Neo Cheow Hui, CEO of GKE Corporation , jokes that he is becoming more popular among his friends. His logistics and building materials company recently expanded into a new business selling mobile phones, and Neo says he has been receiving calls from friends who want to upgrade their phones.

 

For most consumers, GKE&rsquo s move into this new business of retailing will not be too apparent. Its new joint venture, GKE Retails, has been appointed by Singtel as one of its so-called exclusive retailers of mobile phones, pay TV and broadband services. The nine outlets to be operated under GKE Retails will all sport the Singtel branding, as required by the telco for its island-wide retail outlets. The outlets are mainly in busy suburban malls such as One Raffles Place, Sun Plaza, Paya Lebar Square, Changi City Point, Nex, Hougang and City Square. 

 

Under the terms of this deal, GKE Retails operates the outlets and helps Singtel sell mobile phones, other services such as broadband and TV, and accessories such as earpieces and phone covers. GKE Retails buys the stock from Singtel and enjoys a cut when customers sign up or renew their subscription plans at the retail shops. 

 

GKE and its joint venture partner have taken over five outlets previously under an existing retailer who is downsizing his business. With four outlets already under the joint venture partner, GKE Retails&rsquo total of nine outlets makes it one of the largest Singtel retailers around.

 

In addition, GKE Retails &ldquo oversees&rdquo another seven lower-tier retail outlets also operating under the Singtel brand. &ldquo We find this business viable and can help GKE build a more diversified earnings stream,&rdquo says Neo in an interview with The Edge Singapore.

 

Neo stresses that this is not an opportunistic new venture but something he has pondered carefully. According to him, negotiations to start this new business took more than a year and involved not only the seller but also Singtel. 

 

According to Neo, the absolute profit from this business of selling mobile phones may not be too significant if calculated according to profit over revenue. However, the return on capital is attractive, as this business is one where the committed capital can be &ldquo turned&rdquo multiple times within a year.

 

Furthermore, Neo can rely on Singtel&rsquo s support in this venture. He says that GKE Retails has been granted a credit line 1.5 times larger than its current order value, meaning that if GKE Retails orders $3 million worth of inventory, Singtel will provide $4.5 million worth of mobile phones for him to distribute. The primary operating costs for GKE Retails, aside from capital for additional inventory, are rent and staffing, he notes. Singtel will also assist in liaising with mall landlords and sourcing new retail outlets. Neo hopes that GKE Retails will perform well and secure new outlets to manage.

 

Even with higher rentals and other costs, the distributors are assured of a certain margin. He adds: &ldquo This business is very secure. As long as you work and the market functions properly, you will definitely make money.&rdquo

 

Neo plans to build a phone repair business as well. Once an ecosystem of related companies reaches a certain scale in a year or two, he does not rule out a spin-off for its separate listing, although such a move is not on the cards for now. &ldquo Once the numbers are proven and show the potential, this is a possibility. Everybody wants to have a listed status,&rdquo adds Neo, referring to his joint venture partner.

 

To be sure, the physical retailers are but one channel used by the telcos. Subscribers can sign up or renew their subscription plans online, and the handsets that come bundled with these plans can then be picked up or delivered separately. 

 

Neo points out that online selling is popular, especially during the pandemic years, but telcos are now maintaining or even expanding their physical presence. Customers want to &ldquo touch and feel&rdquo these increasingly expensive devices before committing to them. 

 

Of course, having sales staff on hand to properly explain the features of the devices and the terms and conditions of the subscription plans helps as well. &ldquo If you ask me to read two more lines, I will be blur,&rdquo quips Neo.

 

Now, he agrees that the mobile market is saturated, as practically every adult has a device and, for many, two. However, Neo points out that the market has also reached a certain size where there is a steady stream of business. He estimates that if 70% of Singapore&rsquo s total population of six million change their phones every three years, that is an annual demand of around 1.4 million new phones, and if tourists are included, that means 1.5 million. &ldquo The market is not going to have exponential growth, but demand is consistent, and the market is stable,&rdquo says Neo.

 

Another adjacent business GKE can pursue is offering Singtel logistics services. It is already delivering to end customers for its fledgling indoor farming business, and the same delivery network can be used to provide handsets. &ldquo So, the synergy is there,&rdquo adds Neo.

 

Logistics, chemicals blending

Even as GKE ventures into this new business, it is by no means neglecting its core in logistics. In recent months, GKE has set up an office in Dubai. It has rented a warehouse with a capacity of 50,000 sq ft, and when ready in May, it will be another node for the company to provide logistical services for customers with a need to reach the rest of the Middle East, Africa and southern Europe. Neo is confident that the space can be filled very quickly, and he has ambitions to build his own warehouse for additional space down the road.

 

He is aiming for more than just basic cargo storage. GKE, based in Singapore, owns a subsidiary acquired several years ago that provides chemical blending and storage. Neo plans to expand further by establishing a chemical-blending facility in Dubai, which will also offer warehousing services for &ldquo dangerous goods&rdquo that require additional safety measures.

 

GKE already provides such services in Singapore. He explains that the expansion to Dubai is to support customers with markets in that region better and transfer some of their current volumes to Dubai.

 

Neo sees this focus on so-called dangerous goods as a competitive advantage. He recently spent some $3 million to expand the storage space at 39 Benoi Road in Singapore to meet requirements. He laments that he should have done so earlier, as construction costs have doubled. &ldquo I actually hesitated for a while,&rdquo Neo recalls.

 

Nevertheless, he is confident that this added capability will allow the capital expenditure to be recouped swiftly. He explains that customers typically require storage space for hazardous goods, which command higher rates, as well as space for general cargo. By offering storage for both types of goods, GKE&rsquo s facility will provide greater convenience and efficiency in logistics, making it a more attractive option for customers.

