GIVEN half the chance, academic-turned-technologist-turned-businessman Dr Shi Xu would clearly prefer to hold forth on the science of melting metals, thermal energy and the vast superiority of vacuum deposition over other coating technologies.
Still, the executive chairman of Nanofilm Technologies International appears to have warmed up to some corporate speak - a business imperative honed over the past year since the firm he founded 20 years ago snagged a seat on the Singapore Exchange's mainboard.
The C-suite learning curve of a listco must have steepened in recent months for the 57-year-old former professor at Singapore's Nanyang Technological University (NTU).
"In the past, I trusted my entire senior management team to speak to investors. (Lately) I have spent a lot of time talking to them. Being in the CEO shoes, of course I needed to do the CEO job," he says.
But did he like having to communicate and engage with investors? "It was OK," he replies honestly, and then, gives a hearty laugh.
Dr Shi, who was previously the firm's chief for 18 years until 2017, has lately been filling in the CEO shoes once again (on an interim basis) since Nanofilm's chief executive quit in June citing health reasons. Just over two weeks ago, the firm said it has appointed Gary Ho as CEO effective January next year.
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It won't be very long before Dr Shi, a China-born Singapore citizen, who has published over 100 research papers and filed 5 key patents during his 9-year tenure at NTU and developed the firm's proprietary nanotechnology offering, gets to dedicate more time back to his passion - technology.
Dr Shi is The Singapore Business Awards' pick as Businessman of the Year for his vision in successfully taking Nanofilm from the lab to the marketplace as an SGX-listed multinational technology and manufacturing group.
In August, Nanofilm, a tech spin-off from NTU and a stock market darling, had an abrupt fall from grace when it spooked the market with the sudden departure of another key executive - this time, its chief operating officer (COO) - and issued an underwhelming 6-month report card. The stock lost one third its value on the back of the news.
It turned into another opportunity for Dr Shi to understand the market's expectations better and no doubt, vice versa.
While revenue came in 24 per cent higher at S$97 million in the first six months to June 2021, net profit fell 3 per cent to S$18 million versus a year ago owing to higher manpower costs, manufacturing overheads and expenses incurred at its new plant in Shanghai.
HERE FOR THE LONG TERM
Dr Shi is unfazed. "We are here for the long term, not the short term. That's the fundamental mentality. So I don't really overthink the short-term stuff. My philosophy is to do the right thing (that) can withstand the test of history," he says, in reference to the stock's sharp fall as a result of the earnings disappointment.
He adds: "Obviously, I was a little surprised. There is a big gap between what the market perceived as our future growth, and what we think should be sustainable growth. That's what I found out."
Part of that was the firm's own doing. Nanofilm had fared "exceptionally well" in the first half of 2020, owing in one big part to the pandemic, which drove a huge demand for computers, smartphones and tablets; the firm's solutions are widely used in these day-to-day products.
"This year, we actually did even better but growth was incremental as it was a normal year - no more Covid-19 lingo. Most people are not going to buy iPad every year. That is what we have communicated to the market during the roadshows - to look at our business in its totality, as a whole-year event. The second important thing is within this period, what would be the total deliverables or the total sales volume. That is the key message," he adds.
"In the past, we could grow as much as we liked - it didn't really matter. But now, we need to meet the market's demand. The market would love to see Nanofilm grow 40 per cent every time.
"For us, if we grow say, 20 per cent, we will feel very happy because it's a sustainable growth. Forty per cent (growth) will make the company implode in no time and is dangerous. No good businessman should lead the company on that track because it's not sustainable. We are doing manufacturing - we can't grow 40 per cent. It's not like Amazon. Even if we can do that, we will not do that - it's too fast," he explains, in a remarkably even and patient tone befitting his academia background.
Indeed, Nanofilm, which currently has a market value of just over S$2.5 billion, does all the manufacturing in-house. The group provides advanced materials and nanotech solutions as well as manufactures and sells turnkey equipment systems including coating equipment. It counts 3C (consumer electronics, communication, and computers business), automotive, precision engineering, and printing and imaging as the key sectors that it serves.
"We do the actual work. We don't sub-contract out. If we did that, maybe that's fine. We could just be a trading house or one that contributes to the design.
"But our business model - what I like us to do - is be a real manufacturer. Do all the key steps ourselves. If you go down to the manufacturing floor, you will know that even 20 per cent of yearly annual compound growth is a huge challenge."
He continues: "So, the market doesn't really fully understand our business or its cyclical nature and even how to interpret our results. To me, the first half of the year is reasonably good," he says, adding that he would grade the firm's 6-month performance at 70 per cent to 80 per cent.
THE PEAK OF PATIENCE
The market may have to wait it out some more for sweeter digits from Nanofilm. In a recent third quarter business update, the group guided that supply chain disruptions - a growing global dilemma - has shifted its typical June to October peak season. A more realistic period for the peak season could now be the final quarter of this year or spill into 2022.
While the bulk of the orders are pre-orders, and hence, they need to be fulfilled, analysts reckon that supply chain disruptions can still affect delivery.
The group's 3C segment, which contributed 66 per cent to group revenue over the nine months and continues to see strong underlying demand, has been hit by "short-term disruptions" to customers' supply chains. Nanofilm cited power supply curbs in China, component delays, and resurgent chip shortages as key culprits for the disruptions. How concerned should investors be?
"If you look at it microscopically, it is always an up and down thing. But if you take a holistic view, I would say normal," replies Dr Shi, breaking out into his "scientist hat". He continues: "It's serious for the short term. But if you can be confident (enough) to be led to think long term, it's not that serious. For us, the fortunate thing is that we are in an industry where the demand is always there. Once you have the demand, things can be settled."
