Saturday, August 18, 2007

Businessman Engineer

An interesting read of a man who is seldom featured in the media -- Lin Yun Ling of Malaysian construction firm Gamuda Bhd. In Singapore BT's Raffles Conversation, he sounds a tad arrogant, saying things like: "We are used to doing a RM1 billion project so don't come and show us RM100 million. We will fall asleep." But I rather read an honest piece, rather than one couched in niceties.

Anyway, Yun Ling sounds like a smart engineer with good business acumen. He is behind some radical ideas like the SMART system to divert flood water from the Malaysian capital. It also collects toll from motorists who choose to use the tiered tunnel to bypass congested areas.

Business Times - 18 Aug 2007

Engineer with a passion
PAULINE NG talks to Lin Yun Ling, founder MD of Malaysian construction firm Gamuda, which has a market value of RM7 billion

ALTHOUGH he is running what many perceive to be Malaysia's most aggressive construction firm, Lin Yun Ling comes across as far from combative in person. Like so many civil engineers, his passion appears to be in structures, the more imaginative and innovative the better. Numbers themselves are of less interest.

But after some three decades as Gamuda's founder managing director, the 51-year-old obviously knows a thing or two about his trade. The company he founded in 1976 with four others who are now retired has grown from its original RM100,000 to be worth more than RM7 billion (S$3.1 billion) at current market value.

Its work ranges from motorways, ports, tunnels, water treatment and sewage plants, airports, power stations, highway and bridges, hospitals, dams and hydropower and township development - big infrastructure projects where it has often played the lead role of EPC (engineering procurement construction) contractor.

Not bad for a ya kok tiak, which is Cantonese for 'Jack of all trades', as Mr Lin describes himself. Over the years, he had moved on from his sub-contractor beginnings into something far bigger so that he was ready to move again when opportunity knocked in the late 1980s and 1990s during an intense period of privatisation of major assets in Malaysia.

'We rode that wave quite well,' Mr Lin says of former prime minister Mahathir Mohamad's decision to privatise huge chunks of the Malaysian economy, in turn creating many opportunities for companies like Gamuda. The timing was right, but it was also what you could do.

'It can sound very common today but I remember at that time we brought in at quite a high level, professionals from design and engineering consultancy background. The game plan was to have a range of skill sets - financial consultants working with construction managers and design people. Even today we have an undoubtedly strong traffic planning team, all the specialties under one roof.'

Mr Lin is a graduate of King's College, London, and his brother is a former Bank Negara deputy governor - Lin See Yan.

His habit of thinking out of the box and looking for value and solutions in unlikely places might have resonated with Dr Mahathir, an unorthodox 'big picture' man himself. Two projects Mr Lin recalls with great pride are one of Gamuda's early concessions - the 40 km Damansara Puchong Expressway (referred locally as the LDP) - and the recently completed Smart Tunnel in Kuala Lumpur. He describes the LDP as almost 'transformational' in its impact.

'One of our earlier projects, the LDP, has to be one of the busiest motorways in the country now. When we proposed it, it wasn't even in the government roads masterplan. Puchong was the backwaters - a second class area to a lot of people - but what we did was fill up a huge mining pool, 12 million cubic metres, and connected Puchong to PJ (Petaling Jaya). Because of the transformation in Puchong, today you can see more than 20 big townships.

'Of course today people take the road for granted. but when I say transformational impact, we invested RM1.2 billion to RM1.3 billion into the capital expenditure for the entire highway. If you took 500 metres left and right of the road over 40 km and work it out, it is easily over RM20 billion of appreciation in real estate. So with RM1 billion you can leverage and create RM20 billion of wealth.'

The road now collects tolls from some 600,000 vehicles daily.

Where the LDP was an unsolicited proposal to the government, the Stormwater Management and Road Tunnel Project - the Smart Tunnel - was semi-solicited.

Owing to severe flooding in the city, the government in the late 1990s and early 2000s decided that drastic measures were needed and looked to a channel to divert floodwaters out of the city.

'There was no space on the ground, so they had to go underground. We looked at it and put it to them: if you have a tunnel of that size over 10 km and are only using it once or twice a year, it is not cost-effective. Given the alignment it had to go through - underneath parts of the city where there is a lot of congestion, like the Sungei Besi road - we worked out with the installation of some floodgates and a kind of decking into it, you could create motorway lanes in two decks and still open and shut the gates as you like.'

Under a three-mode operation system, the Smart Tunnel motorway is shut to traffic only during a major storm, when the automated water-tight gates to the tunnel are opened to allow flood waters to pass through.

The motorway is reopened within 48 hours. Already collecting tolls from 20,000 vehicles a day, its efficacy with floodwaters has yet to be tested since this portion was only recently completed.

Mr Lin does not for a moment doubt that the Smart Tunnel's dual function makes sense, given the flood tunnel's projected building costs of RM1.8 billion, and the tunnel's actual cost of about RM1.9 billion. 'The government only pays RM1.3 billion because we raised RM600 million on the back of the motorway revenues, so in the end it still works out cheaper for the government.'

The 30-year toll concession on the Smart Tunnel will give Gamuda a return on investment of 11 to 12 per cent, which Mr Lin describes as 'adequate, but nothing to shout about'.

