Ac­tive Or­ganic El­e­ments

Afterer se­cur­ing an earearly suc­cess for the three-year-old Gold­bell Fi­nan­ciali Ser­vices, Mr. Alex Chua, CEO, ex­pounds on the virtue of keep­ing to one’s roots, tak­ing the sup­port­ing role, and not eas­ily equat­ing ‘size’ with ‘growth’

Portfolio - - IN THIS ISSUE - By Marc Al­ma­gro

Mr. Alex Chua ex­pounds on the virtue of keep­ing to one’s roots, tak­ing the sup­port­ing role, and not eas­ily equat­ing ‘size’ with ‘growth’

What even­tu­ally grew into Gold­bell Group be­gan its op­er­a­tion in 1980, the year that Mr. Alex Chua was born. His grand­fa­ther, the late Mr. Chua Kim Cheng, and his fa­ther, Mr. Wil­liam Chua, who is cur­rently the Group chair­man, set up a dis­tri­bu­tion com­pany for trucks, grad­u­ally ex­pand­ing into fork­lifts, other heavy equip­ment, and GPUs (ground power units).

When some cus­tomers for heavy equip­ment did not have the re­sources to ac­quire them, they set up a leas­ing business. Later on, with in­creas­ing num­ber of cus­tomers re­quir­ing pri­vate ve­hi­cles for their for­eign ex­ec­u­tives sta­tioned in Sin­ga­pore, they or­ga­nized a fleet of pri­vate ve­hi­cles on long-term lease.

To­day, the spread of Gold­bell Group’s prod­ucts and ser­vices is enor­mous, en­com­pass­ing dis­tri­bu­tion and leas­ing of ve­hi­cles and equip­ment, as well as fi­nan­cial ser­vices. De­spite its size, a sense of or­der pre­vails in the com­pany, or­ga­niz­ing and in­te­grat­ing ev­ery part of the or­ga­ni­za­tion. This or­ganic growth serves the com­pany well, whether in de­vel­op­ing new prod­ucts and ser­vices or har­ness­ing ef­fi­cien­cies be­tween the business units.

The Group’s client base has ex­panded along­side the pro­vi­sion of new ser­vices, and now spans nearly every­thing from con­struc­tion and lo­gis­tics com­pa­nies to ser­vice and man­u­fac­tur­ing firms. “We do every­thing that runs on the road,” Mr. Chua says, “from four wheels to six­teen wheels, across all in­dus­tries.”

De­fine and Own the Role

Thirty-eight-year-old Gold­bell Group is not a house­hold name that the busi­nesses it sup­ports have be­come. Many peo­ple who know the name from Gold­bell Tower, the Group’s Sin­ga­pore head­quar­ter, are not aware of its business ac­tiv­i­ties, de­spite its 60 per cent share in Sin­ga­pore’s com­mer­cial ve­hi­cle leas­ing mar­ket.

Mr. Chua em­pha­sizes that the Group has de­lib­er­ately kept to its B2B roots of sup­port­ing busi­nesses from be­hind the scenes. “But if you have bought some­thing from Lazada or Red Mart, chances are you have made con­tact with us,” he says. Lead­ing e-com­merce ser­vices provider red­mart launched its business with three Gold­bell vans. To­day, half of singpost’s vans and trucks, and 80 per cent of the Ninja Vans ply­ing their trade across Sin­ga­pore be­long to the Group. It also owns 1,300 pri­vate cars that other com­pa­nies use to ferry ex­ec­u­tives from air­port to ho­tels, or from homes to of­fices.

“That’s how we grew the business. First, we sup­plied them with ve­hi­cles; those who didn’t want to buy, leased them from us. If their CEO were sta­tioned in town and they needed a per­sonal ve­hi­cle to trans­port them, and we of­fered long-term lease on pri­vate ve­hi­cles. We only do what we know,” Mr. Chua says. And, ev­i­dently, they now know a whole lot.

Fi­nan­cial ser­vices, the lat­est business to emerge from the Group, also de­vel­oped or­gan­i­cally. It be­gan with cus­tomers ask­ing for ac­cess to work­ing cap­i­tal, Mr. Chua ex­plains. A se­nior di­rec­tor of the Group spear­headed the de­vel­op­ment of fi­nan­cial prod­ucts be­fore rolling them out un­der Gold­bell Fi­nan­cial Ser­vices (GBFS), a fully owned sub­sidiary of Gold­bell Group. Mr. Chua, who was pre­vi­ously COO of the Group, was cho­sen to lead the new business as CEO.

