Interviews with CEOs of S-Chips

[Musicwhiz]

This is the first of a series of interviews with S-Chips featured on Straits Times. The paper starts off with Yangzijiang. Can S-Chips improve their corporate governance and their standing in investors' eyes?

(Note: Admin may wish to also copy/paste these interviews into each separate company's threads, but my view is that all interviews should be consolidated here for ease of reference, thanks).

Jul 4, 2011
EYE ON... YANGZIJIANG SHIPBUILDING
S-chip firm aims to sail to top spot in China market
This is the first in a weekly series of interviews with the chief executives of S-chips. Yasmine Yahya takes a look at the business challenges these Singapore-listed Chinese companies face and what steps they are taking to improve their corporate governance.

SINGAPORE-LISTED Yangzijiang Shipbuilding may already be among the top five largest shipyards in China but it has ambitions to be No. 1.

In an exclusive interview with The Straits Times, Yangzijiang's executive chairman, Mr Ren Yuanlin, said the company is embarking on a three-pronged strategy towards this aim.

1) First, it plans to offer larger and more technologically complex vessel designs.

The firm recently became the first Chinese shipbuilder to design its own large 10,000 20-foot equivalent unit container ship.

Currently, building of these large vessels is dominated by Korean shipyards but Mr Ren said Yang-zijiang's design is already making waves.

'With our design, the container ship's fuel consumption is reduced by 40 per cent, carbon emissions are cut by 30 per cent and loading capacity is raised by 20 per cent,' he noted.

'Of course, the Korean yards are quite frightened by the competition so they have lowered their prices but it's a bit too late.'

Yangzijiang has won orders for this new vessel design from firms in Germany and the Marshall Islands to build up to 33 container ships.

2) Its second strategy is to double its shipbuilding capacity from four million deadweight tonnes, or dwt, within three years. This will come to fruition when the firm's new yards in three locations in Jiangsu province become fully operational in 2013.

3) Finally, the firm is diversifying into ship demolition and offshore construction services.

Yangzijiang recently acquired a 20 per cent stake in China's second largest shipbreaking firm for US$9 million (S$11 million) and has an option to raise it to a controlling stake.

It is also in the midst of exploring locations with investors from the Middle East and Europe to build an offshore marine base along the coastal lines of China, he said.

While Yangzijiang has one of the best gross profit margins among shipyards, there are still challenges. These margins may not be sustainable from 2013 onwards, Mr Ren said, as about half of the contractual value of its US$5.38 billion order book comes from pre-crisis orders which will be delivered in 2013.

However, he hopes the increase in shipbuilding capacity and Yangzijiang's expanded product offerings will enable the firm to maintain its earnings per share and perhaps its margins, he said.

Yet for all its plans and a profit surge of 63 per cent to 954.9 million yuan (S$181.5 million) in the first quarter of this year, the counter has fallen by almost 26 per cent since the start of the year, last closing at $1.46.

It has underperformed the FTSE ST China Index, which tracks the performance of all S-chips, or Singapore-listed Chinese firms.

This index has dropped 12.5 per cent since the start of the year, as investors have shunned S-chips in the wake of a spate of accounting scandals at several Chinese firms listed here and abroad.

While Mr Ren feels that Yangzijiang's share price has been affected by the continuing scepticism towards S-chips, he agrees it is good that such cases come to light.

'But the exchanges shouldn't just blame the companies. They should take stronger measures against the firm's auditors, sponsors and investment bankers who pushed for these firms to be listed in the first place,' he said.

For its part, at Yangzijiang, Mr Ren said it has instituted a culture of fiscal prudence and account-ability to keep any such scandals at bay.

Every Saturday at 8am, Mr Ren meets Yangzijiang's internal auditors, finance department and project managers to discuss the state of the company's finances.

The nine-member group also discusses ongoing investments the firm is involved in and future ones it is considering.

Members of the group then vote on whether they think Yangzijiang should proceed with the investments on the table. The firm's independent directors then give these potential investments a second round of review, said Mr Ren.

If any of these investments makes a loss, the members who voted for it will have to collectively fork out money from their own pockets to make up for 30 per cent of the loss, he added.

So if a project makes a $30 million loss, the staff who had voted for Yangzijiang to proceed with the project would have to collectively stump up $10 million.

The minutes of this meeting are given to the external auditors for record, he said.

Although Yangzijiang is no longer in the Straits Times Index (STI), and with no other S-chip in the benchmark index, Mr Ren is determined that Yang-zijiang be the first S-chip back in the index.

