All Posts by administrator

Softbank CEO Masayoshi Son’s Decision Making Framework

Masayoshi Son says he first came up with this framework when he was 26 years old. And the 30 years of success is the proof of the validity of it. He continues to revise and improve on it. It is an lifetime pursue.

The formulation of his framework is base upon:

  1. Lanchester’s Law
  2. Sun Tzu’s Art of War
  3. Masayoshi Son’s original thinking

The framework has five pyramid levels, from top to bottom: Ideology, Vision, Strategy, Leader’s Competence, Tactics. Each level has then five attributes:

  • Ideology: Road, Sky, Terrain, Leader, Systematisation
  • Vision: Summit, Information, Strategy, Seven, Battle
  • Strategy: One, Wave, Offensive, Defensive, Group
  • Leader’s Competence: Knowledge, Trust, Benevolence, Courage, Strictness
  • Tactics: Wind, Woods, Fire, Mountain, Sea

Son says all his decisions can based on those 25 attributes.

Ideology

Road: Use information revolution to make people happy

This is Softbank’s universal mission. Everyone in the company has heard of it and is familiar with it. It was mentioned several times also during the 30 years plan talk.

Sky: The information Revolution

The sky is for timing. There are unique things to be alive under this sky at this particular time. He gives few example of some of the unique things happening during this time:

  • Information Big Bang
  • Microprocessors
  • Internet

No matter how great of a person you are, if you were born during the wrong timing, your opportunities are limited. The present people are extremely lucky to be living at this time and there is an unique and huge opportunity. Son reminds of the previous revolutions:

  • Agricultural Revolution
  • Industrial Revolution
  • Information Revolution

The Information revolution is likely to be by far the biggest one. They got so lucky to be here during this timing. The opportunity is here and it should be taken advantage of.

Terrain: Terrain advantage: the epicenter of the Internet is Asia.

  • In the past, the United States had 50% of the world’s internet,
  • In 2015, Asia will have 50% of world’s internet users.

In the past, you had to be in the US and had to speak English, simply because the users were there. All big internet companies have historically come out of the US.

But the times have changed, the internet is shifting to Asia. Softbank Group has already been making a presence in Asia for a decade, notably by making investments in China such as Alibaba, Renren, etc…

With both this godsend opportunity from the Sky(Timing), and Terrain advantage, there is now no reason why Softbank should not take full advantage of the opportunity.

Leader: In order to succeed, you need to gather great leaders.

Of course the CEO must be a great leader, but he/she must also have at least 10 leaders below him/her. Nothing can be done alone, Softbank needs to accumulate great leaders. Softbank, by looking and picking great ventures to invest in Asia, is also gathering another great leader to join the Softbank family.

*Son actually uses the word General, but I’m translating it as Leader.

Systematisation: Systematisation is needed for continuous innovation

With willpower or luck, you may be able to get one win. But you cannot expect that to continue forever.

In order to keep winning and keep generating innovation, you need to create a system where it will make it happen again and again. Some examples of the systems Softbank has already implemented include:

  • Accounting is divided by departments
  • Introduction of new business models

Without the systematisation, it will impossible to execute at a scale.

Vision

Summit: The scenery you see when you have climbed to the top of the mountain

This is vision. The leader must be able to vision that scenery at the top of the mountain. He must be able to choose which mountain to climb. By choosing the correct mountain, you have already won 50% of life’s battle. You must have a great convinction that the mountain is correct be able to have a good idea of what the scenery on the top of that mountain looks like before you climb it. The leaders without a vision are the worst ones of all.

The vision does not come out in a day or two, you must think about it everyday. The vision for his 30 year plan took a whole 1 year of intensive thinking, and input from many many people.

Information: research

“He did research on 40 businesses, and in the end, the pile of papers he had accumulated were 1 meter in hight”

When son graduated from university and came back to Japan, he wanted to start an enterprise. But it took him 1.5 years before he did it. During this period, he was researching and accumulating information. He had came up with 40 businesses. He would create a very thoughtful plan for one business, create the business plan, financials, competitor’s analysis, plan for 10 years, expected revenue etc. And he would think that his was the best business in the world. 2-3 weeks later, he would come up with another business, a business better than the one before. He would then redo the research and create the new plan. He repeated this 40 times, each time with a business better than the one before. And the last one of his business plans turned out into Softbank. He emphasizes the importance of information accumulations (research).

Strategy: Strategy is basically the implementation for the vision.

After the reasearch you may have 40 choices, strategy is when you decide to go with one of them and never look back. Strategy takes a vision into reality.

Seven: The on who fights a battle with 50% winning chance is a fool. The one who fights a battle with 90% winning chance has made his move too late.

The best generals only fight battles they know they are going to win. Son is regarded as an agressive risk-taker but in reality he is very careful. He never risks more than 30% of the business. Even if the business is to fail, he can close it down and the core business can still go on. You must be sure that your math is right.

The leader must close down, make a retreat when that must be done. It is one of the hardest things to do. This is even harder for the next generation of leadership because they will be critisized to be not as good as the previous generation. Needs extreme courage to close a business down, you’ll be criticised by all points of view. When a general has lost 30% of his troops, he should immedialy call for retreat, any other decision is foolish. Not understanding this concept will bring Softbank into ruins.

Fight: The are things that can be seen during the fight

Words are cheap. Execution is hard. There are always competitors. Things change during the fight. No matter how good is the vision, strategy or research, it is all useless if you don’t come down and do the actual execution. He mentions that all companies fought their way into their current position: Toyota, Honda, Ford, Rockefeller, Billl Gates, Steve Jobs. Vision = Execution. Execution = Vision. Why one must fight? In order to make the vision come true.

Strategy

One: Must be by far the number one

Must own the specific market. You only make long-term profits if own the market and are far ahead of number two. If you are ahead by only a littile, it will probably me only a matter of time before you lose all profits. This is even more true in the technology space. Only if you are number one, you will be able to build a platform and define the de facto standard. Examples of platform that he mentions are: Microsoft’s Windows, Intel’s CPU, Google, Amazon, Yahoo.

