would like to express my gratitude to our customers, business partners and shareholders for your unwavering support. I would also like to assure shareholders that we are actively exploring options to enhance value for your shares and are fully committed to getting Chasen out of the SGX MTP Watchlist.

I would also like to convey my appreciation to my fellow board members, management staff and all employees for their continuous support and tireless efforts in making Chasen the go-to service provider for many companies and industries in markets around the world.

LOW WENG FATT
Managing Director & Chief Executive Officer