2004 a fundamentally good year


  • Business
  • Thursday, 08 Jan 2004

WE round up our CEO Outlook 2004 series featuring five CEOs from a broad spectrum of business – property development, engineering, education, biotechnology and unit trusts. 

Datuk Patrick Teoh of Kumpulan Emas Bhd heads a diversified group with interests in property investment, education, water engineering and palm oil milling. 

Datuk Eddy Chen of Metro Kajang Bhd, which, as its name implies, is “king” of Kajang, being the leading property company in the town. 

Datuk Lee Peng Joo built up PJI Holdings, an electrical and mechanical specialist group with an impressive track record. 

Datuk David Yuet of INS Holdings Bhd is a self-made man who became a millionaire before turning 30 and is forging a promising biotech business, leveraging on the huge reservoir of talent in China. 

And Richard Chua Lai Huat of TA Unit Trust Management Bhd is one of the leading investment managers in town whose views on the economy and stock market are very much sought after by the media and investors alike. 

All five CEOs are dynamic and innovative in their own right, and it’s no surprise that the companies they are heading are among the “Companies To Watch”. 

StarBiz would like to thank all the CEOs who had participated in our sixth CEO Outlook series. The series has proved to be hugely popular both among the CEOs and among our readers. 

When it began six years ago, we had 28 CEOs responding to our survey; we had 52 for our 2003 Outlook. A record 70 participated in our CEO Outlook 2004. We hope they will have a happy and prosperous year ahead. 

 

RICHARD CHUA LAI HUATChief executive officerTA Unit Trust Management Bhd 

Outlook for the industry in 2004. 

For most companies, the worst is over. The remnants of the financial crisis have been put to rest. The focus is not on repairing balance sheets but on growing assets and products. 

Consumer-based retail banking will remain robust but corporate banking is likely to stage a recovery. This will be led by the robust private sector activities. There will be further development in the capital market, whether from the regulatory point of view or from the product point of view. 

With the gross domestic product (GDP) expected to exceed 5% this year, banks are going to do robust business. 

As a result of keen competition in the industry we see a lot of shake-ups and many local banks undergoing internal restructuring these few years to further improve their products and services. 

The productivity gap between local and foreign banks will narrow. Local banks are becoming more aggressive and paying more attention to improving consumer banking services. The middle market, or small- and medium-sized industries, will be the focus of most banks for corporate loans. 

Most banks will do well, although margins will be reduced due to competition and higher interest rates. Interest rates may trend up gradually though not substantially this year. 

Income from bond trading will be substantially reduced and those with big bond portfolios may have some problems liquidating their position, however innovative they may be. Otherwise, this sector will perform very well as the economy picks up speed. 

Bank mergers will still be a hot issue as liberalisation draws nearer. Be prepared for surprises. Interesting developments may be in store. 

Company focus this year. 

Last year we focused on building our investor base and our distributing channels. We channelled a lot of our effort into putting our processes in place. There is no point growing business if we cannot handle it well. If we are not careful, the whole system might choke. We may not get a second chance with our investors or business partners. 

We build our business on the confidence of our investors and business partners. This involves staffing, training and upgrading of our systems. These will still be our focus this year. The difference is, we will also be launching more funds. 

I believe the barrel is ready; this is the time to turn on the tap. Based on economic fundamentals, 2004 will be a good year. We see the global and domestic economies improving and, hopefully, there will be no major conflicts. So the issue here is market share, of which we expect a significant growth. We are also working with our business partners to provide comprehensive financial services. 

 

Will 2004 be better or worse compared with 2003? 

I am thankful to our clients, business partners, staff and friends that the company has been growing and improving financially every year for the past four years. Despite the Iraq and US conflict and SARS epidemic last year, we have had a record year (9 months YTD) and we expect another 100% growth in sales for the whole year. 

Barring any unforeseen circumstances and with the world economy recovering, we expect another good year in 2004. It is hard to project numbers at this early stage but, certainly, with a few new funds and with the support of our business partners, coupled with our strong fund performance, we should be rolling in 2004. 

For those that do not know us, they will be hearing a lot from us in this year. Perhaps they should start by checking our performance for the last five years and be pleasantly surprised! 

