Asian Insight Provider - Actionable ideas, CrossASEAN Research

Henry Soediarko

Asian Insight Provider - Actionable ideas

CrossASEAN Research

At CrossASEAN Research we strive to produce unbiased and differentiated on the ground insights on companies across South East Asia. Our Research is produced for the most part after face to face meetings and conversations with company management to dig deep into the long term vision and strategy of the companies we cover. We seek to deliver investable and actionable themes on sectors and markets across SE Asia, often in collaboration with other Insight Providers across the region, pooling the vast experience of the analysts within the Smartkarma Ecosystem. We also offer bespoke work and tailor made trips for our clients. 

Insights across South East Asia

Thematic (Sector/Industry)

The National Automotive Policy 2020 (NAP 2020) has been officially launched, building on NAP 2014, focusing on launching Malaysia as the regional leader in the automotive sector. The focus will be on the development of Next-Generation Vehicles (NxGV), Mobility as a Service (MaaS) and Industry 4.0 that encompasses the development of Automated, Autonomous, Connected Vehicles (AACV), lightweight material technology as well as hybrid, electric and fuel cell vehicles. 
<a href="https://www.smartkarma.com/entities/drb-hicom-bhd" target="_blank" data-smartkarma-citation="entities:19627:1" rel="noopener">DRB-Hicom Bhd (DRB MK)</a> through Proton and Puspakom, <a href="https://www.smartkarma.com/entities/mbm-resources-bhd" target="_blank" data-smartkarma-citation="entities:3993:1" rel="noopener">Mbm Resources (MBM MK)</a> and <a href="https://www.smartkarma.com/entities/umw-holdings-bhd" target="_blank" data-smartkarma-citation="entities:1700:1" rel="noopener">Umw Holdings (UMWH MK)</a> stand as the beneficiaries through multiple prongs of the NAP including autonomous vehicles, lighter material, hybrid and aim to be Energy Efficient Vehicle hub. 
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Thanks in advance for reading this insight!  Please give this a thumbs up if you find this useful and follow me on Smartkarma for more original and actionable insights. Your continuing support renders a continuity of more original and actionable insights.  
</div>

The National Automotive Policy 2020 (NAP 2020) has been officially launched, building on NAP 2014, focusing on launching Malaysia as the regional leader in the automotive sector. The focus will be on the development of Next-Generation Vehicles (NxGV), Mobility as a Service (MaaS) and Industry 4.0 that encompasses the development of Automated, Autonomous, Connected Vehicles (AACV), lightweight material technology as well as hybrid, electric and fuel cell vehicles. 
DRB-Hicom Bhd (DRB MK) through Proton and Puspakom, Mbm Resources (MBM MK) and Umw Holdings (UMWH MK) stand as the beneficiaries through multiple prongs of the NAP including autonomous vehicles, lighter material, hybrid and aim to be Energy Efficient Vehicle hub. 

Thanks in advance for reading this insight!  Please give this a thumbs up if you find this useful and follow me on Smartkarma for more original and actionable insights. Your continuing support renders a continuity of more original and actionable insights.  


Malaysia National Automotive Policy 2020: Beneficiaries

Equity Bottom-Up

Since the beginning of 2018, the company has expanded its business from a Malaysian e-government service provider to a regional e-government service provider (for Indonesian and the Phillippines), proving that the management's past achievement in Malaysia was not achieved by trading favor rather with a superior product offering. 
The concession license is up for renewal sometime soon but so far there is no other competitor like My EG thus maybe the license renewal is not really an issue after all. The company is also backed by a solid mixture of domestic and foreign growth-oriented, low-turnover investors. In addition to that, the key personnel including Chief Technology Officer is a top shareholder.
Trading at 19x historical PER makes <a href="https://www.smartkarma.com/entities/my-eg-services-bhd" target="_blank" data-smartkarma-citation="entities:19765:1" rel="noopener">My E.G. Services (MYEG MK)</a> is valued at a 53% discount to its 3-year-average PER and a 60% discount to the 2019 average PER. Compared to its peers, My EG is trading at a 40% discount in PER while generating 450% higher ROIC. 
The regional expansion to Indonesia and the Philippines is just starting with vast potential. <a href="https://www.smartkarma.com/entities/my-eg-services-bhd" target="_blank" data-smartkarma-citation="entities:19765:1" rel="noopener">My E.G. Services (MYEG MK)</a> is a counter-cyclical stock of choice for a long term growth investor.

