The Smart Investor
    Facebook Instagram
    Monday, January 30
    Facebook Instagram LinkedIn
    The Smart Investor
    • Home
    • About
      • About Us
      • Careers
    • Smart Investing
      • Getting Started
      • Investing Strategy
      • Smart Analysis
      • Smart Reads
    • Special Free Reports!
    • As Featured on BT
    • Our Services
      • Our Services
      • Subscribe now!
    • Login
    • Cart
    The Smart Investor
    Home»Growth Stocks»3 Methods Companies Use to Grow Their Business
    Growth Stocks

    3 Methods Companies Use to Grow Their Business

    Royston YangBy Royston YangApril 7, 2021Updated:April 8, 20215 Mins Read
    Facebook Twitter LinkedIn Email WhatsApp
    Share
    Facebook Twitter LinkedIn Email WhatsApp

    Companies can grow their business in a number of ways.

    Some may decide to construct new factories to expand their capacity as demand remains strong for the products and services they offer.

    Others may collaborate with partners to enhance their supply chain or broaden their revenue streams.

    The presence of growth alone is not enough.

    It has to be sustainable as well.

    Growth may falter or stumble when the business faces challenges or competition.

    Therefore, it is worth your time to pay attention to the different strategies used by companies to grow their business.

    Here are three examples of companies that used different methods to grow their respective businesses.

    Olam International Ltd (SGX: O32)

    One method used by large companies involves “breaking up” the business into separate parts to unlock value for shareholders.

    This move had been announced by Olam International, a vertically integrated agri-business that supplies food, ingredients and fibre, back in January.

    The S$5.7 billion group has made significant headway in reorganising its business into two new operating groups, Olam Food Ingredients (OFI) and Olam Global Agri (OGA).

    OFI will be demerged from Olam through a dividend-in-specie.

    In layman terms, the group will be giving out shares of OFI to eligible shareholders of Olam).

    As for OGA, management is still exploring options to grow the business.

    This separation is expected to be completed by the end of this year.

    Other blue-chip companies such as CapitaLand Limited (SGX: C31) and Sembcorp Industries Ltd (SGX: U96) had also announced similar moves to unlock value for shareholders.

    CapitaLand intends to privatise its development arm and re-list its investment arm under a new entity called CapitaLand Investment Management.

    Sembcorp Industries had divested its stake in Sembcorp Marine Ltd (SGX: S51) through a demerger and recapitalisation exercise back in June last year.

    Mindchamps Preschool Ltd (SGX: CNE)

    Growth can also be achieved through partnerships, as Mindchamps intends to demonstrate.

    The group operates a range of premium preschools in Singapore, the Philippines, Myanmar and Australia. As of 31 December 2020, Mindchamps operated a total of 85 preschools.

    Intent on global expansion, the group’s master franchisee in Malaysia, Victoria Education Sdn Bhd, has formed a joint venture (JV) with Sunsuria Arena Sdn Bhd, a unit of Sunsuria Berhad (KLSE: 3743), to open a new preschool in Sunsuria City in Selangor, Malaysia.

    Victoria Education will hold 70% of the JV while Sunsuria Berhad will hold the remaining 30%.

    CEO David Chiem is excited about this partnership and the opportunity to expand the Mindchamps brand into Malaysia.

    Kimly Ltd (SGX: 1D0)

    The third method that companies use to grow their business is through acquisitions.

    Kimly is one of the largest traditional coffee shop operators in Singapore.

    The group operates and manages 83 food outlets and 137 food stalls around Singapore. Its portfolio of brands also includes Tonkichi (two outlets) and Rive Gauche Patisserie (eight outlets).

    On 1 April, Kimly announced that it will acquire a 60% stake in Klovex, a general solutions cleaning provider, for S$1 million.

    The group will pay for the acquisition using S$700,000 of cash and by issuing one million new shares at S$0.30 apiece.

    Klovex was incorporated in 2015 and has around 100 staff along with 40 cleaning contracts.

    Kimly’s management believes that the demand for cleanliness and hygiene will remain heightened even after the pandemic is over.

    Hence, it is making its first foray into the cleaning services business with this acquisition.

    By having a new division, the group will also be expanding its revenue streams instead of just relying on food and beverage alone.

    However, investors should note that Kimly has no expertise in cleaning services, implying that the acquisition may pose risks to the group in terms of managing this new division.

    Get Smart: Assess on a case-by-case basis

    The three examples above provide a flavour of how companies can grow their business and unlock value for shareholders.

    Though there may be similarities to what other companies have announced, investors need to assess each specific case on its own merits.

    Growth hinges on myriad factors such as the industry the company is in, the strength of its financial resources, its competitors, and also plain good luck.

    But if the process is done right, growth investors should start seeing healthy capital gains on their investments in the medium term.

    A secure, worry-free retirement may not be as far-fetched as you may believe. In our latest special FREE report, we cover eight stocks, consisting of a mix of blue-chips and mid-cap companies, that we believe can ride the recovery and offer investors a great mix of both growth and income. Click HERE to download the report, 8 Singapore Stocks for Your Retirement Portfolio, for FREE now!  

    Follow us on Facebook and Telegram for the latest investing news and analyses!

    Disclaimer: Royston Yang does not own shares in any of the companies mentioned.

    Yahoo
    Share. Facebook Twitter LinkedIn Email WhatsApp

    Related Posts

    Merger and Acquisition

    What Makes Some Serial Acquirers So Successful

    January 30, 2023
    Data Centre (Sunlight)

    5 Key Takeaways from Mapletree Industrial Trust’s Latest Business Update

    January 30, 2023
    Screen Showing Share Prices

    Get Smart: Why You Shouldn’t Focus on Share Prices Alone

    January 29, 2023
    Facebook Instagram LinkedIn Telegram
    • Careers
    • Disclaimer & Privacy Policy
    • Subscription Terms of Service
    © 2023 The Smart Investor. All Rights Reserved. The Smart Investor, thesmartinvestor.com.sg, an investment education website managed by The Investing Hustle Pte Ltd (Company Reg No. 201933459Z) is not licensed or otherwise regulated by the Monetary Authority of Singapore, and in particular, is not licensed or regulated to carry on business in providing any financial advisory service. Accordingly, any information provided on this site is meant purely for informational and investor educational purposes and should not be relied upon as financial advice. No information is presented with the intention to induce any reader to buy, sell, or hold a particular investment product or class of investment products. Rather, the information is presented for the purpose and intentions of educating readers on matters relating to financial literacy and investor education. Accordingly, any statement of opinion on this site is wholly generic and not tailored to take into account the personal needs and unique circumstances of any reader. The Smart Investor does not recommend any particular course of action in relation to any investment product or class of investment products. Readers are encouraged to exercise their own judgment and have regard to their own personal needs and circumstances before making any investment decision, and not rely on any statement of opinion that may be found on this site.

    Type above and press Enter to search. Press Esc to cancel.