Enersave, Novena in furniture venture

Deal could be the first step towards merger of the two

By Andrea Tan
Nov 18, 2002
The Business Times

LOSS-MAKING Enersave Holdings has struck a deal with Novena Holdings in a joint venture which could be a prelude to a merger of the two groups.

Enersave, which makes electronic controls and sells furniture through the upmarket Cream Homestore and Room, has taken a 60 per cent stake in a Shenzhen furniture maker for three million renminbi (S$635,000).

The deal will see Novena reduce its stake in the furniture factory to 20 per cent from 60 per cent. A third shareholder, China state-owned enterprise Shenzhen Calo, will cut its interest to 20 per cent from 40 per cent.

Asked if a merger or an acquisition of Enersave by Novena was on the cards, Enersave director of business development Tay Wee Kwang said: 'In our discussions with them, we've not ruled that out. I cannot exclude any possibilities of them taking an interest in our business. After all, our principal shareholder Acma is also in the process of selling its stake.'

Novena Holdings deputy chairman and CEO Toh Soon Huat told BT: 'This is the first step to move and see if we can work together. At this time, we're not looking at a merger or acquisition of Enersave but maybe in the future.'

Acma has said it intends to sell partially or all of its 40 per cent stake in Enersave. Diversified Acma, which reported wider losses for the six months ended June, is in the midst of restructuring its business.

Enersave shares have slumped to 12 cents apiece from a high of 75.5 cents in July 1999. The company plunged into the red for the half year ended June with a $2.2 million loss against profit of $184,000 a year ago.

Novena's fortunes, on the other hand, are expected to improve this year.

Novena's Mr Toh said net profit for the year to December 2002 is expected to be 'around five times' that of last year. Newly acquired subsidiary Leewah Essentials, of which Novena owns 70 per cent, will add some $1 million to net profit and about $20 million to sales.

In FY01, Novena made a net profit of $421,000 on turnover of $38.8 million. Its share price has also held firm at around 30 cents.

As for Enersave, its interior and furnishings division accounts for 15 per cent of revenue. Mr Tay hopes to grow this to 50 per cent by 2004.

The China factory has the capacity to produce some 50 million renminbi worth of furniture a year. Last year, its turnover was about 18 million renminbi.

The factory will start contributing to the bottom line next year, said Mr Tay.

Enersave is also eyeing alliances with other exporters and retailers in Singapore. It is currently in talks with one firm which is 'exporting to at least 15 countries around the world', Mr Tay said.

On the electronics business, Mr Tay said the group was looking to either take on partners for this division or dispose of it entirely. Enersave has also been scaling down its construction business and is 'very selective' of the jobs it takes on in the challenging industry.