Since the beginning of 2018, the company has expanded its business from a Malaysian e-government service provider to a regional e-government service provider (for Indonesian and the Phillippines), proving that the management's past achievement in Malaysia was not achieved by trading favor rather with a superior product offering. 
The concession license is up for renewal sometime soon but so far there is no other competitor like My EG thus maybe the license renewal is not really an issue after all. The company is also backed by a solid mixture of domestic and foreign growth-oriented, low-turnover investors. In addition to that, the key personnel including Chief Technology Officer is a top shareholder.
Trading at 19x historical PER makes My E.G. Services (MYEG MK) is valued at a 53% discount to its 3-year-average PER and a 60% discount to the 2019 average PER. Compared to its peers, My EG is trading at a 40% discount in PER while generating 450% higher ROIC. 
The regional expansion to Indonesia and the Philippines is just starting with vast potential. My E.G. Services (MYEG MK) is a counter-cyclical stock of choice for a long term growth investor.

My EG (MyEG): A Move to Become Regional Player

Chief Economist & Political Strategist, CrossASEAN Research

Prasenjit K. Basu

Chief Economist & Political Strategist

Cross Asset Strategy

Boris Johnson has secured the strongest Conservative mandate since Margaret Thatcher in 1987, with an 80-seat majority in the House of Commons and a nationwide vote-share of 43.6% (the highest for the Conservatives since 1970). Britain has voted emphatically for Brexit, with the Liberal Democrats (the one party clearly repudiating Brexit) slumping to just 11 of the 650 Commons seats, and losing their leader Jo Swinson's parliamentary seat. PM Johnson's pledge to govern as a "One-Nation Conservative" is credible, given his record as Mayor of London, although his initial focus will be securing Brexit by Christmas and an FTA with the EU in 2020. Although the Scottish National Party (SNP) won 48 of the 59 seats in Scotland, the Conservatives finished second there for the second consecutive time, with 6 seats and 25.6% of the vote (versus 45% for SNP). Labour had dominated Scotland until the 2015 election (in which the SNP won 50% of the vote and 56 seats, up from 6 seats in 2010 to 41 for Labour), but slumped to a single seat and 18% of the vote this time. With 45% of Scottish votes in 2019, the SNP claim that it has a mandate for a second referendum on Scottish independence (after the first in 2014) does not stand up to scrutiny. In Northern Ireland, however, the Irish nationalist parties have won more seats and votes than the Unionists for the first time since the Partition of Ireland in 1922.    Given PM Johnson's clear mandate and large majority, he is likely to surprise the commentariat by delivering not only Brexit this month, but also an FTA with the EU by the end of 2020. Irish PM Leo Varadkar will be a key ally in securing both outcomes, given that Irish commercial reunification is assured by the end of this month, and political reunification becomes a likely outcome before too long. Scotland, however, will not have a second referendum on independence during the next 5 years; instead, the FTA with the EU is likely to ameliorate Scottish concerns about Brexit. Britain will be free to negotiate additional trade deals with other key partners (the US, ASEAN, India, Japan, Australia and New Zealand) by the end of 2020. The removal of uncertainty will provide a strong boost to investment spending in the UK. We are solidly positive about British economic and market prospects in 2020.

