Frankly Speaking: Vertice out of fashion at a loss

This article first appeared in The Edge Malaysia Weekly, on April 25, 2022 - May 01, 2022.
Frankly Speaking: Vertice out of fashion at a loss
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The last two years have been more than just challenging for the fashion and retail industry. Online sales picked up during the pandemic but it was just not good enough to replace sales volume at physical stores.

The devastating effect on fashion brands and their franchise value was huge. One needs to just look at the deterioration in the value of Kumpulan Voir Sdn Bhd to get an idea of the extent of value destruction.

Kumpulan Voir used to be the mainstay of Voir Holdings Bhd, which was a listed entity. In 2017, Vertice Bhd, a construction company, took over the listing of Voir Holdings.

A year later in 2018, Seow Khim Son, the founder of Voir Holdings, proposed to acquire a 60% stake in Kumpulan Voir for RM32.62 million. At that time, it was a good deal for Vertice as its cost of investment of the 60% stake was only RM22 million.

However, the deal was only completed in November 2020 at a significantly reduced price of RM16.4 million. By that time, the pandemic had crippled the retail industry, causing an erosion in the value of Kumpulan Voir.

Now, the worst is over for the fashion and retail industry. The economy has opened up and malls are getting busy again. The prospects of companies such as Kumpulan Voir should be better going forward.

Just when things are looking up again for the retail segment, Vertice is disposing its remaining 40% stake for RM9 million. It is exiting the business and will incur a loss of RM8.4 million from the disposal as the value of the 40% stake is booked at a much higher price. Vertice’s cost of investment of the 40% stake is even higher at RM35.6 million.

Nevertheless, the company, which has a market capitalisation of RM68.6 million as at last Friday, wants out of the retail business to concentrate on construction activities. Moreover, it says the exit is timely as there is a buyer prepared to take a minority stake in Kumpulan Voir.

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