The new incarnation of Citiraya is looking at not just “meaningful” profits but improved business in the long run. E-waste recycling is a low-risk and sustainable business, says Eddie Chng.
UP ON THE 37th floor of Temasek Tower in Shenton Way, we wait patiently for Eddie Chng. The view is breath-taking but I find myself trying to retrieve hazy memories of Eddie.
Some years ago, I interviewed him about an innovative technology product that his company had come up with.
Our paths crossed again several times when he was embroiled in a corporate tussle. He next headed for Hong Kong to do business, returning to Singapore in 2005 as the white knight who helped rescue the former Heshe Holdings, now renamed Equation Corp.
Up in the boardroom of Equation, his secretary pops in to say, sorry, Eddie is running late from a meeting in town but is on the way back.
Eddie, 45, chairman of Equation, has been through tough times in business but the lingering image I have of him is his ever-cheerful smile. And it’s genuine. I can’t imagine what Eddie looks like when he feels down – if he ever does.
He suddenly shows up at the door, and greets: “Hi!”. He is in casual clothes and sneakers as it is Friday dress-down day at the office. And he has his trademark smile and sunny disposition. If I had not known him previously, I’d thought he had just struck lottery or clinched a great business deal. In fact, Eddie actually has sewn a great business deal or two in recent months. Don’t rule out more deals to come.
Targeting China
To start from the start, he was appointed chairman of Centillion Environment & Recycling in late 2006 after its previous incarnation, Citiraya Industries, emerged from judicial management. Equation has a stake in Centillion, which is swinging back into business in a big way. It has signed up a global partner, Veolia Environmental Services Asia, for a joint venture to process electronic waste.
It’s a major milestone and one which Centillion badly needed as its previous customers had fled following the discovery of Citiraya’s illegal activities. “Because of the legacy problems, I needed a big name,” says Eddie. That big name is Veolia, whose French parent company has operations in more than 33 countries.
With their 50-50 joint venture called Centeonyx, over night Centillion has become an e-waste recycling company with a global network, notes Eddie. And of course, there will be a positive impact on the bottomline in due course. For 1Q this year, Centillion reported a net loss of $1.15 million on the back of $405,000 of revenue.
“By the end of the year, we will show meaningful profits,” says Eddie. This stems from the start of shipments by Veolia of 500 tons of e-waste a month from Europe to Singapore for recycling at a plant in Tuas that used to belong to Citiraya but which now belongs to Centeonyx.
The e-waste is made up of material such as printed circuit boards, board assemblies and components, which will be crushed and treated in order to extract metals such as steel, gold, silver and platinum.
The end products are gold bars and chunks of metal, which are then sold to smelting companies in China for their purity to be enhanced. The metals are in high demand by the manufacturing sector there, and are sold by Centeonyx at prices close to those quoted on the London Metal Exchange for the pure metal.
All that means that finding buyers is not an issue for the Centeonyx, says Eddie. Neither is obsolescence an issue. In fact, metal prices keep rising and inventory actually fetches higher prices over time, he adds with a chuckle.
Why China smelters? Being close to the manufacturers who need the metals makes money sense as transportation of the heavy and bulky metals is expensive. China is also where Centillion wants to tap supplies of e-waste, which is why it is establishing a plant in Wuxi, China this year. The facility is expected to begin recycling operations and contribute to Centillion’s revenue next year.
Bright prospects
Centillion will seek supplies of e-waste from other sources apart from Veolia, and reckons that thanks to its partner’s global network, it is now stronger than ever. Global links are vital these days and seem to be under-appreciated by investors, says Eddie.
He cites his own awakening. In the 1990s, his previous company, Serial System, where he was its CEO, grew strongly as it expanded its business network in Asia. But by the late 1990s, it felt the heat of competition from American companies that had started to establish themselves in Asia.
“When I bid for a contract, the customer would ask me: ‘Where is your presence? Are you in Europe? America?’” remembers Eddie. “That was the first time I felt the heat of globalisation and that it’s no longer a pricing issue, it’s no longer a relationship issue. The customer loves me but I couldn’t service them in Boston or Paris, for example. The same thing will happen in the recycling business.”
He figures that in seeking to do business with global multinationals, he will face the same question. “This time around with Veolia, I will be able to answer ‘yes’. It’s easy.”
He adds: “That’s why I’m very confident that by end of this year, I will have very meaningful numbers to tell people of the rise of the phoenix.” The phoenix is, of course, Centillion.
To fund its growth, in June this year, Centillion proposed the issue of $30 million of convertible notes to UK-based fund Pacific Capital Investment Management.
After misdeeds by the previous management brought the company down, it has not been easy for the new leaders to seek new business.
Eddie says: “People would say: ‘You are ex-Citiraya?’ Straight away, they take a step back.”
But with a big-name partner, the company is recovering strongly, and is confidently approaching former customers and suppliers again. Veolia has men working alongside Centillion’s to jointly run the business. “We have beefed up our internal audit system to prevent what happened before from happening again. That’s very important.”
A key challenge for players in this industry is attracting large enough supplies of e-waste to optimally utilise their warehouses and extensive recycling machinery. With its partner being Veolia, Centillion has tackled it head on.
On the big picture, Eddie is all smiles: “The e-recycling business is low risk and sustainable over the long term. It’s a no-brainer since more and more electronic devices are being produced. There’s worldwide momentum towards more pro-enivronmental policies that will generate opportunities for us.”
Centillion shares have risen about 40% since the start of the year, trading recently at 21 cts. Based on issued share capital of about 2.53 billion shares, the company’s market capitalization is about $530 million.
Oei Hong Leong and Equation each owned 37.3% of Centillion until July 16 when Equation disposed of 150 million Centillion shares pursuant to a call option to another party. As a result, Equation's stake was reduced to 31.57%.
Both Oei and Equation have given notice that they will, by July 20, exercise an option to raise their stake by paying $8.05 million each for about 475 million new shares of Centillion each.
The price is 0.85 ct for each share, the same as what they had paid for the original stake.