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Building a corporate Kingdom

Tan Sri (Dr) Francis Yeoh

The Business Times, May 8, 2010

Francis Yeoh, the man at the helm of Malaysian conglomerate YTL Corp, shares his business philosophy.

By Joyce Hooi

FRANCIS Yeoh has every right to think of the world as his oyster, but it is more like his pulpit, instead. The Malaysian billionaire at the helm of the conglomerate, YTL Corporation Bhd, frames most things in near-theatrical terms, as the epic struggle between the godly and the godless.

The financial crisis of 2008, for one thing, was more than just a crisis. It was nearly a 'financial armageddon', in Tan Sri Dato' Dr Yeoh's vernacular.

'We were that close to financial armageddon. Surely the world did not worship God, to have pushed us to the edge of collapse,' says Tan Sri Yeoh, whose views as a Christian have prominently gone verse-in-verse with his business philosophy.

YTL Corporation, however, had been nowhere near financial armageddon - not even a financial crisis. At the end of 2008, while heavyweights like 3M Corporation were trimming headcount, YTL was sitting pretty on RM10.1 billion (S$4.5 billion) in fixed deposits alone.

The emphasis on cash, which is simple pragmatism to other business leaders, takes on biblical significance for Tan Sri Yeoh. 'It is about prudence, about the Josephian grain - always store cash like Joseph,' he says, alluding to an Old Testament figure who had stored grain in anticipation of a seven-year famine in Egypt.

'We know that we have always got cash reserves of about US$3.5 billion at any one time, so whatever economic cycle hits you, that's when the opportunities are the most. And if you didn't have the cash or the balance sheet to acquire them, then you've wasted the opportunities that the Lord provides,' says Tan Sri Yeoh, whose businesses currently span the fields of property, construction, communications and energy.

Where Singapore is concerned, Tan Sri Yeoh has certainly not wasted any opportunities, divine or otherwise. As cash flow problems brought other corporations to their knees or at least made them buckle slightly at the end of 2008, Tan Sri Yeoh's 55-year-old company was remarkably spry.

In late 2008, it bought a slice of Starhill Global Real Estate Investment Trust and became the Malaysian presence behind Singapore's most iconic shopping centres like Wisma Atria and Ngee Ann City in the process. For good measure early last year, YTL swept into its cart PowerSeraya Ltd, Singapore's second-largest power generator.

The grand climax of Tan Sri Yeoh's involvement in Singapore, however, will play out tonight at YTL's free outdoor concert in the Singapore Botanic Gardens, where Italian tenor Andrea Bocelli will be singing to thousands of people. The same way Tan Sri Yeoh's cup overfloweth in business, the audience will be overflowing from the gardens' Swan Lake to the adjacent Palm Valley Lawns. Online balloting for free tickets before this had been oversubscribed twenty-fold.

'In the worst of crisis, we still acquired assets in Singapore. And that's why we're having this concert - to celebrate. In a way, it's to celebrate times like these,' says Tan Sri Yeoh. A regular occurrence, there is no way more apt to celebrate than with an operatic expression of triumph, fitting for both YTL's soaring financial performance and Tan Sri Yeoh's penchant for the dramatic.

In 2002, YTL elbowed the Royal Bank of Scotland out of the way en route to a closely fought acquisition of water and sewage firm, Wessex Water, for 1.24 billion, prompting a Telegraph article headlined, 'Who the hell are YTL?'

The following year, YTL flew the Three Tenors into Bath where the Wessex Water head office is based for a jubilant celebration not unlike tonight's one, and treated 12,000 locals to a free outdoor concert. It is almost certain that no one there is asking who the hell YTL are, anymore.

While these celebrations tend to mark the climax of the group's quest for overseas footholds, it is clear that the show for YTL continues long after the curtains go down on the tenors.

Post-acquisitions, YTL's financial statements have built on a crescendo of turnover in formidable fashion.

