As the pandemic drags on, some companies are compelled to move into radically new business areas.
For example, Chaswood Resources is in the process of transforming from an F&B operator to a lithium-ion battery maker; OIO Holdings transitioned from an engineering firm called DLF Holdings to a blockchain and staking business; while network engineering firm Ntegrator International, following a surprise takeover by a new controlling shareholder, diversified into the selling of luxury watches and digital advertising.
And as all these are happening, VCPlus, which used to be known as granite and gold miner Anchor Resources, is aiming to be a digital asset custodian and consultancy firm, now that it has a new controlling shareholder.
Granite
Anchor Resources went IPO in March 2016 but it had never reported a full-year profit. It had ended FY2015 and FY2020 with losses of RM44.17 million and RM17.97 million ($5.83 million) respectively (Anchor Resources has a December year-end). Unsurprisingly, its stock failed to attract a significant following. From its IPO price of 25 cents, it dropped to 14.5 cents on its debut trading day and plunged to an all-time low of 0.4 cents on March 12, 2020.
However, in Oct 2020, the company took out a $3.5 million loan carrying an interest of 10% a year. The loan was used to repay guaranteed non-convertible bonds of some $1.9 million issued to one Tan Ong Huat, for working capital as well as to settle directors’ and professional fees.
This $3.5 million loan, in turn, was settled in February with the issuance of new shares to the lenders at 0.149 cents each. The lenders, namely, Lim Beng Chew, Tang Yao Zhi, Tan Soo Kia and Lee Teck ended up with 56.87% ownership of the company with Lim holding the largest share at 28.93%.
As described on the company’s website, since 1989, Lim has been the CEO of Ariki, a distributor for the F&B industry, which has expanded into retail in China as well, and he is also a partner of Sevens Group, which is in property development and investments, and a co-founder of ECXX Global, a digital asset exchange although he had resigned from that role in February.
On Feb 10, Lim took on the role of executive director at Anchor Resources, and on April 29, the company was renamed as VCPlus, with a stated aim of moving into FinTech services, namely, a custodian and consultancy businesses for digital assets.
FinTech venture
In an interview with The Edge Singapore, VCPlus’ CEO Clarence Chong explains that the move from mining into FinTech was because of Lim’s optimism that this area has better prospects and growth.
When the company announced its move into FinTech, it quoted a global market that was already worth US$5.5 billion ($7.41 billion) in 2019 and seen to further expand at a CAGR of 23.58% between 2020 and 2025.
“Blockchain as a subset of FinTech is at an early stage and as for digital assets, we at VCPlus believe will go mainstream,” explains Chong.
“So digital assets will be an area that we’ll go in now and establish ourselves, while we still have the opportunity to do it,” adds Chong, who was in various securities and corporate finance roles before joining VCPlus. However, unlike most proponents of the decentralised finance or DeFi market, who espouse a deregulated approach, VCPlus “embraces the regulatory environment”, and believes that regulation is good for the sector, Chong says. “We think digital assets will increasingly go mainstream when there’s proper regulation in place.”
As such, VCPlus aims to acquire a MAS Capital Market Services licence, which will allow the company to provide custodial services regulated under Singapore’s Securities and Futures Act. Chong says this license is crucial, as what the company has observed from the traditional financial market is that there is a role for a “CDP or Central Depository equivalent”, which is the custodian for an investor’s Singapore shares.
“What we see currently lacking in the market that prohibits institutional investors to come in, is to have properly regulated service providers. If you look at the traditional capital market, we have safekeeping, we have proper trading and settlement, we have proper compliance,” says Chong.
He believes that these regulations will be mirrored around digital assets, and VCPlus aims to be the leading market player and provide institutional-grade services.
Chong points out that although centralized exchanges are currently commonly used for cryptocurrency trading, decentralised exchanges (DEXs) are growing in popularity. As a retail investor, it is easy to interact with decentralised finance (DeFi) platforms, such as decentralised exchanges to trade digital assets.
All one needs to do is to fund his or her own wallet with funds and trading can begin. This is more difficult to manage for institutional investors, who handle funds from a variety of sources and in amounts much larger than the average retail investor.
“You can still have a decentralised platform, but I think how regulated entities and institutional investors interact with those platforms will have to be through some sort of centralised and regulated service provider,” he notes, adding that VCPlus is aiming to be such a digital assets custodian, where institutional investors can use them to hold their digital assets, and still interact with these DeFi platforms or trade with different centralised digital asset exchanges.
