Soaring high on roosters
The Leong Hup Group may not be a household name, but it is responsible for ensuring there is an adequate supply of chickens for every festive celebration in Malaysia.
AHEAD of every major festival, the bubbly Tan Sri Francis Lau Tuang Nguang of Leong Hup Group will – without fail – receive a phone call from the Minister of Agriculture.
And just before this Lunar Year of the Rooster that began on Jan 28, the expected call came.
“I promised the minister there would be sufficient supply of chickens to meet the needs of all Malaysians to celebrate Chinese New Year,” says the smiling loudvoiced Lau, dubbed the chicken king, in his office filled with colourful chicken figurines.
As Leong Hup commands 23%25% of the market share in the local poultry sector and produces 500 million birds annually for the Asean market, Francis – the executive chairman of Leong Hup (Malaysia) Sdn Bhd – is often the man the Government turns to if there is any question on the supply of the bird before major festivals.
And the 58-year-old businessman, who has been in the livestock business since leaving school at 18, never fails to deliver on his promise to the nation during festive times.
Though soaring high with its poutry business, Leong Hup Group has been keeping a low profile on the corporate front since the delisting of its local company on Bursa Malaysia in 2012.
He and his brothers have not given many media interviews since.
But the group, whose focus is on chicken farming and its related trade, will continue to crow incessantly in the poultry trade despite the pessimistic economic outlook. The chicken king offers his explanation:
“The year ahead is still very challenging as the ringgit has stayed weak. About 80% of our feed is imported. But for the next three years, we can still enjoy 8%-10% annual growth in turnover because chicken is still the cheapest and main source of meat or protein for people in Asean,” he said.
Last year, Leong Hup International (LHI) – the umbrella organisation for the Lau family business in Malaysia, Singapore, Indonesia, Vietnam and the Philippines – posted a turnover of RM5.5bil-RM6bil.
And if stock market conditions improve, LHI will go for listing within one to three years or by 2020 to further expand its reach in the Asean region.
In 2020, the group’s turnover is expected to hit RM7bil-RM8bil, according to Lau.
Though the local corporate sector might not have kept up with the developments in Leong Hup, it has not forgotten the corporate history the Laus had created in KFC (Malaysia) Holdings Bhd in the 1990s.
Many can still recall the heart-pounding tales of the Lau brothers in their bitter battle for control of KFC (Malaysia) Holdings Bhd with Datuk Ishak Ismail in the mid-1990s.
The Lau brothers – notably Datuk Kevin Lau, the sixth among the eight brothers who made hot corporate news – are seen in a large family framed photograph in Francis’ office, taken in 1982 in Muar, Johor, where the family started their poultry business.
In the early 1990s, the Lau family owned about 30% of KFC. But the entry of businessman Ishak, linked to powerful politicians then, forced the Laus to concede defeat and bow out after a prolonged tussle.
They finally sold their stake to Ishak in 1996 – one year before the 1997/98 Asian financial crisis that caused the markets to collapse.
Using the proceeds, the Laus expanded their poultry business in the region. In 2006, Leong Hup listed its operation in Indonesia.
Meanwhile, its 51%-owned listed Teo Seng Capital Bhd in Malaysia continues to expand its egg production. The output of its “happy eggs” has hit 3.5 million units per day.
On a personal aspect, Francis – having immersed in the poultry farm trade for over 40 years, has developed a liking for all types of chickens – be they real or fake.
In his office at the nondescript Wisma Westcourt in Jalan Klang Lama and his posh bungalow in Ampang Hilir, the tables are littered with a collection of small and big chicken figurines crafted from bright crystals and fine porcelain.
“I have been collecting these items for 15 years. I bought them from all over the world. Some are gifts from friends. I have learnt to adore them,” shares the diminutive and stout businessman, who often wears an affable smile, as he speaks in English peppered with Johor Hokkien.
“Although our office is over 20 years old, its feng shui is good. This is why our business can grow from RM100mil to over RM5.5bil. I am happy and comfortable here,” says Francis, the youngest of the Lau brothers.
In his home, feng shui elements are dominant. Greeting guests with a clear pool of soft-flowing water in the centre, the broad and bright interior of the house appears to usher in the “chi” or luck through the main entrance.
Francis’ wife Puan Sri Wong Kee Choo tells Sunday Star: “This house was renovated according to feng shui principles. There is a sense of harmony and peace. Visitors feel good and comfortable in our home.”
But whether it is the magical power of feng shui, sheer hard work or right business strategies – or all combined – this happy-looking man and his family are enjoying the best moments in their life and business.
Attributing his success to positive-thinking and 10 to 12 hours of work daily, this Teochew man says he habitually hosts CNY open house for his staff and friends with a generous spread of food every year.
In a two-hour interview at Wisma Westcourt and a 30-minute casual conversation at his CNY open house, Francis candidly shares Leong Hup Group’s business plans and his views on various topics. Below are excerpts:
Q: Why is your headquarters in Kuala Lumpur, not Muar?
A: We have been in the chicken farming business, started by my late father in Muar, for more than five decades.
But now, most of the Lau family members live in Kuala Lumpur and overseas (Indonesia, Vietnam, the Philippines and Singapore). It will be easy for us to meet in Kuala Lumpur.
After delisting your Malaysian company in 2012, do you have plans to return to the stock market?
We have plan to list the whole group under Leong Hup International (LHI) in one to three years. LHI owns all operations in Malaysia and other Asean countries.
The Malaysian unit is a member of the group. I am the executive chairman of the Malaysian company and executive director of LHI.
When market conditions get better, we will act to list our
group. That could take place in 2019 or 2020.