In an unassuming paragraph on page 18 of the group's Q2 statement for the period ended Dec 31 last year, the PowerSeraya purchase was singled out as the driving force behind the group's 141.7 per cent superlative surge in revenue to RM3.9 billion.

Tan Sri Yeoh, however, is beyond worrying about quarterly earnings. He is gazing decades into the future instead.

Decades, to most other CEOs, are an eternity. But eternity is more than the point for Tan Sri Yeoh, though - it is something to be embraced.

'We are so addicted to this way of life of short-termism, that a CEO's perspective of long term is three years, maximum five years. And he's going to produce some profits every quarter no matter how he does it and then he's going to have a fantastic golden parachute and then retire with hundreds of millions,' he says.

If Tan Sri Yeoh has his way, YTL Corp will still be in business by the time the rapture rolls around.

'YTL continually has businesses that are very long term and regulated in nature, like Seraya. Our water concession in Britain is a concession for perpetuity. Our concession for the national grid in South Australia - the whole grid is a 200-year concession,' he says.

Even in the Reits sector, Tan Sri Yeoh has done it his own way, stretching the nature of the business into one that resembles perpetuity.

'Properties like Reits are very long-term dividend plays. How many corporation in the world like to have so many units as a unitholder? Look at our Starhill Reit in KL. We own more than 50 per cent. When do you see a property player wanting to take part as a unitholder?' he asks.

'They want to be the manager. They probably want to sell the property for a very expensive price and then manage the Reit, make money from it and let the unitholders suffer. But for us, we like to balance the interest between us, the managers, and the unitholders which are also us.'

In the face of criticism for being 'boring', Tan Sri Yeoh is dismissive.

'Call us what you like but I think boring businesses give me exciting cashflow and profits,' he says.

Whatever they might say about ready-mixed concrete and gas-fired combined cycle power plants, his critics will be hard-pressed to call Tan Sri Yeoh's new areas of interest 'boring'.

By the end of this year, YTL will roll out Malaysia's first 4G Worldwide Interoperability for Microwave Access (WiMAX) network nationwide, in an RM2.5 billion-effort. Once the base stations are up and the nation is connected, there will be no turning back, as far as Tan Sri Yeoh is concerned.

'As an analogy, 4G is probably close to colour television and 3G is black- -and-white. It's quite a big difference. It's not high-definition versus low-definition,' he says.

The implications stretch far beyond downloading YouTube videos in the middle of a traffic jam on Jalan Bukit Bintang.

'For me, broadband penetration is very important for an economy like Malaysia's because a 10 per cent increase in broadband penetration pushes the GDP up by 1.3 per cent. Malaysia's broadband penetration today is only 25 per cent. If that improves to 75 per cent, you can imagine we can have 6 or 7 per cent more sustainable growth,' he says.

While he is willing to talk about the 4G network in first-person terms, he is slightly more reticent when it comes to discussing the high-speed train connecting Singapore and Malaysia, an idea he has been mooting for years.

'I don't want to talk particularly about my interest in the high-speed train because I made it quite clear that the high-speed train is a project that will benefit both economies. This is a fact,' Tan Sri Yeoh says, a sliver of frustration briefly coming to the fore.

For now, fact appears inadequate in spurring the project onwards since it was shelved in April 2008. While the reasons for the train's delay are evident, the reasons for its being are blindingly obvious to Tan Sri Yeoh.

'There was a convergence of property values between London and Paris when the train was in action. There's a huge differential between Malaysian and Singapore property, so the wealth effect on the Malaysian value of property will go up and that will be very good for the Malaysians. But actually not just for Malaysians, isn't it?' he says, treading the well-worn path of logic that he has walked the media and the powers-that-be along for the umpteenth time.

'Properties are owned by the world. London, for all intents and purposes, is a global property ownership. Singapore, too. All your buildings and apartments are not owned by Singaporeans only. At the end of the day, an asset, if it goes up in value, benefits all.'