That was three years ago. Since then GBFS has lent close to S$350 mil­lion. “If you look at non-bank fi­nan­cial in­sti­tu­tions (FIs), we are among the big­ger ones, and if you go by age, we are one of the big­gest,” Mr. Chua adds. GBFS has a team of about 40 peo­ple, and runs busi­nesses in Sin­ga­pore and Malaysia.

Look at the Con­sumer

GBFS of­fers in­voice fi­nanc­ing, an as­set-based lend­ing prod­uct that al­lows com­pa­nies to fi­nance slow-pay­ing ac­counts re­ceiv­ables. Through fac­tor­ing cus­tomers can sell their ac­counts re­ceiv­ables to GBFS in or­der to ob­tain im­me­di­ate funds that can im­prove their work­ing cap­i­tal. The cus­tomer can sell its in­voice in ex­change for an im­me­di­ate pay­ment, or use their re­ceiv­ables to se­cure a re­volv­ing credit line.

“Our cus­tomers are mostly SMEs, and although we cover every­thing from start-ups to listed com­pa­nies, some of them are un­able to ob­tain loans from the cap­i­tal mar­ket for a num­ber of rea­sons,” Mr. Chua shares. Their size, business struc­ture and na­ture of business – the type of prod­ucts or ser­vices – may not fit the pro­file of a com­pany that FIs are look­ing for.

With fac­tor­ing, cus­tomers tech­ni­cally raise funds from sell­ing their as­set rather than bor­row­ing money. As long as the cus­tomer has in­voices from cred­it­wor­thy com­mer­cial clients, it is qual­i­fied for fac­tor­ing. “This is where we have a dis­tinct ad­van­tage,” Mr. Chua points out, “be­cause we de­velop our (fi­nan­cial) prod­ucts based on what the cus­tomer needs.” One cus­tomer, a shoring equip­ment ren­tals and dis­tri­bu­tion com­pany, had dif­fi­culty ob­tain­ing a loan from banks, but when GBFS saw that it had a con­tract with the Land

Trans­porta­tion Author­ity, it read­ily granted the loan. Fac­tor­ing is a big help for small busi­nesses that have nei­ther sub­stan­tial as­sets nor long credit his­tory.

“When you’re do­ing a hire pur­chase on a car, you’re look­ing at the con­sumer, not the as­set,” Mr. Chua ex­pounds. “If you lend to an SME, there’s a sin­gle party which is the owner – you look at his be­hav­ior, not just his com­pany’s per­for­mance.”

Mr. Chua in­sists that their fi­nan­cial prod­ucts do not have eye­pop­ping in­no­va­tion. “They have been there all the time; what makes it dif­fer­ent is our con­nec­tion to our cus­tomers, and our own sys­tem. If the (cus­tomer’s) pro­file does not fit con­ven­tional re­quire­ments for fund­ing, we get to know the business owner, ask how he sees his op­er­a­tion, why it makes sense to him.” He claims they are not con­strained by cookie-cut­ter ques­tions about years in business, as­sets, and P&L. “We look at the business and its owner first; its per­for­mance his­tory and ac­cu­mu­lated as­sets come last – not the other way around. Are we com­fort­able lend­ing to this per­son? If the an­swer is ‘yes’, we go ahead.”

Give the Leg Up

Mr. Chua as­serts that there is a lot of small busi­nesses whose only hur­dle to­wards “mak­ing it big” is ac­cess to cap­i­tal. They have amaz­ing ideas, unique value propo­si­tions, and bright prospects that the cap­i­tal mar­ket of­ten over­looks. “We don’t nec­es­sar­ily go out look­ing for new things to of­fer them. They come to us with their unique prob­lem, and we work with them to find a solution.” Of­ten, these prob­lems fall be­tween the cracks of con­ven­tional credit in­quiry, a sit­u­a­tion that has seen GBFS in business with a whole ar­ray of ‘un­usual sus­pects’ – cus­tomers whose cred­it­wor­thi­ness is di­min­ished by their pro­file. “Now we’re do­ing vending ma­chines and even wash­ing ma­chines – please don’t ask me why,” he says. If the cus­tomer can make a good case for a business, GBFS will try to make it hap­pen.