My confidence is built on what we have delivered year after year, without compromise. All successful companies in the world are built on their products and services. Branding and connection are not enough. You still need to deliver! 

 

Is China an important factor in the management of your operations? 

China has no direct impact on our business. China's economy has an impact on Malaysia's economy and will therefore affect local companies. Some companies will benefit by tapping into the Chinese market. 

We look for companies that can exploit the Chinese market and we invest in them. In a nutshell, a vibrant Chinese economy augurs well for its neighbours and their investors. 

Datuk LEE PENG JOOGroup managing director/chief executive officerPJI Holdings Bhd 

Prospects for your sector this year. 

PJI Holdings is among the leading integrated mechanical and electrical (M&E) engineering specialists in the country with a strong record across a broad spectrum of industries, including infrastructure, energy, petrochemicals, telecommunications and construction. 

Underpinned by increased economic activities, we believe that prospects for the M&E engineering sector remain robust, primarily in the area of water supply and power and telecommunications infrastructure projects. 

The government’s commitment to social infrastructure development, such as in the construction of new universities, schools and hospitals, also augurs well for M&E contractors. 

The government has outlined numerous incentives for the construction/housing industry during the past two/three years. Has these incentives given a boost to your company’s operations and revenue? 

The government has been very supportive of the construction and housing industry in recent years and this has translated into sustained activities in these sectors, providing us contract opportunities in the areas of the construction of universities and hospitals, as well as commercial buildings. 

For example, we have recently been awarded a RM420mil contract to complete the main building works and retail podium for the proposed Plaza Rakyat mixed development project, and we are also involved in a consortium that was recently awarded contracts from Perbadanan Putrajaya for the proposed Alam Warisan project at Precinct 5, where the contract value of our M&E engineering works is about RM57mil. 

Company focus this year. 

Our focus is to continue to strengthen our position as the leading integrated provider of M&E engineering services recognised for service excellence, quality, total customer satisfaction and superior returns to shareholders. 

We will continue in our pursuit of contract opportunities in the areas of water supply, power and telecommunications infrastructure, maintenance and facility services and social infrastructure projects. 

We will also continue with our focus on exporting our expertise to overseas markets such as Bangladesh, the Middle East and Sudan, and to pursue investments in concession-type projects – such as our water supply concessions in China – to improve on our recurrent income base. 

Will 2004 be better or worse compared with 2003. 

Last year was indeed challenging for all, with the SARS outbreak and war in Iraq weighing down heavily on economic sentiments domestically and internationally. 

We encountered delays in project awards, while our operating margins were also affected by higher material costs. Going forward into 2004 and 2005, we are confident of performing better on the back of a recovery in our operating margins, more significant contribution from our China water concessions, the crystallisation of the various joint ventures and proposals we are pursuing, and positive contract flow in general to fuel an expansion in our order book. Including contracts recently secured, the unbilled portion of our order book currently stands at RM710mil, sufficient to keep us busy for the next three years. 

Is China an important factor in the management of your operations? 

Through our 30%-owned DKLS-PJI Venture Capital, we were the first listed Malaysian company to be awarded a water supply concession in China. 

Currently, this joint-venture company has two separate water supply concessions in China under its belt, and the concessions encompass the construction and refurbishment of water treatment plants, operation and maintenance services and the supply of treated water to the respective areas. 

We believe China offers abundant opportunities for us.  

Having established a record and gained valuable experience in terms of local market conditions and the business environment in China, we will continue to evaluate and pursue other investments to add to the success of our existing concessions in the country. 

DATUK PATRICK TEOHExecutive chairmanKumpulan Emas Bhd 

Prospects and challenges for your sector/industry in 2004. 

Our group’s core activities are in education, property investment, water engineering (tap water and waste water), palm oil milling, etc. 

The education industry will be increasingly competitive in Malaysia, particularly with the addition of a few 'university colleges' recently. Over-capacity and over-regulation are major challenges for the industry but overseas prospects remain good for those that dare to venture out. 

Water industry, be it municipal or wastewater, will be even better this year as the government is expected to increase spending, especially on wastewater treatment. Competition is keen but prospects are good, not only in Malaysia but also in regional market such as India and China. 