'I have delivered on my promises such as dividends and growth,' he said, adding, 'I hope Yang-zijiang will make a return to the STI as there is no S-chips representation now'.

yasminey@sph.com.sg

--------------------------------------------------------
RISING UP THE RANKS

MR REN Yuanlin, 58, started in shipbuilding as a welder in the 1970s at Yangzijiang's predecessor, then known as Jiangyin Shipbuilding Factory.

He worked his way up through the ranks, becoming a technician and later supervisor, and production and technical manager.

In 1997, as a factory manager in the midst of the Asian financial crisis, Mr Ren persuaded the government to privatise the shipyard.

He joined forces with the management and workers to raise about 20 million yuan (S$3.8 million) and brought in external investors to raise another 80 million yuan to buy out the firm. The Chinese government held on to a 30 per cent stake in Yangzijiang, but sold it off in 2002.

Yangzijiang became publicly listed on the Singapore Exchange in 2007, and is on the reserve list for The Straits Times Index list of component stocks. It sought a secondary listing in Taiwan last year.

According to Forbes magazine, Mr Ren is the 92nd-richest billionaire in China.

STRONGER MEASURES NEEDED

'But the exchanges shouldn't just blame the companies. They should take stronger measures against the firm's auditors, sponsors and investment bankers who pushed for these firms to be listed in the first place.'

Yangzijiang executive chairman Ren Yuanlin (right), on the spate of accounting scandals at several Chinese firms listed here and abroad.

[Nick]

Wow he forces staff to fork out losses ! I guess they get a slice of the profits too. I wonder will this inhibit risk taking ?

[yeokiwi]

Not sure whether he is trying to impress people...the liability of voting for a project is extremely high.
Assuming that 7 staffs voted for the investment and the investment incurred 30 million loss, the seven staffs would have to cough out 10 million(each staff forked out abt 1.5 mil)

That's a bloody big amount for a senior manager working in any industry.

[Big Toe]

The idea of taking responsibility over decisions made is a good one, but I do not know if their methodology is appropriate.
The best way is to have all senior execs to have their skin in the game by making it mandatory to have a significant(relative to wages) stake in the company.

[koh_52]

The idea of taking responsibility over decisions made is a good one, but I do not know if their methodology is appropriate.
The best way is to have all senior execs to have their skin in the game by making it mandatory to have a significant(relative to wages) stake in the company.

Another way is to make them cook and eat their own food...so they will always think for the company at the same times for themselves.

Many chinaman CEO, under-table and runaway, thereafter laughing all the way to the bank at the expense of investor money.

[Musicwhiz]

This is the second (2nd) interview with an S-Chip CEO. This time, it's Zhongmin Baihui, a retailer in China.

Jul 11, 2011
EYE ON ZHONGMIN BAIHUI
If anything goes wrong, we can't run away: Boss
Exec chairman spends about half his time here, unlike other S-chip heads

THINK of an S-chip boss and you would likely conjure up a China-based businessman with a strong accent who spends most of his time on the mainland - but there can be exceptions.

Enter Mr Lee Swee Keng, executive chairman of newly listed Zhongmin Baihui Retail Group.

He defies this mould completely: A Singaporean born and bred, sounds like a heartlander when he speaks Mandarin and Hokkien, and spends much of his time here.

'So investors can find us here. If anything goes wrong, we can't run away,' he said with a laugh, at the company's premises off Lavender Street.

Mr Lee was referring to the spate of high-profile accounting and corporate scandals affecting S-chips - China companies listed here - that have collectively eroded investor confidence.

He has steps in place to help maintain governance in Zhongmin Baihui, which runs a chain of department stores on the mainland.

Mr Lee spends about half of the work year in China to personally keep tabs on the operations, with the other half here.

Chief financial officer Jeffrey Kan also frequently travels to China to check the accounts. The company's books and accounts are organised and there is an established internal system for processes, said Mr Lee.

The firm was incorporated in Singapore in 2004. This means that unlike some S-chips which are registered overseas, it must have a registered office here. It is also subject to the Companies Act here.

While some S-chips have had problems with rogue legal representatives for their Chinese subsidiaries, Mr Lee ensures control as he is the legal representative for Zhongmin Baihui's units.

Under Chinese law, this representative has entensive authority to execute agreements, transfer assets and provide guarantees on the company's behalf.