The company must have a #1 culture. You must always strive to become number one. A culture that starts to become comfortable of not being number one is a very negative culture, it’s very bad. Son says he has always been number one since elementary school. He just can’t sleep if he is not number one.

Wave: Do not go against wave

Don’t go agains the wave. Get the direction right. Which OS should you choose? Of course the one who will become most used. Do not choose a niche.

An enterpreneurs who succeeds in a niche is not a successful entrepreneur. The successful entrepreneur succeeds in the mainstream market, that might as well be an othodox way. Softbank does not invest on niche markets, it invests on markets that will become big in the future. There is no meaning in winning a small market. If you choose to pursue a niche market because you are afraid to fight in the main market, then you are a loser.

Offensive

  • Sales
  • Technology
  • M&A
  • Development of new businesses
  • etc. etc.

Must be good in multiple skills.

Defensive

  • Cash Flow
  • Cost reductions
  • Investment Relations
  • Close down a business
  • Compliance
  • Auditing
  • Media Reputation
  • etc. etc.

Many ventures today die because of financing. Softbank has a commitment to become zero debt financing in 4 years.

Group: Synergy 5000 companies.

Softbank Group will be compromised of 5000 companies. It will be a multi-brand, multi-business model. This may not be necessary if you want to survive for the next 30 years, but it is must have to survive for the next 300 years. Companies like Microsoft and Intel are struggling today as they have only a single brand.

Leader’s Competence

Knowledge

  • Critical Thinking
  • Global negotation
  • Presentation skills
  • Technology
  • Finance
  • Analytical Skills
  • etc etc.

The leader must posses multiple skills, and have a good banance of skills. Must be very proficient in one skill so that he can make most out of the specialistz. The leader does not rely on specilists, he/she makes best use of them.

Trust: Mutual voluntary cooperation

Trust and be trusted. Partnerships. If you lose trust, others will not work with you.

Benevolence: For the happiness of people

Recall the vision. For the happiness of people.

Courage

Courage to fight against a big opponent. Courage to shut down a business.

Strictness

Strict with self. Strict with others when necessary. If you truly believe in the vision and the good for everyone, you must become a demon at certain times.

Tactics

Son skips the following are they are already well covered in Sun’s Art of War and other literature. however Sea is a original from Son.

Sea

The fight has ended only when everything has been engulfed and remains only complete silence and peace. As the sea.

-ASIAN ENTREPRENEUR

Like the article or found it helpful ? Share it !

Do you eager to know more about The Red Dot Theory, how to make your company IPO compliance or build your company’s financial road map?  Visit The Miracles of Capital for more details.

Bursa Malaysia trails behind key Asian markets

KUALA LUMPUR: Malaysian equities trailed behind the key Asian markets at midday on Monday with Petronas Chemicals the main drag on the FBM KLCI while the trading value of total stocks declined, reflecting the poorer buying quality.

However, a rebound in crude oil prices could provide some support to the oil and gas stocks after Saudi Arabia and Russia have agreed to extend crude oil output cuts until March 2018 in their latest effort to rebalance the global crude market.

The FBM KLCI fell 2.2 points or 0.12% to 1,773.67. Turnover was 2.05 billion shares valued at RM1.12bil. There were 364 gainers, 444 losers and 377 counters unchanged.

The ringgit rose against the US dollar but slipped against the other key currencies. It rose 0.26% to 4.3345 from the previous close of 4.3457 but weakened against the pound sterling to 5.5921 from 5.5807; slipped against the Singapore dollar to 3.0891 from 3.0867 and was lower against the euro at 4.7368 from 4.7199.

US light crude oil jumped 77 cents to US$48.61 and Brent gained 78 cents to US$51.62.

Refiner Hengyuan gained 38 sen to RM4.79 with 1.39 million shares done while Petron was flat at RM8.62. Petronas Dagangan added six sen to RM24.06.

Petronas Chemicals fell 11 sen to RM7.12 and erased 1.44 points from the KLCI while Petronas Gas shed two sen to RM18.58.

Among the banks, AmBank fell eight sen to RM5.44, RHB Bank six sen to RM5.48, CIMB she done sen to RM5.94 while Public Bank and Maybank were flat at RM19.98 and RM9.38.

Crude palm oil for third-month delivery rose RM18 to 2,669 per tonne. IOI Corp lost three se to RM4.61, KL Kepong and Sime were flat at RM24.92 and RM9.33 while PPB Group rose four sen to RM17.10.

F&N was the top performer, up 44 sen to RM25.12 and Ajinomoto gained 14 sen to RM19.86 but BAT fell 56 sen to RM45.64 and Dutch Lady lost 26 sen to RM58.

Poultry company CAB Cakaran lost 17 sen to RM2.77 and the warrants were down 15 sen to RM2.17. However, CCK Consolidated added 10 sen to 84.5 sen after CIMB Equities initiate3d coverage of the company.

As for semicon makers, Globetronics gained 14 sen to RM5.90.

Among the key regional markets,

Japan’s Nikkei 225 fell 0.09% to 19,866.04;

Hong Kong’s Hang Seng Index rose 0.58% to 25,301.50;

CSI 300 gained 0.48% to 3,401.53;

Shanghai’s Composite Index 0.28% to 3,092.28;

Hang Seng China Enterprise jumped 1.23% to 10,409.63;

Taiwan’s Taiex added 0.16% to 10,002.64;

South Korea’s Kospi gained 0.14% to 2,289.15; and

Singapore’s Straits Times Index advanced 0.36% to 3,267.02.

Spot gold  rose US$1.98 to US$1,203.41.

-THE STAR

 

Like the article or it found it useful ? Share it!

Do you eager to know more about The Red Dot Theory, how to make your company IPO compliance or build your company’s financial road map?  Visit The Miracles of Capital for more details.

