2nd Chance Properties is a four-decade-old company with three strong income streams. The company’s gold retailing business and clothing line specialising in traditional Malay women’s wear provide it with assured revenues. But the bulk of its top-line and a substantial portion of its profits come from the properties that it owns in Singapore and Malaysia.
In a canny move back in 1997, the company snapped up several properties at the time of the Asian financial crisis. It used the substantial gains that it made through this transaction to build up its portfolio of properties. It now owns 64 properties, most of which are in Singapore and is enjoying the substantial financial benefits that accrue to it.
The company traces its roots to 1975 when it was started by Mohamed Salleh to provide tailoring of men’s garments. Named Second Chance Enterprises, the sole proprietorship rapidly expanded operations and within a year had spread out to three tailoring shops.
Currently, Second Chance Properties Ltd is listed on the Singapore Exchange and its main areas of business are running Malay apparel stores, renting out real estate and operating a gold-retail business. Additionally, it has sizeable holdings in bonds, stocks and real estate investment trusts.
History – Although beginning operations as a tailoring business, it quickly became apparent to Second Chance Enterprises that faster growth was possible if the enterprise switched over to the retailing of men’s ready-to-wear fashion clothes.
When this venture succeeded a boys’ clothing and accessories line was added. In response to the increasing demand for its products, Second Chance Enterprises also started granting franchises. Soon there were 18 outlets in Singapore and seven in Malaysia.
Mohamed Salleh is named Malay Businessman of the Year 1988 – The strong performance of Second Chance Enterprises led to Mohamed Salleh being awarded this prestigious title. But this honour impacted the business adversely.
The main reason for the success of the firm’s range of clothing was the perception that it was a foreign brand like Lee or Levis. Second Chance had reinforced this belief by using Caucasian models in its publicity.
When the company’s owner came into the limelight, people realised that it was a local business. Sales plummeted and ultimately the company decided to exit the men’s apparel business.
Launch of the First Lady line – Having exited men’s clothing, the company concentrated on the Malay market. In 1992, it also started ‘First Lady,’ a range of traditional Malay women’s wear, by launching a 3,400 sq. ft. store at Tanjong Katong Complex.
This business was a roaring success and was quickly followed by the company’s entry into the jewellery retailing space, with its next venture, Golden Chance. Specialising in gold jewellery, this diversification also paid off.
Listing on SESDAQ and foray into property – The company was listed on Singapore’s SESDAQ in 1997, an event that was quickly followed by the Asian financial crisis. The ensuing plummeting property prices gave the company an opportunity to invest extensively in real estate.
Soon after, a name change was made to the current Second Chance Properties Ltd.
Second Chance gains from its foray into property – Buying property at depressed prices was one of the best decisions that were made.
In 1999 the properties owned were a unit in Blk 190, Lor 6 Toa Payoh, Singapore and three units on the ground floor of Ampang Park Shopping Complex, Kuala Lumpur. From this small beginning, the company went on to purchase 61 properties in Singapore.
These are located in:
- Sim Lim Square (19 properties)
- Sunshine Plaza ( 1 property)
- Peninsula Plaza (5 properties)
- Boon Lay Shopping Centre (2 properties)
- Far East Plaza (2 properties)
- Lucky Plaza (1 property)
- People’s Park Complex (1 property)
- International Plaza (1 property)
- City Plaza (17 properties)
- 11 other properties that are not in shopping malls
Second Chance Properties also owns three lots at the Ampang Shopping Centre in Kuala Lumpur and a Dealership Store in Perak.
Financial position – In the year to August 2015, the company had revenues of $45.8 million and a net income of $10.3 million. Sales have been declining for the last four years while profits have also been showing a downtrend.
In fact, in 2013, Second Chance Properties had profits of $57.1 million largely because of booking an ‘other unusual item’ of $42.9 million.
A brief income statement for the last four years is summarised below:
|August 31, 2012||August 31, 2013||August 31, 2014||August 31, 2015|
|Cost of goods sold||29.0||29.4||25.9||24.1|
|Selling, general & admn expenses||7.3||7.2||7.4||6.7|
|Other operating expenses||0.2||0.0||0.1||0.0|
|Other operating expenses, total||7.4||7.3||7.5||6.7|
|Interest and investment income||–||–||0.1||–|
|Net interest expense||-0.7||-0.4||-0.6||-2.6|
|Currency exchange gains (loss)||–||-1.0||0.9||-1.3|
|Other non-operating income (expenses)||0.0||0.0||0.1||–|
|EBT, excluding unusual items||18.2||15.9||15.5||11.2|
|Gain (loss) on sale of investments||0.0||0.2||1.9||-2.9|
|Gain (loss) on sale of assets||1.7||0.4||0.1||1.1|
|Other unusual items total||9.0||42.9||0.3||1.2|
|EBT including unusual items||28.8||59.4||17.8||10.5|
|Income tax expense||2.7||2.3||1.3||0.2|
|Earnings from continuing operations||26.1||57.1||16.5||10.3|
The company’s subsidiaries include Winning Chance Investments Pte Ltd, Another Chance Properties Pte Ltd, Best Chance Properties Pte Ltd, Better Chance Properties Pte Ltd and First Lady Apparels (Malaysia) Sdn Bhd among others.
Mohamed Salleh Marican is the Founder, Chief Executive Officer, Executive Director and a member of the nominating committee.
Reema Agarwal is the Financial Controller.
Mohamed Hasan Marican is the Deputy Chief Executive Officer and Executive Director.
Dev Naryanan Pisharody is the Executive Director.
Second Chance Properties Ltd is a company with a long and successful history that has converted several challenges into opportunities. It has shown its ability to change with the market and take advantage of business and economic events as they arise.
Its diversification into property has served it well and the company has a sound portfolio of real estate on its balance sheet. Although the sales and profits have declined over the last four years, the company’s property income gives it steady returns.
The First Lady clothing line has a strong brand. Additionally, the gold business is doing well in Malaysia and in Singapore.
Second Chance Properties Ltd is a versatile company which has demonstrated its ability to bounce back after every adversity that it has faced. This is a reflection of its strong management which has a history of successes.
The article is contributed by Barron, a veteran value investor. For the most part, he spends his time unearthing companies through value analysing them.
If you are an independent or freelance writer/blogger willing to provide original content that is related to finance and investing in Singapore, just get in touch with your name and email address and I’ll contact you for a further discussion.