Need A Few More Great CEOs For GLCs

What's the difference between a good CEO and a great one? In Malaysia there are not many great CEOs for sure. Many of our top companies are still family controlled companies, and generally its very rare to get family members that are also great CEOs. Family owned enterprises are usually started by a great entrepreneur but as you mushroom into a listed company, many have problems in letting go. An entrepreneur may be able to build a business from scratch to earning RM50m profit a year, but as you expand and scale up, you need a professional person with the vision and execution ability to bring the company to the next level. Ask many CEOs, they don't even talk about what is the next level.



If you put it to a vote, Nazir Razak should probably come in as the best CEO Malaysia has seen for the past 20 years. All you have to do is to track where Bumiputra Commerce Bank was at 10 years ago. If you put that side by side with Maybank, Affin, heck even Public Bank ... the trajectory and the path taken was so different.

Its just a coincidence that CIMB is now a Khazanah owned company. Even with the recent GLC transformation programme, we still see a dire lacking in the top honchos when compared to Nazir.

Let's cut to the chase, what makes a great CEO?

1. Integrity: Always do the right thing regardless of sentiment and never compromise your core values. If you cannot build trust and engender confidence with your stakeholders you cannot succeed. No amount of talent can overcome illegal, immoral or otherwise ill-advised actions.

2. Courage / Excellent Decision Making Skills / Decisiveness: As a CEO you will live or die by the quality of the decisions you make. These decisions are like the ship's mast, every bit that you do steers the ship in a certain direction. He/she must also know when to back down and be able to accept it when he realises its a mistake.

3. Ability to Focus: If you cannot focus you cannot perform at the level necessary to remain in the C-suite for very long. The ability to do nothing more than understand, and lock-onto priorities will place you in the top 10% of all executives.

4. Leveraging Experience: Inexperience, a lack of maturity, needing to be the center of attention, not recognizing limitations, a lack of judgment, an inferior knowledge base, or any number of other common mistakes made by rookie CEOs can cause your house of cards to fall. If you don’t have the experience personally, hire it, contract it, but by all means acquire it. Great CEOs surround themselves with tier-one talent and the best advisors money can buy. They don’t make uniformed or ill-advised decisions in a vacuum.

5. Command Presence: Great CEOs possess a strong presence and bearing. They are unflappable individuals that never let you see them sweat (unless of course it serves a purpose). Everything from how they carry themselves to how they speak and dress messages that they are in charge.

6. Embracing Change: Great CEOs have a strong bias to action. They don’t rest upon past accomplishments and are always seeking to improve through change and innovation. In today’s fast paced and competitive environment those CEOs who don’t openly embrace change will often be shown the door prior to the expiration of their initial employment contract.

7. Brand Champions: Great CEOs understand branding at every level. They seek to build not only a dominant corporate brand, but also a strong personal brand. CEOs that are not well branded on a personal basis, or who let their corporate brand fall into decline will not survive.

8. Resourcefulness / Boundless Energy: Great CEOs have a boundless amount of energy. They are positive in their outlook, and their attitude is contagious. A low energy CEO is not motivating, convincing or credible.

9. Business Acumen: Great CEOs have a deep understanding of the business and a strong orientation toward profit. Great CEOs possess what often appears to be a sixth sense or an almost instinctive feel for what the company needs to do to make money and remain competitive.

10. People Acumen: Great CEOs have a nose for talent…They understand how to recruit, develop and deploy talent while focusing on applying the best talent to the best opportunities. They also know when it’s time to make changes and cut losses as needed.

11. Organizational Acumen: Great CEOs know how to engender trust, know when and how to share information, and are expert listeners. They develop strong and positive corporate cultures driven to performance by aligned motivations. They can quickly diagnose whether the organization is performing at full potential, delivering on commitments, and whether the company is changing and growing versus just operating.

12. Curiosity: Great CEOs possess a powerful motivation to increase their knowledge base and to convert their learning into actionable initiatives. They question, challenge, confront and are never accepting of the status quo.

13. Intellectual Capacity: Great CEOs are also great thinkers both at the strategic and tactical level. They are quick on their feet and know how to get to the root of an issue faster than anyone else.

14. Global Mindset: Regardless of the geographical boundaries of the current business model great CEOs think globally. Limited thinking results in limited results. Whether global thinking is applied to capital formation, supply-chain issues, business development, strategic partnering, distribution, or any number of other areas, those CEOs who don’t grasp the importance of thinking globally will not endure. Great CEOs are externally oriented, hungry for knowledge of the world and adept at connecting developments and spotting patterns.

15. Never Quit: Great CEOs refuse to lose…They have an insatiable appetite for accomplishment and results and while they may reengineer or change direction they will never lose sight of the end game.

16. Execution: The decisions and strategy of a CEO will only be as effective if they have the implementation and monitoring skills to execute ideas and follow through. The great CEOs will only recruit managers that has proven themselves time and again in seeing through a project or transmitting a vision into reality effectively.