Funeral Business Makes David Kong One Of Malaysia’s Richest

When David Kong had the idea for a funeral-services business in Malaysia back in 1985, no one would listen. Banks wouldn’t lend him money. Local authorities wouldn’t approve his application to open a cemetery. He quickly learned that profiting from a loss was not seen as a “decent” way to earn a living, though in the U.S. and elsewhere the industry had long thrived.

But Kong persevered. Today his Nirvana Asia is Southeast Asia’s largest full-service funeral company. It embalms, buries and cremates. It designs caskets, builds tombs and provides niches for mortal remains. It organizes bereavement services, most often with the rituals and prayers of ancient Buddhist and Taoist cultures.

It’s a strange business. The products and services are part of the realm of culture, religion and tradition. The custodians are monks and priests and the ancient spiritual texts of last rites. “Every life deserves a curtain call,” he says during an interview at his 18-story Nirvana Center in downtown Kuala Lumpur. “We celebrate life and its achievements and make sure that the transition to the other world is dignified, respectful and easy for both the deceased and their loved ones.”

It’s also been a lucrative business for the 61-year-old Kong, who is also known as Kong Hon Kong. Last month he took the Hong Kong-listed company private in a deal with London’s CVC Capital Partners that valued the company at $1.1 billion. The firm bought a 43% stake while Kong collected $200 million; he still owns 38%, down from 42.7%. He’ll continue to run the company. An earlier investor, Orchid Asia, holds the other 19%.

In March Kong debuted on FORBES ASIA’s list of Malaysia’s 50 richest people at No. 34, with a net worth of $550 million. But his fortune is now estimated at $720 million.

CVC is investing in a big operation. Nirvana runs 13 cemeteries, 14 columbaria, 2 funeral homes and 6 crematoriums in Malaysia, Singapore, Indonesia, Thailand and China. It controls 31% of the death-services market in Malaysia and 35% in Singapore, according to research firm Frost & Sullivan. Those shares are at least five times larger than its nearest rival in each country. It’s expected to generate $52 million in net profit this year on revenue of $171 million, according to Bloomberg. “Kong has woven magic,” says Liew Kee Sin, chairman of Eco World Development, who has known him for two decades. “He has changed a social taboo into a business that invokes the blessings of the gods and puts you at ease with the inevitable. People now talk about their own death, plan for it and are no longer afraid of it.”

Following a strategy of market segmentation, Nirvana offers its packages at multiple price points. A burial plot in a premium location could cost $2.5 million and a gold-plated coffin as much as $350,000. Its more than 3,000 agents sell what are called “pre-need” packages to customers as young as 40 who are planning ahead. Some 85% of the company’s revenue comes from selling services that may not be used for years.

Nirvana agents range in age from 30 to 45, defying the notion that death care is a gloomy industry that would have trouble attracting young talent. Says Casey Liew, 33, a former bank executive and a graduate of Adelaide Business School who joined Nirvana in 2014 as assistant manager, corporate sales & marketing: “This is a great learning ground. The company understands the customer’s needs, is constantly innovating and creating products for different cultural sensibilities, backgrounds and even the world beyond.”

In Kuala Lumpur, Nirvana billboards are ubiquitous, making the company a household name. One of its brands, Baby Paradise, caters to parents who have lost a fetus or a child. Its “White Ladies” are recognized for their cosmetology and makeup expertise and their sensitivity in dealing with women customers.  In Indonesia, where Nirvana is the second-largest player, its services are sold under the brand name Alam Lestari Hijau, or “sustainable, natural, green.”

Nirvana’s Memorial Park in Semenyih, outside Kuala Lumpur, has become a tourist attraction. Its memorial hall draws on ancient Chinese history, architecture and intricate gold ornamentation to promote a sense of regal splendor and status. A museum holds the personal effects of celebrities and political leaders buried there. There’s also Southeast Asia’s first Chinese stone calligraphy gallery, constructed at a cost of $5 million. Images of a crystal-embedded Buddha and the Goddess of Mercy are everywhere. Outside, swaying bamboos, a glistening lake and landscaped pathways surround tombs covered with horsehead-shaped roofs. Many of Malaysia’s rich and famous have booked plots for themselves and their families here.

Kong was certainly not one of these when he was growing up. The third of 10 children, he was born to a family of rubber tappers in Kuala Lipis in northern Malaysia. His mother pedaled him and his brother, neither one a teenager yet, at 2 a.m. every day to work on the rubber estates. Then at 7 a.m. the boys would start their long walk to school, only to return home after school to more work–bundling and delivering latex–before they went to bed. “My mama would buy me outsize shoes so they would last longer,” he says. “The only new clothes I ever wore were school uniforms.” At 16, out of “sheer desperation,” the brothers left the village for Kuala Lumpur. There they distributed toothpaste, soap and other consumer goods. Demand was brisk, but creditors were always delaying payments, and margins were razor-thin. Kong moved on in 1985 to launch a moneylending business.

Meanwhile his father-in-law died and he was entrusted with finding a burial ground. But there were no private cemeteries in Malaysia then. The community cemetery was strewn with weeds, unkempt pathways and haphazard tombstones. As he stepped on some of them he found himself apologizing to the deceased. Then came the nightmare of dealing with casket makers and organizing a prayer service. The process was so chaotic that “demand for a better service was self-evident,” says Kong. “Death is a certainty. Whoever is born must die. That means a demand in perpetuity.”

Selling the concept, however, was difficult. Kong might have abandoned it, but a recession hit Malaysia in 1987, and as liquidity evaporated his credit business went belly-up. He was at square one again, this time with a young wife and two children in tow. Plagued by doubts about profiting from such a delicate business, he was fortunate to have a friend who was a monk to get him past the psychological barrier. And a geomancy master helped him identify land in the shape of a dragonhead with good feng shui. He won over a reluctant landlord with a profit-sharing proposal and gained the right to use a 50-acre parcel for burials. But the local government rejected his application. For the next two years Kong would troop down to the land department nearly every day. In 1990 he finally won approval and called his new company Nirvana.

