Cho Thavee PCL (SET:CHO) Director, Mr. Suradech Taweesaengsakulthai discusses the company’s strategy and outlook in The Executive Talk (TET)
TET: Please explain the history of CHO.
CHO: Our founder, K. Cho Taweesaengsakluthai originally began as a rice mill managing 5 mills throughout the Northeast region in Thailand. However, his key passion was in engines and automotives, and 40 years ago, he began working with Hino to provide bus, semi-trailer and transport truck body manufacturing and assembling. Over the years the concept evolved into a one-stop service provider with sales, body, spare parts and after sales service and the business was further strengthened with a partnership with Doll Fahrzeugbau AG (DOLL) that differentiated Cho Tavee from our competitors in the market. The partnership was very fruitful as we were able utilise the technology knowledge and transfer it to our customers in Thailand. Today we are at the stage where we can be a solution provider as well thus a true one-stop service providers to our customers. Our policy is to invent high value-added products at a reasonable price to be the benchmark in Thailand.
TET: What is CHO’s business model?
CHO: We organise our products and services into three categories. Firstly, standard products which is what we have been doing for the past 50 years and these are truck bodies, dry box trucks, cargo trucks that can transport normal cargo for customers, such as Tesco Lotus, DHL, BigC and several others. We sell these products and provide after sales services. Secondly, special design products, this is more advanced due to the amount of technology included within the product and are exported. For example, we work closely with Morita Group which has the largest market share in Japan for fire fighting trucks and we work with them to export these vehicles throughout South East Asia. The cash cow of this category, however, is the catering trucks that we supply to Emirates, Abu Dhabi and South East Asia. Next year we target to expand to the USA as since Doll Germany is no longer a partner we are able to sell globally. Finally, for services and project management, as mentioned earlier we provide after sales services for Tesco Lotus. We have also opened a service center business called “Sib Lor 24-hour by CHO” which is a new service business with several locations throughout the country for commercial vehicles. Project Management as a service because we have the know-how for engineering, logistics, financials, purchasing for project management such as ship building for the Thai Navy where we are now on our second project. We also provide Fleet Management where the asset belongs to us and we manage
it such as in Khon Kaen where we have 50 buses and 5 lines, and if you include the songthaews then we have 300 vehicles in the fleet. We manage the lines and the e-ticketing system. So we are diversifying our business from a pure project based company to having a recurring income services business.
TET: How important is R&D and technology to your business?
CHO: We have a dedicated team for research and development and currently have 90 patents. Our internal KPI is to file 3 patents per year. We have had a third party evaluate the first 19 patents and the value provided was THB 60 mn. Our patents are typically for mechanism within the truck body, the lifting system. However, we are expanding our scope to robotics and electrical vehicle charging stations which is done in conjunction with Khon Kaen University. Thus should EV’s become prevalent in Thailand we will be ready to for this opportunity. The impact of digital technology has been hugely positive for us because we are able to scale for example our ERP system is now cloud-based and can be accessed anywhere in the world, so we have a workshop in Vietnam that is able to work real-time with us.
TET: What differentiates CHO from its competitors?
CHO: Our viewpoint on technology disruption is that we as a company have to combine both the hardware and the software which will enable us to be a long term sustainable business, whereas our competitors are typically focused on short term profits. We have proved this with the bus system in Khon Kaen with the buses, the mechanics, the software and so forth. Also we are faster, more flexible and quicker to changes within the industry. Because without change then our company will not be able to remain competitive and thus we continue to have an eagerness to learn throughout our entire organisation.
TET: What may investors misunderstand about your business?
CHO: Some may confuse us with the news regarding the buses that were stuck at the ports or the ones that caught fire when they are from our competitors and not us. The BMTA bus project has been on process for 15 years and we have won the tender on two occasions, most recently with SCN Inter Plc as our partner for it. The first tender was cancelled, and the latest tender has seen the project postponed even though we have already delivered 100 buses and have another 400 sitting in inventory waiting for delivery and we hope that this situation is resolved clearly and transparently.
TET: What are the biggest risks facing your business?
CHO: The issues surrounding the Bangkok Mass Transit Authority Bus program. Because of the delays in this program our business expansion plans have been delayed. However we are confident in the issues of the Bus program being resolved and therefore CHO will be able to continue along our long term strategic roadmap to continue delivering value to our customers within Thailand and Internationally.
TET: Where do you see CHO in five years from now?
CHO: We have a clear strategic roadmap for the company which is available for all investors to see on our website, that we shall grow the services and recurring revenue portions to become a more substantial part of the overall business. Other than business performance, what is equally important for us our philosophy of strong corporate governance, sustainability and high levels of transparency. We want sustainability in business and that transparency in business is needed in Thailand. Currently there are only two companies on the Market for Alternative Investments (MAI) that have five stars, one of which is us. It shows that we want transparency in doing business and that the country should support companies with this business ethnic. Several investors in CHO are long term focused which is important as the capital markets are an important function of Thailand’s economy.