Boris Johnson has secured the strongest Conservative mandate since Margaret Thatcher in 1987, with an 80-seat majority in the House of Commons and a nationwide vote-share of 43.6% (the highest for the Conservatives since 1970). Britain has voted emphatically for Brexit, with the Liberal Democrats (the one party clearly repudiating Brexit) slumping to just 11 of the 650 Commons seats, and losing their leader Jo Swinson's parliamentary seat. PM Johnson's pledge to govern as a "One-Nation Conservative" is credible, given his record as Mayor of London, although his initial focus will be securing Brexit by Christmas and an FTA with the EU in 2020. Although the Scottish National Party (SNP) won 48 of the 59 seats in Scotland, the Conservatives finished second there for the second consecutive time, with 6 seats and 25.6% of the vote (versus 45% for SNP). Labour had dominated Scotland until the 2015 election (in which the SNP won 50% of the vote and 56 seats, up from 6 seats in 2010 to 41 for Labour), but slumped to a single seat and 18% of the vote this time. With 45% of Scottish votes in 2019, the SNP claim that it has a mandate for a second referendum on Scottish independence (after the first in 2014) does not stand up to scrutiny. In Northern Ireland, however, the Irish nationalist parties have won more seats and votes than the Unionists for the first time since the Partition of Ireland in 1922.    Given PM Johnson's clear mandate and large majority, he is likely to surprise the commentariat by delivering not only Brexit this month, but also an FTA with the EU by the end of 2020. Irish PM Leo Varadkar will be a key ally in securing both outcomes, given that Irish commercial reunification is assured by the end of this month, and political reunification becomes a likely outcome before too long. Scotland, however, will not have a second referendum on independence during the next 5 years; instead, the FTA with the EU is likely to ameliorate Scottish concerns about Brexit. Britain will be free to negotiate additional trade deals with other key partners (the US, ASEAN, India, Japan, Australia and New Zealand) by the end of 2020. The removal of uncertainty will provide a strong boost to investment spending in the UK. We are solidly positive about British economic and market prospects in 2020. 

Tory Landslide Prepares the Ground for an Economic Rebound for GB and Ireland

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

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This week in StubWorld ...
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<a href="https://www.smartkarma.com/entities/genting-bhd" target="_blank" data-smartkarma-citation="entities:14210:1" rel="noopener">Genting Bhd (GENT MK)</a>'s discount to NAV and implied stub are at 12-month NAV lows, but questions linger as to whether Resort World Las Vegas has the necessary growth to be materially accretive.
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Preceding my comments on Genting and <a href="https://www.smartkarma.com/entities/jardine-matheson-hldgs-ltd" target="_blank" data-smartkarma-citation="entities:19718:1" rel="noopener">Jardine Matheson Hldgs (JM SP)</a> / <a href="https://www.smartkarma.com/entities/jardine-strategic-hldgs-ltd" target="_blank" data-smartkarma-citation="entities:15081:1" rel="noopener">Jardine Strategic Hldgs (JS SP)</a>, are the weekly setup/unwind tables for Asia-Pacific Holdcos.
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These relationships trade with a minimum liquidity threshold of US$1mn on a 90-day moving average, and a % market capitalisation threshold - the $ value of the holding/opco held, over the parent’s market capitalisation, expressed in percent - of at least 20%.
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This week in StubWorld ...



Genting Bhd (GENT MK)'s discount to NAV and implied stub are at 12-month NAV lows, but questions linger as to whether Resort World Las Vegas has the necessary growth to be materially accretive.


Preceding my comments on Genting and Jardine Matheson Hldgs (JM SP) / Jardine Strategic Hldgs (JS SP), are the weekly setup/unwind tables for Asia-Pacific Holdcos.

These relationships trade with a minimum liquidity threshold of US$1mn on a 90-day moving average, and a % market capitalisation threshold - the $ value of the holding/opco held, over the parent’s market capitalisation, expressed in percent - of at least 20%.


StubWorld: Las Vegas Bet To Elevate Genting?

SGX Market Strategist, Equity & Fixed Income, Singapore Exchange Ltd (SGX)

Geoff Howie

SGX Market Strategist, Equity & Fixed Income

Asia’s leading multi-asset exchange

Singapore Exchange Ltd (SGX)

Singapore Exchange is Asia’s leading and trusted market infrastructure, facilitating the exchange of capital and ideas to create value for people, businesses and economies. As a multi-asset exchange operating equity, fixed income and derivatives markets to the highest regulatory standards, SGX is a vertically integrated business that provides listing, trading, clearing, settlement, depository and data services.

With about 40% of listed companies and over 80% of listed bonds originating outside of Singapore as well as established linkages across the region and in Europe, SGX is Asia’s most international and connected exchange. Offering a full suite of derivatives products across Asian equity indices, commodities and currencies, SGX is the world’s most liquid international market for the benchmark equity indices of China, India, Japan and ASEAN.

