27 May 2020 — What do you do each time you stake a multi-million dollar investment and are struck by downturns? Time and time again.
That’s been the persistent tune in the playlist of the Popiah King, Sam Goi of Tee Yih Jia Manufacturing, and the executive chairman of SGX-listed GSH.
Privately-owned Tee Yih Jia was established 50 years ago and it was the spring roll or popiah skins that the company manufactures under its flagship brand Spring Home, all 40 million a day, that gave Goi his title. GSH is his property arm with its footprint in Singapore, Malaysia and China.
Since the sudden passing of his younger son early last year, Goi has kept a low profile. In this rare interview with him on Business Unusual, I quizzed Goi on lessons he could apply in his 50 years of building his billion-dollar businesses. Goi conceded that the effect of the coronavirus, compared to the other crises he’s been through is “a hundred times” worse. But this steely business leader is taking it all in his stride.
“In 1987 during the (oil crisis) I built a new factory. In ’97 (during the Asian Financial Crisis), I also built a new factory. Now, with Covid-19, I’m building my biggest factory,” said Goi, referring to a S$400 million automated cold storage warehouse he’s building beside his current factory in Singapore.
To add to the list of inopportune investments, when he acquired the 5-star 1000-room resort in East Malaysia, Sutera Harbour Resort, in 2014 he was greeted two months later with the shocking disappearance of the Malaysia Airlines plane en route from Kuala Lumpur to Beijing. The anger of the Chinese over Malaysia’s handling of the missing aircraft led to a backlash: Chinese tourist numbers plunged significantly. Almost overnight, occupancy at Sutera Harbour slipped to 40%.
For Goi, it is all about keeping faith and staying the course. “You must be confident in yourself”, he asserted.
When I probed further, I discovered that this confidence isn’t just a nebulous self-belief. The key to his ability to stay the course is his strong conviction to keep gearing in control.
Gear Low to Stay High
“I’m always worried about gearing too high. I seldom take up loans from the bank for my business,” he revealed. If it were up to him, he said, he would ensure loans were no more than 20% of the asset. In this way, even when things go south, he can keep things going. Any more leverage than that, Goi said, and it’ll be very challenging, like the effects of this Covid-19 crisis.
But prudence has paid off. With S$113 million in cash and cash equivalent in GSH’s coffers in 2019, Goi is confident in riding through the crisis.
“Our cash flow shouldn’t be a problem because we are a listed company and we don’t borrow too much money. We have cash in the bank until the end of next year,” said Goi. GSH’s current ratio in 2019 was a very healthy 2.1.
Expend Before You Expand
Other than a strong cash position, Goi is also conservative in his expenditure. In his food manufacturing business, expansion must be justified by demand. “If there’s a shortage (of production), we work overtime, even Saturdays and Sundays. But if we still can’t cope with demand, then we will buy a new machine and expand,” Goi said.
He reveals that the food manufacturing business is not a get-rich-quick venture. His investments can take between 10 and 30 years to reap returns. Clearly, a strong cash position helps in the building of patient capital.
In the light of the world recovering from the pandemic, it is a rare chance for businesses to hit the reset button. Perhaps it’s time to re-look the glorification of companies with insane valuations – companies that are running on the fumes of media spotlights, venture capital infusions, and the fickleness of consumers driven by novelty more than real value. Perhaps good old-fashioned/boring principles of keeping healthy balance sheets and building on real value may be the way forward. In view of how the pandemic is cleaning out the economy of debt-ridden businesses, that could just be the default position as the only companies that are left standing when the dust settles will be those that have been built on solid ground, not shifting sand.