Mervyn Sim (left), a shareholder of TT International, contributed this article to NextInsight. He is also Vice President, Equity Sales at Maybank Kim Eng Securities Pte Ltd. 
Time and Date: 11am, 31 July 2014.
Venue: 47 Sungei Kadut Avenue
BEST KNOWN for its Akira brand of consumer electronic products, TT International also operates furniture brands Novena, Barang Barang, Natural Living, Castilla and Mod Living.
TT will change its strategic direction by focusing on retail, rather than continue its global trading and distribution businesses.
Ultimately, the beleaguered firm aims to turn its losses around to achieve sustained profitability, exit from the court-sanctioned scheme of arrangement with its creditors, and list one or two of its subsidiaries.
TT is targeting to open BIG BOX, the last and largest project built under the EDB’s Warehouse Retail Scheme, in Jurong East by the end of this year. It comprises 400,000 sqft of retail and dining space, 600,000 sqft of warehouse and logistics facilities and a 70,000 sqft exhibition hall.
TT will be the mall's sole operator and will sell products from its house brands in addition to new imported labels. The firm will also run a hypermarket at the mall.
TT had acquired the 5.6ha 30-year leasehold site for $43m in 2007, but was hit hard by setbacks during the global financial crisis.
The company secured an investment of $92m from Utraco Investment and Prima BB in 2012, and also obtained a $125m construction loan last year. TT will own 51% of BIG BOX, with the balance held by the two investors.
The focus of the AGM Q&A session was on BIG BOX which is crucial to turning TT around:
Artist impresssion of Big Box, which is scheduled to open in Dec 2014.
Q: What is the projected revenue from BIG BOX?
Julia Tong (Executive Director, left): Under SGX rules, we are not allowed to give projections, but under the Warehouse Retail Scheme, we are required to achieve $200m by the end of year 5. We should be able to achieve this benchmark much earlier.
Q: Is there any intention to put BIG BOX under a REIT?
Julia Tong: Not for the time being. At this juncture, our focus is to get the business up and running and resolve all the teething issues that a new mall can expect.
Q: I noticed that the construction of BIG BOX seems quite far from completion. Is your target of December to be operationally ready still on track?
Julia Tong: There are some delays and we are trying to catch up. The weather with heavy rains last year caused us to give up 25 days. Concrete works is more or less finished with the external claddings outstanding. If we can get that done timely then we should be ok. We may have to reduce our fitting out period from 3 months to one and a half months. For the interior design, we may go for the bare minimum. TOP should be by end October, instead of August. So we will have to rush the fitting out to be ready by Christmas. Otherwise, it will be by Chinese New Year.
Q: You intend to be the sole tenant of BIG BOX and operate the hypermarket on your own. How are you going to compete against Giant and NTUC Fairprice who have economies of scale?
Sng Sze Hiang (Chairman & CEO): For our hypermarket’s “Fresh & Groceries” section, we are focusing on a retail wholesale business model with less categories. NTUC and Giant have 15,000 different types of products but we only do 4,000 to 5,000, so we focus on the bulk sales, targeting items that we are strong that we are able to do retail at a wholesale price. We only take up 6,000 sqm for our “Fresh & Groceries” section out of a total 30,000 sqm retail space. So our main focus is still very much on the non-food and “General Merchandise” section, consumer electronics, IT, furniture, furnishings. Our “Fresh & Groceries” section is complementary to our neighbouring malls.
Q: Sheng Siong CEO Lim Hock Chee is one of your largest shareholders. Is he a passive shareholder or will Sheng Siong be involved in your hypermarket?
Julia Tong: We do meet sometimes but so far he is passive. We will be running the hypermarket on our own.
Sng Sze Hiang: If he wants to supply something very competitively, some products that he import directly that can drive traffic for us, we will be open to it. We will import directly and can offer competitive prices but we are open to other suppliers.
For the furniture and furnishings category, there are items like curtains, tiles and other renovation materials that is not our core business. But we need them to complete our offerings, so we bring in business partners. For furniture, most of the items we can handle on our own.
Q: What about the F&B segment of BIG BOX?
Sng Sze Hiang: We have a few thousand sqm of F&B on the ground floor, second and third floors. Food is always an important element for people to come and shop. We do have a self-service restaurant like Ikea.
Q: Last month you did a share placement through CIMB. Were any funds involved?
Julia Tong: There are some boutique funds but not very big institutions. There are also individual investors. The take-up rate was quite strong.
Q: As you will be operating the whole of BIG BOX, you will have to pay rental to the minority investors?
Julia Tong: Yes, we will be paying $40m to BIG BOX for the first year, $42m for second year and $45m for third to fifth year, after which it depends on the market rental. The first year rental is about $5 psf pm for the retail space and $2 psf pm for the warehouse and logistics space.
Q: What is the valuation of BIG BOX?
Julia Tong: Recent valuation was $600m.
Q: What are the subsidiaries with listing potential?
Julia Tong: Akira Corporation Pte Ltd and Furniture & Furnishings Pte Ltd.
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