Entrepreneurship generally revolves starting new organizations or revitalizing mature organizations, particularly new businesses in response to identified opportunities. However, venturing into foreign ground carries a high risk as the company may not have the expertise to operate or coordinate. Dayen Environmental’s (Dayen) foray into the coal-mining business was put to a halt as problems kept emerging. Nonetheless, the company is trying to up the pieces all over again.

VENTURING INTO UNKNOWN LAND

On Demember 2007, Dayen signed a coal-mining rights agreement with PT Modal Investasi Mineral (MIM) for rights to mine up to 5m tonnes of coal in Kalimantan, Indonesia over 7 years for a fixed royalty payment of US$5 per tonne. In April 2008, Dayen tried to sell the coal mining rights to a China firm for US$25m but the deal hit a snag when MIM’s parent company PT ATPK Resources (ATPK) was barred from selling the rights to a third party.

On 5 June 2008, Dayen announced an agreement to secure a long term supply of coal to facilitate a potential deal with interested end-buyers but Dayen’s share price dived 33.6% once the trading halt was lifted on 9 June. It was a move by disgruntled investors who felt that the company was venturing too much into energy plays considering it is a small cap company without expertise in the area. Investors felt that Dayen should concentrate on the water treatment business due to its good track record and the lack of competitors in Singapore.

FORCED TO SELL

Dayen’s chairman John Lee was a victim of his own doing as he had been actively buying Dayen’s shares at prices between $0.635 - $0.725 since 15 May. When the share price of Dayen plunged, Lee had to force-sell his shares in Dayen due to margin calls at a huge loss. As a result, Lee’s shareholding in Dayen fell from 18.4% to 7.52%, making him the third largest shareholder instead of being the largest shareholder previously. In order to prevent further dilution of his stake in Dayen, Lee halted a share transfer between him and Diversified Energy And Resource Corporation and restored his stake to 11.28%.

Lee has taken on a month’s leave to attend to “personal matters”, leaving the company in the hands of acting chairman Stephen Huen. Huen acknowledged that the mining deal was hastily done and Dayen did not look deep into the regulatory-related issues involved. On a separate note, substantial shareholder and SIA chairman Stephen Lee sold 10m shares on 4 July, paring his stake to 3.78%. This amounted to a loss of confidence on Dayen by Stephen.

STAYING FOCUSED

Dayen has decided to get out of businesses not related to water treatment in a bid to re-focus on its core business. It may also sell its 7.28% stake in ATPK that was acquired by Lee but not known to Dayen’s board members at its briefing. It would be a move applauded by investors but the damage has been done. Dayen will have to work even harder than before in order to regain investor’s confidence. Whether Lee will return back to Dayen as chairman seems unanswered due to his “financial situation”. Even if Lee returns, will Dayen try to pull a rabbit out of the hat again and venture into unknown sectors? As the saying goes, it takes years to build confidence but it only needs a split second to shatter it.