A venture bigger than just making profits

Johor Corporation president and CEO Datuk Syed Mohamed Syed Ibrahim

WHEN Datuk Syed Mohamed Syed Ibrahim walked into Johor Corp (JCorp) as its president and chief executive in 2020, the group was financially stretched, and if things had continued the way they were, it might have reached a breaking point.

Asset rich but cash flow poor, the group was struggling to meet its massive debt obligations. It also didn’t have the ideal management structures and had ventured into too many and varied business segments.

Syed Mohamed, who had garnered experience in the corporate world from stints at various government-owned firms such as Iskandar Investment Bhd and Bandar Baru Enstek to also having worked in the Middle East acted quickly to fix things.

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He spearheaded a reinvention of the group that entailed some drastic changes on how it operated. Businesses were streamlined into four core segments. Divestments of non core segments began and are still ongoing.

He says he was given this mandate by the Board. “Like an artist, one needs a clean canvas to produce a masterpiece,” he quips.

In an interview with StarBizWeek, Syed Mohamed spent time on the history of the group and the reasons for its creation. More importantly, he spent time on how he is reshaping the group, after it had grown into an unmanageable size.

SBW: Please describe your journey so far in reshaping JCorp?

Syed Mohamed: It has been nothing short of exciting, challenging and fulfilling.

Before we start, let me take you through a brief background on JCorp’s history.

You may know that JCorp was first set up as Johor State Economic Development Corp (Johor SEDC) or Perbadanan Kemajuan Negeri Johor in 1968 by the state government of Johor.

It began with a loan of RM10mil from the state government to kick-start our venture in the plantation industry.

I am also not sure if you are aware, I served the then Johor SEDC circa the late 80s to early 90s. Coming back to JCorp at this stage of my career and journey, I must say, it’s like coming home.

JCorp has always been close to my heart no matter where I was in Malaysia or elsewhere pursuing my career.

In my eyes, there is no other entity like JCorp – committed to building businesses, unleashing opportunities and most importantly in the same breath, fulfilling the economic aspirations of the state of Johor.

The JCorp that I returned to, we have reset and reimagined to take it to the next level.

There is nothing better than to serve in a venture that is bigger than just making profits. But don’t get me wrong, profits are crucial, which is JCorp’s fundamental mandate and equally important, is our mission of Membina & Membela for the state. JCorp is clear that our sole purpose is to serve the state and its people.

Coming back to JCorp’s journey, over the past five decades, JCorp has gone through three major phases. Of course, each phase was tuned in to the prevailing economic climate at that juncture. JCorp has not only weathered many storms, but we have also evolved to thrive while overcoming challenges.

The first phase of JCorp’s evolution is themed JCorp 1.0 from our formation in 1968, where we were mandated to eradicate poverty and help shape businesses for Johor. Then, JCorp 2.0 in 1995 was aimed at accelerating economic growth. At that juncture, JCorp successfully achieved a net asset value of RM2.2bil, which was highly commendable during that period.

Today, we are in the current journey of JCorp 3.0. This reinvention that is taking place at JCorp is most critical if we are to punch above our peers not only locally but more importantly, regionally. We need to reset, reimagine, and most importantly future-proof the way we do business. You can imagine how tough it may be to turn a ship around, but it must be done.

Can you describe how JCorp looked before you came in versus what it is looking like now?

JCorp has evolved over the years and is a completely different entity today. JCorp today has a net asset value of RM8.7bil. When we began as Johor SEDC in 1968, we began with a RM10mil investment by the state. It has taken a lot of work to arrive at where we are today.

You could say we have gone through an overhaul. We were asset-rich but cash flow poor.

As you may be aware, JCorp was involved in a multitude of businesses prior to this. Before we embarked on our reinvention plan, we had 298 companies.

To be quite frank, we were all over the place and it was clear that we could not possibly continue with the same approach. We needed to be single-minded and we knew it had to be business unusual in order to build greater value for the state.

