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Ni Hsin Resources sets sights on becoming F&B firm

The Edge logoThe Edge 10/3/2021 Liew Jia Teng
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AFTER several failed attempts to venture into the oil and gas (O&G) industry, premium cookware manufacturer Ni Hsin Resources Bhd has decided to move on and instead focus on the energy and nutritional coffee capsule business.

Last month, Ni Hsin filed a patent for its new energy coffee to be marketed and retailed under the brand name BlackBixon. The group claims that the product can help enhance the human body’s natural process of energy synthesis and, at the same time, lessen fatigue and boost mental alertness.

Ni Hsin’s major shareholder Khoo Chee Kong expects the BlackBixon coffee capsule business to be the group’s new main core business, as he sees good market potential in health and bioenergy beverages.

“Going forward, I no longer want to position Ni Hsin as a cookware manufacturer. We want to transform ourselves to become a food and beverage (F&B) company. Ideally, we hope that our coffee capsule business will overtake the cookware business and become the bread-and-butter of our company,” he tells The Edge in a phone interview. He did not give a timeline to achieve the goal.

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Khoo is the single largest shareholder of Ni Hsin, with a 28.6% direct stake. The 59-year-old is the managing director of Ni Hsin’s major subsidiaries, including Ni Hsin Corp Sdn Bhd. He, however, is not a board member of the listed company.

Can the coffee capsule ­business be a game changer?

It remains to be seen if the coffee capsule business will be a game changer for Ni Hsin, considering that the group has made a few attempts in the O&G sector over the years, but to no avail.

In November 2014, Ni Hsin said it was talking to potential O&G partners and that a deal could be announced within a year. But nothing materialised.

In September 2019, the company signed a heads of agreement to work together with offshore marine services provider Satumarin Sdn Bhd, in a bid to venture into the O&G industry. The agreement lapsed in February last year.

In the same month, Ni Hsin announced its plan to acquire a 22.73% stake in O&G services firm Seamog Group Sdn Bhd. The acquisition was aborted in July last year.

On its coffee capsule business, Khoo says BlackBixon coffee comprises Arabica coffee beans sourced 100% from Latin America (mainly Brazil and Colombia), as well as two important bioenergy and nutritional ingredients called D-ribose and Guarana.

D-ribose, which is developed through the fermentation of corn seed, is said to have a powerful sports and energy ingredient that supports healthy energy levels for optimum athletic performance. Guarana, meanwhile, is a natural herbal source of caffeine, traditionally used to enhance energy levels.

“We will be the first in the world to produce energy and nutritional coffee capsules. We are going to patent it. Hopefully, we can launch the product in March or April, subject to the Covid-19 pandemic situation,” he says.

For starters, Ni Hsin will engage a reputable contract manufacturer to produce the coffee capsules and coffee machines. Subsequently, the group will commence its in-house production by the end of this year. “Once our manufacturing plant is up and running, we won’t need the contract manufacturing service for coffee capsules anymore, but they will continue to manufacture the coffee machines for us. Our factory will be mainly used to produce coffee capsules. With our own facility, we should be able to enjoy better profit margins in future,” Khoo reveals.

He highlights that the BlackBixon coffee to be launched by Ni Hsin in Malaysia is licensed by BlackBixon LLC USA. Once it has gained traction here, the group plans to expand into the overseas market by working with licensees in Indonesia, Hong Kong, Taiwan, Japan and South Korea.

“We will share with them our business concept and teach them how to grow their business in their respective country under a franchising model,” Khoo says, adding that it hopes to appoint dealers, sub-dealers, business and brand partners, who will then approach hotels, offices, government bodies, restaurants, schools, colleges and individual families to sell its products.

“We have also submitted an application to apply for a direct selling licence from the Domestic Trade and Consumer Affairs Ministry in order to widen our marketing channel further,” he adds.

Ni Hsin is adopting a fairly flexible marketing plan to cater for the needs of different consumers. The group will offer an outright plan or a consume-to-own plan with one-, six- or 12-month subscriptions.

Shares of Ni Hsin have declined 37.5% year to date to close at 17.5 sen last Thursday, giving it a market capitalisation of RM61.78 million. The counter is currently trading at a historical price-earnings ratio of 32.1 times, against its net profit of RM1.92 million in the financial year ended Dec 31, 2020.

Cookware business facing challenging future

Khoo acknowledges that Ni Hsin’s original equipment manufacturing (OEM) segment was badly affected last year as production was temporarily halted during the first phase of the Movement Control Order, which took effect on March 18.

Close to 70% of Ni Hsin’s cookware sales comes from the export markets — mostly Japan, followed by Taiwan and the US. The group has about 10 clients in Japan, of which four to five are major clients.

Fortunately, the weaker performance of the OEM business is being partly offset by the stronger performance of its two in-house products, namely the pressure cooker and wok, which command higher profit margins and have stronger market demand.

“We have seen an increase of sales, albeit not spectacular, for our cookware business. Since the pandemic outbreak, we have been tying up with key opinion leaders and social media influencers to sell our in-house brand cookware products on Facebook Live,” says Khoo.

“Overall, the additional sales made up about 10% of our total sales for the cookware division. Today, more people are staying at home, so they also cook more at home. As a result, our sales to the general public through our dealers are also doing quite well.”

Ni Hsin ceased to be a substantial shareholder of undergarment maker Caely Holdings Bhd last August, after disposing of 7.15 million shares or a 4.27% stake for RM4.4 million on the open market, with an expected gain of RM804,049. It first emerged as a substantial shareholder in the company in April 2018, when it bought a 7.26% stake.

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