You are here
Gearing up to fire off a second engine
DESPITE Expand Construction not being in the shipbuilding trade, founder and executive chairman Von Lee Yong Miang likens himself to being the captain of an aircraft carrier.
As the leader of one of Singapore's newer construction companies, he says: "To me, an enterprise must always be forward-looking. We need to have a sustainable model as a base, like an aircraft carrier.
"But we also need to consistently send out little warships everywhere to look for new ground, so that one day we can build our second, third or fourth engines to boost our aircraft carrier."
Expand, which was founded in 2000, has been behind some of Singapore's iconic structures, such as the Supertree Grove at the Gardens by the Bay, as well as over 6,000 HDB units in six build-to-order (BTO) projects.
The company has also won a slew of awards and accolades, including being a multiple Enterprise 50 (E50) Awards recipient in 2010, 2016 and 2017.
But 2017 was not the easiest of times for Expand, which Mr Lee acknowledges was a year that the construction sector suffered some weakness on the whole. The sector shrank by 8.4 per cent for the entire year, in contrast with the 1.9 per cent growth in 2016, according to the Ministry of Trade and Industry.
However, the 2018 financial year was a bounce-back year for the company. Expand's revenue rose from S$149 million last year to S$171 million in 2018, for the financial year ending June 30. This was a reversal of a S$35 million year-on-year drop from 2016's revenue of S$184 million.
The company also became slightly more profitable, with net profit inching upwards from S$13.5 million to S$13.9 million.
Mr Lee says the upswing was due to the rise in the number of en-bloc projects this year. At the same time, he adds that he feels the company is now mature enough to go beyond building-related construction.
He notes: "2018 is when we start our second engine."
Mr Lee explains that this engine refers to civil infrastructure works, such as deep tunnel sewage systems and Mass Rapid Transit (MRT) projects.
"I believe that a good construction company must continue to build up its capability and capacity," he says. And infrastructure is an area which Mr Lee finds to be sustainable in the long run.
"If you look at the data, for example, MRT projects will be running for the next 20-30 years, and the contract value is in the tens of billions. These are the projects that Singapore will emphasise for the next three decades, and I'm quite sure if we are now coming in, we can continue to enjoy this sustainability."
Earlier this year, the company made inroads, as it was awarded a contract from the Defence Science and Technology Agency to develop an infrastructure project at Changi Naval Base. Expand has also hired a director of infrastructure works to make further headway into the infrastructure space.
But Mr Lee noted there are significant barriers to entry in the public infrastructure space, as certain projects require a track record and high technical requirements. As such, Expand believes that forming joint ventures with established multinational partners will be key to overcome such challenges, he says.
"We feel that it is good to have big players to hold your hand, and the learning curve will not be so steep," he points out.
And with infrastructure works as a second engine, Mr Lee believes that the company can sustain itself, even if there is further slowdown in the building construction segment.
"It will be more sustainable with more engines running. When some engines break down or need an overhaul, there are other engines that are still moving."
Expand is also looking overseas to broaden its horizons.
The company has invested in the development of Hotel Alessandra, a luxury hotel in Houston, Texas. The 20-storey building opened its doors in October last year, and has picked up several American design awards.
But unlike before, where Expand played the role of a building contractor, the company now acts as more of a developer.
"Our talent pool is very small. As a Singapore-based company, it is very difficult to deploy our engineers to undertake overseas projects," Mr Lee says. He explains that this makes it challenging to conduct day-to-day supervision, and thus ineffective to be a construction company there.
Instead, he says that being a developer or an owner helps to provide a form of recurring income, adding that Expand is now looking at certain commercial properties in the United Kingdom.
Still, Mr Lee reveals that he is treading carefully in terms of overseas expansion, recognising that companies "get engrossed" in expanding for the purpose of expanding and end up running into many problems.
"I look at it as a very important balancing act. When you are too conservative, then your growth path is impeded. But at the same time, if you are too optimistic, and expand too fast, you forget the limited resources you can command." He notes: "A good captain of the ship has to determine where the balance is."
An initial public offering (IPO) is not on the cards, at least in the near future, because the company has not reached sufficient maturity, says Mr Lee. But he adds that it could be a possibility if the company develops a third or fourth engine, when it has multiple assets or businesses. "A listing status will help to bring all the engines under a single umbrella, then I suppose it will be a natural path."
Mr Lee has a grand vision of Expand becoming a conglomerate. "I always admire those businessmen who built up a huge conglomerate in their lifetime. Not only do they invest time to build up their business, but they also contribute back to the society by employing so many people."
And his staff, which consists of some 500 employees, is what motivates the founder to continue to run Expand. Over a tenth of Expand's executive and managerial staff have also stayed with Expand for more than a decade. "Where we are today is partly because of these individual contributions. The most important thing that I want to do is to take care of the people who have walked with me along this journey."