17. Not Staying Still: Too many CEOs end up just managing their companies in the same pond. Great CEOs will always be aware of the need to move up to the next level. Always be concerned about your business model and platform of activities, building initiatives or recruiting talent to scale up the business.

18. Fair: Too many CEOs are just intent on finding ways to reward themselves. A great CEO will devise ways to reward performers in a big way. Loyalty can only go so far. To build great companies, you need a core team that is well rewarded to see through the long term vision, and be paid well in the process. You cannot build value into the company when talent keeps going out the door - there has to be continuity.

19: Empowering / A Strong BoD: You need to have a fair and strong board of directors and not staffed by cronies. You can have a great CEO but he/she will not be effective if the BoD gets in the way. The BoD is there to oversee not micro manage. Just as a great CEO will be able to empower talented employees to achieve greater heights, so too the BoD must empower the CEO to do his/her job.

20. Foresight: Great CEOs are prepared to create their own luck by cultivating an ability to see opportunities for their company and to make the deals that convert those opportunities into realities. Some things that may seem like amazing foresight are actually the result of the hard work and discipline it takes to constantly look forward to build a successful company. Great CEOs must also constantly develop new products to build and retain a customer base. Foresight is also the ability to hire and retain the right people, looking ahead toward the growth of the company.

Nazir scores brilliantly in almost every category (no, I am not putting myself up for a job at CIMB). If only we have another 4 Nazir Razaks to turn things around faster. Food for thought. If we have another 4 Nazirs, what would he be doing at these 5 GLCs??? I would exclude him from some GLCs because there might be very little he can do there, such as Tenaga or Malaysia Airports. I also would not put him at Maybank as the stegosaurus will take too long and too much work to turn around. I will select the 4 GLCs that I think will benefit the most:

1) UEM World / Iskandar - I think the Nusajaya project started way before the two Singapore IRs. The bloody casinos are up and running and where are we??? Oops, forget about the Middle East partners now, let's look to China and India. Execution, execution, timeline, goalposts, rollout scheduling, ... for every project delays there will be 1,001 excuses, and therein lies our problem, we are always ready with excuses. I think Nusajaya is a brilliant concept, but seriously, I hope its not taking another 10 years to rollout, by that time I think Indonesia may have transformed Batam into another Nusajaya already with a bridge linking up both islands.

2) Proton - It will be a short stay for Nazir at Proton. Just sell the thing to another major car maker that can carry the platform we have and leverage on it. We take a minority stake say 30% and just let the thing run by someone else that have the regional or global marketing, design, distribution and cost efficiencies to run this thing. Close shop.

3) PLUS - As it is, PLUS is already Asia's largest listed expressway owner and toll operator, easily beating out the two listed Chinese firms in HK. Its an under leveraged vehicle. Nazir will come in, start up a "financing unit" within the firm to tap bonds and capital to buy, invest, build new tollways all across Asia. Its all a matter of "funding the thing" properly. Nazir will keep enlarging the portfolio by hiving off profitable tollways into REIT like instruments to free up capital. PLUS will be 3 times the size of what it is now within 3 years. Macquarie Infra here we come.

4) Sime Darby - Nazir will do wonders here. Just break off the plantation unit and rethink the business model. Why are we just in palm oil??? Sell huge plots of land to Sime Property and hive that off as an independent unit as well - I am sure Nazir will buy IJM Land and SP Setia and roll them all into a proper behemoth with a lot of claws and market edge.



p/s photos: Ririn Dwi Aryanti

Financial Times Article On Nusajaya

It is always interesting to see how foreign media view Malaysia. This is the latest article from the influential FT paper:

More than $13bn has been committed to an ambitious plan to create a metropolis at the southern tip of Malaysia three times the size of Singapore, says the chief executive of the state agency set up to drive the project.

Arlida Ariff, chief of Iskandar Investments, told the Financial Times in an interview that a further $2bn was likely to be committed in the next two years, including nearly $300m in retail investment expected to be announced over the next few months. Ms Ariff said the 2,217sq km project, launched in 2006 by Abdullah Badawi, former prime minister, was beginning to make “real progress” as contractors drove highways and other basic infrastructure through thousands of hectares of jungle and abandoned palm-oil plantations in the state of Johor.

In the long-run, the biggest single source of investment is likely to be Singapore, whose central business district is not much more than half an hour’s drive from Iskandar’s proposed financial district. The attraction for Singapore is the low cost of land, office space and housing, which are currently about 80 per cent cheaper in the Iskandar economic zone. Lee Hsien Loong, Singapore’s prime minister, has joined Najib Razak, his Malaysian counterpart, in backing the project.

However, a surge of Singapore investment could raise nationalist hackles in Malaysia, which has had a prickly relationship with the island state since the two split in 1965 after a brief union.

Mahathir Mohamad, prime minister of Malaysia for 22 years until 2001, last year dismissed Iskandar as little more than a platform for Singapore to extend its sovereignty into Malaysia, warning that Malays would be “driven to live at the edge of the forest”. Ms Ariff said such fears were overblown, pointing out that Singapore had always been the largest investor in Johor because of its physical proximity and requirements for crucial goods from the state, including food and water supplies.

