Philippines businessman Andrew Tan has a knack for identifying consumer trends and selling products that benefit from rising affluence.
Revenues in his holding company Alliance Global (AGI) are growing at 30% a year thanks to robust demand for his three core products — high-density property, affordable brandy and McDonald’s burgers.
Investors are keen to tap into Tan’s ability to identify consumer trends.
Since October last year, shares in AGI have risen 170% on the Philippine Stock Exchange, and this year Tan was able to convince investors to back the listing of two subsidiaries — brandy-maker Emperador Distillers and casino-operator Travelers International — raising a combined $825 million.
Travelers is a 50-50 joint venture with Malaysian company Genting and was the first to open a casino in Manila in 2009, while Emperador is the biggest supplier of brandy in the Philippines and has plans to control one-third of the global market by 2018.
All of this activity has made Tan a very rich man. He jumped three spots to number three on this year’s Forbes Philippines rich list, clocking up a personal fortune of $4.6 billion — twice as much as he was worth last year.
Tan is quick to downplay the Forbes list and would rather talk about his business achievements. “These days I look at wealth as a matter of numbers and, as you know, numbers may go up and down,” he told FinanceAsia. “I have been living comfortably for the past 20 years, and nothing really has changed in my lifestyle since then.”
Still, this publicity-shy businessman, known for eating simple meals and preferring blue jeans and a white shirt to a tailored suit, is no stranger to luxury. Such abundant wealth brings certain privileges like being able to side-step the dilapidated infrastructure and slow service at Ninoy Aquino Airport.
Genting has a fleet of private jets that it uses to ferry VIP players to Resorts World Manila casino, and Tan occasionally hitches a ride.
“When you arrive by private jet you don’t have to queue for immigration and customs in the usual way. There’s a dedicated channel for VIP passengers who then walk straight through to a waiting limo,” he explained. “It’s very comfortable. Hassle free.”
It also saves time, which Tan needs more of to manage his mushrooming business empire. Shareholders and bankers have come to expect big things from AGI in recent years but some are questioning whether it can maintain the current pace of growth.
“The big challenge for AGI is to continuously sustain the growth they’ve been enjoying and find new avenues for growth,” said Lauro Baja, head of UBS in the Philippines.
Among other things, they want to know how his $2.6 billion real estate business Megaworld will fare once the current property boom cools, how Emperador would cope with greater competition, Travelers with a sudden drop-off in tourist numbers and they are curious about the next potential business venture.
Tan is likely to take the challenge head-on, drawing on his ability to develop a game plan and execute it by putting one foot in front of the other. It’s an approach he has followed for the past 35 years as an entrepreneur.
Hungry for success
Tan was born in Fujian province in China and raised in Hong Kong where his father worked in a transistor radio factory and his mother kept house. The family moved to the Philippines when he was 16. “We lived in a cramped apartment in an old building in the heart of Manila,” he recalled.
“As a college student, I walked several miles from my house to school and back every day.” To fund his education, Tan tutored grade-school students in math and worked as an assistant for a local import-export company.
After graduation he went into business as a partner in a wholesale trading firm and gradually built on his achievements until he founded Megaworld Corporation in 1989. “I literally started from scratch,” he said. “But this gave me an edge over the others. I wasn’t afraid to compete, I was hungry for success and I pursued that goal with a passion.”
AGI now has a market capitalisation of $6.3 billion, as at November 1, and interests in four key subsidiaries — Megaworld, Emperador Distillers, Travelers International and Golden Arches Development Corporation, the master franchise holder of McDonald’s restaurants in the Philippines.
In 2012 the group generated $2.3 billion in revenue and $462 million in net income, with the two largest contributors being Emperador (representing 36% of net income) and Megaworld (27%). The fastest growing business is Travelers which within three years of opening Resorts World Manila has come to contribute 25% of net income.
Tan attributes much of his success to his ability to observe people. “One of the best ways to improve yourself is to learn something from the people you meet and be inspired by what you learn,” he said, adding he has spent years honing his listening skills. “Everyone has something to offer, some experience and wisdom to share, you just have to listen.” Tan is also aware he has been lucky to meet the right people at the right time. “These people led me in the right direction,” he said, declining to name specific mentors.
At 61, Tan is younger than the other self-made Chinese-born businessmen who populate Forbes’ Philippines rich list. Henry Sy, Lucio Tan and John Gokongwei are now in their 80s and working their way through the tricky process of succession. Tan, meanwhile, is in expansion mode.
Manuel Tordesillas, CEO of Maybank in the Philippines, who worked with AGI on the recent listing of Travelers, said Genting picked well when it chose Tan as a local partner. “AGI knows how to navigate the local regulatory environment, and it has a track record in building something from the ground up and turning it into a solid business venture.”
Being nimble has allowed Tan to ride the ups and downs of the market. When the Asian financial crisis hit in 1998 he made the pragmatic decision of finding a private equity investor to shore-up his stricken property company. “It was hard to attract capital from anyone back then, but we knew we had to do something,” he said.
A $50 million injection from California-based Colony Capital helped to return Megaworld to a net cash position by 2000, and the company began to expand again.
Bede Gomez, head of investment advisory with First Metro Investment Corp, remembers Megaworld coming out of the crisis with all guns blazing. “While other developers were still trying to work through their debt problems, Megaworld was building aggressively. In fact, at the time, some said Andrew Tan was expanding too fast too soon. He sure proved them wrong.”
Core competencies
Tan says the most important question he asks himself when assessing a new investment opportunity is whether it ties in with his core competencies. That’s why he hasn’t been inclined to do what a lot of other Philippine conglomerates do and buy a bank. “I am not interested in going into banking, it’s not a field I am familiar with.”
Instead, Tan defines his expertise as covering two main sectors: consumer products and real estate.
“Property is where it all began, it’s in my blood,” he said. “People make the point that I am now involved in gaming, but to me the underlying asset is real estate. If you look at the total floor area of our Resorts World Manila casino, only 7.5% of that is dedicated to gaming, the rest is hotels, shopping outlets and apartments. Real estate still offers the best returns on our risk.”
