MB Dec | Time to copy China


KNJ Investment Ltd. is now in the limelight due to a media buying spree in Portugal. But is your portfolio bigger even if is a relatively new company? 

Kevin Ho – KNJ has been investing in different fields, mainly in Macau, for the past five to six years. We formed this company ourselves. It’s called KNJ for a reason: because it’s the initials of the three shareholders (Kevin Ho, Nel (diminutive for Manuel) Philip Manuel Eusébio Yip, and João Sio). 

We’ve undertaken a lot of investments in Macau and over the past two years in Hong Kong and a bit in China. And then we realised there is so much more that we can do and that Macau is not a big city. If we have to go into something new, then we need to go abroad, and being very closely tied to Portugal it seemed a natural [step]. You either go close, like Asia, or if you have to go somewhere distant then you find somewhere that you really know.  

And from our expertise, three of us all did our schooling abroad. I did mine in Australia, my partners did theirs in the United States and Canada. So we thought about these three countries. But then we had all left these countries for many years, so we were not too familiar [with them]. When we looked for opportunities there were different proposals from different places. One of them was the Global Media deal. 

 Tell us more about you and your partners 

K.H. – We are three young Macau people. Philip (Yip) and I have known each other a bit longer, and I’ve known João (Sio) for 10, 15 years. We all have our own goals, objectives, dreams. We complement each other. For example, I like to plan and network – looking for opportunities, strategies, objectives. Philip does all the administration, the details, finances, which I hate. João is the moneyman. This has become KNJ. And so far it’s working well.

 Major media group in Portugal 

 Portugal seems obvious for investment from a Macau perspective . . . K.H. – We have all known Portugal for many years. Portugal has been strongly related to Macau, even after the handover; and we have a really good relationship. After the [global] financial crisis Portugal went through a major recession. The economy was really bad, unemployment really high. Up to 2014, 2015, and then it started to recover.

Two years ago, when I made my first trip to Portugal
after many years, I realised that the country had changed – the economy was starting to grow; people were more energetic, the cities more robust. So I went back. It’s growing rapidly, the whole economy. The young generation has a very good mindset, innovative. These are the people and the environment that we need. 

Media is never a good business, we all know. Look at all those media companies in Portugal. Global Media is already the best. All these other media companies are still losing money, with huge debts. Global Media was the same three years ago. And then they had a major restructuring, as everybody knows, big layoffs, they sold some of their assets. Now, they still have debt but it’s manageable. The company itself is barely breaking even. So I think it was a good opportunity for us to come in.  

We will, of course, retain what we have, because these are strong brands, these are assets, but we will look into new ways of improving the whole group; we’ll bring in new ideas, new business models, and we’ll turn the company from a traditional media company into a series of different products, a new company. We will try to make it global, more than just newspapers. 

When you look at this investment, it requires, of course, our fresh capital – 15 million (euros) – and it also requires the co-operation and understanding of the existing shareholders and our creditors. We have a good agreement with all the banks, with existing shareholders: no-one is taking any money [out], we’re not buying anybody out, we’re not paying any debt with our investment. The whole 15 million, every single cent, is going into investing in new projects. 

Cash only for investments 

The starting price was, however, 25 million euros . .

K.H. – People say I lowered the price, for different reasons. But when you look at it, if you go into the pure financials, the company made 10 or 15,000 euros last year. Profit! With a certain amount of debt in the bank. Was it worth 15 million for 30 per cent? No. Who said so? You can argue that it’s worth nothing. So there’s not a price that you can determine how much the company is worth.

The reason we have 15 million now is because we agreed no-one is leaving the company, no banks are taking any money to repay debts, this 15 million goes into investments. And they agreed, and we worked on the future plans and on the future profit growth and came up with 15 million. It doesn’t mean that it was going down from 25, to 17.5 when we signed our agreement, and now to 15. It goes back to our investment plans. It’s purely on the business. 

But why the Global Media group? 

K.H. – Because there are other opportunities in Portugal: a few real estate projects, a hotel, a winery that we also looked into. And because we decided to use Macau as a platform.

Macau has always been asked by the central government, or supported by the central government, to be the platform for China and Portuguese-speaking countries. Honestly, what have we done? We’ve done nothing. The past 17, 18 years we’ve tried to be a platform. And then we see Chinese enterprises going to Angola, to Mozambique, not because of Macau. They just go because the state-owned ones want the African and China co-operation. So they went. Brazil has a lot of dealings with China. From Macau? No. 