His first customer was a friend who bought a plot after his uncle died. Soon word spread about the new “death company.” Before the year was out, Nirvana was turning a profit. But not believing that the land had any resale value, banks still wouldn’t lend Kong money. So he kept an eagle’s eye on cash collections and landholding costs. Any surplus went into accumulating more land and beautifying the cemetery. Skeptics began turning around as he rolled out one innovation after another and profits soared. “For the first time lenders, investors and bankers began to look at my business as legitimate, though unusual,” he says.

But he hadn’t quite arrived yet. In 1996 Malaysia’s stock market was on a tear. Nirvana applied for a listing, but it didn’t have any peers or valuation model to judge its viability. “No one knew how to deal with it,” he says. The application was rejected, but once Kong was finally able to launch his IPO in 2000, the way was paved for very quick growth. “I would work 16 hours a day, supervise every detail for every service personally till it was perfect,” he says.

Kong relisted Nirvana in Hong Kong in 2014, fetching $246 million and giving him the muscle to expand into Thailand, Vietnam, Hong Kong, the Philippines and China. The private equity deal will speed that expansion. “When I started out, I simply had a dream to provide seamless, worry-free death services,” he says. “It has made me more money than I ever dreamt, and it has also ensured that I will have a happy ending when the time comes.”

Indeed, his burial plot stands right on top of the hill at his Memorial Park in Semenyih.

– FORBES

 

Do you eager to know more about The Red Dot Theory, how to make your company IPO compliance or build your company’s financial road map?  Visit The Miracles of Capital for more details.

4 Ways on How to Develop a Better Exit Strategy

In the beginning of your business and building your company must be truly focused on creating good product or service as well as generate revenue. But, when they had reached on a certain stage they want to acquired, they starting not getting their house in order. They only focus on one aspect and believe the rest can be taken care by itself.

Companies that only focus on one area and neglect the others are not good acquisition targets. Acquirers care about everything fro contracts to HR to sales pipeline. Now, here are the four ways to be a better acquisition target:

1. Avoid the “Super VP” trap

Many CEOs come from functional area of business as example, marketing, sales or engineering. The temptation of CEO role is to continue to focus on what they know and do best. For example, CEO from sales sometimes jump in to close a big deal but it may be useful at times but spending to much time in one area, in other words “Super VP” totally a quick way to failure.

Acquirers are looking to minimize risk. When one area of business is poorly run, it increases the risk for the acquirer.

2. Build mature system and processes.

In early organization’s founding, entrepreneurs had to make up for the lack of processes and system with talents. This is only temporary and somewhere north 25 to 50 employees, when the business is starting to take off, entrepreneurs need to put the “engineer’s hat” and invest in more sophisticated system and process that can help to run the company more efficiently.

Sometimes, CEO think they can get by without knowing their proper business system and processes or maybe they don’t want to spend money. Other times, the business is growing fast that the system and procedures can not keep up. So, failure to do so will inhibit the growth and the ability to attract potential acquirers.

3. Strive to be world – class in every department

Just simply buying new software is not enough. CEOs have to make a priority to make sure every department functions at the world-class level. They need to work closely with the executive team to determine the key process in each area of business and then take a systematic approach to improve each one.

Some companies will have a COO who may take primary responsibility for this work. If not, the CEO should regularly review metrics and focus on the processes that make the biggest difference to the business. Leaving this role entirely up to the members of the executive team means the CEO often won’t have the knowledge needed to make effective decisions when issues escalate and all of this starts with hiring the best people possible at every level in the organization.

4. Get the financial side of the house in order

Every department is important, but prospective acquirers who cannot make sense of company’s finances will make a low ball offer or quickly walk away. CEO advisor Bob Barker of 20/20 Outlook recommends that start-ups have two years of audited numbers to help “potential acquirers get a rapid and reliable financial picture of the business, a key step in accelerating their interest. This immediate positive step doesn’t require deep thought — just do it.”

CEOs and leadership teams often focus only an exit. They don’t strive to build the finest business they can, diminishing their chances of getting the best deal possible for themselves and their stakeholders.

 

Do you eager to know more about The Red Dot Theory, how to make your company IPO compliance or build your company’s financial road map?  Visit The Miracles of Capital for more details.

 

Retail needs more than just size to survive

IS retail an art or a science?

To most, it may be more art than science but to property consultancy Savills (Malaysia) managing director Allan Soo, it is both. Creating desire and aspiration is all about art while the science bit comes in the form of numbers, catchment area and household income.

Considering that technology is based on which retail – as with other economic sectors – thrives today, the intrepid traveller and shopper who has just returned from a spree in Italy says: “There is the hardware – which is the sq ft – and there is the software, which are the tenants, merchandise and demand from shoppers. You need to look at both,” says Soo.

Soo believes that instead of thumping our chests on the sq ft (or burgeoning retail space), it is important to paint a more wholesome picture of how retail can evolutionise amid the space and technology against the maturity backdrop of the Malaysian retail.

“It may be hard to see the good news, but there are good news,” Soo says.

The millennial generation, those between 20 years and 35 years old, will dominate. “Young people are good at swiping (cards) which will impact retail, and which they already have,” says Soo.

Online transactions are rising. So retail today is in a sort of flux; as in the banking industry because of fintech, and in the property sector, because of proptech, says Soo. An online property website may have 100,000 visitors in a day, but does the bricks and mortar property consultancy have that?

“Online is big today and it will become bigger,” says Soo.

A case in point. Chinese e-commerce group Alibaba Singles Day last year reached a record US$14.3bil in one day, Reuters reported.

That is more than 25 years of Suria KLCC annual sales of RM2.5bil for 2016. It took 20 years to get RM2.5bil but Alibaba did it in one day, says Soo.

These are the challenges facing the retail sector, not only in Malaysia, but globally.

“So what I am trying to say is, this goes beyond sq ft and how much space we have. In the midst of all these, there will be winners and losers.”