The property industry is expected to be flat this year due to substantial overhang of excess capacity, especially in the commercial sector, although landed property and residential units in good location still sell. We do not see major improvement in this sector in the near term. 

Focus of your company/group this year. 

Our focus for 2004 will be on building up our core businesses, which are the 'pillars of strength' of the group, even in the worst of times. 

In the water sector, Salcon Bhd will continue to build on the strength of the Malaysian operations, which has been the main source of our earnings. In the foreseeable future, however, greater emphasis will be placed on our overseas operations, especially in the Indian sub-continent, Indochina and greater China areas. 

In the education sector, our main focus will be on upgrading the image of SEG International Bhd to that befitting its leading position as the largest private education provider in Malaysia. Major campuses will be built in the Klang Valley and in east Malaysia. 

There will also be a major thrust into the Indonesian and China markets, although we already have many Indonesian and Chinese students. 

Do you expect your company/group to do better or worse in 2004, compared with 2003? Why? 

As a group, we expect to do better in 2004 compared with 2003, barring any unforeseen circumstances that might derail economic recovery. 

The main reason, as explained above, is the better economic outlook not only for Malaysia but also for the world. In fact, we have undergone some internal rationalisation earlier to prepare for this upturn. 

Moreover, the sectors that we are involved in, such as education, water and palm oil industry are all businesses in which Malaysia has 'competitive advantages' and we are able to compete in the global market. 

In addition, our palm oil business in India is maturing nicely and as the leading palm oil player there, we are well-placed to reap lucrative returns from the project, which is not affected by import quotas or tariffs imposed by India. 

Is China an important factor in the management of your operations? 

China is such a huge market that we believe any serious international player will not be able to ignore it. Although the market is full of pitfalls, the opportunities are also plentiful for the discerning entrepreneur. 

We have already made major inroads into China. Salcon has successfully clinched five water supply contracts in one coastal Chinese province. Currently, we are evaluating a few more in other provinces to identify those that meet our returns criteria. 

SEG has a fair share of Chinese students but we believe we have just touched the tip of the iceberg. However, we are also planning to set up operations in major Chinese cities. The numbers can be mind boggling due to the size of the population, increasing affluence and emphasis on education by Chinese parents. 

As such, China will be a major powerhouse for our future growth. 

 

DATUK DAVID YEAT SEW CHUONGGroup chief executive officerINS Holdings Bhd 

Focus of your company in 2004

Our attention in the first half will be our listing on Mesdaq. Our entry is essential as the speed of technology changes in biotechnology is tremendous. Malaysia needs to be a major player in this relatively new field and we cannot afford to lose more time. This area also requires huge commitment of funds. 

For example, not many people are aware that we have successfully used palm oil fibre as a base to make diet products under our 'So Easy' Slim Care Nutri-Scheme. This is a boost for Malaysia's palm oil sector, as in the past the trunks were disposed of but we have added value to it. 

A listed status will give a measure of confidence in our venture and ensure a high level of commitment on our part. 

We will continue to strengthen and expand our current group of four factories and well-established direct selling network. INS Holdings has a number of subsidiaries that manufacture items ranging from food and beverages, health products, functional foods, traditional Chinese medicine to bio fertilizers. 

Is China an important factor in the management of your operations?  

Certainly! Over the past three years, we have turned our sights on China as a potential market and source of technology. 

One of our group’s BioValley initiatives is the joint venture between the group and Zhen AO Bioengineering Co Ltd, a biotech company in Dalian, China, which makes ribonucleic acid extracted from soya bean. 

INS and this Chinese company have pledged to invest RM15mil in total to the BioValley plant. In July, INS signed an agreement with the same company to increase the level of technological exchange but also to cross market each other’s products in China and Malaysia. The agreement was among three documents signed during Datuk Seri Abdullah Ahmad Badawi’s visit to China recently. 

INS Holdings also has signed an agreement with Beijing Leili Agrochemistry Co Ltd, another Chinese biotech company, to develop natural agro-nutrients for the Asean market. Leili will also assist INS Holdings to set up a franchise company in the Chinese market. 