We now have four core businesses – agribusiness, wellness and healthcare, food and restaurants as well as real estate and infrastructure. Today, JCorp is leaner and more focused.With a leaner JCorp, we are now galvanised to provide greater focus and dedication to the sectors that we are in. More than that, we want to be nothing less than market leaders for the businesses that our investee companies are involved in.

Please share the reinvention plan JCorp has undertaken.

It is themed JCorp 3.0 reinvention. It has been two and a half years since it was formulated and executed. Kicking off our Business Sustainability Plan even before the pandemic, it was premised on a more expectant need to future-proof the business.

Pandemic or no pandemic, it was do or die for us. Our mindset was in crisis mode. If we didn’t pivot quickly enough, we would not have survived.

We had to reimagine, reset and rewire how things were. It was a drastic, massive change from how we were operating previously. It was to ensure our sustainability and not just to overcome the crisis we were handling at that time, but more importantly, to build value for the decades to come.

Our reinvention plan is framed by our 3-3-5 playbook. It ensures that we execute our reinvention plan in a structured and effective manner.

We have three objectives: to maximise shareholder returns, deliver on stakeholders’ expectations and future-proof the business.

The next three are our focus areas. First is to strengthen resilience to survive the pandemic. Second is making JCorp a knowledge-based and learning organisation, while the third focus area is to build a portfolio of champions.

The crux of it lies in our five-pronged strategy, which are corporate restructuring and investment management, financial restructuring, the future of work, ESG and digital transformation.

Digitalisation and corporate restructuring are core drivers in our journey. With our hybrid workforce module, we are able to tap into global talent. Our talent matrix is made up of permanent staff and our gig force. We are even able to hire a global workforce that is not necessarily based in Malaysia.

How do you balance between a focus on the bottom line versus the social obligations of JCorp. In the case of a loss-making entity, do you have the freedom to make a pure business decision and shut down that business?

There have been numerous achievements via the execution of JCorp 3.0 reinvention and this goes back to our mandate of Membina & Membela. We are a refreshed, energised and vibrant JCorp. We had to undertake an entire mindset shift to build an Investment Holding Corporation of global standards. That being said, we are very much a work in progress.

What is crucial is that we are already seeing tangible proof points, with the clearest progress being our financial performance. Operationally, we have been fortified despite the multifarious challenges of the pandemic, economic disruptions, inflation and supply chain constraints.

We are no longer firefighting despite the fact that we are coming out of the pandemic and going into economic uncertainty. We are now in a position of strength to capture emerging opportunities.

Beyond our profit obligations, we have a social obligation, which is enshrined in our mission of Membina & Membela. Via our investee companies, JCorp has created over 220,000 job opportunities, recorded more than RM90bil investments (both local and foreign) and established a strong presence in the healthcare, industrial, plantation and real estate sectors.

We are committed to ensure that each and one of our businesses must contribute to JCorp’s profitability and prospects.

If we have a business that has prospects and needs hand holding to go through a period of loss-making in order to achieve sustained earnings, we will nurture such businesses.

But let me be clear, all businesses must contribute to the group, if not, we have no reason to be involved in that business.

To answer your question point blank, yes, we have the freedom to make decisions that are business-driven.

JCorp used to be saddled with high debts. How did it restructure this?

Yes, unfortunately, when I joined, I was not comfortable with how overleveraged we were.

We saw to this via our financial restructuring. It made it possible for us to be prepared for headwinds, while tapping on viable opportunities amidst the very challenging VUCA (volatility, uncertainty, complexity, and ambiguity) environment that we see today.

We have already put in place measures to strengthen our liquidity while improving our fiscal obligations.

A series of debt consolidation exercises across the group are taking place to optimise our finance costs and unlock assets that will not bring us long-term yields.

At the same time, we are reviewing our capital structure at JCorp and our group of companies to ensure optimum debt and equity structures, which will result in a more optimum cost of capital.

