BMCs-Best Execs-r2:AMM grid in qxp 12/24/09 9:42 AM Page 45
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thelargestinternetgamingproviders.Itwasthekeydriverforthecom- Yip’sreporteda44%year-on-yearriseinnetprofittoHK$228mil-
pany’soutsizedprofitgrowththisyear,too. lion(US$29million)forthesixmonthstoSeptember30,eventhough
Tencentisalsogoodatleveragingitshugeuserbase,whichhas itsrevenueswerenearlyflat.
allowedittomoveintonewmarketssuchasonlineauctionsthrough Operatingmarginsatitssolventandcoatingdivisionsincreasedby6%
itspaipai.comsiteandonlinepaymentsthroughTenpay.Theymaynot and129%respectively,leadingtoa39%riseinthecompany’soperating
bemarketleaders,butoffergoodgrowthpotential. profit.ThemarkedincreaseinitsbottomlineispartlyattributedtoYip’s
Thecompany’srelianceonorganicgrowthalsoticksboxes.“They heavierinvestmentinbrand-buildinganditsdistributionnetwork.
haveconsistentlybeenaskedaboutacquisitions,”saysabuy-sideana- ThefirmsawstrongdemandinparticularforinkandBauhiniapaint,
lystinHongKong.“Therehavebeennomajoronesinthelastfive whichisunderstoodtobegrowingatafasterratethananyotherpaintin
yearsandyetthecompanyisstillgrowing.Theyhaveproventhem- China.
selves.” Thecomingmonthslookgood,too.Yip’sproductionfacilityforrawsol-
Itisn’tjustanalystswhofavourthem;investorsalsoknowagood ventsineasternChinaisexpectedtocomeonstreambeforetheendof
thingwhentheyseeit.Tencent’ssharepricehasconsistentlyoutper- December,whichwillmakeittheworld’slargestproducerofacetatesol-
formedtheHangSengIndex,triplingfromHK$50toHK$150inthe vents.
yeartoDecember3. Ithasalsoacquiredtwopiecesoflandadjacenttoexistingplantssothat
itcanincreasetotalcapacityforcoatingsbymorethan60%.
“InthepastyearYip’shasdoneagreatjobandmadeaverygoodfoun-
BESTEXECUTIVE dationforcontinuousgrowth,”summedupanotherHongKong-basedana-
MaHuateng,chairmanandchiefexecutive,Tencent lyst.
Certainlyinvestorsbelieveinthecompany,whichdeclaredaninterim
dividendofHK$0.12pershare.Itsstockpricehassurgedmorethan200%
MarketsourcesliketothinkthatMaHuateng,Tencent’schairmanand overthepastyear.
chiefexecutive,hastheMidastouch.
GivenTencent’simpressiverunsinceitwasfoundedin1998,it’s
hardnottohavethatimpression.Sincethen,theShenzhen-headquar- MEDIUM-CAPCORPORATEOFTHEYEAR
teredstart-uphasmorphedintoChina’slargestinternetcompanyby Vtech
marketvalue.
The38-yearoldGuangdong-bornentrepreneur,whoalsogoesby
Pony,isseenasthedrivingforcebehindthecompanyhefounded.Its ExceptionalcostcontrolensuredthatVtechwasabletoemergefromthe
meteoricrisehasalsomadehimoneofthecountry’srichestmen. globalfinancialcrisisinstrongershape,withanextremelyhealthybalance
Tencentisbestknownforitsblockbusterhit,themessagingsoft- sheet.
wareQQwhichhasmorethan450millionusers.Andovertheyears, Thefirmisoneoftheworld’slargestsuppliersofcordedandcordless
hehasexpandedthecompanyinmanydifferentdirections:internet telephonesandelectroniclearningproducts(ELPs),andalsoprovidescon-
portals,onlinegaming,mobileinternet,e-commerceandwebadver- tractmanufacturingservices(CMS).
tising. Eventhoughitsrevenuesdropped5%inthesixmonthstoSeptember
Analystsareimpressedbywherehehasledthecompany.“People 30,thefirmreporteda33%riseinnetprofittoUS$91.5million.Thatwas
alwaysthinkthatthebusinesswillslowdown,butbasicallyitalways nomeanfeatgiventhatitsmajormarketsaretheUSandEurope.
hassomethingnewtomoveontoandgrabmarketshare.Thatalways Thecompanyalsoincreaseditsnetmarginto12.3%,from8.8%,reflect-
surprisesthemarketandweshouldgivecredittohim,”saysaheadof ingnotonlylowermaterialcosts,butalsohigheroperationalefficiency.
ChinaresearchinHongKong. ObserversnotedhowVtechwasabletoworkwithitscustomerstotrim
Givensuchhistory,theysayheshouldbeabletonavigatethrough downinventoriesintheeyeofthestormlatelastyear.
changesinthisfast-growingindustry. “Themanagementknowshow “Theysawthepotentialriskofinventorybuildinthechannelveryearly
togetinvolvedinthenewestsubsegments,”addsabuy-sideanalyst. on,sotheyscaleddowntheirproduction,”saidoneHongKong-basedana-
Mahasalsosucceededinoneofhishardesttasks–keepinghispre- lyst.
dominantlyyoungandcreativeworkforcehappyandmotivated. “Asforearnings,nodoubtvolumesgothit,buttheirbalancesheetwas
“Thisisapeople-orientedbusinessratherthanacapital-intensive verystrongrightthroughthedownturn,sothatallowedthemtomaintain
industrysoit’sveryimportanttokeeptheworkforcehappy,”notesthe their[dividend]payout.Thatisimpressive.”
analyst.“Hehasdoneaverygoodjobatretainingstaff,whichmany Vtechincreasedearningsparsharealmost32%year-on-year,whilethe
othersfindproblematic.” boarddeclaredaninterimdividendofUS$0.16perordinaryshare,a33%
riseoverthesameperiodlastyear.
HONGKONG
Addintothisthefactthatthecompany’ssharepricehasralliedmore
than220%overthepast12months,anditrepresentsanimpressiveper-
formanceinadifficultyear.
SMALL-CAPCORPORATEOFTHEYEAR Cost-consciouscustomersensuredVtech’ssalesandmarginsdecreased
Yip’sChemical inELPs,butgiventhecompany’ssteadypipelineanalystsareoptimisticthat
growthcanbeachievednextyear.
Anddespitean11%fallinCMS,theyareconfidentthefirmcanliftfull-
IthasbeenaproductiveyearforYip’sChemical.Theindustrialfirm– yearsalesontoaparwithlastyear,notingmajorordersforsolid-statelight-
whichmanufacturesandtradeschemicalproducts,solvents,paints, ing.
lubricantsandinks–iscreditedwithmanagingitsworkingcapitalwell
duringthedarkdaysoflate2008.
AnalystsnotethatbyJanuaryitboastedanetcashpositioncom- LARGE-CAPCORPORATEOFTHEYEAR
binedwithalowbad-debtratio,atatimewhenliquidityandcashflow Li&Fung
wereofparamountimportance.
Thenwhenthemacroeconomicenvironmentpickedupearlyin
China,whereYip’ssells90%ofitsproducts,itwasquicktocapitalise. Iftherecentcrisisprovedanything,itwastheimportanceofastrongbal-
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