INS Holdings has also signed a memorandum of understanding with the College of Food Science & Nutritional Engineering of the China Agricultural University to set up an International Incubational Centre on joint R&D efforts in functional food. The R&D collaboration with China Agricultural University will be the think-tank in the BioValley project. 

Works on the laboratories have started. It is a win-win situation as INS Holdings has the marketing skills while our Chinese partners have the technological know-how. 

These agreements also give us a foothold in the vast Chinese market. 

In November, INS Holdings had also signed a memorandum of understanding with two China corporate venture partners to jointly develop bio-pharmaceuticals vaccines and traditional Chinese medicine that is halal in order to cater to the Muslim market. 

 

DATUK EDDY CHEN LOK LOIDeputy managing directorMetro Kajang Holdings Bhd 

Prospects for your sector/industry this year. 

The property industry should see stable growth. The demand for affordable, well-located properties is still strong. The Klang Valley should continue to see strong growth. The population growth rate is high. The 2.3% to 2.7% population growth over the last 20 years means a lot of people will need housing in the years to come. 

This can be translated into strong demand. However, this demand is not homogeneous throughout the country. This is because population growth is not the same for each state or region: for example, population growth in Selangor is about 8.5% while in Perak it is close to zero. 

Building at the right place is all important. Even in Selangor demand is concentrated in the Klang Valley. Nonetheless, some spillover demand helped some projects to be viable in Negri Sembilan. 

In the other states, Johor continues to see pockets of good demand. Johor developers have come to terms that they cannot rely on Singaporeans to boost the industry, which over the years have been building the domestic demand. Similarly, major towns in Johor, Malacca, Pahang, Kedah continue to sustain pockets of viable residential properties development. 

Strong demand on Penang island continues, due to scarcity of land. In mainland Penang, some demand is seen around major towns like Prai, Butterworth and Bukit Mertajam. 

Commercial development continues to be slow. This is mainly concentrated in building of shop-offices. Strategic pockets of shop-office development saw some good demand. Prices have reached pre-1997 level. Shop offices of 3- to 4-stories are selling for over RM1mil to RM2mil in Petaling Jaya and other major towns in Selangor. 

Retail developments, too, show good prospects – again in selected locations in the Klang Valley. Mega Mall, One Utama, Ikea, Tesco, Jaya Jusco, just to name a few, have invested in expansion plans. Traffic volume to these shopping centres has not diminished despite new retail spaces being erected by competitors. 

Other sub-sectors of the property industry continue to show lacklustre development e.g. the industrial development will continue to see slow growth – what with China continuing to attract most of the foreign direct investment in the region. 

Have the incentives provided to the construction/housing industry given a boost to your company’s operations and revenue? 

The government stimulus package for the housing industry has certainly worked. Together with low interest rates, the property industry has prospered through these incentives. 

Metro Kajang has certainly gained from the incentives. It reported record pre-tax profit of RM57.1mil for financial year ended Sept 30, 2003. 

Metro Kajang has seen steady profit increments since 1998, when the stimulus package for the industry was announced. Metro Kajang is one of few property companies that reaped maximum benefit from the stimulus package for two reasons: one, it built in the right location; all its properties developments are in the Klang Valley; and two, its houses are all within the affordable range. 

Metro Kajang can continue to benefit from the stimulus package as it continues to launch residential units below the RM180,000 price tag through to May 31, 2004. 

Focus of your company/group this year. 

Metro Kajang's core business is in real estate. It will continue to focus on this sector particularly the affordable housing sector. However, it will not hesitate to build commercial properties for sale and rental in its pockets of strategically located land-bank. 

Well-located commercial properties continue to command good sales and rental value in and around the Klang Valley where most of Metro Kajang's land are located. 

Do you expect your company /group to do better or worse in 2004, compared with 2003? 

Baring any unforeseen circumstances, Metro Kajang is confident of achieving satisfactory results for the financial year ending Sept 30, 2004. Revenues from sales locked in over the last one to two years are expected to come onstream in 2004. 

New launches and sales can also be expected to contribute to its 2004 revenue. New launches in the affordable range of its residential development projects in the Damansara areas are expected to be well received. This will also contribute to the 2004 revenue. 

 

CEO Outlook 2004 

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