Most recently, VCPlus announced on Nov 11 that it is the blockchain adviser for a US$100 million security token offering by Thailand-based media group T&B Media Global and its affiliate company, Tree Roots Entertainment. The offering aims to raise funds from Singapore to finance the production and development of five animated movies and one animated series, as well as the development of its live streaming platform. The tokens will be listed and traded on ECXX Global and the token holders will receive returns through participation in future profits and plans deriving from the intellectual property rights to the films and platform.
Custodian and consultancy
To kickstart this effort, VCPlus’ FinTech business consists of two arms, a custodian service and a consultancy arm.
Its custodian’s arm was started in May with a digital assets custodian joint venture with CapitalX Global, setting up a company named Custody Plus. This JV company will provide custodian services for digital assets.
Just a few months later, VCPlus then entered into an agreement with HydraX, a Singapore-headquartered Fintech group to license its digital asset custody technology solution for digital asset tokens and associated services.
The transaction will see VCPlus pay HydraX $600,000 as licensing fees which will be fulfilled in two tranches. The first tranche of $300,000 will be paid by issuing shares to HydraX while the remainder $300,000 can be settled by cash or shares, subject to certain conditions.
There are a few interesting names associated with HydraX. Its directors include Mah Bow Tan, who was Singapore’s national development minister until 2011 as well as his son Warren Mah. HydraX’s CEO is Daryl Low, who for a brief four months till November 2020 was an independent director of another SGX-listed company Axington.
Axington was in the news because its two controlling shareholders, Terence and Nelson Loh, together with their business partner Evangeline Shen, were co-leading the Bellagraph Nova (BN) Group which raised eyebrows with a GBP280 million bid for English Premier League club Newcastle United.
But a Reuters exclusive unveiled that the company doctored photos of former US President Barack Obama in marketing materials used to publicise the newly formed group and made claims that could not be verified, such as saying that HydraX was part of the BN Group.
In the Reuters report, the BN group claimed HydraX is one of the entities in its global empire and that it is implementing a trading system for the Singapore Exchange (SGX). However, this was swiftly denied by HydraX and SGX.
Chong is unfazed by Low’s past associations. He sees Low’s link to Axington as something done in Low’s “personal capacity” and not HydraX the company.
On VCPlus’ part, they partnered HydraX “purely based on the strength of their solution”, with Chong pointing out that one of HydraX’s companies conducts some MAS-regulated activity. This gave a lot of comfort to himself and the board, as this meant that the company must have done “certain due diligence before the MAS licence could be given”.
VCPlus then continued to accelerate its foray into the sector by announcing that it was buying over 100% of APEC Solutions on Sep 27 for a consideration of $5 million, a technology consultancy firm that bills itself as a “one-stop developer and integrator of technology solutions for companies.”
The company says in its release that APEC’s solutions include blockchain and FinTech solutions development, enterprise software solutions, e-commerce, and digital marketing services. In addition, APEC Solutions also advises companies on licensing and grant requirements and applications in Singapore.
The purpose of these acquisitions, Chong explains, is so that VCPlus does not need to spend time and resources in building its own capabilities from scratch, and can have a faster time to market.
He adds that the collaboration with VCPlus is to secure and tap onto the expertise, resources, and network of APEC Solutions to accelerate its business growth in the technology consulting space.
It will see VCPlus taking over APEC Solutions’ tech team, which Chong highlights will reduce the cost and time spent of progressively acquiring and training such talent.
VCPlus will also stand to gain from APEC Solutions’ expertise and experience in advising companies on licensing requirements and applications in Singapore, while also taking over its existing partnerships with blockchain solutions companies, which can further augment VCPlus’ capabilities for its blockchain business.
Legacy business
With such a radical shift, what will happen to the original mining business? Chong reveals that due to the Covid-19 pandemic, mining operations in Malaysia had to be halted and as such, the company is now evaluating its options for the legacy business.
Lim Chiau Woei, the previous controlling shareholder of Anchor Resources, remains on VCPlus’ board as the managing director.
“We are monitoring it, whether to restart, whether to go into an outsourcing arrangement or to go into other business arrangements,” says Chong.
For now, VCPlus will try and keep the operational costs of the mines low although Chong acknowledges that mining is not easy, especially in the ESG-conscious investing environment nowadays.
“If I have a business that still generates cash flows, then, of course, that will still be a business to grow, [but] unfortunately, the mining business has been halted for some time.”
On Nov 3, VCPlus announced that it was reducing the size of its mining concession area from about 300ha to 196ha to reduce the operation costs of maintaining the legacy business. This was done by returning mining concession rights to its quarry site in Bukit Chetai. With this, the company will not have any active mining sites, as its other site in Bukit Machang is not operational yet.
