05-05-2014, 07:36 AM
TOPLINE
Myanmar lights up UPP prospects
Malaysian entrepreneur Tong Kooi Ong looks to frontier markets for more rewarding returns, reports ANITA GABRIEL
'We have delivered (in Myanmar). This is our first instalment - not just in contract, but cash flow.'
- Tong Kooi Ong, UPP executive chairman
- PHOTO: YEN MENG JIIN
MALAYSIAN entrepreneur Tong Kooi Ong is making bite-size corporate moves into Singapore by snapping up stakes in smallish firms and rendering them turnaround material.
One of them is pulp maker UPP Holdings, a firm majority-owned by Singapore billionaire and close pal Peter Lim, which he bought into two years ago. Mr Lim is now UPP's second largest shareholder, next to Mr Tong who owns 28 per cent.
Based on his track record in Malaysia, Mr Tong's moves are well worth watching - very closely. The energised businessman who also owns the media group that publishes The Edge in Singapore and Malaysia, is gifted with turning modestly sized outfits not bigger, but strikingly nimble and innovative, making them stand out against their lumbering, staid rivals.
Case in point: Malaysia's PhileoAllied, a niche bank he founded in the 1990s which shook up the sector with its swift moves into online services and was later gobbled up by the country's largest lender Maybank under a forced consolidation. Later, he led niche property builder Sunrise Group, known for its upscale Mont Kiara development in Kuala Lumpur. He did that job so well that it didn't take too long for another state-controlled giant UEM to swallow up Sunrise, retain Mr Tong on the board (until late 2012) and rename the merged entity UEM Sunrise. The group is the flagship developer of Malaysia's booming Iskandar.
Mr Tong is also director of M+S Pte Ltd, a partnership between Malaysia's Khazanah Nasional and Singapore's Temasek Holdings for the Marina South and Ophir-Rochor projects here in Singapore.
In a rare interview with The Business Times, Mr Tong, UPP's executive chairman, is eager to share the firm's transformation now that its power business in Myanmar has been signed, sealed and delivered - right down to its bottom line.
"We have delivered. This is our first instalment - not just in contract, but cash flow. The message is that the transformation continues," says a visibly relieved Mr Tong.
It's a story that has gone somewhat unnoticed by investors since UPP signed the power purchase agreement in February this year for the 50MW gas-fired plant in Yangon. That's partly because it took a while to happen.
Shortly after emerging as the single largest shareholder in UPP in 2012 and a $40 million cash call via share placement, UPP went hunting for opportunities in Myanmar. That journey was riddled with challenges.
"Myanmar was interesting as it had a big population and was opening up. But we never expected that many problems," he admits.
In a rare display of candour in the firm's 2012 annual report, Mr Tong said: "I have little to show except for a couple of memorandum of understandings. I am indeed sorry."
Mr Tong said the firm started out mulling over a bagful of options ranging from silver work, real estate, hotel to the quarry business. None worked out. Then, a massive power outage in the summer of 2013 in Myanmar became a silver lining for UPP, which not too long after bagged a 30-year concession to supply electricity to the power-starved nation.
"We are one of the very few who have done a real deal in Myanmar. A lot of people were interested and got burnt, some very badly," he admits.
The new business, governed by a water-tight agreement that favours UPP, promises steady annual income - almost sweet nothings in investor speak - and should soon start lighting up UPP's uninspiring earnings, long driven by the dull, low margin and highly competitive pulp and paper mill business.
Here's how dull - for 2013, UPP made only $946,000 in net profit, down from $2 million a year ago, on the back of a 4 per cent fall in revenue to $48 million.
"UPP has been in that state for the longest time since the 1990s. But now, we have a fairly robust agreement for a project that should bring us an IRR (internal rate of return) of 15 per cent," says Mr Tong.
Myanmar's chronic power outages and the fact that 70 per cent of its electricity is hydro-driven - hydro plants don't work optimally in summer time - could augur well for UPP under the take or pay agreement. It could also mean that UPP, which already has a foot in, could get lucky down the road as the country doles out more power contracts to tackle its woeful energy supply.
But what of its low-yielding, bland pulp and paper business? Mr Tong admits that UPP is at a crossroads there. "The paper business is a business where returns are always going to be fairly low. We either improve their returns or get rid of them."
While he dons the thinking cap on that, UPP is on the lookout for other assets that yield higher returns, not just in Myanmar, but in other frontier markets too. "We need to find new assets that generate higher returns. We are most excited about frontier territories, not just Myanmar, but Laos, Vietnam and Cambodia. It's clearly evident that although it's a lot harder work, the returns are more rewarding."
