Just as they say to buy when everyone’s selling and to sell when everyone’s buying, so you should invest and expand when the economy contracts. The proviso, of course, is that your fundamentals must be solid, reports JOY LEE.

WHILE most businesses prefer to scale back in a soft market, PKT Logistics Group CEO Datuk Michael Tio says it could, in fact, be a good time for companies with deep pockets and strong reserves to expand.

He argues that stronger companies should take the opportunity to invest during a slowdown as this would be a time when weaker companies are more open to selling out at a lower price.

“More and more people are talking about selling. So it’s a good time for companies that want to expand and can afford to do so to look at weaker companies. When the market is high and doing good, you would have to pay a higher price, so that would not be a good time to invest,” Tio explains.

And expansion is not only about acquiring a competitor, he points out.

Companies that need to invest in infrastructure or are looking to upgrade their facilities may also want to leverage on the lower pricing from the lower demand as the majority cut back on spending.

Tio made just such a move during the 2008 market crash. While most companies were conserving whatever resources they had, PKT made a bold move and spent to expand its facility.

The logistics provider embarked on the construction of its 380,000sq ft regional distribution centre known as “The Waves” in 2008.

“We invested in The Waves instead of slowing down. There was not a lot of construction work during that time. Because of the lack of construction demand, we were able to get a better pricing, and this reduced the cost of construction for us,” reveals Tio.

The distribution centre was completed at the end of October 2010. By then, the market had improved and, Tio notes, the property was revalued to a higher price, increasing the gains from The Waves even more.

Likewise, Tio pointed out, the company invested in developing other segments of its business while PKT was going through challenging times when the 1997 financial crisis hit. This has helped to increase its margins.

Tio’s moves have certainly helped PKT grow during tough market conditions and put the company on stronger footing to grow even stronger in better times.

He urges SMEs, particularly those with fundamentally strong capability and capacity, to take advantage of the current economic condition to build the missing pieces and infrastructure in their business.

“If your company has strong fundamentals, invest during the recession. Buy over companies that are selling or improve your facilities. It is really a good time to expand,” Tio concludes.