Significant policy measures have been implemented to institutionalise the management of our finances in order to safeguard our investments.

For example, we have introduced the JCorp Investment Policy, which amongst other matters, governs total shareholder returns to JCorp in terms of dividends and capital appreciation.

Our efforts in restructuring our debts have borne fruit as reflected by the highly sought-after AAA rating granted to JCorp by RAM for our sukuk issuance.

The group’s financial results showed good progress, can you elaborate on the key driving factors for each core business?

It was no easy feat to get here. For our 2021 financial year, all four core businesses continued to contribute dividends to JCorp. This shows the strength of our investee companies despite the tough year that 2021 was. It also demonstrates the impact of the reinvention plan that we have put in place.

Agribusiness drove revenue due to the uptrend in crude palm oil and palm kernel prices. The segment recorded a revenue of RM1.65bil, a significant leap of 49% compared to FY20.

Wellness & Healthcare is picking up. There are higher inpatient and outpatient numbers. It was also due to the successful cost optimisation efforts across the segment. The segment achieved a 10% increase in revenue for 2021.

We are also very excited about the upcoming opening of Damansara Specialist Hospital 2 (DSH2). It aims to create a new benchmark in the healthcare sector in Malaysia by reinventing the future of healthcare as the first smart hospital in Malaysia.

The Real Estate & Infrastructure segment’s revenue was from sales of its property offerings as well as sales of industrial land. Due to market dynamics, the business saw a reduction in revenue contribution from 2020. This impact was circumvented by sales of industrial land at the Tanjung Langsat Industrial Complex, Muar Furniture Park and Sedenak Technology Park.

The Food & Restaurants segment also contributed significantly to the group. The higher revenue was thanks to the swift pivot to e-commerce, continuously refreshed menus as well as enhanced delivery channels. It just goes to show that digitalisation is a key differentiator and game-changer in staying ahead in the consumer segment.

As a key economic enabler for the state, how much do you give back to Johor?

We have contributed a total of RM123mil to the state government from 1989-2019. Beyond this, we have created a real impact via various ESG efforts. Particularly via Yayasan JCorp, we have contributed enormously via wealth distribution, job opportunities as well as assistance to the underserved. More than 220,000 jobs have been created. JCorp has curated and facilitated more than RM90bil worth of investments, both foreign and local. For example, more than 3,000 units of affordable homes delivered and more than 450 recipients have benefitted from the Dana Niaga micro-credit amounting to RM1.3mil.

This is just a snapshot of what we’ve done and we are confident that the profit motive for us has to be in sync with being a core economic enabler.

As Singapore’s neighbour, how is JCorp/Johor capitalising on this?

This is a very apt question. We have so much to leverage on and we can and we must. To do this we have our core inherent potential that we must build on. After all, we are a rich state, with a significant presence in logistics, agriculture, oil & gas, manufacturing (electronics & furniture), healthcare, education, leisure & entertainment as well as sports.

We must not allow these opportunities to pass us by. We have many things coming up for Johor – the RTS link, Johor Strategic Growth Plan 2050 are all key impetus for growth for the state. What’s crucial is we have a clear plan on how to ensure that we create the necessary structure to enhance the value creation that can be derived. We must take ownership of the projects taking place in the state and see it through.

Execution is critical in getting the right results. JCorp continues to play its role as a key enabler of Johor’s economic growth.

Among the catalytic projects that we drive for the state which will contribute to our profitability include the Ibrahim International Business District, which sets the stage for Johor to be a leader in urban redevelopment with a positive multiplier impact.

The Data Centre at STeP, meanwhile, captures the digitalisation aspirations for Johor as it is envisioned to be a catalyst in propelling regional growth and position Sedenak as the future data centre hub of Malaysia. The Pagoh Special Economic Zone will drive economic and industrial growth for Johor. Lastly, the Muar Furniture Park, which is at the tail-end of its construction, will be the furniture hub of the country.