Myanmar lights up UPP prospects
Malaysian entrepreneur Tong Kooi Ong looks to frontier markets for more rewarding returns, reports ANITA GABRIEL
'We have delivered (in Myanmar). This is our first instalment - not just in contract, but cash flow.'
- Tong Kooi Ong, UPP executive chairman
- PHOTO: YEN MENG JIIN
MALAYSIAN entrepreneur Tong Kooi Ong is making bite-size corporate moves into Singapore by snapping up stakes in smallish firms and rendering them turnaround material.
One of them is pulp maker UPP Holdings, a firm majority-owned by Singapore billionaire and close pal Peter Lim, which he bought into two years ago. Mr Lim is now UPP's second largest shareholder, next to Mr Tong who owns 28 per cent.
Based on his track record in Malaysia, Mr Tong's moves are well worth watching - very closely. The energised businessman who also owns the media group that publishes The Edge in Singapore and Malaysia, is gifted with turning modestly sized outfits not bigger, but strikingly nimble and innovative, making them stand out against their lumbering, staid rivals.
Case in point: Malaysia's PhileoAllied, a niche bank he founded in the 1990s which shook up the sector with its swift moves into online services and was later gobbled up by the country's largest lender Maybank under a forced consolidation. Later, he led niche property builder Sunrise Group, known for its upscale Mont Kiara development in Kuala Lumpur. He did that job so well that it didn't take too long for another state-controlled giant UEM to swallow up Sunrise, retain Mr Tong on the board (until late 2012) and rename the merged entity UEM Sunrise. The group is the flagship developer of Malaysia's booming Iskandar.
Mr Tong is also director of M+S Pte Ltd, a partnership between Malaysia's Khazanah Nasional and Singapore's Temasek Holdings for the Marina South and Ophir-Rochor projects here in Singapore.
In a rare interview with The Business Times, Mr Tong, UPP's executive chairman, is eager to share the firm's transformation now that its power business in Myanmar has been signed, sealed and delivered - right down to its bottom line.
"We have delivered. This is our first instalment - not just in contract, but cash flow. The message is that the transformation continues," says a visibly relieved Mr Tong.
It's a story that has gone somewhat unnoticed by investors since UPP signed the power purchase agreement in February this year for the 50MW gas-fired plant in Yangon. That's partly because it took a while to happen.
Shortly after emerging as the single largest shareholder in UPP in 2012 and a $40 million cash call via share placement, UPP went hunting for opportunities in Myanmar. That journey was riddled with challenges.
"Myanmar was interesting as it had a big population and was opening up. But we never expected that many problems," he admits.
In a rare display of candour in the firm's 2012 annual report, Mr Tong said: "I have little to show except for a couple of memorandum of understandings. I am indeed sorry."
Mr Tong said the firm started out mulling over a bagful of options ranging from silver work, real estate, hotel to the quarry business. None worked out. Then, a massive power outage in the summer of 2013 in Myanmar became a silver lining for UPP, which not too long after bagged a 30-year concession to supply electricity to the power-starved nation.
"We are one of the very few who have done a real deal in Myanmar. A lot of people were interested and got burnt, some very badly," he admits.
The new business, governed by a water-tight agreement that favours UPP, promises steady annual income - almost sweet nothings in investor speak - and should soon start lighting up UPP's uninspiring earnings, long driven by the dull, low margin and highly competitive pulp and paper mill business.
Here's how dull - for 2013, UPP made only $946,000 in net profit, down from $2 million a year ago, on the back of a 4 per cent fall in revenue to $48 million.
"UPP has been in that state for the longest time since the 1990s. But now, we have a fairly robust agreement for a project that should bring us an IRR (internal rate of return) of 15 per cent," says Mr Tong.
Myanmar's chronic power outages and the fact that 70 per cent of its electricity is hydro-driven - hydro plants don't work optimally in summer time - could augur well for UPP under the take or pay agreement. It could also mean that UPP, which already has a foot in, could get lucky down the road as the country doles out more power contracts to tackle its woeful energy supply.
But what of its low-yielding, bland pulp and paper business? Mr Tong admits that UPP is at a crossroads there. "The paper business is a business where returns are always going to be fairly low. We either improve their returns or get rid of them."
While he dons the thinking cap on that, UPP is on the lookout for other assets that yield higher returns, not just in Myanmar, but in other frontier markets too. "We need to find new assets that generate higher returns. We are most excited about frontier territories, not just Myanmar, but Laos, Vietnam and Cambodia. It's clearly evident that although it's a lot harder work, the returns are more rewarding."