Malaysia’s newest billionaire and automation (podcast)

I regularly have podcasts and produce videos which look at news stories from around the world, where I analyse them and look at the wider picture.

On today’s podcast I speak about two news articles which caught my eye:

  • Malaysia’s newest billionaire and automation. Could this tell us something about wealth generation in the future?
  • The Japanese Nikkei hitting 31-year highs. I have previously given comments of a bullish nature about this market, and those comments were recently picked up by media outlets.

I have copied the articles below with links to give credit to the original authors.

  1. Malaysia’s Newest Billionaire Automates Factories Around The Globe – Forbes

Surging demand for electric vehicles and solar energy is proving to be a double boon for low-profile Malaysian entrepreneur Tan Eng Kee, cofounder and CEO of Penang-based Greatech Technology. The company, which makes industrial automation equipment for a variety of different manufacturers, saw its shares jump 330% in the past year, propelling Tan into the billionaires club with a net worth of just over $1 billion.

“Renewable energy and electric vehicles are hot now,” says Tan, 50, who established the business in 1997 with his school buddy Khor Lean Heng, who now serves as Greatech’s COO. “They have boosted our profitability.”  

Sales for the nine months ended September 30, 2020 were up 17% to 184.78 million ringgit ($44.44 million), while net profit jumped 64% to 59.338 million ringgit ($14.27).

Greatech makes automated equipment for production lines for a host of manufacturers–from medical device makers to renewable energy producers to semiconductor companies. The company, which gets more than 50% of its business from international markets, primarily the U.S, has a list of marquee clients including Lordstown Motors, a manufacturer of electric pick-up trucks in Ohio, and Arizona-headquartered First Solar, which makes solar energy systems

Greatech’s more notable products include a robotic hand for placing solar modules in a production line; equipment for handling solar wafers on a production line, and an automated measuring device for smartphones. 

As it migrated from making single automation equipment to producing entire production lines and as it won more orders from clients like Panasonic and First Solar, the company’s annual revenue and net profit rose ten-fold between 2015 and 2019, the year when Tan decided to list Greatech on the Kuala Lumpur stock exchange.

In October, Kuala Lumpur’s Public Investment Bank projected that Greatech’s revenue was poised to grow at a compounded rate of 47.5% over the next three years “Greatech is well positioned to capture the growth in the solar photo voltaic segment through its indirect exposure via First Solar, by supplying more production lines to First Solar,” wrote Chua Siu Li, an analyst at the bank, who authored the October research report. 

Meanwhile, Tan, who is often referred to as EK, is taking his newly acquired billionaire status in stride. “I never had dreams of becoming a billionaire,” he says. “I did not expect this at all. I have a simple life–I come to the office; do my job and I go home. Nothing changes because of this.”

Tan grew up in Penang in what he describes as a “poor family,” the only son among four children. His father, who was a cab driver, died when Tan was just 13, forcing him to take on more responsibilities at a young age. At 16, he was working part-time after school at a bakery.

Tan went on to earn a certificate in mechanical engineering in 1991, and began working as a production planner for a precision tooling company. Two years later, he borrowed 10,000 ringgit from his mother, and set up Greatech (M) Sdn Bhd to make components for engineering equipment. He enlisted a friend to help him with marketing, and in 1995, convinced his school pal Khor Lean Heng to join him, too. But in 2001, Tan wound up the company.

Meanwhile, in 1997, he started a new outfit with Khor–Greatech Integration–to produce semi-automated and automated equipment for the consumer electronics sector. Greatech expanded into the semiconductor industry in 2002, and to the solar sector in 2010. 

Tan says that while there was some downtime during Malaysia’s pandemic-induced lockdown, the company’s eight factories are now all up and running again. “Our business is getting stronger,” says Tan, who’s gearing up for further growth. 

In December, Greatech expanded its capacity when it opened a new assembly plant in Batu Kawan and is currently looking to buy more land in an industrial park nearby. Greatech also opened its first office in the U.S.– a testing facility in Michigan–in the third quarter of 2020 for its electric vehicle customers. A couple more such offices will open in the third quarter of this year in Illinois and Arizona. Tan also plans to establish an office in Germany by the third quarter of 2021 and expand further into Europe and India. 

Tan is upbeat: “We will benefit from the importance being placed on ESG (environmental, social and governance) as companies move toward achieving zero-carbon status,” he says.

2. Nikkei hits new 31-year high above 28,500 – Japan Times

The Nikkei surged to extend its winning streak to a fifth session Thursday, rewriting a 31-year high above 28,500.

The 225-issue Nikkei average of the Tokyo Stock Exchange climbed 241.67 points, or 0.85%, to close at 28,698.26, the highest finish since Aug. 3, 1990. The benchmark index soared 292.25 points Wednesday.

The Topix index of all first section issues closed 8.88 points, or 0.48%, higher at 1,873.28 in its six-session bull run, after gaining 6.46 points the previous day.

The market got off to a weaker start after the U.S. Dow Jones Industrial Average turned lower Tuesday. But it soon regained strength as Dow futures rebounded in off-hours trading and investors moved to buy the dip.

Better-than-expected Japanese core machinery orders in November last year, released right before the opening bell, also heartened market players.

Stocks gained further ground around noon on media reports that U.S. President-elect Joe Biden was about to announce a $2 trillion fresh coronavirus relief package, brokers said.

