Iris moves to shed its past

by **Cals** Mon 10 Feb 2014, 05:44

Published: Saturday February 8, 2014 MYT 12:00:00 AM
Updated: Saturday February 8, 2014 MYT 7:52:06 AM
Iris moves to shed its past
BY NG BEI SHAN
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Tan: ‘Building houses is not something new to us. We have been building houses since two years ago with our pilot Rimbunan Kaseh project.’
THE stigma of Iris Corp Bhd may be hard to forget. Recall in 2006 when the passport-chip maker was in the crosshairs of the Securities Commission which designated the stock after the speculative frenzy that sent the company’s shares from 8.5 sen to RM1.37 within a few months.
After that episode of relentless regulatory supervision, the stock slipped from the minds of investors.
But early this year, the counter has sprung back into life and has risen some 60% from the end of last year to 44.5 sen by mid-January. It closed at 45.5 sen yesterday.
Some dealers and analysts opine that the Federal Land Development Authority’s (Felda) entry as a major shareholder is one of the catalysts as investors expect more collaboration and synergies between the two going forward.
Better financial state
Unlike the days when its share price was heavily driven by speculative buying, the company’s revenue has been growing steadily since the financial year ended March 31, 2007 (FY07). Profits grew from RM7.5mil in FY07 to RM40.8mil in FY12. It took a breather in FY13 as profit after tax fell more than 50% to RM18.4mil.
In an interview with StarBizWeek, group managing director Datuk Tan Say Jim, who is an accountant, says the company invested heavily in research and development in the previous financial year and hopes to reap what it sowed in the next two years.
He also says the company’s cash has improved after placing out shares to Felda.Bloomberg data shows that it has a negative cash from operations of RM27.52mil and capital expenditures that stood at RM91.25mil, resulting in a negative free cash flow of RM118.77mil as at Sept 30, 2013.
Iris received an offer from Felda to subscribe for up to 394.1 million new shares, representing 25% of its issued and paid-up capital, at 28 sen a share.
Through the placement, it raised RM110.3mil last August. From that amount, Iris will utilise RM30mil to repay bank borrowings, RM25mil for capital expenditure and RM47mil as working capital.
Growing all divisions
With a market cap of about RM887mil, Iris has grown from providing identification chips for passports and today has seven divisions: Trusted ID, payment and transportation, food security, environment and renewable energy, KOTO industrialised building system (IBS), sustainable development and education.
The question of earnings dilution and attention for the businesses that appear overly diversified was well-handled by Tan. After all, it was better known as the e-passport maker but going forward, he expects the other divisions to contribute much more significantly to its top and bottom-line.
If Tan has to describe the company in a word, he says he will call the company a technology conglomerate. Regardless of the diversity of its businesses, technology is the common link.
“No conglomerate in this world runs on a single business… If we think that the business is profitable, why don’t we do it ourselves?” he quips.
Why did he wish to expand the company in such a manner? It was “greed”, he retorts, adding that he wants to optimise the resources and opportunities available.
The entrepreneur quotes an example of how the company will be able to make the most out of a fruit tree it plants using its autopot system.
He explains that a rejected fruit that has a dent cannot be sold to wholesalers or customers; hence, it would be cut into pieces and be sold in its cafeteria called Café Kaseh. Some of the fruits that are not ripe or sweet could be made into jam or other processed food.
Even the peels of fruits could be processed into animal feed for the chicken or fish it rears at the sustainable farm so that nothing goes unused.
Foreseeing that its food business could grow bigger, Tan said that was why the company bought over Versatile Creative Bhd. “People said, Tan Say Jim, you must be crazy! Why would you want to buy a packaging firm which is unrelated to your core business?” he exclaims.
That is the reasoning he has for all its businesses, completing the value chain, something he learnt when it created the e-passport.
Being the pioneer in covert security in the identity document, he says it was the whole solutions that complement the e-passport that makes it valuable.

Banking on Smart Village
Besides completing the value chain, he emphasised on sustainability. Naturally, it will grow its sustainable development division.
News of the company venturing into property raised eyebrows when it first emerged.
This technology firm is building houses and in markets that are not popular among listed property developers.
“Building houses is not something new to us. In fact, we have been building houses since two years ago with our pilot Rimbunan Kaseh project,” he says.
After the maiden project, it is replicating the format in other parts of the country.
There are six upcoming Rimbunan Kaseh projects while it is also collaborating with Felda to implement Sentuhan Kaseh in six different sites.
Rimbunan Kaseh is funded by the Government while Sentuhan Kaseh is funded by Felda.
TA Securities wrote in a note that the potential from new jobs from these projects could amount to RM411mil in the immediate term.
“Assuming RM5mil worth of farm produce in each farm, there will be some potential; income of RM75mil recurring each year,” it says.
According to Tan, these projects have changed the lives of many rural poor as they created jobs and provided a conducive living environment for the community there. He coins the template as “Smart Village”.
The smart village is essentially a housing project that consists of integrated sustainable farms, amenities and affordable housing where the community will live, work and spend their leisure time within a self-contained environment.
The farms employ its food and agro-technology system while it uses the KOTO industrialised building system to build the houses.
He claims that the costs of building the houses are lower and the time required shorter due to the advantages of the system. It took six months to complete the housing development for the first Rimbunan Kaseh project which saw 70 units being built.
As for its trusted ID business, he says the company aims to get jobs from a new country. It has clients in more than 25 countries.
In the second half of 2014, Tan says it wants to market itself so that people will know what the company does. He declines to elaborate.
“We didn’t know how to sell ourselves, which was why we did not take off as well as we could have been,” he says.