As Asia’s pioneering central counterparty, SGX is globally recognised for its risk management and clearing capabilities, and was one of the first globally to adopt the Principles for Financial Market Infrastructure.

Headquartered in AAA-rated Singapore, SGX has over 800 employees including offices in Beijing, Chicago, Hong Kong, London, New York, Mumbai, San Francisco, Shanghai and Tokyo.

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Seah Kiin Peng, CEO of SGX-listed reinforcing steel fabricator BRC Asia Ltd, seeks opportunities to initiate change and influence events. 
Reminiscent of the "dreamers of dreams" in English poet Arthur O'Shaughnessy's "Ode", the 43-year-old aspires to be among "the movers and shakers of the world". 
"Management and people, dealmaking and making a difference - these are my passions," said Seah, who graduated with Bachelor and Masters of Science in Management degrees from the London School of Economics and Political Science. 
"As BRC Asia is a manufacturing entity serving the cyclical construction industry, it's a day-to-day, month-to-month, and quarter-to-quarter ride through the waves - we need to make sure our staff have good working conditions and keep their jobs, and that we're able to deliver quality products to our customers on time." 
Seah began his career in the Singapore Foreign Service before joining the shipping industry. In March 2010, he was appointed Executive Director of BRC Asia, with then-Group Managing Director Lim Siak Meng as his mentor. Eight years later, Seah was named the Group's Chief Executive Officer. 
"The purpose of my entry into BRC Asia was very clear - this was part of the Group's succession planning," he recalled.  
In the early years, Seah faced his fair share of stumbling blocks. At one point, BRC Asia's survival was called into question after Lim was hospitalised for a period of time and competitors began nipping at the company's heels. "We were fighting fires on several fronts, and many people said we wouldn't make it. But we did." 
Lim officially retired in November 2017. "By then, the team that had been nurtured over the years was ready to step into his shoes and take the business forward," Seah said. 
"Our management team now has a good mix of professional managers and shareholder representatives," he added, referring to Esteel Enterprise, which holds more than 70% of BRC Asia. Esteel - owned by You Zhenhua's Advance Venture Investments and Liu Bin's TopTip Holding - completed its takeover of the Group in September 2017. 
Incorporated in 1938 in Singapore, BRC Asia was listed on the Mainboard of Singapore Exchange in July 2000, and has a current market capitalisation of about S$320 million. In the year-to-date, the stock has generated a total return of 7.9%, compared with total returns of 5.2% and 7.2% for the benchmark Straits Times Index (STI) and broader FTSE ST All-Share Index respectively. 
The Group, which draws on more than a century of expertise in steel fabrication technology originating from Britain, designs and manufactures a range of prefabricated reinforcing steel products. Ranging from cages for beams, columns and pile caps, as well as mesh for household shelters, to heavy prefabricated beam and column reinforcement, these innovative products aim to help contractors construct "better, faster, and therefore cheaper". 
With factories in Singapore, Malaysia and China, BRC Asia caters to builders in public and private housing sectors, as well as the commercial and industrial space. A strong proponent of off-site prefabrication, the Group helps clients cut down laborious and inefficient in situ steel fixing work, allowing them to enjoy greater on-site productivity and shorter construction cycles. 
As a testament to the recognition of its brand, steel meshes in many markets are known simply as "BRC". The Group has also participated in a number of iconic projects, such as Singapore's Marina Bay Sands and Resorts World Sentosa integrated resorts, as well as the world's tallest public housing project, The Pinnacle@Duxton. 

