Straits Trading’s executive chairwoman, Chew Gek Khim, was interviewed recently on CNBC Managing Asia. She discussed her career, the company’s evolution over time and her own vision for its future. You can watch the entire ~12 minute interview on the CNBC website (link here).
Straits Trading is a Singapore-based holding company with primary investments in real estate, hospitality, resources and financial services. It is currently in the midst of a significant business model transformation, away from the direct ownership of lower yielding, capital intensive businesses and towards a more capital light asset manager model. It is a core holding of the Moerus Worldwide Value Fund and you can find the highlights of their investment thesis here.
Below are some notes from the interview (any mistakes are my own):
- On her background and career:
- She is the granddaughter of Tan Chin Tuan, who was the former chairman of OCBC.
- Under his watch, OCBC had built up stakes in a number of companies including Straits Trading, the Raffles Hotel, Fraser & Neave, Robinson & Co and WBL Corporation.
- This was in a post-colonial era when it meant a lot to have Asians participating in business. Her grandfather saw an opportunity as the British and others were pulling out. Accumulated these stakes over many years, so it was his whole life’s work. Eventually, in 1999, local banks were required to divest all of their non-financial businesses.
- She first joined the family’s investment group (Tecity) in 1987 as a “young twenty-something” after having initially trained as a lawyer.
- Only had one condition: she would give it a shot for two years and, if it didn’t work out, they would part ways amicably. Was determined for it not to affect their familial relationship.
- Her grandfather was a man of few words, so she had to watch and learn by example.
- On obtaining control of Straits Trading:
- In 2008, Chew led a high profile acquisition of Straits Trading, bidding against the Lee family of OCBC Bank. The Tan and Lee families were linked for decades through OCBC.
- She initially found it very tough to change the culture and mindset of the 130 year old company. She tried to get management on board with her vision but they eventually had to make a lot of changes. Was economically painful but she wanted to give people a chance.
- Things got even harder as the financial crisis unfolded shortly after the acquisition was completed. They had taken on debt to acquire Straits Trading. Had to systematically go through the portfolio and look at what assets they could monetise to reduce debt. Chew says she likes to feel “stable and safe” so she can sleep at night. Once the balance sheet was shored up, she felt a lot better.
- On the transformation of Straits Trading:
- She would like to build an investment company that is very good at capital allocation and can invest in businesses that give a sustainable and hopefully increasing return over time.
- They are currently focused on three key sectors: real estate, hospitality and resources. Moving towards an asset light business model.
- They have no mechanical timeline with regard to selling assets. They tend to look at the outlook and evolution of the broader industry – for example, if the industry is nascent and has potential, they would be happy to just ride it (e.g. with their property exposure via ARA and Straits Real Estate).
- She still believes it is early days for the real estate industry in Asia. Most people in the region still tend to be direct owners of real estate but there is an opportunity to create a financial platform for individuals to participate more efficiently in real estate (for example, through REITs, property funds and real-estate backed instruments). Straits wants to ride this potential wave of securitization.