Serial System taps opportunities from digital to durians
WHEN opportunity knocks, how will you answer?
This is one question that frequently swirls in the back of Derek Goh's mind, keeping the chief executive officer of Serial System Ltd focused on what he enjoys most - growing profits and maximising returns for shareholders.
By spending his entire career exploring and capitalising on opportunities that emerged along the way, Mr Goh has transformed a one-man operation into the largest electronics components distributor listed on Singapore Exchange, with annual revenue of more than US$1 billion.
"Life isn't fair, and money is hard to earn. I wasn't born with a silver spoon in my mouth, in fact, all I had was a rusty spoon - one which I had to polish very hard," Mr Goh recalled wryly.
"So when opportunities come your way, better grab them with both hands, because when they're gone, you might regret it."
Mr Goh, who loves tinkering with electronic components, founded Serial in 1988 in the back room of his wife's florist shop. At the time, the florist business was profitable, but Mr Goh dreamed of building something more substantial.
With dogged determination, he established Serial's electronics distribution network from scratch, and in 1997, listed the company on SGX's then-Sesdaq second board. Three years later, the company was upgraded to the Mainboard.
Shortly after, the company entered a period of turmoil, triggered by Mr Goh's handover of the business to his long-time buddy Eddie Chng, who took the reins in September 1999.
The next few years were marked by boardroom battles, operating losses and broken relationships with customers and suppliers. In 2001, Mr Goh wrestled back control, and began the arduous process of returning the business to profitability.
Comeback
Since then, Serial's comeback has been nothing short of remarkable. Over the past 16 years, the group has chalked up a compounded annual growth rate (CAGR) of 26 per cent, with revenues breaching the US$1 billion mark in 2013.
Three years ago, Serial entered a new growth chapter by diversifying into the distribution of consumer products. Its current portfolio comprises household appliances and lifestyle goods, ranging from camera accessories and timepieces to hard disk drives.
The group now employs more than 1,000 people in 53 offices and 13 warehouses across Asia. It has over 7,000 customers from a diverse range of industries.
With a market capitalisation of over S$150 million, Serial shares have generated a price gain of 18.9 per cent in the 2017 year-to-date, compared with gains of 16.9 per cent and 16.6 per cent respectively for the benchmark Straits Times Index and broader FTSE ST All-Share Index.
"To get to where we are today, we adopted a three-pronged strategy," said Mr Goh, who bagged the "Ernst & Young Entrepreneur Of The Year 2011 Singapore" award for the Electronic Components Distribution Category, as well as the "Top Outstanding Leaders in Asia" title at the 2015 Asia Corporate Excellence & Sustainability (ACES) Awards.
"We expanded geographically, and upgraded our operations through automation. We also widened our range of suppliers, taking on second- and third-tier ones. With more suppliers, we broadened our product range and added new clients."
The road ahead, however, remained bumpy. In March 2016, Serial was placed on the SGX Watch-List for failing to meet the minimum trading price of S$0.20 required for companies on the Mainboard. Undeterred, Mr Goh doubled down on efforts to boost performance, and before the close of 2016, Serial exited the SGX Watch-List. In the strongest sign yet that the group remains a key partner of leading semiconductor suppliers and electronics manufacturers, its full-year revenue hit an all-time high of US$1.4 billion, representing a 15 per cent year-on-year increase.
Looking back, Mr Goh underscored the importance of maintaining focus and discipline. And a lack of discipline can be your downfall, driven by one of the most pervasive qualities of human nature - greed. "A common cause of business failure is poor discipline. It takes many years to build an empire, but only a year or two for it to burn to the ground."
Despite challenges in the operating environment, the group's outlook remains bright. Serial is targeting revenues of US$5 billion to US$10 billion over the next decade. "I believe US$5 billion is 100 per cent achievable in the next five years," Mr Goh added.
Most of this growth will come from the steady expansion of Chinese demand. "Hong Kong and China currently account for 55-60 per cent of our group revenues, with Singapore contributing only 3-5 per cent."
More importantly, the group's focus on diversification will ensure its long-term survival, Mr Goh noted.
Diversification
Serial has ventured into hospitality and healthcare solutions, which includes its flagship electronic Meal Ordering System for local hospitals, as well as the assembly and distribution of medical devices. It holds a 27.3 per cent stake in SPL Holdings Australia Pty Ltd, which provides laundry services to hotels, hospitals and restaurants in key Australian cities.
The group also owns 21 per cent of Tong Chiang Group Pte Ltd, a Singapore-based food manufacturer that provides delivery of home-cooked meals known as tingkat, bento boxes for corporate customers, as well as halal and non-halal catering for events.
Looking ahead, Serial aims to raise its stake in its laundry services associate to become a major shareholder, and make further inroads into food distribution to boost income streams, Mr Goh said.
In September, the group announced its subsidiary was taking a 27.5 per cent stake in a company that manufactures, processes, trades and exports durian puree and durian-related products. "While my semiconductor business has very low profit margins, the durian business is profitable, and China is a large potential market. As an entrepreneur, I'm always looking for good ROI," added Mr Goh.
Mr Goh, who owns 39.6 per cent of Serial, is also putting in place a succession plan for the group.
"I'm 55 now, and hope to be semi-retired in the next 10 years. I want to find someone to run the core business so that I have the bandwidth to pursue other higher margin ventures - time is an issue here," he said.
"I have lots of ideas, but I need time to explore and execute them."
