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Interview

with Kar King Wong, Founder, Managing Director, Advanced Holdings Ltd.

06.08.2010 / Energyboardroom

You have founded Advanced in 1992 at a time when the supply of process equipment in the Asia Pacific was dominated by a few international companies. What drove you to leave Rotork and set up your own business at that particular point in time, and what were the main challenges in setting up the company?

My experience at Rotork was challenging but I was getting comfortable in my position. Nevertheless, I was driven to explore the unknown and find out what else I could achieve on my own. As a young, ambitious and confident entrepreneur with little experience in running my own business, I decided to take the challenge and set up the company in 1992. In the following 18 years, the company has gone through a rollercoaster of events.

How have you been able to draw on your experience at Rotork to lay the groundwork for a new MNC?

Before Rotork, I was a researcher at university, so Rotork was in fact my first commercial job. Prior to establishing Advanced, my experience was acquired from Rotork and my research work in university. Subsequently, I tried to build a corporation with a similar corporate culture and strengths that I had observed at Rotork. Building a company from scratch and putting a corporate culture in place is much easier than walking into an existing company and trying to change its culture. In the meantime, Advanced has developed into a growing company showing positive results for the past decade. While Advanced started as a one man company in 1992, the current headcount amounts to approximately 400. Nevertheless, it is still a growing company with a lot left to achieve.

In the past 18 years, Advanced has experienced two crises which is not unusual for a start-up company. The first hit took place in 1995 and was closely followed by the 1997 Asian Financial Crisis. In spite of this, the company has always been fortunate with the amount of work. It did not take Advanced very long to convince its customers that despite being a young company, it was a dependable supplier and partner. Nevertheless, securing projects and and realizing good cashflow are different things. Thus, the first crisis negatively affected the cashflows of the company but at the same time served as a valuable learning experience for Advanced . By 1997 prospects were positive again with a headcount of around 20 engineers. As soon as the currencies started crumbling, the company was in fact still positive about the situation as a large backlog of projects could cover at least two years of work. However, by the start of 1998, the situation worsened as some orders were cancelled and others remained unpaid, which badly affected the cashflow of the company again.

How has the most recent global financial crisis affected the business?

As soon as the economy slowed down in the USA, Advanced started to notice decreasing activity. Nevertheless, as the bulk of the company’s business comes from mainland China and other emerging Asian economies, the effects were moderated. Nevertheless, as soon as the European banks started to become exposed to the situation in the USA, the effects became more prevalent. This series of events has rendered Advanced more cautious for macro-economic instability.

Did you take any particular measures to cope with this challenge?

Cost-control is an every-day tool to which Advanced pays even more attention now than in the past. In addition to this, the company will keep pursuing additional sales and revenues.

Apart from these daily measures, Advanced has also capitalized on the economic slowdown to acquire additional businesses. The company was able to acquire two businesses, one being ATAC with whom the company had already been negotiating for three years. ATAC is a Brittish company where I have worked approximately 23 years ago. While there was a strong difference between the ask and bid price three years ago, the financial crisis made the former owner of ATAC more anxious to sell off the business. In sum, Advanced has been able to take advantage of the lack of confidence in the industry to acquire new businesses.

You mentioned the role of cost-control in your day-to-day operations. Running a business from Singapore is obviously not the cheapest option. What are Singapore’s capabilities you can draw on that motivate you to keep your headquarters here?

The main reason Advanced is headquartered in Singapore is its listing on the stock exchange and the accessibility of funding. If the company would prefer to be very close to the customers, the operational headquarters should be in the People’s Republic of China (PRC), wherefrom approximately 60% of the company’s revenue is drawn. But at the moment, Advanced is expanding its business beyond Asia with a subsidiary in the US, a US based representative to cover Latin America and the UK acquisition for entry into Europe and the Middle East.

While a lot of the company’s business comes from China, the PRC market is a very tough market to enter. How did you manage to enter this market in 1994 so soon after the company was established?

I have to thank Rotork for this. During my time at Rotork, I was the regional manager developing business in the Asia Pacific region. China was one of the main markets of particular interest to Rotork. I was one of the few, if not the only, managers that could speak Mandarin. I thus spend a considerable amount of effort developing Rotork’s business in China in 1989. As an overseas Chinese working in China for 21 years, I am one of the few who has been very active on the ground-level, working with the many engineers some of whom are senior managers in different oil companies today. There has been a big change in China. Whereas the decision-makers in the early nineties were mostly men in their fifties or sixties, later that decade decisions were made by people in their thirties. The reason for this gap was the cultural revolution that had created a stop in education and an age gap of approximately 10 years between generations of the same education level. I have had the opportunity to observe this evolution from being present on the field and have established a network of contacts that have become close friends. This explains how Advanced managed to enter China in a relatively short period of time and gained acceptance from the Chinese customers.