Another ma­jor prod­uct from GBFS is hire pur­chase agree­ment, which pro­vides cus­tomers – in this case, lessees – with an op­tion to buy a heavy equip­ment or a ve­hi­cle. An or­gan­i­cally de­vel­oped prod­uct, hire pur­chase grew out of ac­tual needs from GBFS cus­tomers to own an equip­ment or ve­hi­cle that they are leas­ing but could not af­ford. Through hire pur­chase, GBFS spreads the cost of, say, a heavy equip­ment, and gives the cus­tomer a chance to pur­chase it. Own­er­ship of the leased prod­uct is turned over to the cus­tomer only at the end of the agree­ment, giv­ing GBFS ad­e­quate pro­tec­tion.

GBFS has also gone into in­ven­tory fi­nanc­ing, which pro­vides short term loans or re­volv­ing line of credit to cus­tomers who need to pur­chase prod­ucts to sell. This helps small busi­nesses that need to pay their sup­pli­ers faster than they can sell their in­ven­tory. It also helps them man­age sea­sonal peaks by hav­ing cap­i­tal to pur­chase larger in­ven­to­ries and take ad­van­tage of a high de­mand. In this in­stance, the said prod­ucts serve as col­lat­eral for the loan. In­ven­tory fi­nanc­ing is con­sid­ered risky: If the bor­rower is un­able to move his in­ven­tory, his lender will be sad­dled with it.

“There are red flags, tell-tale signs, that we take into con­sid­er­a­tion to mit­i­gate our risk. For ex­am­ple, if a joss stick ven­dor needs in­ven­tory fi­nanc­ing, we can look at his books and study his per­for­mance dur­ing the New Year, Hun­gry Ghosts Month or Qing Ming when sea­sonal de­mand for such prod­uct peaks. If records do not tally, we can call off the deal.”

Cur­rently, the GBFS business is evenly di­vided be­tween equip­ment fi­nanc­ing and work­ing cap­i­tal. “We started with 80-20, with ve­hi­cle fi­nanc­ing mak­ing up the larger vol­ume of business, nat­u­rally be­cause we started out in that sec­tor. Through the years we moved it to 50-50: It’s now 50 per cent ve­hi­cle and 50 per cent work­ing cap­i­tal-re­lated –fac­tor­ing, in­ven­tory fi­nanc­ing, mort­gages, and so on,” Mr. Chua shares. “Last year we ran a de­fault of 0.15 per cent, and that is all just from the car fi­nanc­ing.”

Adopt the Mind­set

Adopt­ing the SME mind­set makes a big dif­fer­ence for GBFS, Mr. Chua claims. “I think it’s be­cause we started out as an SME. We came from a business back­ground – dis­tri­bu­tion, leas­ing – not lend­ing.” He il­lus­trates his point with how a cus­tomer in Malaysia had been turned down by a bank for a loan. “They have been bor­row­ing from banks for the last 20 years to buy big in­jec­tion mold­ing equip­ment. It’s a highly prof­itable com­pany with a good record. They were grow­ing so fast and at one point needed RM5 mil­lion to ren­o­vate their of­fice and make space for their ad­di­tional staff. When they ap­proached a bank for a loan, the bank de­cided that since 90 per cent of their trans­ac­tions have been hire pur­chases, their case was turned over to the hire pur­chase depart­ment.”

The bank took six months to come back with an an­swer. “We went in, looked at the business, and found it to be good. They have un­en­cum­bered equip­ment; we went ahead to re­fi­nance the en­tire flow of the equip­ment, and give them the RM5 mil­lion. This took us a month to de­cide.” Un­der­stand­ing the na­ture of busi­nesses

al­lows GBFS to work with speed and ef­fi­ciency, and look past the pro­gram. “We look at what the cus­tomer needs, and fig­ure out how much we need to man­age that kind of risk. You can quan­tify some parts of credit, but the big part of it is art.”

Go­ing by turnover, Gold­bell is no longer clas­si­fied as an SME. “We’re a big lo­cal cor­po­ra­tion now, although we started out as an SME and grew as an SME. The dif­fer­ence be­tween a large cor­po­ra­tion and an SME lies in the men­tal­ity of their work­ers. It’s about hav­ing a sense of own­er­ship.

“I spent eight years in JP Mor­gan. Dur­ing my first four years there, my depart­ment had only 12 peo­ple, all eq­uity traders; it was a startup. We did every­thing. My MD, one of the youngest MDs in Asia, sat next to me. We had lunch to­gether, played basketball to­gether. Ev­ery­one did every­thing, and ev­ery­one worked as if it’s their own business they were run­ning,” Mr. Chua re­mem­bers.

