Need A Few More Great CEOs For GLCs

What's the difference between a good CEO and a great one? In Malaysia there are not many great CEOs for sure. Many of our top companies are still family controlled companies, and generally its very rare to get family members that are also great CEOs. Family owned enterprises are usually started by a great entrepreneur but as you mushroom into a listed company, many have problems in letting go. An entrepreneur may be able to build a business from scratch to earning RM50m profit a year, but as you expand and scale up, you need a professional person with the vision and execution ability to bring the company to the next level. Ask many CEOs, they don't even talk about what is the next level.



If you put it to a vote, Nazir Razak should probably come in as the best CEO Malaysia has seen for the past 20 years. All you have to do is to track where Bumiputra Commerce Bank was at 10 years ago. If you put that side by side with Maybank, Affin, heck even Public Bank ... the trajectory and the path taken was so different.

Its just a coincidence that CIMB is now a Khazanah owned company. Even with the recent GLC transformation programme, we still see a dire lacking in the top honchos when compared to Nazir.

Let's cut to the chase, what makes a great CEO?

1. Integrity: Always do the right thing regardless of sentiment and never compromise your core values. If you cannot build trust and engender confidence with your stakeholders you cannot succeed. No amount of talent can overcome illegal, immoral or otherwise ill-advised actions.

2. Courage / Excellent Decision Making Skills / Decisiveness: As a CEO you will live or die by the quality of the decisions you make. These decisions are like the ship's mast, every bit that you do steers the ship in a certain direction. He/she must also know when to back down and be able to accept it when he realises its a mistake.

3. Ability to Focus: If you cannot focus you cannot perform at the level necessary to remain in the C-suite for very long. The ability to do nothing more than understand, and lock-onto priorities will place you in the top 10% of all executives.

4. Leveraging Experience: Inexperience, a lack of maturity, needing to be the center of attention, not recognizing limitations, a lack of judgment, an inferior knowledge base, or any number of other common mistakes made by rookie CEOs can cause your house of cards to fall. If you don’t have the experience personally, hire it, contract it, but by all means acquire it. Great CEOs surround themselves with tier-one talent and the best advisors money can buy. They don’t make uniformed or ill-advised decisions in a vacuum.

5. Command Presence: Great CEOs possess a strong presence and bearing. They are unflappable individuals that never let you see them sweat (unless of course it serves a purpose). Everything from how they carry themselves to how they speak and dress messages that they are in charge.

6. Embracing Change: Great CEOs have a strong bias to action. They don’t rest upon past accomplishments and are always seeking to improve through change and innovation. In today’s fast paced and competitive environment those CEOs who don’t openly embrace change will often be shown the door prior to the expiration of their initial employment contract.

7. Brand Champions: Great CEOs understand branding at every level. They seek to build not only a dominant corporate brand, but also a strong personal brand. CEOs that are not well branded on a personal basis, or who let their corporate brand fall into decline will not survive.

8. Resourcefulness / Boundless Energy: Great CEOs have a boundless amount of energy. They are positive in their outlook, and their attitude is contagious. A low energy CEO is not motivating, convincing or credible.

9. Business Acumen: Great CEOs have a deep understanding of the business and a strong orientation toward profit. Great CEOs possess what often appears to be a sixth sense or an almost instinctive feel for what the company needs to do to make money and remain competitive.

10. People Acumen: Great CEOs have a nose for talent…They understand how to recruit, develop and deploy talent while focusing on applying the best talent to the best opportunities. They also know when it’s time to make changes and cut losses as needed.

11. Organizational Acumen: Great CEOs know how to engender trust, know when and how to share information, and are expert listeners. They develop strong and positive corporate cultures driven to performance by aligned motivations. They can quickly diagnose whether the organization is performing at full potential, delivering on commitments, and whether the company is changing and growing versus just operating.

12. Curiosity: Great CEOs possess a powerful motivation to increase their knowledge base and to convert their learning into actionable initiatives. They question, challenge, confront and are never accepting of the status quo.

13. Intellectual Capacity: Great CEOs are also great thinkers both at the strategic and tactical level. They are quick on their feet and know how to get to the root of an issue faster than anyone else.

14. Global Mindset: Regardless of the geographical boundaries of the current business model great CEOs think globally. Limited thinking results in limited results. Whether global thinking is applied to capital formation, supply-chain issues, business development, strategic partnering, distribution, or any number of other areas, those CEOs who don’t grasp the importance of thinking globally will not endure. Great CEOs are externally oriented, hungry for knowledge of the world and adept at connecting developments and spotting patterns.

15. Never Quit: Great CEOs refuse to lose…They have an insatiable appetite for accomplishment and results and while they may reengineer or change direction they will never lose sight of the end game.

16. Execution: The decisions and strategy of a CEO will only be as effective if they have the implementation and monitoring skills to execute ideas and follow through. The great CEOs will only recruit managers that has proven themselves time and again in seeing through a project or transmitting a vision into reality effectively.