 

Bad debt collection

Neo has some positive news for GKE&rsquo s other business segment &mdash the production of ready-mixed concrete in China. The multi-year slump in property and infrastructure has forced the company to make provisions for $6.5 million in unpaid debt. In addition to developers, local public sector organisations are also in arrears with some of their payments.

 

However, with the recent moves by the Chinese central government to stabilise the property market, Neo is already seeing signs of improvement in his bad debt collection. At the same time, customers, including local authorities, have been given the go-ahead and the support of the central government to continue with the development of infrastructure. This means GKE can look forward to an improvement in its production volumes and, therefore, turnover as well. &ldquo Hopefully, we will see a better picture and profit growth restarting in the new financial year.&rdquo

 

Overall, GKE, which reported a record profit of $4.4 million for its 1HFY2025 ended Nov 30, up 132.5% y-o-y, can probably end this year better than last, based on organic growth. In the previous years, some financial periods were distorted by one-offs, such as government wage subsidies and, most recently, the sale of mining rights. 

 

Neo believes that when the various new developments kick in &mdash retail, warehousing and chemicals-blending in the Middle East and ready-mixed concrete in China &mdash the company is set for a new leg up.   

 

A new subsidiary of Catalist-listed GKE Corporation Limited has entered into an agreement to be one of Singapore Telecommunications &rsquo (Singtel) distributors in Singapore.

 

Under the agreement, GKE Retails will own and operate nine Singtel Exclusive Retailer outlets in Singapore to provide lifestyle products, along with Singtel-related products and services, which include mobile handsets and accessories, broadband solutions, Singtel TV and smart home solutions. 

 

GKE has partnered with an undisclosed &ldquo experienced dealer&rdquo who specialises in retailing and consumer services. This partner has operated through his own outlets &ldquo in the past few years&rdquo , says GKE CEO and executive director Neo Cheow Hui. 

 

Neo refers to this dealer as &ldquo the JVP&rdquo . GKE will own 60% of GKE Retails, with the JVP holding the remaining 40%.

 

GKE Retails will acquire five retail outlets, including the lease of premises owned and managed by the former distributor along with four retail outlets owned and operated by the JVP. 

 

GKE Retails will own and operate nine retail outlets in Singapore to conduct retailing and consumer services business and also oversee another seven retail outlets that are owned and operated by independent dealers under the dealership arrangement.

 

The move follows shareholder approval on Jan 27 for GKE to diversify into the sales and distribution of telecommunications mobile handsets and accessories business in Singapore. GKE incorporated GKE Retails on Jan 15.

 

This expands GKE&rsquo s operations from integrated warehousing and logistics solutions in China and agriculture in Singapore. 

 

The group does not expect this new business to have a material impact on its financial results for the financial year ending May 31.

 

GKE Corp has reported record interim earnings of $4.41 million for its 1HFY2025 ended Nov 30, up 132.5% over the year-earlier period. Revenue was up 13.8% to $63.16 million. The company attributes the better bottom line to better operational performance of its warehouses. 

 

In addition, GKE booked a one-off gain of $1.1 million from the sale of its mining rights and its related equity investment in China.

 

The company plans to pay an interim dividend of 0.05 cents per share. " We are delighted to share the fruits of our focused efforts with our key stakeholders, who have placed their trust and support in us," says CEO Neo Cheow Hui.

 

Following the divestment of the mining rights, GKE maintains a presence in China with its ready-mixed concrete plant. It says it " remains vigilant in conducting its infrastructural materials and services business in China, focusing on cost efficiency as the economy gradually recovers."

 

The warehousing and logistics business, here in Singapore, has maintained a moderate level of growth and stability. 

 

Last October, the company set up a wholly-owned unit to explore overseas opportunities.

 

More recently, on Jan 9, GKE announced plans to diversify into the mobile handsets distribution business. This move requires shareholders' approval and an EGM will be called.

 

&ldquo We believe that it is timely for us to embark on new business opportunities to diversify our business and broaden our earnings base, leveraging the sound foundation of our core operations and strategic investments," says Neo.

 

" While these initiatives offer attractive long-term growth potential that could in turn enhance shareholders&rsquo value and returns, we maintain our prudence in pursuing these viable business opportunities to safeguard the interest of our key stakeholders," he adds.

 

Logistics and building materials firm GKE Corp is seeking shareholders' approval to diversify into a new business of distributing mobile handsets, and will do so by buying over the distribution business of an existing player.

 

Together with a partner, GKE will then run the distribution business via their venture, where GKE will hold 60% and the partner the remaining 40%.

 

According to GKE in an EGM circular, the joint venture company " intends" to work with one of the key telcos here to set up a chain of retail shops for this. It has already identified certain locations and is in talks with the telco, which was not named.

 

GKE says the new handset distribution is meant to complement its current business so long as it " remains viable" . The company says this move will give it " better prospects of profitability and ensure long term growth."

 

While this new distribution business will start in Singapore, GKE says it has regional ambitions " if and when" suitable opportunities come about. It will also be open to distributing other products and not just handsets.

 

While GKE continues to run its warehouses, it has previously expanded into the production of ready-mixed concrete in China. 

 

On Jan 2, the company announced it is booking a one-off disposal gain from the divestment of rights to a limestone mine in China, which it bought back in May 2019, GKE paid RMB5.05 million for the rights to mine for 9.5 years.

 

Gains from this sale, plus improvements in other areas will lead to a " significant" increase for its 1HFY2025 earnings for the period ended November 2024, the company says.

 

GKE expects to report its 1HFY2025 results on or before Jan 14. The EGM will be held on Jan 27.