Japanese retailer Nojima eyes SEA market, offers to buy COURTS Asia

A subsidiary of Japanese electrical appliance retail chain Nojima Corporation, Nojima Asia Pacific has offered to buy over COURTS Asia. According to investor documents seen by Marketing, Nojima has offered COURTS Asia "a voluntary conditional cash for all the issued and outstanding ordinary shares in the capital of COURTS Asia".

This comes as Nojima looks to enter the consumer appliance retail market in Southeast Asia, where it expects market growth. With the acquisition of COURTS Asia, Nojima looks to gain a strong foothold in Southeast Asia.  Nojima said that the combined business is “complementary” and has potential synergies available. This includes cross-selling to an enlarged customer base, economies of scale, improvement of productivity and cost efficiencies, as well as the sharing of knowledge such as know-how and best practices.

According to PricewaterhouseCoopers Corporate Finance, which is handling the offer on behalf of Nojima, if the offer is undertaken, Nojima "may undertake a strategic and operational review" of COURTS Asia with a view to realising synergies, economies of scale, cost efficiencies and growth potential. Nojima will also consider delisting COURTS Asia from the SGX-ST in the event it achieves the requisite acceptances for such delisting, in order to facilitate management and operational control and leverage over Nojima and its subsequent developments.

Meanwhile, COURTS Asia has closed one of its Indonesia megastores as it was not profitable and the company did not want to incur the high rental costs over the remaining lease term. This comes following COURTS Asia's subsidiary PT Courts Retail Indonesia's sale and purchase agreement with PT Garwita Sentra Utama in relation to the acquisition of a building located in West Java, Jakarta. The building called, KHI Building, has been acquired by PT Courts Retail Indonesia at approximately SG$9.36 million.

The acquisition is part of COURTS Asia's efforts to restructure its store format in Indonesia, in particular, the Megastore format which was said to be unprofitable. COURTS Asia said that the acquisition provides "more flexibility" on restructuring the COURTS KHI Megastore, including but not limited to optimising or right-sizing the existing store premises for better efficiency, and considering re-purposing the rest of the premises for other potential commercial uses.

The company also said in a document seen by Marketing, that the termination of the existing leases will help to reduce recurring rental and operating costs. in November last year, COURTS Asia reported a 6.4% year-on-year (y-o-y) dip in revenue to SG$165.1 million for the second quarter ended 30 September 2018. Revenue was SG$165.1 million in Q2 FY18/19, a decrease of 6.4% from GS$176.4 million in Q2 FY17/18. Compared to Q1 FY18/19, revenue was down by 8.2% in Q2 FY18/19.

This was mainly attributable to the decline in Singapore as well as Malaysia’s top line performance. Singapore’s revenue decline was due to lower earned service charge income and corporate sales, whilst Malaysia revenue came under pressure after the introduction of the Consumer Protection (Credit Sale) Regulations 2017.