Macau investors, yes, have invested in Portugal,
in Africa. But in wineries, in real estate, which don’t serve as a platform. So, for me, it’s partly business and also because I wanted to show that Macau investors can actually work on something and bring Macau to fulfil our role as the platform for Chinese and Portuguese-speaking countries. So, media is definitely one of the good channels that we can do it [through]. 

Opportunities in Africa? A major shareholder in KNJ is an Angolan . . . 

K.H. – This Angolan shareholder is not new, we always had an Angolan shareholder in Global Media. They just made some changes. So now we have 30 (per cent), Mr. Soares has 30 (per cent). Firstly, it’s good for us to expand into Angola, maybe one day. But going into Portuguese-speaking countries is not easier because we have an Angolan shareholder.

The way that makes it easier is the fact that Global Media has 24 per cent of the [Portuguese News Agency] Lusa. So, we will partner Lusa; we will probably use it to work on something whereby we can both supplement each other and go into different Portuguese-speaking countries. 

You have start-ups in China. Is this also an area to be explored in Portugal? 

K.H. – We will have start-ups in Global Media. We will utilise the new talent in Portugal and their minds, and we will work out something that will help the whole group go into the future.

Speaking of China, 10, 15, 20 years ago, what did people say about China? China is copying all different things from the Western world, and making something similar. And people all laughed at China, right? We all experienced that. Nowadays, what I want to do is bring my talent in Portugal to China. Because the advances in China these days are something worth copying. We should learn from what China has now, and bring it back to Europe, take it to Portuguese-speaking countries, to Portugal.  

During the WebSummit in Lisbon, one of the most technology-based events, (…) between pavilions there were resting areas, food kiosks. And people were paying for hotdogs, hamburgers, beer, with cash! I told them that in China no-one pays with cash anymore, we all use our phones. And they were amazed; they hadn’t actually experienced it. So I said these are some things where we can learn from each other. 

We will bring some Chinese people to Portugal to learn and will bring the Portuguese – maybe from universities, maybe our start-up people – to China. This is how we will build our platform. 

Given that there’s no controlling shareholder [in GM], how does this influence your plans? 

K.H. – We, being Chinese, trust people. There is no controlling shareholder and there are definitely no ‘yes’ people. We have mutual agreements, understandings that will work together [in order to] come up with something that’s good for the company.

So, it’s collective decision making. We’ve just started – but if all things go smoothly, I don’t see a problem. We took two years to work on the whole deal, so we know these people well and we believe in these people. 

Is your relationship with BCP bank growing stronger? 

K.H. – It has certainly grown over these two years, and then we trust each other. And honestly, the first time when we talked about this deal it wasn’t anything close to what we’re doing now. There were investors who wanted to sell, there were banks – BCP, Novo Banco – who wanted to recover their debts.

That’s all after two full years of working, planning, strategic thinking, that comes to what we have today. That we all decided – looking to a brighter future, we will change the company. The company has very good assets – we will utilise our assets, our brands, and then we’ll work on something new. 

Cars to Angola 

Is this the beginning of the internationalisation of KNJ? 

K.H. – Yes and no. Of course it is, because once we made our first step there will definitely be a second, third, fourth step. Whether it will only be Portugal, or whether it will be Europe, we don’t know yet; we’ll see. And Africa, of course.

We talked about one. Because of this deal I’m actually trying to line up with Guangzhou Motors – they have their own brand – to move into Angola. This is something that I’m working on now. It’s not an investment; we’re trying to build a bridge – bring them over and then they can start selling cars in Angola, which is good for them, good for Angola, too. So, this is what I’m doing. 

Brazil is too far and too big a market [requiring] a lot of time and maybe a few local partners before we can really look into that market, Angola is very natural because we already know people there, we have our partners. So, I think it will be an easier move to this country. I think we’ll do something in Angola very soon.  

Your deal in Portugal, where there are already strong Chinese investments, will it not give you political strength? 

K.H. – I never see it this way. Back in Portugal, when I was interviewed just the first night after we announced the news, a lot of people asked “Now that you’re Chinese coming into Portugal, buying media, what do you plan to do? What have I done so far? What’s my plan?”

I’m not turning any paper or radio into a Chinese paper. I’m not doing anything specifically for China or Macau. We are purely investors looking into the growth [prospects] of the company. The only thing that is China related is we are Chinese, we are from Macau. 