Much of the investment Iskandar is seeking would help Singapore companies by allowing them to expand locally at low cost, she said, suggesting that the initial ambitions of the financial centre were limited largely to attracting back-office activities such as data processing centres.

“This means we can work in collaboration with Singapore rather than competiting for the same brands and the same products to come across [to Malaysia]. Some of this [fear of Singaporean involvement in Iskandar] is to do with the traditional rivalry. Singapore used to be part of Malaysia and it’s like watching your kid brother grow up and become more successful than you.”

The project has attracted a clutch of Middle Eastern investors including Mubadala Development, Abu Dhabi’s state investment vehicle; Kuwait Finance House and the Kuwaiti Bank. Other investors include Newcastle University of the UK, which is setting up a medical school, and UK-based Merlin Entertainments, which is building a $220m Legoland theme park.

Ms Ariff said several other investors were in negotiations, with three more university campuses dedicated to engineering, logistics and leisure industries likely to be announced before the end of the year. Investors are being offered a raft of incentives, including a 10-year corporate tax holiday and exemption from rules requiring local participation in foreign-owned projects. However, the project remains well short of the target of M$383bn over 20 years that will be needed to finance the planned doubling of the local population to 3m, a 1.5sq km financial district, eight university campuses, theme parks, hospitals, schools, retirement homes and a resort.

p/s photo: Olivia Ong

Trying To Make Sense Of UEM Land Holdings

UEM Land Holdings has been hogging the top turnover table in recent weeks. Who might be buying, or selling? When a counter features prominently in the volume charts, it will attract traders and speculative money, but what are they really buying into?To those who are in the mist, this used to be UEM World. It used to be a Nusajaya / Iskandar play but that focus has been harder to sell as it requires a lot of FDI, in particular from the Gulf countries and Singapore. Many MOUs were signed and there were plenty of tea parties celebrating these intentions. However, these potential investors went back to face their own niggling problems as they have to come to terms with the engulfing global credit crisis.

US-based fund Discovery Capital Management LLC has been actively selling down UEM Land Holdings Bhd based on recent available information. Discovery Capital has been cutting its shareholding in UEM Land after acquiring a 5.7% stake comprising 138.5 million on the day of UEM Land Holdings' listing on Nov 17, 2008. According to filings with Bursa, Discovery Capital has since disposed of some 9.07 million shares, reducing its shareholding in UEM Land to 5.33% or 129.43 million shares. It would not be surprising to find the fund continuing its selling down activity in recent weeks as it is significantly above the IPO price of 55 sen - is it a staged exit strategy? It could simply be a case of profit-taking as UEM Land's share price has risen sharply to around 75 sen since its opening-day closing price of 57.5 sen versus its IPO price of 55 sen. With net tangible assets pegged at 50 sen per share, the counter is currently trading at a premium.

Where is the justification for trading above its NTA? It does not even have a long enough track record. Furthermore, its growth prospects were dependent on the success of its flagship development at Nusajaya in Iskandar Malaysia, which has been fairly quiet of late. Their debt levels is questionableas well. As at the end of September 2008 it has total debts of RM772m and cash of just RM23m, or a net gearing of 62%. Taking into account the capital requirements at Cyberjaya, Puteri Harbour and Southern Industrial & Logistic Cluster - they will need to issue new shares.

The Iskandar development is still very much at its infancy, and its long gestation period meant that it would be a while before UEM Land begins to see returns from that development. UEM Land, however, appears to be continuing strongly with its venture in Iskandar, with management saying it would be completing a fund-raising exercise worth RM1.2 billion to invest in Iskandar Malaysia by next month. The loan would raise its debt-to-equity ratio to 60%, which is on par with other property companies, but property analysts said they were concerned about the cash holdings and the cash flow of the company.

To be fair, UEM Land has also tried to diversify its business by investing elsewhere, notably in Cyberjaya where it has agreed to purchase 98 acres (39.7ha) of land for RM102.49 million. It could be that the company is hedging its bets by boosting its Cyberjaya projects as Nusajaya could be delayed further. The land is being bought from Cyberview Sdn Bhd and Setia Haruman Sdn Bhd. UEM Land plans to undertake "a mixed and exclusive mid-upper and high-class secured and guarded residential development". The project should generate a gross development value of RM1.5 billion over nine years,UEM Land said.

UEM Land has about 4,500 acres in Iskandar Malaysia, with its flagship development being Nusajaya, identified as a catalytic project in the region.

The key is probably here, the company has applied to the Securities Commission (SC) for an extension of time to implement the issuance of up to 10 per cent of the issued and paid-up capital of the company. The SC's approval for the proposed issuance will expire on February 28. It is very likely that the activity is to push through the new issuance of capital. I doubt very much that it can issue the new shares very much above the NTA of 50 sen. Can you imagine if the bulk of the shares was issued at 55 sen, compared to where the current share price is 76 sen. As much as I think Nusajaya is a viable project, there may be better times to take on a position. Buyers beware.

p/s photo: Maki Nishiyama (my kind of handroll)