The $7.3 million net proceeds from Zhongmin Baihui's initial public offering in January are still in Singapore and will be moved to China only when there is a need for investment funds. The company's eight-member board comprises equal numbers of Singapore and Chinese nationals.

One reason why Mr Lee has been able to crack the Chinese market is the help given by his relative, Mr Chen Kaitong. Mr Chen, Zhongmin Baihui's chief executive officer, is based in China. The duo, who are distant relatives, have been business partners since 1993 when Mr Lee visited his ancestral village in Fujian province.

Mr Chen, who was in the textile business, teamed up with Mr Lee to start a department store in the province that year. The business has grown steadily since.

Zhongmin Baihui owns and operates a large underground retail mall in Xiamen City, the commercial centre of Fujian. It also manages six other stores in China.

It says it can tap on the growth of the retail segment in China, where the government is encouraging consumer spending to drive the next lap of growth.

The firm's stores are in cities and near major transport hubs - a strategy similarly employed by larger retail and mall players to capitalise on the heavy flow of human traffic.

In five years, it aims to own or manage 300,000 sq m of shop space compared with 90,000 sq m now.

Zhongmin's share price dropped sharply in May after a media comment that its price appreciation since its listing 'defies logical explanation'. Amid a trying time for new listings, the counter is many times above its offer price, even after the fall.

The Business Times article added that the firm's losses widened from 6 million yuan (S$1.14 million) in 2009 to 9 million yuan last year.

It also raised the possibility that the stock price could have been manipulated as only a small number of shares were placed out.

But Zhongmin Baihui has dismissed the possibility. Director Low Chui Heng pointed to statistics compiled by the firm that showed it had 398 shareholders in May, from 264 in March.

'The number of shareholders has been growing,' he said. 'Here's the evidence that the stock has not been cornered.'

The company also says its losses last year were due to accounting policies, adding that its cashflow is positive.

Mr Lee said he will 'likely give out dividends, as a Singaporean', adding that the firm will look at its performance before deciding on the timing of the possible payouts.

jonkwok@sph.com.sg

-----------------------------------------------------------------

About the company

ZHONGMIN Baihui Retail Group listed on the Catalist board on Jan 20.

It was the year's first listing but fell below the radar of many investors because the initial public offering (IPO) sold shares only via placement, with no public tranche.

The firm sold 30 million shares at 30 cents each to raise $9 million. Net proceeds after deducting costs were about $7.3 million.

Amid an uncertain time for new listings, the counter has consistently stayed above its IPO price of 30 cents. It closed on Friday at $1.53, more than five times the IPO price. Its market capitalisation is now about $300 million.

The firm owns and operates a large underground mall in Xiamen, the commercial centre of Fujian province, and manages six stores under its brand in other parts of China.

These stores occupy about 90,000 sq m. The firm wants to grow to own or manage 300,000 sq m within five years.

By the end of the year, it will open a store near Nanjing's high-speed railway station, as well as another new store in Xiamen. The expansion will continue next year and beyond.

Chairman Lee Swee Keng holds over 25 per cent of the firm, while chief executive Chen Kaitong owns 24 per cent. About 100 employees from China are also shareholders. There were a total of 398 shareholders in May.

[Musicwhiz]

For this week's S-Chip, it is Pan Hong Property Group!

Jul 18, 2011
EYE ON PAN HONG PROPERTY GROUP
No regrets over listing in Singapore
This is a weekly series of interviews with the head honchos of Chinese companies listed here. Jonathan Kwok takes a look at the business challenges these companies face and the steps that they are taking to improve their corporate governance. HK valuations higher, but firm says its listing here helped it to grow
By Jonathan Kwok

DEVELOPER Pan Hong Property Group knows first-hand just how soft investor sentiment is in Singapore for China-focused firms.

The company is hiving off a part of its business to list in Hong Kong and facing an unusual situation: the Hong Kong unit is attracting higher valuations than the entire firm, which will continue to trade here.

Pan Hong builds houses and offices in China's Zhejiang and Jiangxi provinces. It is selling shares in the Jiangxi business to Hong Kong investors.

The mid-point of the indicative offer price range - HK$1.39 - will value the Jiangxi business at HK$1.668 billion (S$261 million).

The entire firm is valued at only $223 million here, based on last Friday's price of 43 cents. Yet the listed entity here will continue to hold most of the Jiangxi business after the Hong Kong listing, as well as the whole of the Zhejiang business.

