Investing in solutions

This article first appeared in Wealth, The Edge Malaysia Weekly, on July 26, 2021 - August 01, 2021.
Plus Xnergy installed solar panels for IKEA Batu Kawan in Penang in 2018

Plus Xnergy installed solar panels for IKEA Batu Kawan in Penang in 2018

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Ko Chuan Zhen, 37, co-founder and group CEO of Plus Xnergy Holdings Sdn Bhd, is among the younger generation of entrepreneurs stewarding their own companies and creating their own wealth. 

Like many of his cohorts, he has structured his business to provide a social or environmental return on top of a financial return. Meanwhile, his personal portfolio consists of mission-related investments, mainly start-ups that are developing solutions to widespread problems, as well as equity interest in companies that are doing well during the pandemic and will likely continue to do so after it ends.

Under Ko’s leadership, Plus Xnergy, established in 2013, has rapidly evolved over the years. From the provision of procurement, construction and commissioning services, it has moved into solar farm development and recently, came up with innovative cutting-edge technology-based products to become an integrated clean energy solutions provider. 

During the series of lockdowns last year, Plus Xnergy launched an intelligent cloud-based and artificial intelligence Internet of Things (AIoT) energy performance management system so that its clients can digitally manage their electricity consumption.

“The top three cost elements for a business are usually raw materials, salaries and electricity consumption. I was thinking that businesses, affected by the current pandemic, can avoid laying off employees if they reduce their electricity bills,” says Ko.

"The general belief is that start-ups are risky, especially if their business model is unproven. However, I find that small businesses that survived last year, and continue to do so this year, have very strong business fundamentals.” - Ko

“Solar power can generate up to a 50% reduction in monthly electricity bills for businesses. Furthermore, our AIoT system, known as Source, allows managers to monitor their energy consumption without having to be physically present at their business.

“The heart of Plus Xnergy is about helping people, and the current environment requires us to be agile in bringing clean energy solutions to the market. Although the pandemic has affected the economy and revenue streams of many businesses, we are fortunate that many companies are still interested in clean energy and in sustainability. We want businesses to be able to better monitor and control their energy savings which, in turn, reduces their operational costs.”

Plus Xnergy is a total clean energy provider of solutions to energy generation, energy efficiency and energy storage, a triad ecosystem that it calls the Energy Trilogy. Its clients include well-known businesses such as Kawan Food, IKEA, the Kuala Lumpur International Airport, Mah Sing Plastics, Spritzer and Secret Recipe. At the end of its last financial year ended March 2020, Plus Xnergy reported revenue of RM150 million, a more than 200% increase from the previous financial year.

Ko points out that the provision of clean energy tackles climate change, creates highly skilled jobs and lowers electricity bills. It is a sunrise industry and poised for high growth.

These are the characteristics he looks for when investing in small, local start-ups. “Like most entrepreneurs, my business represents the bulk of my investment portfolio. I am familiar with my company and the clean energy industry. Thus, I am better able to manage the risks. I have more certainty about its future compared with investing in other businesses or assets,” he says.

“Last year, I reduced my personal consumption and reinvested in the company. I am more cautious with my personal and the business’ cash flow and have kept some money in fixed deposits to pay for contingencies. 

“Now, Plus Xnergy’s clients are mainly in Covid-proof industries. My aim is to keep the business going during this economic slowdown. To do so, we must provide relevant solutions, which range from innovations such as Source as well as affordable financing options for our clients.”

Solar panels on UWC Bhd’s building

Ko is investing in start-ups and small and medium enterprises through local equity crowdfunding platforms, a trend that has taken hold in recent years. He looks for businesses that he is familiar with and those with a tech-based competitive advantage. He also prefers start-ups that are developing solutions to problems.

“I occasionally mentor start-ups, especially those that leverage technology, because I have some experience in this field and I like guiding entrepreneurs who are developing a product or solution that positively impacts society and perhaps, the country. If these start-ups are open to funding, I may or may not invest in them. This is not my priority if I am their mentor or business coach. This way, I do away with concerns about a hidden agenda as an early-stage investor,” he remarks. 

“I have friends involved in operating crowdfunding platforms, so I benefit from their advice and guidance on what to look for and what to avoid. Much like other investors in this field, I have a checklist of things that the business must satisfy. This includes a good market, traction for their product or service and good management. I am a careful investor since it is a long road to success for these companies.

“The general belief is that start-ups are risky, especially if their business model is unproven. However, I find that small businesses that survived last year, and continue to do so this year, have very strong business fundamentals.

“Moreover, these companies are probably undervalued at this point, so they are compelling investments. The returns for early-stage investors will be extremely good if these companies are successful and perhaps undertake an initial public offering and list on the stock market. Your return on investment will likely be in a range that you never imagined possible.”

Ko has also invested in the local stock market and has friends to manage his equity investments. This does away with the need for unit trust funds, he says.

“The stock market is different from equity crowdfunding platforms as it is largely made up of established businesses with a track record. About 10% to 20% of my portfolio is investments in the local bourse,” says Ko.

“A business will catch my eye if it is high growth, high potential and operating in a sunrise industry. I also invest in Covid-proof sectors, for example, companies in the packaging and transport industry. In terms of stock picking, I look for value and would not invest when I feel the company’s shares are fully priced even if their outlook is promising.”

Although he finds that foreign investments can complement and diversify a portfolio, he has only invested in domestic assets. He had plans for Plus Xnergy to expand regionally before the pandemic, but this has been put on hold. The company currently has offices in Kuala Lumpur, Penang, Johor and Perak.

Ko is not investing in the local property market as he doesn’t see high-growth opportunities. “I think real estate is a good investment, but I don’t see prices going up soon and frankly, I haven’t done enough research to be able to recognise good opportunities. There is still a lot for me to learn about this asset class,” he says. 

Moving forward, he anticipates the local economy to rebound quickly from the damage caused by Covid-19. “I think we are in the midst of a W-shaped recovery. This is a decline followed by a rise [in economic indicators] and another decline,” says Ko.

“It may take a while to address the tide of Covid, but when this is mitigated, I expect the economy to rebound quickly, largely because information flows very quickly nowadays. Information often translates into economic growth because when good news spreads, businesses and investors will invest and consumers will spend.

“However, I am concerned about the country’s competitiveness on a regional and global platform. Economic recovery in countries in this region will be uneven as countries with shorter lockdown periods are better positioned to capture future growth opportunities. I also expect to see more mergers and acquisitions among businesses.

“But most of my time is spent thinking about the problems we face, especially the need for jobs. There are many jobless people and I would like our corporate social responsibility initiatives and/or our solutions to contribute towards addressing this problem. I advocate the environmental, social and governance (ESG) criteria and apply them in my company as well as my investments.”