Why they are winners

If one were to take a ratings poll, there are five malls which constantly come up tops. They are Suria KLCC, KL Pavilion, Sunway Pyramid, 1Utama in Petaling Jaya and Mid Valley Megamall, which is half-way between Petaling Jaya and KL city.

Each of these malls have a net lettable area of more than 1 million sq ft, which gives rise to the term megamalls.

That being the case, there are three other malls that fit that bracket – Sunway Velocity and MyTown, both in Cheras and IOI City Mall in Putrajaya. By the end of this year, there will be Mall No. 9, with 2.4 million sq ft at Empire City in Damansara Perdana, Petaling Jaya.

Soo says IOI City Mall, although isolated according to some, attracts visitors as far as Seremban. It has a catchment area within a 20-minute drive compared with some malls in Petaling Jaya within a five-minute drive.

Put simply, the longer the drive time, the larger the catchment area because there are no competing malls close by.

But what makes the Top 5 always the Top 5?

Tenant mix is one factor. Tenant mix is different from trade mix, which refers to fashion, food, services. Within the fashion mix, there is Zara, which is priced higher than H&M, says Soo. A mall’s tenant and trade mix draws a particular group of audience.

Location, the mall’s catchment area, is another boom or bust factor and the Top 5 malls are located in what may be considered as prime area in the catchment that they serve, he says.

Soo says a mall with a net lettable area of 1 million sq ft will need about 300 tenants, while 2.4 million sq ft, about 700 tenants.

When there is more than 2 million sq ft, the mall owner may need a Louis Vuitton (LV) but does the catchment area within which the mall is located have household incomes that fit the LV bracket?

Two of the Top 5 does not have a LV. In the whole of Malaysia, there are only three LV stores, compared to Tokyo where a single destination can have three LVs. So size does not determine that LV, or some other top luxury brand, will take up tenancy in a mega mall, important though it may be.

LV and other top end luxury brands want access to consumers, and if the median household income of that catchment is not there, space becomes a secondary factor.

“So generally speaking, a mega mall of 1 million sq ft may not need a luxury line. Suburban malls are all about convenience, households, family and entertainment. City malls are about fashion, entertainment and food. And here is where the luxury market comes in.

“The luxury market is important because it provides a benchmark for the retail industry and although it (the luxury market) is softening, city malls need them because it has that aspirational pull,” Soo says.

The luxury market

Luxury brands expanded because of the rise of China, says Soo. After the 2008 global financial crisis, some of the world’s largest luxury goods producers over-expanded in China. LVMH or Louis Vuitton Moet Hennessy, the world’s largest luxury goods maker with over 50 brands, including LV, expanded at breakneck speed in China. Incidentally, that included Chinese property developers.

Top of the range branded goods and property were the darlings of the burgeoning middle class and both sectors – retail and property – fell over themselves to cash in on their propensity to spend. When the Chinese administration threw down the gauntlet on corruption, under the current leadership, and the “gifting” stopped, and the luxury market was impacted. The global economy is still seeing the effects of that today under China’s capital controls.

Some may ask, how does that affect Malaysia? With regard to the property sector, one can monitor the scene in certain parts of the country. As for retail, when MH370 was lost in 2014, it affected retail sales and tourism.

Tourism and retail, particularly at the higher end of the luxury market, are best buddies. In Malaysia, as in other parts of the world, the retail sector is tourism-dependent.

“On many counts, Malaysia is priced lower than most of our neighbours but yet there is this softness in the retail scene. So that is how every shopping centre owner and operator looks at the market. The retail industry goes beyond sq ft and supply of space,” says Soo. New malls need to differentiate themselves.

“If I were to generalise, it is difficult to get a 10% differentiation for a new mall. You can only have differentiating factor for a short time. By next year, they would have lost it. The challenge is today.

Twenty to 30 years ago, that differentiating factor could last longer because things were not moving so fast as today. Another factor is the lack of depth and breath of our retail sector. Unlike Bangkok and some Chinese cities which have a lot of homegrown brands, Kuala Lumpur lacks that.

“Our breath and depth of retail is not established or explored. In Bangkok, in just shoes alone they have so many brands,” says Soo.

How many of the 300 shops in the 1 million sq ft mall will be local or homegrown brands? Hardly any. So how do you fill that 300 shops? Which explains the high degree of cannibalism when malls are located too close to each other, and so the smaller malls of about 700,000 sq ft suffer because whatever they have, their bigger neighbouring malls also have.

Which means retailers need to change their merchandise, their design and/or their target market, says Soo. Do they want to be classic or new and young? Today, the Chinese prefer the smaller brands. So there is a shift.

The intrepid traveller puts it thus: “Retail is about fashion, and fashion is about changes and lifestyle. We have brands which just arrived in Kuala Lumpur which are doing better than some of our older brands because the latter did not change.

The Ralph Lauren flagship store in Hong Kong closed late last year. It was not because the brand lacks quality.

It did not change with the current. Women used to swoon over floras and prints 20 years ago. The baby boomers who like prints are gone. Now the 25 and 30 year-olds are swooning about something else.

– THE STAR

Do you eager to know more about The Red Dot Theory, how to make your company IPO compliance or build your company’s financial road map?  Visit The Miracles of Capital for more details.

Create a Road Map to Business Success

For those who are in business industry, what do you feel when you starting a new business venture from the bottom? It may feels like jumping out of an airplane and trying to assemble the parachute on the way down. Business is often happens hugely through trial and error and that’s when a road map is really in need so that you won’t stuck in the middle of your business journey.

If your path is like most people’s, this how it will proceed:

  • You’ll start with personal road map, and when you find your passion, you’ll develop a business road map.
  • Your journey will start at point A, but point B will not be linear; there’s often no straight line between the two.
  • You’ll plan seeds to achieve your personal goals and see which one grows and chart a course to follow the growth.
  • When the growth become a passion and a business, then you plant more seeds within your business to see which ones work. This is the beginning of your business road map.

