Bold move to reinvent itself starts to pay off for Thakral

The company moved its business focus to property investments, beauty and lifestyle products, and likes the signs it is seeing, says CEO Inderbethal Singh Thakral.
The company moved its business focus to property investments, beauty and lifestyle products, and likes the signs it is seeing, says CEO Inderbethal Singh Thakral. PHOTO: MARCUS TAN FOR THE STRAITS TIMES

Thakral Corporation was once known for selling TV sets and cameras but the firm took a huge gamble a few years ago and transformed itself into a business focusing on property investments, beauty and lifestyle products.

The results of that gamble - one the mainboard-listed company felt it had to make - are now starting to show, according to chief executive Inderbethal Singh Thakral.

Mr Bethal told The Straits Times: "Consumer electronics used to be a major part of our business, and we had up to a 10 per cent camera-market share in China.

"But cameras have since been replaced by smartphones - we had to relook our direction of focus."

This led to the creation of Thakral Capital Holdings, which, since 2011, has invested - in partnership with big fund players such as Aberdeen and Apollo - more than A$300 million (S$311 million) of capital in Australia's property market.

"Over the past six years, we have completed 11 projects with a market value of around A$1.2 billion, and we have six more in the pipeline worth a further A$1.4 billion on completion. We target an IRR (internal rate of return) of over 20 per cent from our investments," Mr Bethal said.

The pipeline includes the first two projects for GemLife, the retirement-housing joint venture that Thakral formed late last year with Australia's retirement resorts operator Living Gems.

"Beyond the first two projects, GemLife has four more sites under contract and three being evaluated. These nine projects will give us the size and ability to recycle our capital to achieve the goal of having a consistent pipeline of 2,000 retirement homes."

Meanwhile, Thakral Capital Holdings is drawing steady cashflows from the GLNG Gladstone housing project. It owns 101 houses that have been leased to the Gladstone liquefied natural gas plant in Queensland until 2020.

"For now, we need to pencil in property value impairment every quarter until the end of the lease term to account for amortisation. But, accounting aside, we earn a steady $9 million revenue per annum from the GLNG project," said Mr Bethal.

"When it's fully unencumbered in 2020, we can hold the houses and continue earning rental or we can sell them. We'll see."

Together with a Japanese subsidiary that has a commercial building portfolio in Osaka worth $20.6 million, Thakral Corp's entire investment division generated revenue growth of 29 per cent year on year to $7.2 million in the three months ended March 31.

First-quarter net profit of $1.51 million was up 142 per cent from a year earlier, as the lifestyle-segment earnings were back in the black.

Thakral Corp has been gradually switching its consumer electronics business in China to focus on distributing and managing beauty, wellness and lifestyle brands via both physical retail outlets and online channels.

The revenue share of these products has grown from 7.2 per cent in 2013 to 87.1 per cent last year.

It has not been a smooth transition but the management is hopeful for a turnaround and growth, as the segment finally broke even in the first quarter after cutting its 2016 full-year loss by 35 per cent, compared with the year before.

Mr Bethal is cautiously optimistic: "We just crossed our first hurdle - we have managed to break even for our lifestyle division. Let's first focus on making sure we don't slip back into the red but we like the signs we're seeing."

Wong Wei Han

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A version of this article appeared in the print edition of The Straits Times on May 15, 2017, with the headline Bold move to reinvent itself starts to pay off for Thakral. Subscribe