Buying sentiment grew further to push up the Nikkei average close to 29,000 in midafternoon trading.

The market, however, lost steam toward the closing, as profit-taking pressure built up amid the spread of caution over high prices.

“With U.S. economic indicators, such as nonfarm payrolls, showing signs of a slowdown in recovery from the coronavirus crisis, investors are increasingly pinning hopes on Biden’s stimulus measures,” said Hirohumi Yamamoto, strategist at Toyo Securities Co.

Masahiro Ichikawa, chief market strategist at Sumitomo Mitsui DS Asset Management Co., said the envisaged fresh relief package helped reinforce investor expectations for higher prices ahead.

But at the same time, participants realized that stocks were rising too fast, an official at a bank-affiliated brokerage house noted.

“Sentiment has been overly optimistic,” another brokerage official said.

Despite the Nikkei’s powerful advance, decliners outnumbered gainers 1,090 to 1,000 on the TSE first section, while 98 issues were unchanged. Volume rose to 1.413 billion shares from Wednesday’s 1.239 billion shares.

Industrial robot-maker Yaskawa Electric went up 5.30% on continued buying since revising up its earnings forecasts for the year ending next month. Its peer Fanuc rose 2.21%.

SoftBank Group gained 2.93% on media reports that a U.S. investment ban will not be applied to Chinese e-commerce giant Alibaba Group Holding, in which the Japanese technology investor holds a large stake.

Tire-maker Bridgestone and security firm Secom also attracted buying.

On the other hand, stocks in the semiconductor sector, such as chipmaking gear-maker Tokyo Electron and test device manufacturer Advantest, fell back.

Shipping firms Mitsui O.S.K. Lines and Kawasaki Kisen were downbeat as well.

In index futures trading on the Osaka Exchange, the key March contract on the Nikkei average jumped 350 points to 28,810.

Further Reading

I often write answers on Quora, where I am the most viewed writer for investing, wealth and personal finance, with over 220 million views in the last few years.

On this article, I will use my answers from Quora to answer the following questions:

  • What advice would I give to a high flyer who seems destined for success and wealth? Would my advice be different to anybody else? Could complacency be the problem with such people?
  • Can you lose more money than you put in investing in ETFs or does it depend on which ETFs we are speaking about? Many people have misconceptions about this question. Often people look at ETFs as though they are all the same kind of investment, when in reality they can be tracking any number of financial instruments.
  • Is it a good idea to invest in index funds when some track “overvalued” as well as undervalued stock market opportunities?

Below is a preview of one of the answers

If somebody was truly destined to become a multi-millionaire, meaning it seems highly likely that they would achieve that number, I would first speak about the importance of a lack of complexity.

I know, personally, countless people who fit into the following categories:

  1. They peaked too soon in their teens, 20s or 30s.
  2. They became millionaires and multi-millionaires but then lost it due to divorce, complacency or any number of events. 2020 was a great example. Plenty of new millionaires were created due to the rise and rise of the internet and rising stock markets yet…….there were also plenty of ex-millionaires that were created too. Typically, they were either old-fashioned companies that didn’t adapt, or business owners who didn’t see the need to diversify until it was too late. Bar and restaurant owners who were doing well before the crisis, and never planned for the worst case and black swan events.

So, I partly agree with this quote below. I think the key is a healthy degree of paranoia – one that avoids a high degree but keeps you on your toes:

In addition to that, I would get them to focus on the process of planning money and managing money.

Most highly talented people, be they business people, sports and entertainment stars or whoever else, know how to make money.

Sometimes they know how to make a lot of money. What is much less frequently found is somebody who knows how to manage money long-term.

Studies have shown that between 20% and 60% of lottery winners go bust and up to 78% of former NBA and NFL stars are broke within five years of retirement.

The reason is simple. Salaries go down after retirement. If you can’t adjust your spending habits and live within your new means, you will soon be eating into your wealth.

For somebody who is used to living off tens of millions, this can be a hard pill to shallow, which is why the likes of Mike Tyson and Michael Jackson went into financial difficulties despite earning $500m+.

So, my biggest tips would be to focus on expenditure and investing the surplus well as much as income.

It is pointless to earn $1m, if you spend $1.1m! It is far better, for wealth, to earn 90k and invest 20k a year over many decades.

People make the same mistakes in business. Saying “I have a business which has a turnover of $10m, and I employ 100 people across five continents” sounds sexy, but it is pointless and an ego measure if the costs are also $10m.

Having ran businesses myself, I can say that it gets harder to stay as profitable once you add infrastructure like staffing and rental costs.

In some cases having a business with $30,000 a month after tax revenues and only $5,000 costs because it is a one-man business ran from your home, is a far better model, as it is net $25,000 a month vs net $0.

Too many people are focused on the top line and not the bottom line. Now sure, running a business is different to personal finances.

In some cases if you manage the top line, the bottom line will eventually follow, and you can sometimes sell out a non-profitable business which has big revenues.

But I am more alluding to the obsession some people have with status and something sounding good.

That is one reason why online, stay-at-home, businesses didn’t take off as quickly as they could have done from 2000 until 2015 or 2018.

Too many business owners thought it doesn’t sound as sexy as some alternatives.

What’s more, highly talented and intelligent people, are more likely to get bored and think something is working too well.

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