Don’t be scared to aim high because not goals can be achieve in a short time. Every departments in business such as marketing, production, sales and others need to be responsible. Budgets will need to be created and adjusted while products and serviced will need to be developed. Sales need to made and orders fulfilled. All these incremental activities are necessary to reach your goal.

However, you know that not all incremental steps will go as planned but it will not be a major failure. Instead, the next thing is where you can refocus your attention within the scheme of larger goal of building. Every new incremental goal will become your next mountain to climb as you travel the road to your final goal.

So start by identify your passions and goals and you’ll already have the makings of definitive plan. And don’t forget to give it 100 percent. Once you have set an intention and a goal, don’t just dream it, work it !

Keeping your road map flexible

Startups have to be nimble and open to change, especially in the first few years. There’s a fine balance between retaining products that fit your market and stubbornly trying to hold on to ideas, products or marketing strategies that are not attracting a significant target market.

Sometimes you can pound on market, but the product will still not work. Consider these stories of well-known pivots i which companies changed in order to grow better:

  • Flickr – a role playing gaming site for several years before emerge as the new popular photo sharing social media site.
  • Apple – sell computer kits to kids before making its own computer and becoming a $700 billion business.
  • Lego – start by making wooden ducks. A few years after a fire burned down its factory, the management switch to plastic toys. The interlocking bricks that spawned a multi-billion dollar business.
  • Nokia – start as a paper mill and expanded into rubber goods before moving to electronics and eventually mobile phones.
  • Avon – begin with a door to door salesperson who gave away free samples of perfume. The perfume get better reviews than the books so he did a pivot and dumped the book to start the California Perfume Company, a precursor of Avon.

Now, here is the list of step to step of how to get where you’re going in business:

  1. Plant seeds and constantly observe your garden, looking for growth opportunities and pockets of passion.
  2. Network.
  3. Set an intention and write it down.
  4. Network.
  5. Learn the business thoroughly through classes, internships, seminars, books, networking, etc.
  6. Network.
  7. Work for someone else first, and keep learning.
  8. Network.
  9. Conduct due diligence on product-market fit prior to writing a business plan.
  10. Network.
  11. Find talent, steal talent and keep that talent happy.
  12. Network.
  13. Talk to your customers consistently to capture feedback.
  14. Network.

By the way, don’t forget to be flexible. No straight line from point A to point B and success is never linear.

Do you eager to know more about The Red Dot Theory, how to make your company IPO compliance or build your company’s financial road map?  Visit The Miracles of Capital for more details.

 

MONEY THOUGHTS: Are all your eggs in one basket?

WHEN it comes to earning, accumulating and growing wealth, there is a natural tension between concentration and diversification.

For many successful entrepreneurs, the high profit margin on the annual revenue of their businesses, which is linked to their return on capital employed, is why they sneer at typically lower investment portfolio returns.

These individuals often choose, understandably, to concentrate their economic activities in their own businesses.

The advantage of opting for wealth concentration is that for as long as good times last, these business owners will thrive. The downsides, though, are obvious.

Taking the path of pure wealth concentration means that (by the Law of the Excluded Alternative), the superhighway to wealth through diversification is shunned. You see, it is a binary choice like 0 or 1, yes or no, up or down.

HOW MANY BASKETS DO YOU HAVE?

Each of us, either through active choice or lackadaisical inaction, puts all our economic eggs, so to speak, into just one basket (concentration) or in two or more baskets (diversification).

So mentally scan your past and present economic decisions. Have you in the past and are you now pinning all your hopes on a single streaming inflow of cash from a business you run or from your job? Are you wholly dependent on the active income that business or job brings in?

If your answers are ‘yes’, what will happen to your family when you stop working and cease bringing in an active income?

For everyone who takes financial planning seriously, the only solution is to create passive income streams.

Toward that end, I often tell my financial planning clients, “Thank God for EPF!”

All of us who are forced to contribute to EPF and the wise ones among us who don’t HAVE to but who proactively choose to do so anyway are generally in better shape to handle an eventual future marked by forced unemployment than those who don’t have an EPF account.

If we think about the simple process of how EPF collects our money, we will grasp two factors in long-term personal and family economic survival:

First, either through the operation of law or personal choice, when we contribute to EPF, we exercise delayed gratification by spending less than we earn.

Our core intent is to give up some good old-fashioned consumption today for the needed capacity to at least partially fund our retirement tomorrow.

Second, the growth we enjoy on our personal unspent capital that flows into EPF comes in the form of the annual snowballing, compounding dividend that EPF pays us.

For instance, EPF’s most recent 2016 dividend of 5.7 per cent is a form of passive income that will help us survive in retirement.

SAVING FOR A RAINY DAY

But all of us, of course, wish to do more than survive in our later years. We yearn to thrive in retirement.

So we should arrange our affairs to transition from “working for our money” to “having our money work for us”.

It is thus wiser for us to select diversification over concentration because just as there is safety in numbers when traipsing through a dark alley in a bad neighbourhood, there is greater risk mitigation when we diversify our investments across different asset classes, geographic regions, and across the timeline (meaning we should save and invest steadily over many, many years).

The late investment icon Sir John Templeton once declared: “Diversify. In stocks and bonds, as in much else, there is safety in numbers.”

Templeton knew what he was talking about. Still, it is difficult to ignore the powerful, siren call of concentration.

After all, you don’t need to be a business owner to pick that hyper-focused path; even employees in specialist fields like medicine, law and engineering sometimes behave as though their well-paid work will last forever and is all they will ever need for their long-term financial needs.

In my opinion as a financial planner, a safer path for my clients and workshop audiences to tread is to focus on becoming the best they can be at their work so as to elevate their capacity to earn more money with every passing year. That’s maximising active income!

As smart people grow their active income by investing in themselves through books, journals and seminars, the absolute smartest among them simultaneously commit to a gradual transitioning of their total income profile (total income = active income + passive income) so that with each passing year their ratio of passive income to total income rises.

Snowballing passive income arises from decisions made by the savvy to spend less than they make and to save and invest the difference for a long, long time.

