Sunday, May 5th, 2019


Growing importance of social entrepreneurship

KUALA LUMPUR: Social entrepreneurship is still nascent in Malaysia and efforts should go towards increasing entrepreneurial education, shaping a medium- to long-term mindset of entrepreneurs and connecting the social enterprise ecosystem, said a UK professor.

Coventry University International Centre for Transformational Entrepreneurship director Prof Gideon Maas said an area to improve is in terms of how people are orientated towards social enterprises, by creating awareness in the public that social enterprise is playing a significant role here, and that it is neither a charity nor non-profit organisation.

“The centre point of everything is education because you need to align your curriculum design. Entrepreneurial universities are universities that are gearing themselves for this type of future. You can’t be too traditionally oriented with education, research, this and that faculty… they all need to be connected. If Malaysia is getting those things right, you will be much stronger. At the end of the day, entrepreneurship will help you to go through the ‘roller coasters’,” he told SunBiz.

“If you can select good stories from 20,000 social enterprises and start sharing them, the attitude about what social entrepreneurship is will change. People will recognise that for the value it plays in society. Shouldn’t any business be more social orientated in anyway? You’re focusing on the community at large and not just on selling of products and services,” Maas added.

Generally, he said, social entrepreneurs have a short-term mindset and should be medium- to long-term orientated.

“In other words, I create a business today but, tomorrow I want to be a millionaire. Impatience that I’m in this for the long haul. You’re not a sprinter in entrepreneurship. It’s over time. It’s mindset. If solutions are too short-term orientated, nothing is going to happen. In this environment, we want to nudge people (towards) futuristic and unknown things,” said Maas.

He added that there is also a need to get the social entrepreneurship ecosystem connected towards a more integrated and multidisciplinary approach. He opined that the business models of Malaysian social enterprises are in line with the rest in the world, with a need to focus on creativity beyond business model.

Social enterprise Tandemic COO Natasha Hishamudin said the Malaysian social enterprise landscape is conducive but noted that there is work to be done to tighten the structure in the absence of a clear framework to navigate the whole area of entrepreneurship.

“We have the platforms in place but there are gaps within the platform and we’re figuring out how to fit it in. The most significant gap is insustainability. We have a lot of support in terms of entrepreneurship but why do we have start-ups that do not last? It goes back to the basic issues like lack of awareness. It’s ironic because we have the enthusiasm and support (for social enterprises) but we don’t have the narrative language to begin a discussion,” said Natasha.

On funding issues, she said there are funders around but it is not made clearly known how to go about getting the right funds amid strict regulations on obtaining funds.

“We have government support, so there are strict, clear policies but what we don’t have to follow up is corporate governance because we have entrepreneurs who don’t know how to properly manage, including financial management and how to operate in accordance to proper regulations on how a start-up should be one.”

On profit-making social enterprises, she said profit is important for the sustainability aspect but management and corporate governance come into the picture as well.

“The profit that you make, you pump into diversification and how to diversify what you started with. A start-up is where you begin and you’re supposed to take it from there. Profit is to diversify. When you diversify, you amplify the values that you set out to achieve – double employment opportunities, bring a bigger change and bigger impact to the community. That’s what profit is designed to be.”

British Council programme manager of society Eisya Sofia Azman said Malaysia lacks participation from higher education institutions in growing social entrepreneurship.

“We have universities that offer entrepreneurship courses but it’s about business and getting profit… there’s no societal impact linked to the courses that they teach,” she said.

Social enterprises – businesses that are primarily motivated by social good

PETALING JAYA: Social enterprises are classified as business activities that are primarily motivated by social good where profits are reinvested towards a social cause.

According to the State of Social Enterprise in Malaysia, there are 20,749 enterprises in the country.

Cash flow (55%), the lack of awareness of social enterprise in Malaysia (36%) and recruiting staff or volunteers (33%) remain the top challenges of social enterprises.

Social enterprises in Malaysia are largely viable and successful businesses. Slightly over one third of respondents are making a profit (37%), while 32% of social enterprises are breaking even. However, 31% of respondents say that they have yet to generate profits.

This appears to be a more positive picture than for SMEs in general. According to Malaysia’s SME Masterplan 2012-2020, 42% of enterprises registered in 2000 closed down by 2005. While more recent and concrete data on the failure rate of SMEs is unavailable, researchers estimate that this may be anywhere between 40% and 60%.

The most common sector in which Malaysian social enterprises operate is education, with 22% of respondents working in this sector.

A further 16% of social enterprises operate in the environment and sustainability sector.

The most common sector in which Malaysian social enterprises operate is education. – REUTERSPIX

YTL buys Lafarge: Game changer or time to exit?

PETALING JAYA: AllianceDBS Research has advised investors not to accept the offer by YTL Corp Bhd to acquire a 51% stake in Lafarge Malaysia Bhd at RM3.75 a share as it believes that Lafarge could fetch higher valuations if it remains listed, on the back of improved outlook for the cement industry.

“We expect cement demand to recover with the revival of several major infrastructure projects and this should help support prices,“ the research house said in a report last Friday.

Several key projects such as the East Coast Rail Link, Bandar Malaysia, Klang Valley Double Tracking Project and Penang Transport Master Plan have recently been revived. As a result, AlianceDBS expects cement demand to improve, projecting a growth of 10% (FY19), 5% (FY20) and 5% (FY21).

In contrast, Kenanga Research believes that this is a golden opportunity for investors to exit their investments in Lafarge regardless of a mandatory general offer exercise, due to the limited upside (+3 sen) to the offer price of RM3.75/share and 103% / 95% premium to its and consensus target price of RM1.85/RM1.92.

“We view the offer price of RM3.75/share from YTL for the 51% stake in Lafarge as generous, especially when Lafarge has been loss-making since 2017, and expected to continue until FY20 due to intense competition,“ the research house said.

“We remain cautious over the overall group’s outlook in 2019 due to weak domestic demand woes and continuous overcapacity in the market leading to stiff competition and cement rebates wars. The group’s export strategy may partially help to drive revenue but given generally low margins from export sales, we do not expect any immediate significant bottom-line improvements,“ it added.

AllianceDBS is positive on YTL Cement Sdn Bhd’s acquisition as this would improve industry dynamics that have been pressured by intense price competition and sluggish demand over the past few years. YTL Cement and Lafarge will have a combined market share of about 60%, which would lead to better pricing power.

“We do not discount the possibility of YTL Corp injecting YTL Cement into Lafarge in the future, given that YTL Cement intends to keep Lafarge’s listing status (unless it receives acceptance level of more than 90%). This could create greater shareholder value,“ said AllianceDBS.

It expects the stock to trade close to the RM3.75 offer price in the near term. Assuming the stock is valued at its three-year forward price-to-book value mean (of 1.7 times book value), it would imply a RM4.55 value/share for Lafarge.

Lafarge’s share price closed unchanged at RM3.72 last Friday.

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