Published March 16, 2009

Crisis spelt o-p-p-o-r-t-u-n-i-t-y: Tat Hong CEO

To overcome the downturn, the firm's strategy is to boost its China presence

By CHEN HUIFEN

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CRISIS does not spell paralysis, says Tat Hong Holdings president and chief executive Roland Ng. On the contrary, it can spell opportunity for companies that look beyond the current downturn and take a pro- active approach.

'There are always plenty of opportunities in a crisis,' Mr Ng told BT in Mandarin. 'But you have to look for them - not wait for luck.'

He speaks from experience, having steered his crane leasing company through the Pan-Electric crisis of the 1980s and the 1997-98 Asian financial crisis.

He recalls that Tat Hong was a small company during the Pan-El crisis with just over $30 million a year in turnover. It had 20 staff, half of whom were family members. Everyone took a pay cut, and entertainment and transport expenses were slashed. 'That crisis was quite easy to overcome,' he said.

But how Tat Hong dealt with the Asian financial crisis was critical to making or breaking the company. By then it had grown to a mid- size outfit with 500 employees and $200 million in turnover. But its net gearing ratio was 0.94.

'We are in a very niche market. When times are good, you will need our equipment. And when times are bad, demand is fuelled by government infrastructure projects.' - Tat Hong president and CEO Roland Ng

Cashflow became a problem. So to meet its debt obligations, Tat Hong sold - at a loss - non-core assets such as stakes in property ventures. It was bitter medicine. But Mr Ng believes in the Chinese proverb 'Liu de qing shan zai, bu pa mei chai shao'. Loosely translated for context, this means that as long as you preserve your most valuable resource, there is a chance to make good again.

As it managed its cashflow, Tat Hong revamped its business model to focus on crane rental, deviating from its traditional model of distribution. Since the appetite for major capital expenditure was low then, trading stock was converted to rental stock.

At the same time, Tat Hong's networking contacts alerted it to opportunities to buy cranes at low prices in Japan, Singapore and Thailand. Rental income and cash from the sale of non-core assets enabled the company to snap up these bargains.

And in no time, it had grown its fleet to become Asia's third-biggest crane owner - and one of the world's largest crawler crane lessors today.

'Because of the experience we gained during the Asian financial crisis we are better off today,' said Mr Ng. 'We just need to make adjustments to the way we manage our cashflow. In any case, our rental business now accounts for two-thirds of all our business, so it provides a steady stream of income.'

To overcome the current downturn, Tat Hong's strategy is to strengthen its presence in China, where it already has equipment rental joint ventures in Shanghai, Beijing and Jiangsu.

As the crane rental market there is fragmented, with high entry barriers, Mr Ng sees great potential for growth, driven by China's industrialisation.

He aims to grow China's contribution to Tat Hong's bottom line to 20 per cent in three years, from 5 per cent now.

'We are in a very niche market,' he said. 'When times are good, you will need our equipment. And when times are bad, demand is fuelled by government infrastructure projects. So to me, there will always be plenty of room to expand.'

Apart from keeping low gearing, Mr Ng believes in regularly reviewing his business model and in networking. He urges other business leaders to communicate with their bankers to gain understanding.

And recently he shared these pointers on surviving crises at an OCBC Bank Crisis Management Seminar for SMEs.