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Insights from Award Winning MTQ CFO
Asean Equities Review had the opportunity to catchup with Mr Dominic Siu, Group CFO of MTQ Corporation Limited. Mr Siu was the winner of the Best CFO Award (Market Cap below $300 million) in the 2014 Singapore Corporate Awards. This was thus an occasion to listen and appreciate the perspectives of an award winning CFO.
I started by asking Mr Siu about the challenges he has had at MTQ as CFO. He started by saying that MTQ have grown significantly over the last 3 to 4 years. MTQ’s Profit and shareholders’ funds doubled over the period. Up until 2010, there were two lines of business, the engine systems business and the oilfield engineering business which were more or less equal size. The oil field business expansion started in 2009 with a green field investment in Bahrain which became operational in 2012. Between 2011 and 2014, the Group made 3 acquisitions. All 3 are oil and gas related.
The greenfield investment in Bahrain started in 2009 after securing land to build its facility. The thinking then was to serve the same customers it had in a new geography. The current facilities in Singapore could only practically service customers as far as India. MTQ have developed good customer relationships with many of the global players who could give it jobs all over Asia and Australia. Hence the expansion to the Middle East was a strategic and an excellent decision.
The first acquisition that MTQ made for the oilfield business was the Premier Group. This transaction was completed in 2011. It was a company that MTQ knew well. This was a peripheral business that a US Listed Company wanted to exit. One of Premier’s subsidiaries was Pemec, which was a competitor of MTQ. The strategic intent of this acquisition was to allow MTQ to grow its capacity. Its current capacity in Pandan Loop was already facing capacity constraints. The Premier Group went on to do well financially.
However, the biggest challenge remained the acquisition of Neptune Marine Services. This was an Australian Listed Company that had fallen into losses and made significant write-offs. Again this was a company that MTQ knew well and Australia is a territory which the Group is familiar with as its Engine Services business had extensive Australian presence.
The complication in this case was that Neptune Marine Services was listed and that the acquisition while not hostile, was also not friendly either. There were issues of being able to manage and complete the acquisition and its required approvals and processes while navigating two regulatory jurisdictions and stock exchanges. There were also disgruntled shareholders who had bought Neptune Marine shares at a historic high. The challenge of turning around the company was also there.
Neptune Marine is in the subsea space and a good complement to the rest of the MTQ business. On the surface, it differs in that most of Neptune’s work is done in the sea while the rest of the Oilfield Engineering work is done it MTQ’s facilities. But there is synergy in that there are common customers which both businesses service. In addition, the opportunities to market the Group’s services and capability have been greatly enhanced with the enlarged footprint. Neptune has strong presence in Australia and Scotland while MTQ has always been strong in S E Asia and have just completed the investment in Bahrain.
The latest acquisition, the Binder group, was completed beginning of this year. Binder is a specialised pipe support provider and has been involved in many of the large scale gas pipeline projects.
We then moved on to discuss more CFO-related topics. Singapore has in recent years seen an increase in the requirements of the corporate governance and regulatory regime. Mr Siu felt that improving the governance regime is certainly the direction to go. However the cost-burden of this increased corporate governance was disproportionately weighed on smaller companies. This is because the cost of this increased corporate governance was of the same quantum to both a big and small company. Thus a smaller company would have to absorb a higher percentage of this as a component of its revenue.
He cited the challenge of moving from a half yearly reporting regime to a quarterly reporting regime. There is a tremendous amount of effort that a company needs to undertake to prepare for this. There are also more costs involved. Given the project-based nature of MTQ’s revenue, the visibility offered by quarterly reporting was also not substantial. There was also not a huge improvement in share liquidity. Mr Siu felt that corporate governance regimes should be further tailored to the size of the company.
Mr Siu also gave his perspective on Integrated Reporting. While he said that the concept was good, it is an immense challenge to implement which is why the development is at conceptual stage. He felt that what is currently proposed includes a lot of information to be squeezed into a report. Unless very comprehensive and complex reporting standards are set, there will be issues of comparability and interpretation of the information presented. From a practitioner point of view, the time, resources and costs involved are all relevant considerations to be taken into account. He also felt that the scope of information involved covers a lot more facets than financial reporting and as such will involve quite a number of other professionals apart from Accountants to do Integrated Reporting. The additional reporting requirements will also translate to more burden for the Board of Directors of Listed Companies particularly when the Directors have to sign off on these.
Towards the end of the interview, I asked Mr Siu about his achievements to date at MTQ. He said he felt really honoured by the Best CFO Award. This was because of the recognition from his peers. He did say that there were a lot of good and capable CFOs who are more deserving of the honour and he is fortunate that he had the opportunities to work on projects and issues that prove his ability and be recognised.
Mr Siu also made the point that the award was also recognition of the effort and support from his Team
As for acquisitions, Mr Siu felt that MTQ would not do them for the sake of doing them. There was no thinking that they had to do a certain number of transactions a year. Instead the focus is on the strategic value of the acquisition and how MTQ would be able to manage it.
GET TO THE POINT : Every company would benefit from a capable and down-to-earth CFO. While growth and strategy are traditionally the job of a CEO, the CFO also plays an important part in enabling and facilitating this growth. A good CFO makes the difficult things look and sound easy.
(Picture from MTQ Corporation Limited)
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