It is a simple formula for lifelong financial success.

So when my clients ask me to help them invest their excess funds into various asset classes in different countries across a span of years – ideally decades – I applaud them for steering onto the diversification superhighway.

Templeton admitted once that: “In my 45-year career as an investment counsellor, humility did show me the need for worldwide diversification to reduce risk.”

Nurturing humility to recognise that diversification can help us grow and stay wealthier might be a phenomenally precious lesson for us all.

-NEW STRAIT TIMES

Do you eager to know more about The Red Dot Theory, how to make your company IPO compliance or build your company’s financial road map?  Visit The Miracles of Capital for more details.

How WhatsApp Can Makes Money for Us?

WhatsApp was fouded in 2009 by Brian Acton and Jan Koum as an alternative to pricey SMS services. For free, the apps allowed the user to upload their contact book in your android or iPhone and message anyone who has the app installed. This app is available for iPhones, Androids, Blackberries, Windows Phones, Nokia (NOK) phones and most recently is desktop.

In February 2014, Facebook Inc. had purchased WhatsApp for $19 billion and according to Facebook Form 10-Q 2014, WhatsApp has generated revenue of $1,289,000 in the nine months preceding 30 September, 2014. How WhatsApp is actually making its money?

One Dollar at a Time & Beyond

The quick answer used to be $1 at a time but in some countries, to download the app is cost $1 meaning that the first year is cost free but for every continuous year will be cost $1. In other words, WhatsApp has a subscription model. The revenue per year was estimated at $700 million as the model reached its peak about 700 million users worldwide.

In January, 2016 Facebook revealed that WhatsApp was monetized in very ‘limited fashion’ , it may be not generated meaningful revenue in a long period of time that hint change of strategy. Soon after WhatsApp announced in a blog spot that the subscriptions had come to end, the messaging app will be free to be use.

For the time being, there are still no ads in the app but “Starting this year, they will test the tools that allow user to use WhatsApp to communicate with business and organization” state the company at the time. The goal is to have people communicate directly with banks, airlines and others while the business picks up the bill previously paid through subscriptions.

Forbes estimated the total revenue to be $5 billions and the average revenue per user is to be $4 by 2020. WhatsApp had 1.2 billion user by April 2017.

Other SMS / Messaging App

Outside from the America, the sending text messages are more pricey, SMS apps are popular and have successfully monetized. As example, WeChat, the popular Chinese SMS app has ads and few online games. The company is responsible for Tencent’s that owns WeChat, had $6 billio revenue in the 3rd quater of 2016. Now, the app has over 846 million active users.

Growth Focusing

WhatsApp is adding around a million users per day, mostly in Latin America, India and Europe. With SMS apps, growth is exponential – when one person in a social group downloads and advocates using the app, many new users download the app in order to communicate with the original person. These new users then encourage other members of their other social groups to use the app.

By increasing market penetration, the app becomes indispensable and the user base grows.

Is it All About Money?

Industry insiders have speculated that part of the rationale behind acquiring WhatsApp was for Facebook to access user’s behavioral data and personal information.

With location sharing data, 42 billion messages sent per day, and access to users’ entire contact lists, Facebook has access to a ton of personal information – all uploaded and saved on its servers. While Mark Zuckerberg has previously promised that this data won’t be used to improve consumer targeting in Facebook ads, it will be unless the user changes the settings to not share information with Facebook.

End To End Encryption Controversy

WhatsApp including other messaging providers and also Apples, have been in hot situation with governments around the world after terrorist had used the apps to communicate with the others before, during or after attacks. Because of that, the governments and counter terrorism agencies had ask all those companies to share their encryption key in order to gain access to messages sent and received by the terrorists. However, the companies refused to obliged which lead to WhatsApp’s implementation of end to end encryption that prevents anybody including WhatsApp itself except the sender and receiver from gaining access to the data shared in app.

Conclusion

Whether you believe that Facebook overpaid for WhatsApp or not, the fact is that the app has a growing revenue stream with more room to grow.

Do you eager to know more about The Red Dot Theory, how to make your company IPO compliance or build your company’s financial road map?  Visit The Miracles of Capital for more details.

 

 

Bigger IPOs in 2017

THE impending listing of Serba Dinamik Holdings Bhd, an engineering solutions provider in the oil and gas (O&G) and power sectors, will likely pave the way for a bigger initial public offering (IPO) market in 2017, more so if Eco World International Bhd (EWI) joins the fray.

This year, less than RM1bil was raised from the 11 IPOs on Bursa Malaysia, the lowest figure since the global financial crisis in 2008-2009. The figure is a far cry from the RM4.7bil and RM4.1bil raised in 2015 and 2014, respectively.

Serba Dinamik, which has received approval to list, is said to be looking to raise more than RM600mil. EWI, which industry sources say is looking to list in 2017, is expected to raise more than RM2bil.

Serba Dinamik’s core activity is providing engineering solutions to the O&G and power-generation industries with operational facilities in Malaysia, Indonesia, the United Arab Emirates, Bahrain and the United Kingdom.

“Serba Dinamik is seeking to secure between 12 and 14 times its historical financial year 2015 (FY15) earnings in its IPO. Companies such as Deleum Bhd would be a close comparison for Serba Dinamik’s business,” an analyst says.

Deleum is currently trading at a price earnings (PE) multiple of 13.3 times its 2015 earnings with a market capitalisation of RM368mil, according to data by Bloomberg.

When contacted, Serba Dinamik group chief executive officer Datuk Dr M.A. Karim Abdullah says the company is hoping to list on Bursa Malaysia by February next year with a market capitalisation of RM2bil.

“The listing of Serba Dinamik is timely, as we expect the O&G sector to be better by next year on the back of the recent Organisation of the Petroleum Exporting Countries’ decision to cut its crude oil production that would increase the demand for services,” he says.

According to Serba Dinamik’s draft prospectus, the company plans to utilise the bulk of its IPO proceeds to expand its operations in Sarawak and power plant projects in Sabah and Indonesia, and debt repayment.

