You are here
A yen for doing things differently
SOMETIMES, success comes from thinking differently and investing boldly.
Steven Toy Kok Sin, 47, recalls how he invested S$15 million in 2010 to buy machines that make components for the oil and gas industry - without having landed any orders from potential customers.
"It's a chicken-and-egg thing. If you don't have the facilities, customers won't be interested in you," says Mr Toy, the founder and managing director of precision machining firm AME International.
"A lot of people were saying I was crazy, throwing in S$15 million as a small SME (small and medium enterprise) without getting orders. But I like to do a lot of things that people don't think is the right thing to do. I decided to go in and do something different. A lot of people don't do that," he says.
The move paid off. AME , then making components for the semiconductor and construction industries, pivoted entirely into oil and gas - and started growing its business significantly. It now produces components for multinational equipment makers which sell their equipment to oil majors for subsea drilling purposes.
From making S$10 million in annual revenue in 2011, AME now makes S$25 million a year. The firm's order book for 2016 is already S$20 million.
Despite the oil price crash, revenue is expected to grow 20-30 per cent again next year.
Says Mr Toy: "Our customers are forward looking. They have been in the business for more than 100 years. They're not looking at the short term, they're thinking of the long term.
"And when compared to the West, we're more cost effective and efficient."
AME began in 1996, when Mr Toy was in his late 20s. He was then a sales engineer dealing with customised machines for the plating and semiconductor industries. But he yearned to make more money. So he set up Automated Machinery and Equipment with S$15,000 of his savings and just one other person, a welder.
They rented a 1,000 square foot space in Pioneer North and got their first deal making a spectacle lens coating machine for an Indonesian company.
But disaster soon struck.
The Asian financial crisis hit the region, and in 1998, Indonesian President Suharto resigned. There were riots in Indonesia, and a major customer's factory was burnt down.
"We also took the hit. We were forced into transforming our business to focus more on a sector that gives us more consistent orders at lower risks," Mr Toy recalls.
The first five years of his business were very challenging, Mr Toy adds. "Cash flow was the main issue. It was hard to get bank financing as a new startup," he recalls.
As AME transformed its business, it began making components for machines for the semiconductor industry here, which then had rosy prospects. By 2003, the company hit S$1 million in annual revenue. Two years later, the offshore and marine sector took off.
AME entered the industry after making some investments, supplying components to a major rig builder in Singapore.
In 2008, the company, which was renting its factory premises, decided to buy its own space in Tuas South, which had a gross floor area of 65,000 sq ft.
Then in 2010, Mr Toy made his foray into oil and gas.
The company's move was in line with how the Singapore economy was transitioning into higher value-added businesses, Mr Toy says.
"The entry level was higher, more stringent. But in terms of stability and growth, we saw that from a global perspective, this was a growing industry."
He says the rig business was also labour intensive. Making machine components for subsea drilling activity, however, relies more on technology and knowledge.
"We needed to have special know-how on equipment and also to digest the specifications our customers needed," Mr Toy says.
To qualify to supply components to their multinational customers, AME had to undergo a stringent process. But once qualified, the company is assured of a long-term business relationship, he says.
Still, AME cannot afford to rest on its laurels. Every year, the company is reviewed on the quality of its work and whether it delivers goods on time.
And AME has always delivered, Mr Toy says. "In our business, the trust and confidence customers have in us is important. We have to ensure internal teamwork across engineering, production, quality control and logistics."
Looking ahead, a major challenge for AME concerns labour: attracting local talent to work as engineers, and dealing with restrictions on foreign workers.
Certain operations and checks in the manufacturing process are dictated by customers and cannot be cut out in the name of productivity, Mr Toy points out.
Meanwhile, few Singaporeans are willing to work as machinists. The company hires 50-60 machinists from China and Malaysia on Work Permits.
The company of 120-150 workers also employs a number of production, quality and programming engineers. Yet, like other SMEs, it suffers from the perception that working there is less than prestigious.
"One of our key projects is to come up with schemes and a career path for undergraduates to join us after they graduate," Mr Toy says.
The company took in two interns from Nanyang Technological University and hopes to do more, he says.
And while the company is competitive relative to Western firms, it has to contend with even cheaper countries like Vietnam, Malaysia, Thailand and China as well as those from Eastern Europe, notably Poland.
"Poland can be pretty good in their engineering; labour costs are much cheaper. For customers to choose us, we need to have certain winning points; we need to have an advantage in our efficiency," Mr Toy says.
He is confident the subsea drilling business will continue to grow as he says land exploration opportunities are limited.
"The energy business is a must, a necessity, especially when the world's population is still growing," he says. "I think this is a big industry; there's a lot of growth for us in the next 10-20 years.
Mr Toy also has other plans for his company. It may pursue an initial public offering in the next two years. This will raise funds to take AME's business to the next level, possibly through acquisitions.
The company has also invested S$30 million in a new 140,000 sq ft plant in Joo Koon, which will be ready by the end of 2016.
"The spirit of business is that you have to continue to grow. In Singapore, I see plenty of SMEs get comfortable after they've been in business for 10-20 years," Mr Toy says. "I want to continue to grow. We want to go to the global market and do business not only with the West, but with the Middle East.
"The multinationals are doing oil and gas, but there are other markets like pharmaceuticals and aerospace that we can bring here."