When they [Chinese investors] go into energy why don’t the Portuguese get worried? When they go into banks, why don’t the Portuguese get worried? If the Portuguese are not worried about a [Chinese] state-owned company buying EDP, not worried about them controlling [electricity] power, don’t worry about me going into media. 

In Macau, I don’t know yet, I just got back. The government has not called me yet so I don’t know, but we’ll definitely try to work on some co-operation with companies like TDM, Macau Daily, to exchange different news [with] Xinhua. It’s not because I’m a Chinese and a shareholder of Global Media that we have to partner with them to get more news from China; it’s because China is the trend. If you don’t report China what do you report now? So I think this is natural, just natural. 

Does that mean you’ll be looking to open a news outlet in Macau? 

K.H. – No, what we will do, and that we’re very close to doing, is we’ll have Global Media in Macau. We will have a newsroom here because in Europe and Macau the best thing is we have different time zones, so when my newsroom in Europe is resting, we have our newsroom in Macau that can provide 24-hours up-to-date news from this part of the world. And that is very key to being a global player.

I think it’s good, and also for Global Media, especially for the traditional two newspapers and TSF radio; we’re not only expanding into Portuguese-speaking countries, we’re expanding into Portuguese [markets] outside Portugal. For example, France – we have a million Portuguese living in France and no media company, no-one has tapped into them. We’ll try to use modern technologies to try to hit these people, too, to make sure they’re still connected to Portugal.  

Start-ups, of course 

So what’s next? What are you looking at now? 

K.H. – To rest (laughs). First of all, more projects in Portugal that we have in mind. We have a couple down the road that we’re working on, one of them Global Media related. I spent a day in Oporto and Gaia. I met with the mayor of Gaia. As you know, there are a lot of warehouses, the old warehouses for red (Port) wines; we’re co-operating in a start-up. So, something will happen very soon. That is very exciting. And, of course, in Lisbon we’re working on some new products; hopefully, it will be out before Chinese New Year here, it will be TV-related.

And there’s more investment in Portugal down the line. There are two real estate projects we are looking into, very promising. The prices in Portugal have gone up a bit but the rental yield is still there, so for long-term investment it’s still a good place to go. 

What about the overall environment in Macau for start-ups? 

K.H. – In terms of actual business it’s hard; it’s never been easy and I don’t see it getting easier in the future. But in terms of opportunity, we’ve got everything we need. I do a lot of talks with young people on helping them to start a new business. The first thing I always tell them is “Don’t start a new business, you’re not ready for it. Why do you always have to think that starting a business requires a shop? Why do you always have to think that starting a business requires capital? If you have a good mind, if you have good business sense, these things will come”.

We all talk about, especially nowadays, the Greater Bay Area, within the Guangdong Province and Hong Kong and Macau [arc]. Why do we have to start it in Macau? Why can’t we go into these parts of China, Guangzhou where there are millions of people and there are shops and there are ideas? We cannot limit ourselves to just Macau. And this is something that we always try to tell the Macau people: being a Macau person doesn’t mean you have to start your business in Macau. 

What do you think of the funding schemes the government is offering to residents, SMEs? 

K.H. – The government has to do something to help these people. The government is trying its best. The only thing, in my opinion, the government has done wrong is promoting too actively and not painting a clearer picture for these youngsters. We all talk about helping you start a business, the Chinese central government has this slogan: ‘Creativity and innovation and starting a business’ – because they have high unemployment, because they want people to come up with creativity and innovation, [but having a] start-up least.

Macau is supporting these ideas, following our central government’s move, but Macau is a different place, we have low unemployment, we have high costs. Let these people gain more experience. We have to support people when they start up a business but we want to support people who are ready. This is the only thing that the Macau Government hasn’t done. They should tell people ‘We will help you to build your own business when you are ready’. [At the moment] people think ‘Oh, as long as I’m happy, as long as I have an idea, I’ll go and start my business and the government will support [it]’. And then the business dies. 

Can you estimate what might be the investment overall in the near two, three years in Portugal? 

K.H. – It’s very hard to say, it depends on what comes up. [If] we were in Portugal and someone gave me a pool of assets of 400 million euros, of course it’s beyond our ability to do it. A couple of million here and there, yes or no, I don’t know. We have some funds here now, but a year later, maybe in two months, I sell some of my other investments in Macau or Hong Kong and then I may have more money. Otherwise, if there’s something in Macau or Hong Kong that [was a] good investment, I might invest back here. We always look at good opportunities.

I am an investor.