17. Not Staying Still: Too many CEOs end up just managing their companies in the same pond. Great CEOs will always be aware of the need to move up to the next level. Always be concerned about your business model and platform of activities, building initiatives or recruiting talent to scale up the business.

18. Fair: Too many CEOs are just intent on finding ways to reward themselves. A great CEO will devise ways to reward performers in a big way. Loyalty can only go so far. To build great companies, you need a core team that is well rewarded to see through the long term vision, and be paid well in the process. You cannot build value into the company when talent keeps going out the door - there has to be continuity.

19: Empowering / A Strong BoD: You need to have a fair and strong board of directors and not staffed by cronies. You can have a great CEO but he/she will not be effective if the BoD gets in the way. The BoD is there to oversee not micro manage. Just as a great CEO will be able to empower talented employees to achieve greater heights, so too the BoD must empower the CEO to do his/her job.

20. Foresight: Great CEOs are prepared to create their own luck by cultivating an ability to see opportunities for their company and to make the deals that convert those opportunities into realities. Some things that may seem like amazing foresight are actually the result of the hard work and discipline it takes to constantly look forward to build a successful company. Great CEOs must also constantly develop new products to build and retain a customer base. Foresight is also the ability to hire and retain the right people, looking ahead toward the growth of the company.

Nazir scores brilliantly in almost every category (no, I am not putting myself up for a job at CIMB). If only we have another 4 Nazir Razaks to turn things around faster. Food for thought. If we have another 4 Nazirs, what would he be doing at these 5 GLCs??? I would exclude him from some GLCs because there might be very little he can do there, such as Tenaga or Malaysia Airports. I also would not put him at Maybank as the stegosaurus will take too long and too much work to turn around. I will select the 4 GLCs that I think will benefit the most:

1) UEM World / Iskandar - I think the Nusajaya project started way before the two Singapore IRs. The bloody casinos are up and running and where are we??? Oops, forget about the Middle East partners now, let's look to China and India. Execution, execution, timeline, goalposts, rollout scheduling, ... for every project delays there will be 1,001 excuses, and therein lies our problem, we are always ready with excuses. I think Nusajaya is a brilliant concept, but seriously, I hope its not taking another 10 years to rollout, by that time I think Indonesia may have transformed Batam into another Nusajaya already with a bridge linking up both islands.

2) Proton - It will be a short stay for Nazir at Proton. Just sell the thing to another major car maker that can carry the platform we have and leverage on it. We take a minority stake say 30% and just let the thing run by someone else that have the regional or global marketing, design, distribution and cost efficiencies to run this thing. Close shop.

3) PLUS - As it is, PLUS is already Asia's largest listed expressway owner and toll operator, easily beating out the two listed Chinese firms in HK. Its an under leveraged vehicle. Nazir will come in, start up a "financing unit" within the firm to tap bonds and capital to buy, invest, build new tollways all across Asia. Its all a matter of "funding the thing" properly. Nazir will keep enlarging the portfolio by hiving off profitable tollways into REIT like instruments to free up capital. PLUS will be 3 times the size of what it is now within 3 years. Macquarie Infra here we come.

4) Sime Darby - Nazir will do wonders here. Just break off the plantation unit and rethink the business model. Why are we just in palm oil??? Sell huge plots of land to Sime Property and hive that off as an independent unit as well - I am sure Nazir will buy IJM Land and SP Setia and roll them all into a proper behemoth with a lot of claws and market edge.



p/s photos: Ririn Dwi Aryanti

This Doesn't Sound Right

Read this over the weekend in The Star. Was flabbergasted. The audacity to even think of such a move. Considering the feelings of the general public, this is a pretty silly proposal. My views after the article.
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RM26bil bonds poser on takeover of toll concessions.

LITTLE known Asas Serba Sdn Bhd claims it had submitted a proposal in May to seek approval from the Government to take over all the toll concessionaire companies in the country. That’s 22 toll concessionaires in the country with the cream of the crop being PLUS Expressways Bhd, which is in the UEM Group Bhd stable. It is a clever plan to take over all the highways and their pledge is that they will bring down toll rates by 20% and maintain that rate level for the remaining of the concession period.

But the proposal raises questions – how will it fund the acquisition, has it taken into consideration the RM26bil worth of bonds that have been issued by all the toll concession companies, and what would it offer as a solution to bottlenecks on urban highways?

At this point there are more questions than answers and many wonder why Asas has come up with a plan when the Government also has plans to take PLUS private. Is there a correlation or is this a mere opportunity to buy the assets? Of course the Government and PLUS have denied seeing any proposal from any party. Not many analysts are convinced that it will be easy for Asas to take over all the assets.

It was reported yesterday that Asas, a special purpose vehicle, had submitted a plan to the government, presumably the Finance Ministry, to take over all the toll concessions in the country. It was reported that Asas was represented by Datuk Syed Md Amin Aljeffri, chairman of the Kuala Lumpur Malay Chamber of Commerce (KLMCC), Ibrahim Bidin, the president and chief executive officer of Pinelabs (M) Sdn Bhd and former chief operating officer of PLUS, Wan Kamaruddin Wan Mohamed Ali, a former director of Babcock and Brown and Fieldstone International, and Syed Budriz Putra, chief executive officer of Sepang Aircraft Engineering Sdn Bhd.

