Unlikely winner in trade warMoney Glitz | Bonnie Chen 20 May 2019
The trade war could generate more business for Tricor Group, which can help companies relocate their supply chain and incorporate elsewhere, says chief executive Lennard Yong, who adds the current situation presents opportunities.
Besides, the business solutions provider is also eyeing opportunities in initial public offerings of all sizes.
Hong Kong-headquartered Tricor offers business and corporate services including incorporation and company secretary services for more than 30,000 companies in 21 countries and regions, including over 1,300 listed in Hong Kong. This part of the business accounts for around 80 percent of its revenue. The rest of the about 20 percent is from investor services including securities registration and IPO in Hong Kong, Malaysia, and Singapore.
With double-digit growth every year, Tricor was founded in 2000 when Bank of East Asia (0023) acquired the corporate services of the big three accounting firms. It was sold to private equity fund Permira two years ago.
Since then, Tricor has made several major hirings and changes. Yong joined in early 2018.
Instead of a trade war, Yong describes it as a "trade issue."
"I see it as a reset of trade. Trade is all relative. For instance, if you don't buy soya bean from one country, you need to buy it from elsewhere. I always think how Hong Kong can benefit from the global change," stresses Yong.
He sees tariff hikes and other market disruptions as opportunities.
"Whenever there are resets of trade agreements, that may affect MNCs that they may need to source elsewhere, to rebuild the value chain and to set up companies. Some corporations may need to relocate factories and headquarters. There will be business for us whenever there is incorporation of a company."
Despite enterprises relocating from China, he believes it is not necessarily bad for the world's second largest economy.
"Even without the trade issue, the world has been changing. For instance, Guangdong has more service industries than before and manufacturing plants have been moving to Southeast Asia. Hong Kong also shifted from manufacturing to services and is a lot stronger than before," stresses Yong.
Citing the United Nations World Investment Report, he says China and Hong Kong together had attracted the largest amount of foreign direct investment in Asia in 2017, with US$136 billion (HK$1.07 trillion) to China and US$104 billion to Hong Kong. Singapore came third with over US$60 billion.
"Bear in mind that we only have 7 million people here," says Yong.
After acquiring Madison Pacific, which allowed Tricor to expand into corporate debt services, he says the group has been looking at two acquisitions to strengthen corporate services.
Being involved in 119 IPOs of mainly mid-sized companies in 2018, Tricor handled more deals than rival Computershare, which helped raise more capital with larger clients.
Pamela Chung, dubbed the "Queen of IPOs," joined Tricor as managing director, commercial, Hong Kong, from Computershare last October.
Yong says there are new signups from larger companies in addition to the mid-cap ones.
He says Tricor will not give up on the mid-and-small-cap companies.
"Tricor helps mom and dad to access to the market as it is not an investment house. We serve aunties and uncles and that is why we will refurbish the office here to make it more comfortable for customers."
Tricor will move its headquarters to Kwun Tong from Wan Chai next month. The current office in Hopewell Centre will be renovated for customer services.
As a share registrar, the more subscriptions Tricor handles, the more it can gain. Some small-sized IPOs can attract a huge number of investors with several hundreds or even thousands of times of oversubscription. This is because some investors believe it is easier to drive up share prices of these firms than the big-caps in addition to their fame and business nature.
He is not worried about the mainland's new Science and Technology Innovation Board, which will be launched soon.
"If mainland companies want to attract domestic investors, they will list there. However, if companies want to diversify their investor base, they will choose Hong Kong," says Yong, stressing that the SAR's advantages include free flow of capital and rule of law.
The IPO market fell in the first quarter, but he believes there will be a rebound in the second half.
Tricor and other share registrars have been working with the Hong Kong Exchanges and Clearing (0388) on the paperless securities regime, which will be implemented in 2022.
Last year, Tricor started the insurance and wealth management services, for which it works with partners.
He explains that it does not only serve corporations but also wealthy clients, who own business. It has been serving some family trusts.
He says Tricor is not a bank and cannot directly sell products to customers.
"We have qualified persons to identify the needs of our customers and get our partners to present the right products," Yong says.
"We want to be a bridge, helping global companies to go to China and help mainland companies come to Hong Kong before going abroad."