YHI – Revving Up For The Next Lap
MR RICHARD TAY TIAN HOE, the group managing director of YHI International can’t wait for the new Formula One racing season to start for a good reason.
It will be the first time that Singapore-made products will be featured in the closely followed global sports event.
YHI will be sponsoring the Scuderia Toro Rosso team, which will be driving with its Advanti Racing brand of aluminum alloy wheels.
The three-year F1 sponsorship will cost YHI some S$2 million annually in terms of monetary support and supply of wheels. But it’s an effort worth the spending.
Noted Mr Tay, “The contributions to our top and bottom lines may not be immediate. However, we see the partnership with the Scuderia Toro Rosso Formula 1 team as a good opportunity for us to build up the global branding for both Advanti and the YHI name as the F1 is an international event.”
“The sponsorship is in line with our long-term strategy to strengthen our brand building efforts and further secure our global market position. It fits our long-term vision to build up YHI as the biggest aftermarket wheel supplier in the world. We are looking to continue to expand into more markets and become an enterprise with global recognition and reputation.”
YHI International has come a long way since its humble beginnings in 1948 as Yew Huat & Company.
 Starting out as a sole proprietorship in the tyre retailing and repair business, it has over the years grown into an international distributor of automotive and industrial products. Its global network now spans 72 countries with more than 5,000 customers worldwide.
YHI is also a recognised original design manufacturer (ODM) of alloy wheels, with factories in Shanghai and Suzhou in China, Taoyuan in Taiwan and Sepang in Malaysia. It also offers its own brand of alloy wheels, Advanti Racing.
Mr Tay who is the son of Yew Huat & Company’s founder, joined his father’s company in 1970 as a 19 year-old, but his entrepreneurial instincts soon kicked in.
With a little help from his father, the young man set up Yew Huat Tyre & Company as a separate venture the same year, which focused on retailing commercial and industrial tyres.
“In 1972, I took a milestone step by securing the Yokohama tyre distributorship directly from Japan. At that time, I was only 21 years old and I took my first flight to Japan to meet the Yokohama bosses for the distributorship for Singapore,” recalled Mr Tay.
Flush with his first success, Mr Tay continued to win over other Japanese auto giants, securing the distributorships for Hitachi batteries in 1973 and Enkei wheels in 1975. The business blossomed in the seventies and eighties. “We became the centre for the supply of tyres, batteries and wheels to the neighbouring countries.”
In 1975, the business turned full circle when Yew Huat & Company finally merged with Yew Huat Tyre & Company to form YHI International.
Over the years, the group’s distribution network has expanded, and now spreads across Southeast Asia, China, Hong Kong, Taiwan, Japan, Australia, New Zealand and even as far afield as the USA, Canada, Middle East and Italy. YHI has currently 25 subsidiaries and two associated companies.
In 1996, the group made its foray into the manufacturing space as an original design manufacturer (ODM) of alloy wheels with the setting up of a factory in Taiwan with a single manufacturing line. Its ODM business has since grown to four factories with 14 production lines and two supporting factories.
“As an integrated ODM solutions provider, YHI now provides a range of services from design and development to manufacturing, marketing and distribution of alloy wheels. We are the designer and manufacturer for major brands like Konig, OZ-MSW and Enkei Tuning,” said Mr Tay.
Besides Yokohama and Enkei, the group has also expanded its distributorships tyres to include Nankang and Nexen, as well as its own brand of Neuton tyres. YHI also has a 10% stake in Yokohama’s manufacturing facility in Hangzhou and a 49% joint venture stake in Yokohama Tire Sales (Shanghai) Co Ltd which handles the distribution of Yokohama tyres in China.
Under alloy wheels division, it distributes Enkei and OZ, in which it’s a stakeholder, Konig and its own Advanti brand. It is also a distributor for Hitachi automotive and industrial batteries. In addition, YHI is also the distributor for EZGO golf and utility buggies in Singapore, Malaysia, Brunei and Thailand.
YHI notched up another milestone when it was listed on the mainboard of the Singapore Exchange in July 2003. For his relentless efforts and forward vision, Mr Tay was bestowed the Entrepreneur of the Year Award 2007 for the manufacturing sector by Ernst & Young.
The group racked up a 13.8% increase in turnover to S$426.9 and $26.3 million in profits for FY2008. But for the next leg, YHI is embarking on a five-year plan to achieve a group sales target of S$1 billion by 2012, a feat that will require an annual turnover growth of 20%.
Mr Tay said the group will be committing “most of our cash from operating activities” to fund YHI’s working capital and expansion plans.
“In order to promote YHI to become the global leading premium brand, we will focus our efforts on developing world-famous brands. Currently, our portfolio includes world leading brands like Enkei, OZ, and Konig as well as our own brands Advanti and Neuton.”
But just like the F1 circuit, the road ahead will not be without its own twists and turns.
By his own admission, Mr Tay said, “The higher oil prices will mean higher fuel and operating costs, and the weaker US economy will impact global markets.”
“This will affect all businesses including YHI. It is still too premature to quantify the exact impact. With our diversified geographical markets, we hope to achieve balanced growth in all key markets and hence reduce any reliance on the US economy.”
He added that rising labour costs in China due to new employment regulations and the strengthening Chinese currency have already shaved profit margins and that the group is currently fine-tuning its processes to meet these challenges.
“Barring unforeseen circumstances, we remain optimistic about our outlook,” Mr Tay said.
What SIAS analyst, Jessie Xia says of YHI
Aluminum Prices: Global aluminum prices remain volatile. YHI is extremely sensitive to the raw material price. Aluminium prices on the Shanghai Futures Exchange rose after the worst storms in 50 years that have may reduce China's output of the lightweight metal by 650,000 metric tons this year. It could take months for normal production to resume. Aluminium for three-month delivery on the London Metal Exchange advanced 2.7 percent to US$2,764 a ton. We expect it to maintain this high level for most of 2008.
Production Issues in Malaysia: The Sepang factory still faces operational challenges, which will only be alleviated when the second line is put in place in 2008.
Automobile Industry Outlook: International rating firm Fitch expects sales in developed markets in the US, Europe and Japan to decline or stagnate at best in 2008, after an already weak 2007. In contrast, emerging regions will continue to experience surging growth prospects. This is in line with our forecast that Chinese automobile sales will grow at a stellar rate of 20% in 2008. YHI will stand to benefit from its relatively large exposure to emerging markets such as China.
Forecast: We are forecasting YHI’s sales to grow15% to a new target of S$506m for the financial year 2008 (FY08) after expanding its tyre manufacturing facilities in China. Net margin forecast at 6% and earnings growth of 19% will be achievable. We see YHI as a key beneficiary of rising consumption and affluence among Chinese. Apart from decent organic growth of 15%, there is also the prospect on the M&A front as YHI has been in merger talks with Stamford Tyre. We believe that at 5.7 times FY08 earnings, the stock is undervalued. |
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