In general, there is a severe scarcity in qualified labor supply making the different industry players compete for the right talent. It is part of Advanced’s 4-pronged strategy to keep developing its people, but how do you plan to realize this objective in view of the restrictions on the labor market?

People always feel attracted to work for a good and reputable company. The remuneration package is obviously an important factor in the decision-making process, but people also want to know how far they will be able to develop in their role. Advanced spends a lot of effort on branding itself to enhance its profile as an attractive employer. The career opportunities Advanced offers is what makes the company attractive in the market. The company continuously draws on the new people joining as well as the experienced resources from companies Advanced acquires. It is not only about talent attraction, it is also the retention of talent that counts.

What are the key growth markets in the Asia Pacific region for new acquisitions?

Advanced has a relatively conservative business model as the company tends to focus only on acquisition targets it feels comfortable with. For example, the company has recently been introduced to an acquisition prospect offering medical services. The target itself looked very good on paper and showed healthy financial results. In the end, Advanced decided not to go ahead by simply asking itself the question whether it had the management resources in case something went wrong with this subsidiary. For the other two companies that Advanced did acquire, it was very well aware of having the right people in place to cope with potential problems.

Further to this, Advanced remains truthful to the core sectors it is active in. These are the oil, gas and petrochemical industries which account for 80 to 90% of the company’s revenue. The company will continue to look for acquisitions in these sectors as well as clean energy and environmental business. Advanced has built up a strong marketing and sales network, so as long as the products, services and technologies are complimentary, the same network can be used for distribution.

While the company looks for complimentary products and services, we also notice that Advanced has moved into clean energy solutions. How can the company draw on its capabilities to enter this niche?

Clean energy is a hot topic that covers a broad playing field. Advanced started looking at clean energy around 1999. At that time, the focus was on technologies that could make the use of fossils cleaner, which is different than the trend towards non-fossil fuels today. One of the technologies formed was the alkyilation technology to reduce fuel and pollutant emission. While the idea and the marketing resource was there, the company did not have the necessary financial resources at that time to acquire this technology from some licensors. Advanced formed an alliance with Dupont who bought such technology from a licensor (Stratco Inc) to market this technology successfully in China and Asia. Four years ago, Advanced also started actively pursuing projects in renewable energy and biomass projects in particular.

Advanced also invested SGD1.8 million in a bio-gas plant on a poultry farm in Singapore focusing on waste-to-energy processes. How does this project fit into the company’s business model and why exactly did you choose Singapore?

One of Advanced subsidiaries has been involved in environmental monitoring for many years. The green niche is therefore not entirely new to us . As a company, we strongly believes in making a change to the environment and society. Environmental conservation is regarded as very important. The biomass project was started in Singapore because the country has always shown that it truly cares about the environment. For the different industry players, investing in the environment is an expense. By only looking at this from the shareholders’ point of view, there is not much return to fall back on.

Advanced believes it could do something to improve the environment in Singapore and turn it into a sustainable business for the company. The purpose of the move into this niche was thus twofold: social responsibility and return for the shareholders. The Singaporean government is very supportive of such projects. It is important for companies pursuing green projects to do so in a sustainable manner without relying on government subsidies.

Since 1992, Advanced has established itself in China and other regional and international markets. What is the next challenge for the company and where will we see Advanced in 5 years from now?

Advanced is still a young company. The young age of the company is sometimes a burden for the staff of the company. To achieve big aspirations, employee mindset is one of the first things that needs to change Although Advanced is still relatively small but it profiles itself as the future IBM of the oil and gas industry. By believing in what it is capable of, the company thus has a chance to achieve these ambitions. The aspiration of Advanced is to turn into a billion dollar company which has been a 10 year goal since 2005. With just 5 years to go, we believe the company is on the right track. Within the company there is a strong mindset to go forward and achieve these targets. Advanced will also continue on its trail of acquisitions and will keep looking for businesses that generate good cashflow.

Do you have a final message you would like to send out to the readers of Oil and Gas Financial Journal?

Advanced wants to become the Microsoft or IBM of the oil and gas industry, clean energy and environmental business. I would like to leave a legacy that our next generation will find at us in the league of Fortune500 companies.

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