While it remains to be seen whether the high-speed train will come into fruition before the Second Coming does, Tan Sri Yeoh is not taking any chances with this idea of perpetuity.

Even with his father, Yeoh Tiong Lay, still occupying the executive chairman seat at YTL, the search for a successor - or successors, given the sprawling nature of YTL - is on.

Currently, three of his children - Ruth, Jacob and Joseph - have their noses to the grindstone in various parts of the YTL empire, and their cousins will be expected to do the same in due course.

'The next generation must never be mollycoddled. They have to master three languages,' says Tan Sri Yeoh.

'First, the language of God - they have to be steeped in integrity and morality. Second, the language of man - it is very useful to articulate vision and the process to get there. Third, the language of machines. You must be able to handle 4G or any technology to sustain your company.'

One of his sons, Jacob, is the deputy CEO of YTL Communications, the YTL unit pushing the WiMAX network through the peninsula.

It is here that another one of Tan Sri Yeoh's derived maxims emerges, packaged in Yoda-like syntax. 'Much is given, much is expected of them,' he says of the young Yeohs.

'I must say that my next generation of leaders within the family - most of them are from Imperial College, LSE, Oxford, Cambridge and all of them went on their own and they qualified.'

Perpetually mindful of the curse that plagues third-generation wealth and appears to have bypassed his own, Tan Sri Yeoh admits to being a lot harder on the fourth generation of his family.

'The second part of that succession plan, would be to put them through the system so that they work in management levels, until they can become a CEO. Today, YTL has many CEOs that are non-family, like John Ng of (Power)Seraya and Colin Skellett in Wessex Water,' he says.

'So, the next generation of succession must qualify like the John Ngs and Colin Skelletts of the world. They must fight for their place within the company so that they are able to be a CEO first before they become the MD of the group or a director of the board.'

While the group and its MD appear to be making all the right moves, that might paradoxically be the case because they never forget all the wrong ones.

The company has what Tan Sri Yeoh calls, a 'museum of mistakes'. In it, stand the empty tanks once used for a failed dabble in the latex glove business.

'There was once this big boom in latex gloves and they were making a fortune, it seems. So, one of my brothers said, 'Why don't we get into that?'. The economic imperatives were so evident that it was a fantastic business and it was so easy to do,' he says.

'We soon found out that if it was so easy, everybody would do it and everybody was doing it.'

The same museum also houses the detritus of the group's foray into retail. 'We thought we could make T-shirts. Then we found that the retail business is very, very competitive. At the end of the day, we stopped that business but the lesson we got was it's better to own shopping centres than be part of a retail,' he recalls.

These days, when he is not buying stakes in shopping malls, Tan Sri Yeoh guards his time with the same kind of judiciousness applied to the company's cash reserves.

'Time is the ultimate luxury that God can give us,' he says.

Asked what he does with what is left of it on this earthly plane, he says, 'To spend time with people that you like, not the people you have to,' as he takes his leave for his next appointment, hopefully with someone he likes, this time.



Group managing director, YTL, 56

1954 Born in Malaysia

1978 Obtained a Bachelor of Science (Hons) in Civil Engineering from Kingston University, UK

1988 Appointed managing director of YTL Corporation

2002 Awarded the First Malaysian Ernst & Young Master Entrepreneur of the Year Award

2003 Awarded BusinessWeek's "25 Stars of Asia 2003"

2004 Ranked 21 by Fortune Magazine in Asia's 25 Most Powerful Business Personalities

2004 Conferred an Honorary Doctorate of Engineering from Kingston University, UK

2005 Member of Barclays Asia-Pacific Advisory Committee

2006 Awarded the Commander of the Most Excellent Order of the British Empire (CBE) by Her Majesty Queen Elizabeth II

2008 Named one of Asia's Top Executives 2008 by Asiamoney

2008 Appointed chairman for South-east Asia, International Friends of the Louvre









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