18 September 2013

A Lunch Talk with A-Sonic CEO - September 2013

Not too long ago, our company conducted a lunch talk with A-Sonic CEO, to my surprise the CEO is female (I'm sorry that I didn't read the annual report on this company yet). She and her another colleague shared with us their business model as well as their plan to further grow A-Sonic.

If you are not aware of, A-Sonic is expanding their business in Aviation business, and you notice that the revenue from aviation business @ 1H2013 grew 4 times ++ to S$5.0M from S$1.0M last year. The CEO shared with us that the logistic business was a number game, that they have to keep on increasing the logistic volume in order to have a better economy of scales and hence better gross profit. In comparison, aviation business provides better gross profit margin, which is about 25% as compared to single digit percentage of logistic business.

The CEO shared with us the difficulty they faced when they started off the aircraft leasing business few years ago. Firstly, they tried to source the raw material at cheaper price. Secondly, they met the financial crisis few years back and the global economy took a hit from there and they hardly find a potential client to lease from them. Thirdly, it took some time for them to better configure the air craft and send it over to the clients.

In the meeting room, several questions were raised:

1. How do you ensure that you have sufficient cash / fund to support the aviation expansion?

    The business model is that the client must deposit first once the LOI is signed. So the company does not need to worry over the initial cash flow (I think the same goes to Yang Zi Jiang who also require deposit before the shipping project is started). They also have several banking facilities. With 25% gross profit margin, the single digit bank loan interest actually does not mean too much to them as long as they can complete the project in time.

    Nonetheless, the CEO also mentioned that they are in the midst of restructuring the logistic division and logistic business is actually still in growing stage, although it may not as fast as aviation division.

2. How long does it take to complete a project (air craft leasing)? 

    After sourcing the raw material, it takes about 3-4 months for the engineers team to configure and of course it would take about few weeks for authority to approve it.

3. Is there any conflict of interest because CEO actually own substantial percentage in one of the client's co stake? 

    The CEO mentioned that her motive in becoming a substantial stakeholder is to strengthen client relationship and in the hope to become one of the exclusive partners with the client. In fact, the client actually does not require additional fundraising, but they would like to have technology & skills by A-Sonic.

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