Proceeds from the initial public offering (IPO) will be used to fund our expansion, acquisitions, and research and development.
But whatever the plan, we want to continue to focus on the livestock business. This is what and where we know best.
How profitable is your group?
We enjoyed RM5.5bil-RM6bil turnover last year. But our margin was only 5%-8%.
In the livestock business, investment is heavy but margin is little. Hence, volume counts.
What type of growth has your group been experiencing since 2012?
We have posted an average annual growth of 8%-10% in recent years and we expect this growth rate to be maintained in the next three years because chicken can be eaten by everybody and the price is reasonable.
In Malaysia, we are the biggest player. We control 23%-25% market share in the poultry business. This is why government officials often call us to check the supply situation.
But the growth in Malaysia will not be as high as other Asean countries in future. Our consumption rate is the highest in the world – at 47kg/person/year. For Singapore, it is 40kg.
The room for high growth in other Asean countries is huge because of their very low consump- tion rate. For example, the rate in Indonesia and Vietnam is 8kg/person/year.
How do you see your group’s performance this year?
The year ahead is very challenging as the ringgit is weak. About 90% of our components – which include feed stock like corn and soybean – is imported.
But having been in the business for more than 50 years and overcome economic crises such as the 1997/98 Asian financial crisis, we will be all right. We still see 8-10% growth in the next three years.
But if the ringgit gets stronger this year, our profit will be better.
In the last financial year, our award-winning company PT Malindo Feedmill Tbk in Indonesia posted a turnvoer of RM1.3bil and a profit of RM100mil.
Malindo was established in 1997 and listed in 2006. It produces animal feed, and has breeding farms, broiler farms and food processing business. It has operations in Sumatra, Java, Kalimantan and Sulawesi.
Our processed products in Indonesia are sold under SunnyGold and Ciki Wiki brand.
This year, we are going to promote in Malaysia the SunnyGold brand. It will be our Asean brand. This name was chosen by the third generation, so SunnyGold is a new generation brand.
Hence, in Malaysia, there will be two brands under us – Ayam A1 and SunnyGold.
For four consecutive years from 2011 to 2014, PT Malindo had received “Best of The Best” from Forbes Indonesia magazine.
Do you see Teo Seng handing out better results this year?
This year may be another challenging year for Teo Seng due to the high cost of imported raw materials.
But Teo Seng will post growth in profit this year, although the cost of raw materials has gone up with the ringgit.
Our business strategy is to stay competitive by raising productivity and lowering cost via mechanisation.
(Teo Seng posted a revenue of RM412.9mil and net profit of RM40.9mil in the financial year ended Dec 31, 2015).
On Leong Hup’s website, it is stated the company wants to “feed the world”. Are you planning expansion beyond Asean?
We will focus our expansion in Asean, where we know the language and culture.
As there is a total of 600 million people in Asean, there is still a huge market potential in this region.
In Indonesia, where there are 260 million people, business growth there will be faster than that of Malaysia.
For this year, we may venture into Cambodia that has a population of 60 million.
Livestock is still the basic food for the people in Asean. If you don’t eat chicken and eggs, what do you eat?
Do you plan to move your headquarters to a new building since Wisma Westcourt looks old and congested?
No. The feng shui here is good. The location is good. We are doing renovations to this building of more than 20 years.
The feng shui here must be good. When we moved into this building, our turnover was only RM100mil and now it is over RM5.5bil. I am happy here.
This is a family business. What makes 70-80 of you stick together for so long?
This business was started by my late father in Muar. As a family, we work very closely together. I am the youngest among the eight boys and four girls of the second generation.
We practise Confucianism that teaches unity. Although I am fully English-educated and don’t know Chinese, I follow the teachings of Confucius.
My father came from China. He never went to school and hence had a tough life. But through sheer hard work, he built up a chicken farm which laid the foundation for Leong Hup.
We are now selling 500 million chickens annually in the Asean region. My nephews are stationed in various countries.
On business, we meet five times a year in Kuala Lumpur.
As a family, all the Laus converge in our ancestral home in Muar every Chinese New Year Eve to celebrate together. During Ching Ming festival (in April), all will show up to pray to our ancestors together.
We will have reunion dinners, sitting together in seven to eight tables in Muar.
Do you do charities, like many other successful Chinese businessmen?
Yes, we believe in karma.
We give donations to Chinese schools and Lion Club in Muar annually.
My late father often said we would be blessed if we give and help others. In the last 20 years, we have also been giving donations to centres for special children.
Who is heading Leong Hup International?
Datuk Lau Bong Wong, my third brother, is the chairman of LHI.
I am the executive director of LHI.
You see and smell chicken day in and day out. Are you tired of eating chicken?
My favourites are chicken rice and bak kut teh. Just before you came for this interview, we had bak kut teh.
How do you wish to be described?
I am a simple, humble and happy businessman with positive thinking.
I am hardworking, clocking in 10 to 12 hours of work daily. I used to work on Sundays too but not anymore.
By working hard, you make your brain exercise. Now, it is no longer the money that I pursue. I want to be in excellent health.
Has your family business diversified to other sectors?
We went into diversification 10 years ago. We have oil palm plantations in Sabah and Kelantan now but they are not under Leong Hup. In the plantation (line), we are still a small player.
Having said this, our focus is still on livestock. This is still what we know best. We hire about 12,000 people under our family businesses.
In 1996, your family had to give up control of KFC (Malaysia) due to a fierce tussle with Datuk Ishak. Any regrets?
In life, you cannot turn back the clock. You just have to look forward and move on.
We sold our stake to him in 1996, before the setting in of the 1997/98 financial crisis.
But KFC continues to buy chickens from us.