And when the com­pany grows too big and too fast, its peo­ple loses that cul­ture, Mr. Chua sur­mises. “When the sys­tem gets cor­po­ra­tized it loses that essence. To achieve ef­fi­cien­cies, you com­part­men­tal­ize the struc­ture. I guess you can do that in the back end, but not with every­thing. The front-end needs hu­man el­e­ment, and I be­lieve that’s where the SME cul­ture can come in. I know a lot of com­pa­nies that have grown but re­main run­ning like an SME, and their suc­cess lies in peo­ple tak­ing own­er­ship of the business. When a prob­lem comes, no one walks away and says, ‘That’s not my depart­ment’s prob­lem’. In an SME when a prob­lem comes, ev­ery­one gets in­volved.”

Cre­ate the Cul­ture

The big­gest chal­lenge in start­ing a com­pany is find­ing the right peo­ple who are re­cep­tive to a par­tic­u­lar work­place cul­ture, Mr. Chua says. “Gold­bell has 38 years to build the team for this kind of cul­ture. (The av­er­age length of ser­vice in the com­pany is 12 to 15 years.) They un­der­stand and em­body the cul­ture.”

With his team in place and the business thriv­ing, Mr. Chua can draw up a growth plan for the com­pany: “In Sin­ga­pore, I’d like to ex­pand the book size to close to S$.5 bil­lion. Com­pa­nies usu­ally take a long time to get there, per­haps up to 20 years, but we be­lieve we can do that in 10 years or less – of course with the banks’ sup­port. We also want to grow ge­o­graph­i­cally. We’re now in Sin­ga­pore and (since Novem­ber 2017) Malaysia. We’re three years old, and our growth has been steady,” he says.

Un­der Mr. Chua’s guid­ance, GBFS is in­vest­ing sub­stan­tial re­sources in process de­vel­op­ment, which re­calls his ini­tial ac­com­plish­ment at Group level when he set in mo­tion an in­tel­li­gence sys­tem that would an­a­lyze business data for a bet­ter un­der­stand­ing of the com­pany’s pro­cesses and map­ping out a way for­ward.

He re­calls how the en­tire Gold­bell business ran on a sin­gle sys­tem built by one per­son in the early days. “When I joined the com­pany, I had no data, so I had no CRM, no mod­els, and so on. I spent my first three years build­ing up a new sys­tem.” Be­ing a start-up, GBFS is in an ideal sit­u­a­tion for process de­vel­op­ment and in­cep­tion.

Plan for the Fu­ture

Tech­nol­ogy in­vest­ment is a new fo­cus for the com­pany. Gold­bell has re­cently con­trib­uted to a se­ries A round of the start-up Rely, which is de­vel­op­ing an in­stal­ment sys­tem for e-com­merce. Founded by young NTU and RMIT grad­u­ates, “the start-up has just com­pleted its seed round, but they’re al­ready sign­ing up ma­jor e-com­merce com­pa­nies,” Mr. Chua re­veals with pride. The re­sult­ing tech­nol­ogy will be shared be­tween the start-up and GBFS.

“I will use it and en­hance it for our needs, but if they want to use it in other places they should be able to do it. I don’t be­lieve things can be con­tained nowa­days.

“What I want is their con­sumer credit al­go­rithm. They’re de­vel­op­ing some­thing for B2C, but it has rel­e­vance to me. I’m in­ter­ested in tak­ing what they have and ap­ply­ing it to a B2B model. They have just com­pleted the term sheet; now we’re ready to start the R&D. We have pre­pared a small room for them to use so they can work with my team.” Mr. Chua com­pares the start-up to a “trans­la­tor” that would bridge the ex­ist­ing sys­tem and the one that un­der de­vel­op­ment.

“I don’t think business pro­cesses and sys­tems should ei­ther be old or new. I think it’s a hy­brid. Busi­nesses thrive best when they work with new part­ners and come up with some­thing new to­gether. A lot of what you see us de­vel­op­ing are not new, but they use new ways of look­ing at things. It’s us­ing our old do­main knowl­edge to do things bet­ter,” he ex­plains. Mr. Chua will likely sit on the board and help in fund­ing the start-up.

Although he plans to keep to a sup­port­ing role, Mr. Chua hopes that the men­tion of Gold­bell would bring to mind “a place that is good for its em­ploy­ees, good for the clients, and good to its in­vestors”.

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