Astral Asia diversifies into FMCG e-commerce

by SHAHEERA AZNAM SHAH / pic credit: ANNUAL REPORT

ASTRAL Asia Bhd plans to diversify into the e-commerce segment with a focus on household fast-moving consumer goods (FMCG) due to the stable demand of the essential goods.

The plantations group stated that its wholly owned subsidiary, Clean Link Sdn Bhd, is expected to launch a new e-commerce business in December 2020.

“The board has taken into consideration that consumer goods, including but not limited to household cleaning products which are considered as essential items, are relatively stable in demand and have a lower elasticity of demand compared to non-essential goods.

“The group will focus on FMCG, including but not limited to household cleaning products. Astral Asia will initially focus on household cleaning products and more specialised heavy-duty cleaning products to be sold on the e-commerce store,” it told Bursa Malaysia in a filing yesterday.

Astral Asia added that the new business will take advantage of the low operating costs and benefits of the large-consumer base of an online platform.

“The proposed diversification provides an opportunity to the group to venture into the e-commerce business and will diversify the earnings base by providing an additional income stream to the group which will reduce the dependency on its existing businesses,” it said.

Currently, earnings of Astral Asia are derived from its three core divisions — operations of oil palm estates, investment holding, and property development and construction.

Its plantation segment remained its main business and revenue contributor between 2017 and 2019.

The group expects its new venture into the e-commerce business to contribute more than 25% of its profits and targets the segment to replace plantation as the group’s largest earnings contributor.

To carry out the diversification proposal, the group is seeking its shareholders’ approval at an EGM to be convened in the fourth quarter of 2020.

“The board is of the view that the proposed diversification will add value and contribute positively to its earnings and enhance value to its shareholders,” it said.