JustCo eyes global growth and an IPO

Singapore

HOMEGROWN coworking player JustCo, valued at US$1 billion, has been cautiously pursuing growth in a tough year, and it plans to "definitely" undertake an initial public offering (IPO) at some point, the firm's chief executive Kong Wan Sing told The Business Times.

The Covid-19 pandemic has not put a lid on the company's global expansion. It is set to launch its own facility in Tokyo next year, and moving towards an asset-light business model, instead of taking on long-term leases. The 43-year-old entrepreneur was speaking to BT on the back of JustCo's launch of a suite of smart workplace solutions, called the Digital Future of Work Platform.

When asked about JustCo's exit plans, Mr Kong said an exit is not the endgame, but a milestone that provides "some answer to the shareholders who have been with you". The firm's investors include sovereign wealth fund GIC and real estate firms Frasers Property and Sansiri.

"So definitely, one day we need to IPO. When is that day? I don't know. I will make Singapore proud; you will know that day very soon," he said with a laugh. Potential IPO destinations include Singapore, the US, Hong Kong and Australia.

Founded in 2011, JustCo operates over 40 coworking spaces across nine cities, in markets including Singapore, Indonesia, Thailand, China, Taiwan, South Korea and Australia. According to data platform VentureCap Insights, the firm has raised US$407 million in equity funds.

Regulatory filings of the entity Justco Holdings Pte Ltd show a net loss of US$30.6 million for the year ended December 2019, on the back of a US$40.3 million topline. The entity had US$92.4 million in cash as of end-2019.

Mr Kong said that the filings are not fully reflective of the group, but added that the firm has turned profitable in Singapore. JustCo is "looking to be very profitable" as a group. The firm has zero borrowings, having only raised funds through equity issuances, and holds a nine-digit sum of cash, he added.

Since last year, the firm has embarked on a more "asset-light" model of managing space for landlords, instead of taking on long-term leases.

"At the very (first) phase of our business model, yes we do take on long-term leases... But we stopped doing that already, and we have been focusing on managing the space for the landlord. So what it means is that landlords see the value of us, they ask us to go and manage the space for them and find the members for them, because they can't lease out the space, simply put," Mr Kong said.

He declined to disclose which specific JustCo locations operate on this asset-light model, citing confidentiality agreements. On why JustCo only started the asset-light approach recently, Mr Kong said that it was important for the firm to demonstrate its capabilities.

"Otherwise today, if you own a space and I ask you to let me manage, you wouldn't let me manage right? Because Wan Sing, where's your track record? I couldn't see how you built your space, I don't know whether you have the capability to find your members right?" he said.

That said, Mr Kong does not think that there is anything wrong with long-term leases, given that some players have succeeded.

But as he sees it: "We don't want to take on the long-term leases also because we think that we can really bring value to the office building by bringing in technology and how we manage the space. So that's what we wanted to focus on."

The firm announced a joint venture with real estate firm Daito Trust in November 2019 and had hoped to launch its Japanese facility this year. However, due to the pandemic, it now expects to open the facility in the second half of 2021.

Nevertheless, JustCo has stayed busy in Tokyo. Since Dec 1, it has taken over the management of a coworking space in Tokyo, on behalf of Daito. Beyond Tokyo, JustCo could expand to other cities such as Osaka.

Corporate Japan is very open towards coworking, Mr Kong said. Outside Japan, large corporates and multinational corporations account for about 50 to 60 per cent of JustCo's number of members.

"There are a lot of big enterprise companies in Japan that are already giving up a lot of their old traditional space, letting their staff work from anywhere, and giving them the flexible options. That really sets up well for JustCo," he said.

Beyond Japan, JustCo remains on the growth path, with new facilities slated to open next year in Singapore - such as Razer's regional headquarters. It also plans to open more locations in Thailand, Taiwan, South Korea and Australia.

JustCo also remains open to mergers and acquisitions (M&As). Back in 2017, it nearly merged with a Shanghai player, Naked Hub. Mr Kong pulled out of the deal when he saw that it would not work out. But growing in China, where JustCo now has two Shanghai facilities, is still on his mind.

"China is a very special market. For us to really enter China, we would really need to find a very strong local partner that we can work with . . .The market is very complicated. You need a lot of local knowledge," he said.

Looking back on 2020, Mr Kong reflects on how some thought that Covid-19 may be the death knell for coworking. "I never believed that coworking is dying," he mused. Instead 2020 has taught resilience in the face of uncertainty.

"Just try your best and believe in what you do. And here we are, I think we are doing even better," Mr Kong said.