KUALA LUMPUR: Sunzen Biotech Bhd expects to return to profitability this year, thanks to strong demand for its small and medium-sized enterprise (SME) loan financing.
Director Ching Chee Pun said the company was optimistic about increasing profits for its traditional Chinese medicine, herbal health foods and beverages, and bird's nest under its EcoLite brand, all part of its human health care segment.
"Sunzen has already made profits in the last two quarters, owing primarily to EcoLite and the successful acquisition of Finsource Credit. We've seen an increase in demand for loan financing from SMEs as a result of the Covid-19 pandemic.
"We hope to make even more progress in the final two quarters of our current fiscal year. We hope to turn things around this year, otherwise, we are confident that we will be able to return to profitability in 2023," he told the New Straits Times.
According to Ching, the loan financing business was expected to grow steadily as most business activities in the country begin to recover from the pandemic's effects with improvements in the current economic environment and the easing of the Covid-19 curbs.
Sunzen paid RM6.8 million to acquire Finsource Credit (formerly Finsource Solution) on June 1, 2020.
According to a filing with Bursa Malaysia, the acquisition of Finsource Credit cames with a guaranteed net profit of at least RM2 million for fiscal years 2021 and 2022.
The transaction is classified as a related-party transaction because of Ching's and Sunzen group managing director Teo Yek Ming's involvement in the company.
Teo established the SME loan financing company, which is a licensed moneylender under the Moneylenders Act of 1951 in 2015. Ching is a director of the company.
Sunzen, according to Ching, would begin looking for merger and acquisition opportunities in 2023.
"Once everything is back on track and the group returns to profitability, we will consider acquiring fintech companies and businesses involved in animal health and human health care that provide synergy to Sunzen's existing business and enhance its profit level," he said.
Meanwhile, Teo said Sunzen would continue to reduce costs and improve efficiency through asset rationalisation.
Sunzen sold its factory in Kota Kemuning, Shah Alam, last year, resulting in RM600,000 annual cost savings from term-loan interest and operating costs.
Another cost-cutting measure was the closure of eight retail outlets in its traditional Chinese medicine segment.
"When we took over Sunzen's management in 2020, we looked at many ways to cut operational costs. We identified and sold a few underutilised assets. It was a wise decision because it resulted in significant cost savings. Our profits increased as a result of increased efficiency.
"We still have two factory lots (Lot 1 and Lot 2) in Kota Kemuning where we are doing further enhancements for business expansion. Lot 1 is fully utilised while 60 per cent of the space in Lot 2 has been leased to Xmegami Manufacturing for recurring income.
"We will continue to reduce cost and look at ways to improve our net profit and revenue," Teo said.