Serba Dinamik registered revenues of RM532.2mil, RM755.7mil and RM1.4bil for FY13, FY14 and FY15, respectively. Its profit after tax came in at RM61.6mil in FY13, RM67.4mil in FY14 and RM156.6mil in FY15. Its profit margins for FY13, FY14 and FY15 are 11.5%, 8.9% and 11.2%, respectively.

Karim says that about 60% of Serba Dinamik’s revenue is generated from its operations in the Middle East, while the remaining 40% is from local O&G activities.

“During the downtime of the O&G sector, Serba Dinamik was able to maintain its profitability mainly due to our exposure in oil field maintenance services and operations in the Middle East,” he says.

Karim, who is also one of the co-founders, owns about 35% in Serba Dinamik. Post-listing, his stake in the company will be reduced to between 26% and 28%.

The other major shareholder includes Cahya Mata Sarawak Bhd’s private equity arm CMS Opus PE Sdn Bhd, which has about a 16.1% stake in Serba Dinamik. Post-listing, the firm is expected to hold about 6.4% in Serba Dinamik.

Karim says Serba Dinamik’s planned expansion in Sarawak is to tap into various development projects in the state such as in Samalaju and O&G activities.

“We are also looking to establish a new fabrication facility to support our current fabrication jobs for the Refinery and Petrochemical Integrated Development project and tap into potential projects in the Pengerang Integrated Petroleum Complex in Johor,” he adds.

Serba Dinamik is also in the power plant business, of which the company is currently building three power plants with an installed capacity of almost 30MW in Sabah costing about RM218mil. The company owns a 30% stake in the project, which is expected to be completed by the end of 2017.

It has secured a contract to operate as well as maintain the three hydropower plants for 21 years.

In addition, the company is involved in the development of small gas power plants and water utilities in East Kalimantan.

“Our internal growth plan in the next two to three years is to have a recurring income of 15%-20% of our revenue,” Karim says.

Karim started the company back in 1993, specialising in “plant turnarounds” for the O&G and power sectors.

“After graduating from university in mechanical engineering, I joined a local O&G company as maintenance engineer. But I wasn’t happy because I spent a lot of time in the office planning,” he says.

He then started Serba Dinamik with money raised with two other shareholders, and set up office in Sarawak.

IPO details

Market observers reckon that the listing of Serba Dinamik would be timely, with the better outlook in the O&G sector next year, as well as the company’s exposure to power plant activities in Sabah and Sarawak.

Serba Dinamik is seeking a listing on the Main Market of Bursa Malaysia in February next year. Its IPO will involve 389.4 million shares, of which is an offer for sale of up to 118 million existing shares and 271.4 million new shares.

Large IPOs, raising more than RM500mil, didn’t take off this year in Malaysia. For instance, in Ranhill Holdings Bhd’s case, the IPO was undersubscribed while several planned IPOs such as Ekuiti Nasional Bhd’s education arm Ilmu Education Group were shelved in light of volatile market conditions.

“Among the uncertainties that have loomed over the market, which in turn have deterred IPOs, include volatile crude oil prices, the United States presidential election, Brexit and local political uncertainty. The market has already priced in these factors and we will see a good number of companies looking for IPOs on Bursa Malaysia over the next 12 months,” says an investment banker.

The impact of the softer market has also seen IPOs being priced at lower PE ratios as compared to two years ago.

Notably, some of the IPOs that took place this year were priced at single-digit PEs, such as Dancomech Holdings Bhd and the upcoming listing of Rhone Ma Holdings Bhd, which is lower than previous years when the broader market was better. One exception is Bison Consolidated Bhd, which listed at a PE ratio of 25 times its historical earnings.

“At the current market conditions, some investors would prefer to take the wait-and-see approach while some see it as an opportunity to find better-valued companies whose shares have plummeted as compared to new shares that generally demand higher valuations,” says an analyst.

Despite the sluggish fund-raising activities, interestingly, small-to-medium-sized IPOs have been doing fairly well this year – an indication that the market is hungry for new investment ideas.

“For example, Dancomech, which was listed this year, has significantly outperformed the market. Its share price has doubled from its IPO price. This proves that there is real investor appetite out there for the right stock themes and ideas,” says MIDF Amanah Investment Bank director of corporate investment banking Sherilyn Foong.

– THE STAR 

Do you eager to know more about The Red Dot Theory, how to make your company IPO compliance or build your company’s financial road map?  Visit The Miracles of Capital for more details.

Bursa Malaysia, Shanghai Stock Exchange ink MoU to further strengthen cooperation

KUALA LUMPUR, May 14, 2017: Bursa Malaysia Bhd has signed a memorandum of understanding (MoU) with the Shanghai Stock Exchange to explore potential ways for the two exchanges to improve their visibility and accessibility to market participants in Malaysia and China.

Bursa Malaysia in a statement here today said this MoU would further strengthen the already strong cooperation between both exchanges.

China remains an important market in the region, if not globally, and there were many Chinese investors looking for investing opportunities beyond China, particularly in Asean countries, said Bursa Malaysia chief executive officer Datuk Seri Tajuddin Atan.

“We, in Bursa Malaysia, have a lot to offer to this group of investors with our various innovative products and services, including our diverse Syariah-compliant offerings, which are ideal for Chinese investors looking for something different,” he said.

Both exchanges will also explore opportunities presented by China’s Belt and Road Initiative (BRI).

“Already one of Malaysia’s largest trading partners with bilateral trade reaching almost RM100 billion, the potential for further growth between Malaysia and China under the B&R Initiative is expected to be big,” said Tajuddin.

Under the MoU, Bursa Malaysia and the Shanghai Stock Exchange will also closely collaborate to address structural issues that may impede market accessibility, in addition to improving information flow between the two markets.

– BERNAMA

Do you eager to know more about The Red Dot Theory, how to make your company IPO compliance or build your company’s financial road map?  Visit The Miracles of Capital for more details.