 

Asia Beckons  
Last July, BRC Asia completed its S$200 million purchase of 100% of Lee Metal Group Ltd, a distributor, fabricator and international trader of steel products. According to analyst estimates, the acquisition is expected to have raised BRC Asia's market share to 45%-55% from about 20%-30%. 
The Group has expanded its net asset value (NAV) to nearly S$200 million prior to the Lee Metal takeover, from below S$40 million in 2006, thanks largely to the management team led by Lim. After coming on board, Seah also focused on extending the Group's reach beyond domestic shores, into Malaysia - which he started from scratch - and China.  
Now, being the largest reinforcing steel fabricator in Singapore post-acquisition, and with established operations in two overseas markets, the Group is eyeing opportunities in the rest of Asia.  
"Demand in Singapore is mature, and we need to explore new markets," he said. "We want to leverage on the resources, facilities and expertise available in Singapore, Malaysia and China to broaden and deepen our reach - our vision is to be the region's reinforcing steel powerhouse."  
With this in mind, BRC Asia has embarked on steel trading and distribution activities in Thailand and Indonesia. "Our trading and distribution platform offers good insight into these economies, and we intend to use it to venture into these markets. A lot will still depend on how ready these countries are to accept our products, and that will vary across the region." 
Apart from the risks and challenges of venturing abroad, BRC Asia is also grappling with integration pains. 
"What is most challenging about any acquisition is the people and the culture. It's extremely tough to achieve cohesiveness within a short period of time, especially when you've had no prior relationships with the people whom you are integrating with," Seah pointed out. 
"While there's no question about the Group being able to perform efficiently, to have a unified and united group - and not just at management level - takes time. This is a target we'll be working towards over the next two years."

 

The Next Lap 
Meanwhile, the sector's improving prospects bode well for the Group. Singapore's construction sector grew 2.7% year-on-year in the third quarter of this year, extending the 2.8% and 2.7% expansion rates seen in the first two quarters of 2019, according to advance estimates released by the Ministry of Trade and Industry earlier this week. 
According to Singapore's Building and Construction Authority (BCA), domestic construction demand is expected to hold steady or edge higher this year from 2018. The value of construction contracts to be awarded in 2019 is projected to range between S$27 billion and S$32 billion, versus a preliminary estimate of S$30.5 billion awarded in 2018, BCA data showed. 
This will be driven by sustained public sector construction demand, stemming from a pipeline of major infrastructure and industrial building projects, as well as private sector activity, comprising redevelopment of en-bloc residential sales sites and new industrial developments.  
Over the medium term, Singapore's construction activity will likely continue to improve, according to BCA data. Demand is estimated to reach between S$27 billion and S$34 billion per year in 2020 and 2021, and could increase to between S$28 billion and S$35 billion per year in 2022 and 2023. 
Besides public housing developments, large government infrastructure projects will underpin demand. These include the S$9 billion expansion plan for Singapore's two integrated resorts, the Cross Island high-capacity subway line spanning east and west, a new integrated tourism development at Jurong Lake District, Changi Airport Terminal 5, and Tuas Megaport. 
"The government is embarking on the next lap of nation-building, and I would expect the next decade to be a busy one in terms of public sector construction demand," Seah added. 
The outlook for China and Malaysia also remains bright. Apart from the sheer size of the China market, steel prefabrication as a method of construction is expected to gain popularity, and enter a fast-growing phase because of the government-led, nationwide push for green construction. According to industry estimates, the country's steel prefab market could grow at a compound annual rate of 14%-24% between 2018 and 2020. 
Meanwhile, the Malaysian construction sector is expected to register a CAGR of 4.7% between 2019 and 2024, according to data from Mordor Intelligence. The sector had averaged a 7.9% annual growth rate from 2010 to 2016, underpinned by government infrastructure investments under the 10th Malaysia Plan 2011-2015. 
As at 30 June 2019, BRC Asia's order book stood at about S$1 billion. The duration of its projects may span up to five years. 
 

