For the longest time, companies venturing into businesses unrelated to their core competencies have been scaring investors away.

That is because they either don't understand why the company is diversifying into the new segment, or are worried the unfamiliar territory will weigh it down.

Investors really should not be too worried because these companies are just trying to make more money from these forays.

Take Popular Holdings, for example.

When it first announced investing in property development One Robin, investors frowned upon the news and a knee-jerk selling of Popular's shares took place.

This was probably further exacerbated by how Popular's core publishing business was facing margin pressures.

Investors wondered why the company would jump into property when it should be concentrating on its core business.

But Popular had its own reasons.

First, it wanted to park a sum of money somewhere before taking it out a few years later.

Second, the property market was riding high and the company would be able to make some money from investing that particular sum in a project.

In essence, the company has found a way to make more money while waiting to pump money into a planned investment a few years later.

The same goes for Time Watch Investments.

Why would a watch-maker and retailer want to buy a shopping complex in Zhengzhou for S$20 mln?

The company wants to brand the shopping centre under its name and to house its various brands in it.

It can also make more money through commissions collected from the other retail outlets operating in it.

Of course, investors should be extremely concerned if a company like UTAC wanted to start selling canned food.

Otherwise, companies should be trusted to make the right decisions that would benefit it and its shareholders.

Serene Lim

Labels: investment, property