Calls to Syed Md Amin went unanswered.

The Government, according to Minister in the Prime Minister’s Department Tan Sri Nor Mohamed Yakcop, who also heads the Economic Planning Unit, is looking for the best option to take PLUS private. He said the proposal was in its final stages before it was submitted to the Cabinet. The Government, via its investment agency Khazanah Nasional Bhd, has a 63.87% stake in PLUS, which is said to be worth RM10.5bil at current market value.

Besides that, another 22% of PLUS is held by other Government institutions such as the Employees Provident Fund, PNB/Amanah Saham, which means the government controls 84% of PLUS currently. If the Government is set to take PLUS private, will it consider Asas’ proposal? The Government has to fork out an estimated RM7.7bil if it were to buy the remaining shares in PLUS it does not own.

This is based on PLUS’ closing price yesterday of RM3.32 a share, plus a 30% premium for 1.8 billion shares from the non Khazanah block. That is a lot of money to fork out to buy assets that do not create new jobs nor has any multiplier effects on the Malaysian economy unlike the building of new highways. Those funds could be used to build alternative routes for some of the choked intra-urban highways.

About 10% of the current shareholders of PLUS are foreigners and that means billions of ringgit will flow out of the country if Malaysia’s biggest toll operator is taken private. If there is indeed a proposal from Asas to take over all the highways, then there may also be pressure on the Government to do the same for other companies. All this is going to cost the Government billions, perhaps it would be more cost effective to have a bullet train criss-crossing the country than buying up highways as the bullet train will create more economic activity.

An expert noted that “if the Government takes over PLUS then it can forget about the handsome dividends it gets and all the revenue from toll collection would be used for debt repayment and operations and maintenance of the highway.” The expert believes that instead of the Government buying up highways, it should instead be looking at reviewing and capping toll rates, as well as revisiting the agreements made with the road toll operators. The Government should also look at finding alternative routes to ease congestion, the expert said.

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My views:

a) taking toll roads private should not be encouraged, in particular when PLUS is about the biggest toll road company in Asia, it is a significant and interesting vehicle to foreign funds, it adds to the allure of listed Malaysian stocks ... you don't want to keep taking interesting stocks off the table, first Maxis, now PLUS, what next??? YTL, IOI, Commerce???

b) how can you privatise 22 toll roads and ensure a 20% drop in toll charges ... are you saying you can maintain the same charges forever, of course not, you will have to raise toll rates sometime again in the future, and thats when the public sentiment will come back to bite the government, ... do not create the situation where so many are going to be so pissed off by so few.

c) the only way I can privatise 22 toll roads, drop tolls by 20% and not raise them for 5 years is if I get to privatise these toll operators VERY CHEAPLY, i.e. below market prices.. hell if the purchase price is low enough, I may be buying PLUS that will be yielding me 20% now... of course no need to raise rates then, can even lower them, but that is not an equitable proposal for shareholders, and the only way it will happen is if the government forces its hand and sell cheaply = the public selling these assets cheaply to the few.

d) if the government is really wanting to deal effectively with tolls and pacify the public, then get EPF to privatise, at least it will be owned by the public, and EPF always complaining of not enough decent assets to invest in, this can generate stable dividends, even if you have to raise rates, ppl won't be so mad as it flows back to them via EPF, EPF should target an anual return via dividend of 6%-8%, if it can get that, no toll rate hike, easy peasy...

e) just do the math for PLUS, it has a market cap of RM16.6bn and net profits for first half was RM509m (annualised RM1.018bn). To get a 6% rate of return, net profits need to be RM996m, so taking that line of logic, EPF can take this on, particularly since their debt mgmt exercise dragged down profits a bit which will rework itself to higher profits in future interims. On 16 sen DPS, it it giving a net yield of 4.9%, assume no growth in toll rates after EPF privatisation, the dividend yield will move much higher just on organic traffic growth. Operating cash flow is already past RM1bn, so EPF can and should take this on - isn't it wonderful if EPF takes it over and gives a guideline to PLUS that if they give EPF an annual net dividend of 6%-8%, there will be no toll rate hikes - I think the general public will celebrate this. ... On the same logic, how the new vehicle can drop rates by 20% is beyond me, who will fund such a thing when its netting around 3% for PLUS a year??? Surely they will have hike rates up significantly sometime in the future, and the government will have to come in and guarantee the RM26bn. If the deal is palatable, just do it via local and foreign banks and see if they bite with no guarantee, if they do, then by all means go ahead.

f) IF and its a big IF, IF you can drop toll rates by 20% like what Asas Serba is saying, by taking them private... ALL THE MORE REASON THIS DEAL SHOULD BE DONE BY EPF and not just by a few individuals.



p/s photo: Ziana Zain