'The valuations in Singapore are lower than in Hong Kong, lower by a lot,' said bemused Pan Hong executive chairman and founder Wong Lam Ping.

But he has 'no regrets listing in Singapore' in September 2006. He said that the firm is currently not considering moving its listing to Hong Kong.

'We grew up in Singapore, Singapore helped us to grow,' he said.

When the firm listed, its property portfolio had a combined site area of about 500,000 sq m. It is now up to five million sq m.

'Now we want to list (a unit) in Hong Kong for the next stage of growth,' said Mr Wong.

The firm has about 20 years of experience in property development in China. It is headquartered in Hong Kong, but listed here as Mr Wong's younger brother was a banker involved in the listing of one of the first S-chips, a term referring to Chinese companies listed in Singapore.

He suggested listing Pan Hong in Singapore and Mr Wong, a Hong Kong resident, took to the idea.

Mr Wong, who spoke to The Straits Times in Cantonese and Mandarin, highlighted the steps taken to uphold corporate governance.

He personally spends about 300 days a year in mainland China keeping tabs on the operations.

Any spending by the firm above 200,000 yuan (S$37,700) needs to be personally approved by him, while outlay above 100,000 yuan needs backing from the unit's managing director.

Twice a year, lawyers also remind management of legal requirements.

Mr Wong said: 'We follow the Hong Kong level of corporate governance and do everything properly. Management and executives all go by the book.'

Pan Hong uses its website, annual general meetings and a public and investor relations firm to engage Singapore investors, said Mr Wong.

He also said Pan Hong should not be called an S-chip.

'We're a Hong Kong company, as we have been for all these years, though we do business in China and list in Singapore.'

But he said the Singapore Exchange, Monetary Authority of Singapore and financial media could work to improve the lot of S-chips.

Chinese firms are facing low liquidity and valuations and difficulties in raising funds from the market, with investor confidence eroded by a spate of accounting and corporate scandals.

'It's not just the responsibility of the S-chips,' he said. 'The authorities... should spend money and effort promoting S-chips... They are a bridge from Singapore to China.'

Regulators also have to conduct tighter checks before letting firms list here, he said.

These measures, other than helping companies, could also increase the status of a listing in Singapore.

He estimates that a shell company on the SGX mainboard is worth $8 million, while one in Hong Kong will be worth HK$400 million. Firms are willing to pay much more for a Hong Kong listing as it helps achieve goals like fund-raising.

But Mr Wong maintained that listing in Singapore still brings many benefits to Chinese firms, such as helping them understand the international market and meet higher governance standards.

Funds raised here, though less than in Hong Kong, will also be useful.

jonkwok@sph.com.sg

---------------------------------------------------------

The man at the helm

MR WONG Lam Ping (above) founded Pan Hong Property Group in Hong Kong, where he is a resident.

The firm developed its first mainland China property project in the 1990s.

Pan Hong listed in Singapore in September 2006, one of the early China plays. The S-chip craze later gathered steam and reached its peak in 2007.

Mr Wong, who is in his 50s, was born in Guangdong province in China.

He became a Hong Kong resident when he was in his 20s.

He completed a postgraduate course in the economics of science and technology and management at the Zhejiang University of Technology in 2000.

He holds an honorary doctorate in business management from Armstrong University in the United States.

Mr Wong sits on the boards of some companies in China, including telecoms firm Jiangxi Ganxun Electronic Technology and Chaozhou Jinaote Sanitary Ware.

Mr Wong also participates in social affairs and community work. In 1986, he began to donate to the establishment of schools and hospitals in China. He has also given about 20 million yuan (S$3.8 million) towards supporting national construction projects in China.

[piggo]

These interviews really shows how hard it is to spot the wolf amongst the sheep

[d.o.g.]

These interviews really shows how hard it is to spot the wolf amongst the sheep

So far they have plucked the low-hanging fruit - those with strong ties to Singapore or Hong Kong are less likely to be crooks. Other "non-fraud" candidates they can feature include Yanlord Land (whose boss has become a citizen and is currently a VP of the Singapore Chinese Chamber of Commerce and Industry) and Sinomem (who got started in Singapore and has also become a citizen)

[Musicwhiz]

For this week, it is Xinren Aluminium.

Jul 25, 2011
EYE ON XINREN ALUMINUM HOLDINGS
Company dangles dividend lure
This is a weekly series of interviews with the head honchos of Chinese companies listed here. Jonathan Kwok looks at the business challenges these companies face and the steps they are taking to improve their corporate governance.