He says: 'What gratifies us is that we were able to make a facility that would otherwise have been under-utilised and make it work in a cost-effective way.'

Now working on bigger things, small projects no longer interest him. 'At that time it was odd to people, but among ourselves we had a house rule: we do not go for projects less than RM1 billion, whether it is development or infrastructure.

'Today you will find only four to five projects in our order-book. Our competitors will have 20-30, but even the smallest of our four or five will still be bigger than their biggest ones.'

Mr Lin says: 'There's a Cantonese saying - whether you jaga (look after) two cows or 20 cows, the work is the same. But if your two cows are very big you can move very fast and can go very far.'

He doesn't state how far he aims to go, but indicates he derives more pleasure defending his ideas from people such as Dr Mahathir than the bottom-line or the profit performance of a project.

'Twenty years from now when I look back what I will remember won't be margins we made on a project. But I'll remember things like putting the Smart proposal to Dr Mahathir and the kind of questions he'll grill me on for two hours; but once you pass that, the project is going to move the next day. These are the things you remember.'

Mr Lin's expansion strategies are just as undefined. 'Even the growth part - if there is one - is a consequence of this passion for the creative part. By that I mean if we can come up with the creative proposals that we like doing, then that's the growth for you as a shareholder.'

But shareholders needn't worry too much - the proof of the pudding is in the company's order book, which is the envy of many. After a number of years in the corporate wilderness when construction work dried up overnight in the wake of the Asian financial crisis, Gamuda is back, big time. Analysts have projected a doubling of its profits this current fiscal year, Gamuda's new found confidence is a reflection of its success in overseas markets.

'As with most things in life, it (construction) is cyclical. Although by some measures it was a low ebb then, it was when we embarked on our overseas expansion that we discovered ourselves, our strengths, how hungry we were.

'The last time I felt like that was when I was 17 and my parents sent me to UK to study. You rediscover yourself and after seven or eight years - if I may pass judgement - I would say we are very confident.

'In India and the Middle East we have been completing very tough projects which were not as profitable as we would have liked, but we have built a very good track record there. We haven't had new work in India for more than three years now, but yesterday Indiabulls asked us to team up with them on a housing project in Mumbai.'

Overseas jobs are predicted to account for half of Gamuda's future earnings. Huge deals are being brokered in Indo-China, one recent example being the Vietnam Yenso Park project. In return for financing and constructing some of Hanoi's infrastructure - mainly its sewerage system at a total cost of some US$400 million - Gamuda will receive 500 acres of land within the city. The company plans to build a commercial centre along the lines of the Kuala Lumpur City Centre, targeted at the multinational companies and expatriates in Hanoi.

'Here the project was unsolicited but we know their needs in terms of infrastructure. And we could also identify the land that we are comfortable with - it is unencumbered and nobody is staying on it, so we know they can hand it over to us immediately.'

But in the search for the different and undiscovered, Mr Lin sometimes gets it wrong. One venture that did not pay was Gamuda's investment in Dyna Plastics - a company engaged in developing energy sources to make advanced rechargeable batteries.

The mid-2000 investment incurred the fury of fund managers and investors who could not see the rationale for Gamuda plonking down nearly RM69 million into an unrelated venture. Its shares were sold down sharply and a few years later when it exited the investment with nothing to show, few were surprised.

What was the reason for the uncharacteristic slip-up? 'I suppose if you know us it wouldn't be difficult to see. A lot of us are engineers and we are fascinated by - I wouldn't call it rocket science or state-of-the-art discovery - lithium ion batteries which until today are still a very hot topic.

'It's an on-going race to come up with batteries that are lithium ion based. Scientists say it is the way to go, that 60 to 70 per cent of all our fossil powered applications can eventually be replaced by lithium ion, so it is a fascination.

'At that time we were not experts in it but checked with third party sources on the people who had the technology. A lot thought he had a very good chance of making it. The lab samples that he sent had test results from people like Motorola and they were good.

'But we didn't understand at the time to translate lab samples into factory products would take a very big jump, and that's where it failed. But nevertheless by normal commercial and corporate criteria it was bad judgement.'

Mr Lin is not one to beat himself up over it. 'Just like I do not take credit over something very profitable, I consider this just one of those things. I hope I don't come across like I am financially insensitive, but after 20-30 years, a lot of things have made a lot of money for the company, so in a way I have half forgotten this, really.'

Already boasting the largest network of urban tolled-roads and biggest water treatment operations in the country, the company's order book has expanded to over RM15 billion at present. Projects in hand include its RM6 billion half share in the country's double-tracking rail project, RM1 billion worth of construction on the Doha International Airport, RM2 billion of work on the Laos Nam Theun hydropower project, and another RM7 billion-8 billion worth of property projects in Vietnam, as well as some local property developments.

Mr Lin is not the largest shareholder of the Perak-founded company, owning only 5 per cent. The state pension Employees Provident Fund holds some 9.89 per cent and Raja Eleena Raja Azlan Shah of the Perak royal family owns nearly 10 per cent. Raja Eleena is considered one of the country's richest women by virtue of her stake in Gamuda.

Mr Lin is obviously ambitious for more projects, but 'nothing small please'.

He says: 'We are used to doing a RM1 billion project so don't come and show us RM100 million. We will fall asleep.'

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