No Lip Service 
Industry prospects aside, Seah is also focused on customer experience. "Servicing clients tends to keep me up at night quite a bit," he admitted. 
Reflecting the Group's commitment to efficient, timely deliveries and customer satisfaction, individual chat groups are created for each major project. "My name in the chat group tells the contractor that we are not a company that pays lip service to customer support," he said. 
And when Seah is not consumed by the Group's day-to-day operations, he can be found with his children - two boys and a girl, aged six, eight and 10. "It doesn't really matter what we do, it can be something inane like me nagging them or chauffeuring them from place to place. But when kids need help or advice, the person they turn to is the one they've spent time with." 
For him, a source of good counsel is the lyrics of "Everybody's Free (To Wear Sunscreen)", a spoken-word track known as The Sunscreen Song, released in 1999 by Australian writer, director and producer Baz Luhrmann.  
"This song is full of truisms," Seah grinned, referring to lyrics like "You will not understand the power and beauty of your youth / Until they have faded, but trust me, in 20 years, you'll look back / At photos of yourself and recall in a way you can't grasp now / How much possibility lay before you and how fabulous you really looked". 
The ditty also champions the axiom that fretting over the future is useless: "Don't worry about the future / Or worry, but know that worrying is as effective as trying to solve an algebra equation by chewing bubble gum". 
Instead, the song recommends you "Do the one thing every day that scares you". This can-do attitude is one of Seah's touchstones. "Before you embark on something, think it through. But once you've decided, stop hesitating and take the leap," he said. 
"If you're always saying 'No' and "Can't', you'll never succeed. Don't be afraid - just try!"

 BRC Asia Ltd

Incorporated in 1938 and listed on SGX Mainboard, BRC Asia is a leading solutions provider for prefabricated reinforcing steel, offering products such as 12m standard length rebar, standard and customised welded wire mesh, as well as cut and bend services for rebar and prefabrication service. Through the use of off-site prefab technology, BRC Asia helps customers cut down on laborious and inefficient in-situ steel fixing work, resulting in increased on-site productivity and consequently, shorter construction cycles. The Group currently employs more than 1,000 people in Singapore, Malaysia and China.  
The company website is: <a href="http://edm.sgx.com/a/hBdqRypB86%24MfB9z79OAABR54OZ/link8">www.brc.com.sg</a>. 
Click <a href="http://edm.sgx.com/a/hBdqRypB86%24MfB9z79OAABR54OZ/link9">here</a> for the company's StockFacts page. 
For the three months ended 30 June 2019 financial results, click <a href="http://edm.sgx.com/a/hBdqRypB86%24MfB9z79OAABR54OZ/link10">here</a>.

 About kopi-C: the Company brew

Text: Jennifer LH Tan Photo: Company file kopi-C is a regular column on the SGX Research website that features C-level executives of leading companies listed on Singapore Exchange. These interviews are profiles of senior management aimed at helping investors better understand the individuals who run these corporations. 
For previous editions of kopi-C: the Company brew, please click <a href="http://edm.sgx.com/a/hBdqRypB86%24MfB9z79OAABR54OZ/link11">here</a>.   
For more information, or if you would like your senior executives to be featured on SGX Market Dialogues, please send suggestions to <a href="mailto:jennifer.tan@sgx.com">jennifer.tan@sgx.com</a>.
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    BRC Asia


Seah Kiin Peng, CEO of SGX-listed reinforcing steel fabricator BRC Asia Ltd, seeks opportunities to initiate change and influence events.  
Reminiscent of the "dreamers of dreams" in English poet Arthur O'Shaughnessy's "Ode", the 43-year-old aspires to be among "the movers and shakers of the world".  
"Management and people, dealmaking and making a difference - these are my passions," said Seah, who graduated with Bachelor and Masters of Science in Management degrees from the London School of Economics and Political Science.  
"As BRC Asia is a manufacturing entity serving the cyclical construction industry, it's a day-to-day, month-to-month, and quarter-to-quarter ride through the waves - we need to make sure our staff have good working conditions and keep their jobs, and that we're able to deliver quality products to our customers on time."  
Seah began his career in the Singapore Foreign Service before joining the shipping industry. In March 2010, he was appointed Executive Director of BRC Asia, with then-Group Managing Director Lim Siak Meng as his mentor. Eight years later, Seah was named the Group's Chief Executive Officer.  
"The purpose of my entry into BRC Asia was very clear - this was part of the Group's succession planning," he recalled.   
In the early years, Seah faced his fair share of stumbling blocks. At one point, BRC Asia's survival was called into question after Lim was hospitalised for a period of time and competitors began nipping at the company's heels. "We were fighting fires on several fronts, and many people said we wouldn't make it. But we did."  
Lim officially retired in November 2017. "By then, the team that had been nurtured over the years was ready to step into his shoes and take the business forward," Seah said.  
"Our management team now has a good mix of professional managers and shareholder representatives," he added, referring to Esteel Enterprise, which holds more than 70% of BRC Asia. Esteel - owned by You Zhenhua's Advance Venture Investments and Liu Bin's TopTip Holding - completed its takeover of the Group in September 2017.  
Incorporated in 1938 in Singapore, BRC Asia was listed on the Mainboard of Singapore Exchange in July 2000, and has a current market capitalisation of about S$320 million. In the year-to-date, the stock has generated a total return of 7.9%, compared with total returns of 5.2% and 7.2% for the benchmark Straits Times Index (STI) and broader FTSE ST All-Share Index respectively.  
The Group, which draws on more than a century of expertise in steel fabrication technology originating from Britain, designs and manufactures a range of prefabricated reinforcing steel products. Ranging from cages for beams, columns and pile caps, as well as mesh for household shelters, to heavy prefabricated beam and column reinforcement, these innovative products aim to help contractors construct "better, faster, and therefore cheaper".  
With factories in Singapore, Malaysia and China, BRC Asia caters to builders in public and private housing sectors, as well as the commercial and industrial space. A strong proponent of off-site prefabrication, the Group helps clients cut down laborious and inefficient in situ steel fixing work, allowing them to enjoy greater on-site productivity and shorter construction cycles.  
As a testament to the recognition of its brand, steel meshes in many markets are known simply as "BRC". The Group has also participated in a number of iconic projects, such as Singapore's Marina Bay Sands and Resorts World Sentosa integrated resorts, as well as the world's tallest public housing project, The Pinnacle@Duxton. 