THE RIGHT WAY
Dr Shi demonstrates unflinching pragmatism when he says the only way to deal with the current circumstances is to do "a lot of right things".
By that, he means, keeping the house in order.
He cites last year, as the Covid-19 outbreak reared its head in China and prompted the authorities to impose restrictions to curb the spread during the Chinese New Year. "Everyone immediately went into such a panic. . . because we were going to stop everything. But then - you know - it's no use to panic," he says. Instead, the company, which has its main operations in Shanghai, engaged with the government to get a clear picture of the situation. The discourse helped the firm better understand that the administration was not keen to completely halt businesses.
"They want the economy to still go on - to a certain extent. And our supply chain fills that very well. We only shut down for four days. We made sure we mitigated all the risks and were prepared to do the necessary to ensure public and our employees' health.
"As a manager, you need to do a lot of things. You need to think afar. And actually, it became a blessing (for businesses). We did fantastically well," he continues.
Revenue from its key advanced materials business unit rose 66 per cent in FY2020 to S$183 million, buoyed by higher contributions from the 3C and automotive product sub-segments. The other segment, Nanofabrication saw a 90 per cent jump in revenue to S$11 million, on the back of new projects secured to produce Fresnel lenses for smartphone applications.
The industrial equipment segment however posted a 10 per cent drop in revenue to S$25 million as the firm continued to fabricate in-house coating equipment at "record pace" for the advanced materials business and turned selective on equipment sales to external customers.
In a pandemic-roiled year, Nanofilm put up a stellar showing with a record 2020, as net profit jumped 68 per cent to S$58 million on the back of a 52 per cent increase in revenue to S$218 million.
UNFINISHED LEGWORK
There is still a great deal of "lingering" work to be accomplished. Nanofilm's IPO which raised half a billion dollars last year, was a "bit of a rush", admits Dr Shi. The original plan was to get the group's "business transformation" model down pat first and then head for a listing this year. But the pandemic and the US-China trade hostilities pushed the timeline ahead to 2020.
One key task which Dr Shi had hoped to accomplish before the listing, which includes lining up the various "growth pillars" for the group, remains work in progress. These pillars or new business units involve diverse industries that share nothing in common with one another except for the firm's technology. Some of them include new energy, biomedical, aerospace, fast moving consumer goods (FMCG) and Internet of Things (IoT) optics.
"These are part of our company's characteristics. We provide advanced materials and deep technology as a base and build on the pillars. To us, this is a natural thing.
"From the industry perspective, they have different customers, marketplace, environment and products. But we acknowledge that they share the same technology," he explains.
Another core focus would be value-chain integration across these products. "The pillars are in different industries and while they need to grow, they also need to maintain a certain coordination. . . have overall consensus as Nanofilm family-companies," he says.
"So, we are developing a very strong business development system centred by a common Nanofilm innovation engine. This will be supported by a proprietary business system - like a ribbon to tie them up and put everything together," he adds.
A significant step towards this big-picture plan is Sydrogen Energy - a joint-venture between Nanofilm and investment firm Temasek Holdings which aims to work on technology to improve the efficiency of hydrogen fuel cells for cars.
With the foray into the hydrogen energy economy, Nanofilm is hoping to apply its advanced materials and nanotechnology to critical components in fuel cell and electrolyser systems.
To avoid potential "over-stretching" or "de-focusing", the various units will have their own distinct senior management team and independent board.
Sydrogen, which has already commenced work in Shanghai and Singapore, and is working towards a maiden revenue contribution in 2022, already follows this structure.
Dr Shi explains: "This will be the overall Nano thing - how it will look in the future. Based on such a structure, the group no longer needs a COO at the corporate level.
"The group will handle the technology, finance and strategy. (That way too), I don't need to spend much time on them (the business units). Of course, I will stay involved on the technology side, which is my passion," he adds.
SPREAD THE SHARES
Over the longer term, Dr Shi who together with his wife now own 54 per cent of Nanofilm, is keen to shed the group's identity as a "family company". In September, Dr Shi sold a 1 per cent stake in the company to a wholly-owned unit of Temasek.
"It's an interesting thing because we have talked about it for a while with other shareholders, especially Temasek. I don't think it's healthy for me to remain as overall major shareholder of Nanofilm. That will eventually not be a plus but a minus as the company will be seen as a family company," he says.
"That's not the way to go, especially if we have the ambition to grow. We are not happy with just what we have. So, family business is not the way to go and that is our position," says Dr Shi, who showed up this year for the first time on Forbes' Singapore's wealthiest list at 24th spot.
He is hoping for the firm to eventually have a more diversified shareholding structure. He wants to do this by bringing in more "strategic partners", not just those with financial and connection heft like Temasek, whose backing nevertheless is very useful. "I would also like to see industrial players as strategic partners. . . they can open us up to other industries, which we may not be strong in yet. . . where we are trying to gather more momentum," he says, adding that these could include the medical, aviation or FMCG sectors.
As the group blossoms, so too could Dr Shi's role in it.
He says he is embarking on a "different phase", one more akin to a "mentorship", even as his ongoing role as chairman continues.
"I will still oversee and look after the technology development and spend a lot more time with our team and the board on the strategy. I'm not good at everything. So, I need to rely on our senior team to work as a really high-performance team," he says.
He is crystal clear on the work culture he wants Nanofilm's executives to embody: "We should all be idea generators, be open and authentic. That's very important. And we need to be decisive and to constantly and critically review our decisions and revise them without being afraid of change.
"Personally, I think that while leaders should delegate, it doesn't mean you don't do anything yourself. Of course, you have your own contribution. These are the standards I set for myself."
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