According to Dato' Robert Teo Keng Tuan, new economy businesses and long-stay hospitality accommodation are potential growth sectors.
Teo has more than 40 years of experience in the fields of corporate taxation, audit assurance and corporate restructuring exercises. He has undertaken Special Administrator appointments by Pengurusan Danaharta Nasional Berhad (Danaharta was established by the Government of Malaysia to act as the national asset management company) for certain publicly-listed companies and is also involved in the restructuring of corporations, some of which are listed on the Bursa Malaysia Securities Berhad.
Teo’s specialised industry knowledge lies in the property, construction and housing development sectors, with a focus on tax planning. He was an independent Non-Executive Director and Chairman of the Audit Committee of Symphony Life Berhad* for 17 years until he resigned on 23 March 2021.
An avid nature lover and food connoisseur, the multi-faceted Malaysia International Business Awards and Malaysia National Business Awards judge shares his insights on passion, principles, business growth, and innovation in the construction industry during the pandemic.
Can you share with us your work experience or any backstory that has contributed to your professional career?
In terms of industry knowledge, I am focused on the property, construction and housing development sector specialising on corporate restructuring and tax planning advisory work.
During the COVID-19 pandemic, I have also been very busy with liquidation assignments, one of which is the liquidation of the famous Department Store “Robinsons” whose brand is a household name. For all those intending to take up a professional career, I would like to share a piece of advice: always carry out assignments with passion, based on a set of principles. This should be done consistently until it gets embedded as part of your daily habit.
Unfortunately, in many instances, priority is given to first making money, and in the process failing to deliver the proper service. When that occurs, chances of success can be very challenging as less attention is invariably given to providing that excellent service. I reiterate that to build a successful professional firm, one's approach to work must be based on a set of principles that will guide you morally in making the right decisions.
Such principles are based on fundamental truths, established and accepted by most successful people over time. They are a useful guiding star to navigate one's decisions in achieving the final objective.
In this connection, perhaps it's appropriate for me to recommend the book Principles, by Ray Dalio, as a good reference.
Crisis presents opportunities, even in corporate restructuring. What do you think are these opportunities, and how do you think they will shape corporate restructuring in the future?
COVID-19 has opened our eyes all over the world on how to carry out our business in a pandemic environment. Some corporations may discover new ways to operate their businesses, which include working from home with less office space required, utilisation of visual meetings and communication tools to close the boundary gaps, using online platforms, and even combining the operations of companies via mergers or restructuring to achieve better cost savings and efficiencies.
Doing more for less and pushing for higher staff productivity will be business prerequisites during and after the COVID-19 pandemic. Therefore, companies should review their current processes, risk exposures and operations management, and innovate themselves to serve their customers more efficiently. It is important to invest in IT and talents, and realign their businesses, increase their resilience to external factors, changing operations models to achieve better work efficiencies.
The present world economy is still full of uncertainties - with the US-China trade war expected to escalate further with the new US administration, together with the burning question of how long it will be before we reach normalcy free from COVID worries. Amidst the uncertainties, it makes business sense to avoid those areas which involve high upfront capital investments. The top priority is business continuity and for this, it is important to have a healthy cash flow.
During such uncertainties, it is wise to err on the side of caution before making any heavy investments. The target sectors to focus on are those which are "asset-light" with good cash flow generation potential.
Not all businesses will be adversely affected since those well-managed companies with a strong financial "war chest" will be able to acquire assets at very attractive costs! I feel this is the best example of how crises can present opportunities. With many changes occurring as a result of corporate restructuring, there is an opportunity to first streamline one's internal operations by reducing the headcount while looking for new talents to bring on board as soon as business conditions improve.
They say that real estate in new economy businesses like data centres, suburban offices, logistics and long-stay hospitality businesses are COVID-resilient. Can businesses invest in these right now? Which area in real estate should they avoid?
During the pandemic, traditional businesses have suffered heavily due to lockdowns and various other measures implemented by the government. Office-based businesses had to downsize, due to the use of flexible working and the new remote working culture.
Businesses which were able to transform and adapt to working from home arrangement, making sales using online platforms and using logistics services to deliver their goods, are those which can minimise the impact from the pandemic. As COVID-19 is expected to be here for some time, new economy businesses like data centres to store servers providing cloud services, suburban offices for employees working off-site, logistic facilities to store goods (and vaccines) as well as long-stay hospitality accommodation are potential growth sectors, at least until the present pandemic continues.
How has the pandemic affected the way property, construction and housing development sectors operate? And what significant changes or trends do you think would play a pivotal role in the coming years?
The property and construction sectors have been badly hit by the pandemic, as evidenced by numerous stop-work orders issued to construction sites affected by clusters involving foreign workers. This has raised concerns on the size and conditions of the workers' dormitory as well as the welfare of the foreign workers. This translates into higher accommodation costs, healthcare and welfare costs for the workers.
For developers, based on the experience learned from the pandemic, there is a need to incorporate new, innovative ideas when embarking on new projects. These could include concepts such as bigger lifts, dedicated bathrooms for all rooms, different entrances, social distancing, and IoT devices imposed by the Health Ministry. Also, they would have to invest in technology platforms, to help them in marketing their products online, and via social media and blogs. Their staff would therefore have to be trained to use these digital platforms and deliver their promotions via virtual platforms in addition to their traditional physical sales and promotion activities. These would inevitably start a chain effect on the other construction costs and ultimately, the price of properties in the country is expected to increase.
To make the property more affordable, future units will therefore have to be much smaller and the design concepts will have to utilize the most cost-efficient products available. As cost-cutting will be the common factor among all developers, the ones to survive at the end of the day are those who are "asset-light" and able to turn around their projects speedily. Developers will have to re-strategise their financial models and pay more attention to cash management as well as to have more diversified activities because of the cyclical nature of property development.
* Formerly known as Bolton Berhad, one of the oldest established development groups listed on the Main Board of Bursa Malaysia
This article was extracted from Singapore Business Review