 

Asia Beckons   
Last July, BRC Asia completed its S$200 million purchase of 100% of Lee Metal Group Ltd, a distributor, fabricator and international trader of steel products. According to analyst estimates, the acquisition is expected to have raised BRC Asia's market share to 45%-55% from about 20%-30%.  
The Group has expanded its net asset value (NAV) to nearly S$200 million prior to the Lee Metal takeover, from below S$40 million in 2006, thanks largely to the management team led by Lim. After coming on board, Seah also focused on extending the Group's reach beyond domestic shores, into Malaysia - which he started from scratch - and China.   
Now, being the largest reinforcing steel fabricator in Singapore post-acquisition, and with established operations in two overseas markets, the Group is eyeing opportunities in the rest of Asia.   
"Demand in Singapore is mature, and we need to explore new markets," he said. "We want to leverage on the resources, facilities and expertise available in Singapore, Malaysia and China to broaden and deepen our reach - our vision is to be the region's reinforcing steel powerhouse."   
With this in mind, BRC Asia has embarked on steel trading and distribution activities in Thailand and Indonesia. "Our trading and distribution platform offers good insight into these economies, and we intend to use it to venture into these markets. A lot will still depend on how ready these countries are to accept our products, and that will vary across the region."  
Apart from the risks and challenges of venturing abroad, BRC Asia is also grappling with integration pains.  
"What is most challenging about any acquisition is the people and the culture. It's extremely tough to achieve cohesiveness within a short period of time, especially when you've had no prior relationships with the people whom you are integrating with," Seah pointed out.  
"While there's no question about the Group being able to perform efficiently, to have a unified and united group - and not just at management level - takes time. This is a target we'll be working towards over the next two years."

 

