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Saturday April 26, 2008

Expanding at red-hot pace

RH Media has ambitious growth plans

MEDIA agency RedHot Media's (RH Media) group managing director Cheong Chia Chieh still sits in the same office that he has occupied at the Nanyang Siang Pau building in Petaling Jaya since 1998.

RedHot Media, founded by Cheong, used to be a Nanyang Press Holdings subsidiary prior to a management buyout in 2005 and 2006.

“In a short time, we will move out (of the building) to build our own identity. This place is like an incubator because I was previously a Nanyang employee,” he tells BizWeek.

Some would say it is high time RH Media had its own stand-alone premises. After all, it has now grown to be a force to be reckoned, with several prominent investors and a market capitalisation valued at RM144mil.

Cheong: We target to acquire companies in Beijing and Shanghai

Cheong, who previously held several portfolios at the Nanyang Press group including strategic investment consultant, has been actively getting investors as well as expanding RH Media.

RH Media recently raised RM20mil via share placement, which it will use to expand its regional footprint.

Its China operation, which started in 2006 with an office in Guangzhou, is doing well. Its clientele includes Prudential, Diamond Water, and China Telecom unit HBOL.com.

“This year, with the newly raised fund, we target to acquire a company in Beijing and another in Shanghai,” Cheong says.

Asked why it would not just start its own offices there, he says that through acquisition, it will secure the required talent as well as a profit guarantee that will allow it to have “a better grip” on the next three years' growth.

RH Media is negotiating with the two China-based companies, and he is confident that the acquisition will be completed by year-end.

Asked whether it could be completed before the Beijing Olympics, he says the RH Media group will at least have an office in London by the 2012 London Olympics.

The group is also looking at acquiring a company in Vietnam, either in Ho Chi Minh City or Hanoi. However, Cheong says it does not have any target yet.

“After the Vietnam acquisition, our footprint will be in Beijing, Shanghai, Guangzhou, Ho Chi Minh and Kuala Lumpur. So we would have positioned our company in the “most sexy” and dynamic parts of Asia.”

In addition, RH Media has a strategic partner in South Korea. Goodmorning Shinhan Securities Co Ltd, which is part of South Korea's second largest financial group, has invested US$1mil for a 3.28% stake in RH Media.

“We're the only company in Malaysia that Shinhan has so far invested in, and I feel this is a good sign. It gives us strong confidence to move forward and to do future international fundraising,” he says.

“And Shinhan is coming in not only as a pure investor. It also comes in as our strategic partner. They will invite us to Seoul regularly to introduce us to other fund managers for investment in our company and to clients who seek to advertise in China.”

At present, Cheong owns about 20% in the RH Media group. Other shareholders include MIDF Amanah Ventures Sdn Bhd, Bank Pembangunan Equity (via Simfoni Maya Sdn Bhd), Mavcap Biotech Sdn Bhd, and former Sarawak state secretary Tan Sri Hamid Bugo.

To attract more investors and expand overseas, RH Media is promoting Malaysian management.

“The advantage in having a Malaysian company manage an operation is that our accounting and legal practices follow the international standards. Investors will have confidence as we can incorporate our corporate governance and harmonious multicultural management style,” he says.

The RH Media group is already making plans to go public and has engaged a merchant bank. “We will study where the most suitable place is to be listed for our international expansion,” Cheong says.

Last year RH Media's after-tax profit grew to about RM3mil from RM1.7mil in 2006. And this year it is forecasting stronger growth to RM8mil.

Due to its fast growth over three years, it was recently put on the Deloitte Technology Fast 500 Asia-Pacific's top 100 list. RH Media was one of three Malaysian companies on that list. In 2005 it was a winner at the MSC Malaysia Asia Pacific ICT Awards.

RH Media has quite a unique business model in the advertising industry. It allows advertisers to trade their products and services in exchange for its media space/airtime booking or marketing services. This means that advertisers can opt not to pay in cash.

“The model was still very greenfield in 2004 but now it's already proven. We have won a lot of big clients in Malaysia like Osim. Genting's advertising in China is also done by us,” Cheong says.

At present, the ratio between clients paying in cash and in kind is 50:50.

For those paying in kind, RH Media only takes clients involved in property, automotive products, insurance, electrical items, computers, telecom (prepaid cards), hospitality (rooms), and healthcare products.

Besides an online gallery, RH Media has 400 associate outlets to help clients sell their products in Malaysia. These partner outlets include telephone shops, beauty salons, computer shops, and electrical shops.

“We regularly have email correspondence with all the merchants and our members. We have about 600,000 RedHot members, of which 100,000 are credit card members,” he says.

The advantages of being a member include being able to pay for the products in instalments without interest.

“So far, we have got 1,000 clients, mostly SMIs and SMEs. Once they’ve tried us, they'll love us. Our client renewal rate is 90%,” Cheong says.

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