LIKE many other China-based companies, XinRen Aluminum Holdings is suffering from low valuations on the Singapore Exchange (SGX) but the company insists it has 'no regrets' coming here.

Singapore is a good, international stock market which is best for the firm in the long run, said executive chairman Zeng Chaoyi. But he added simply that 'the share price is not good enough' in Singapore.

Executive director Liang Hongbo said in Mandarin: 'We never regret things. We just do what we think is best, and now we hope we can raise our valuations.'

Despite the upbeat attitude, the firm, which produces aluminium metal for various industries, is trading significantly under its initial public offering (IPO) price when it listed last year.

XinRen initially sold its shares to investors for 55 cents a piece, but the counter closed last Friday at 38 cents - 31 per cent below the IPO price. This meant the market valued the firm at $417 million, down from $604 million during the IPO.

XinRen also pointed out that it is trading at lower valuations than its peers in Hong Kong. For instance, China Hongqiao Group, also an aluminium producer, last traded in Hong Kong at HK$6.65 - giving it a historical price-earnings ratio of about 6.6, more than XinRen's ratio of 4.9. Price-earnings ratio is a commonly used method to value shares - the higher the ratio, the stronger the share price.

XinRen thinks the low valuations are because investors here do not understand its business or the China market enough, whereas Hong Kong investors may have a clearer picture due to their proximity to the mainland.

The company operates an aluminium smelting plant in Hubei province, and another in Guizhou province. They have a combined annual production capacity of 275,000 tonnes. The firm also has a plant in Jiangsu province which makes aluminium sheets, coils and foils.

It says costs should be contained due to its long-term supply contracts with large suppliers of Chinese alumina, which is used to make aluminium. Yet, it expects to benefit from higher aluminium prices as industries in China and overseas use more of the metal.

'People don't understand, it's a sellers' market for aluminium,' said Mr Zeng. 'People pay on collection of the metal, and we don't extend credit.'

The firm could also be suffering from generally dampened sentiment for China stocks, after a spate of high-profile corporate and accounting scandals at these so-called 'S-chips'.

Also, investors may be cautious that XinRen is a family firm, with the board dominated by members of the same family. But observers add that no particular red flags have been raised over XinRen.

XinRen is led by Mr Zeng, 41, and his 28-year-old brother Chaolin, the chief executive. Their sister Mingliu, 39, is on the board, as is their father, Mr Zeng Xiaoqiao, a 65-year-old industry veteran who started the company in 2002.

The fifth and last executive director, Mr Liang, 35, is married to the founder's daughter, Ms Zeng Hong.

The three independent directors are not related to the family.

The firm has outlined some measures to help support the share price. For instance, it conducted share buybacks using internal funds last month. Top shareholders have also been increasing their stakes, of their own accord. In two separate trading sessions this month, Yan-sheng, an investment vehicle owned by the controlling family, snapped up three million shares on the open market.

Mr Zeng Chaoyi also wants to tell investors that XinRen 'will consider' paying out a maiden dividend this year, even though it is a relative newcomer to the local bourse.

He added that he and his executive directors visit Singapore once or twice every quarter to hold the board meeting and meet shareholders.

The firm also stressed that it has been in Singapore since 2006, using it as a base for its international exports and trade. In fact, Mr Zeng Chaoyi and Mr Liang are Singapore permanent residents.

It is this link to Singapore that prompted them to list here, said Mr Zeng.

XinRen has also attracted coverage from DBS Vickers analysts. The brokerage's last update was in May, when it said that XinRen's first-quarter results came below estimates due to higher costs, but it registered relatively stable margins compared to its peers.

DBS Vickers cut the price target on the stock from 76 cents to 73 cents, but maintained its 'buy' call due to XinRen's 'undemanding valuation and relatively stable profitability compared to China peers'.

jonkwok@sph.com.sg

-------------------------------------

All in the family

FAMILY ties figure strongly in the management team at XinRen Aluminum.

But its members are old hands in the business.

Founder Zeng Xiaoqiao has been in the aluminium business for more than 30 years. In 2005, he was named one of the 18 most influential players in the non-ferrous metal industry in China by China Non-ferrous Metals News.

Before starting XinRen, he had founded other aluminium firms he subsequently sold off.

Executive chairman Zeng Chaoyi, a son of the founder, has 17 years of experience in the business working for his father.

Sister Mingliu, an executive director, is as experienced as her brother.