The Next Lap  
Meanwhile, the sector's improving prospects bode well for the Group. Singapore's construction sector grew 2.7% year-on-year in the third quarter of this year, extending the 2.8% and 2.7% expansion rates seen in the first two quarters of 2019, according to advance estimates released by the Ministry of Trade and Industry earlier this week.  
According to Singapore's Building and Construction Authority (BCA), domestic construction demand is expected to hold steady or edge higher this year from 2018. The value of construction contracts to be awarded in 2019 is projected to range between S$27 billion and S$32 billion, versus a preliminary estimate of S$30.5 billion awarded in 2018, BCA data showed.  
This will be driven by sustained public sector construction demand, stemming from a pipeline of major infrastructure and industrial building projects, as well as private sector activity, comprising redevelopment of en-bloc residential sales sites and new industrial developments.   
Over the medium term, Singapore's construction activity will likely continue to improve, according to BCA data. Demand is estimated to reach between S$27 billion and S$34 billion per year in 2020 and 2021, and could increase to between S$28 billion and S$35 billion per year in 2022 and 2023.  
Besides public housing developments, large government infrastructure projects will underpin demand. These include the S$9 billion expansion plan for Singapore's two integrated resorts, the Cross Island high-capacity subway line spanning east and west, a new integrated tourism development at Jurong Lake District, Changi Airport Terminal 5, and Tuas Megaport.  
"The government is embarking on the next lap of nation-building, and I would expect the next decade to be a busy one in terms of public sector construction demand," Seah added.  
The outlook for China and Malaysia also remains bright. Apart from the sheer size of the China market, steel prefabrication as a method of construction is expected to gain popularity, and enter a fast-growing phase because of the government-led, nationwide push for green construction. According to industry estimates, the country's steel prefab market could grow at a compound annual rate of 14%-24% between 2018 and 2020.  
Meanwhile, the Malaysian construction sector is expected to register a CAGR of 4.7% between 2019 and 2024, according to data from Mordor Intelligence. The sector had averaged a 7.9% annual growth rate from 2010 to 2016, underpinned by government infrastructure investments under the 10th Malaysia Plan 2011-2015.  
As at 30 June 2019, BRC Asia's order book stood at about S$1 billion. The duration of its projects may span up to five years. 
 

No Lip Service  
Industry prospects aside, Seah is also focused on customer experience. "Servicing clients tends to keep me up at night quite a bit," he admitted.  
Reflecting the Group's commitment to efficient, timely deliveries and customer satisfaction, individual chat groups are created for each major project. "My name in the chat group tells the contractor that we are not a company that pays lip service to customer support," he said.  
And when Seah is not consumed by the Group's day-to-day operations, he can be found with his children - two boys and a girl, aged six, eight and 10. "It doesn't really matter what we do, it can be something inane like me nagging them or chauffeuring them from place to place. But when kids need help or advice, the person they turn to is the one they've spent time with."  
For him, a source of good counsel is the lyrics of "Everybody's Free (To Wear Sunscreen)", a spoken-word track known as The Sunscreen Song, released in 1999 by Australian writer, director and producer Baz Luhrmann.   
"This song is full of truisms," Seah grinned, referring to lyrics like "You will not understand the power and beauty of your youth / Until they have faded, but trust me, in 20 years, you'll look back / At photos of yourself and recall in a way you can't grasp now / How much possibility lay before you and how fabulous you really looked".  
The ditty also champions the axiom that fretting over the future is useless: "Don't worry about the future / Or worry, but know that worrying is as effective as trying to solve an algebra equation by chewing bubble gum".  
Instead, the song recommends you "Do the one thing every day that scares you". This can-do attitude is one of Seah's touchstones. "Before you embark on something, think it through. But once you've decided, stop hesitating and take the leap," he said.  
"If you're always saying 'No' and "Can't', you'll never succeed. Don't be afraid - just try!"

 BRC Asia Ltd

Incorporated in 1938 and listed on SGX Mainboard, BRC Asia is a leading solutions provider for prefabricated reinforcing steel, offering products such as 12m standard length rebar, standard and customised welded wire mesh, as well as cut and bend services for rebar and prefabrication service. Through the use of off-site prefab technology, BRC Asia helps customers cut down on laborious and inefficient in-situ steel fixing work, resulting in increased on-site productivity and consequently, shorter construction cycles. The Group currently employs more than 1,000 people in Singapore, Malaysia and China.   
The company website is: www.brc.com.sg.  
Click here for the company's StockFacts page.  
For the three months ended 30 June 2019 financial results, click here.

  About kopi-C: the Company brew

Text: Jennifer LH Tan Photo: Company file  kopi-C is a regular column on the SGX Research website that features C-level executives of leading companies listed on Singapore Exchange. These interviews are profiles of senior management aimed at helping investors better understand the individuals who run these corporations.  
For previous editions of kopi-C: the Company brew, please click here.    
For more information, or if you would like your senior executives to be featured on SGX Market Dialogues, please send suggestions to jennifer.tan@sgx.com.



BRC Asia: Forging a Reinforcing Steel Powerhouse 

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