Behind the face of Sincere Watch

by Matthew Phan, Mar 8 2006Matthew Phan meets award-winning chief financial officer Soh Gim Teik, who quietly keeps the company in financial step

A specialty retailer of luxury watches, Sincere Watch is better known for its branded timepieces that could adorn your wrist for $20,000. Or, if you were an investor, you would have watched its stock price trending steadily upwards from less than 20 cents to just about 80 cents in the past five years. Sincere's CEO Tay Liam Wee has been winning several awards recently - from the Ernst & Young Entrepreneur of the Year award in 2004, to the Tourism Entrepreneur award.

But behind the scenes - just as the precise time-keeping mechanisms of a watch are hidden behind the face - his chief financial officer, Soh Gim Teik, quietly keeps the company in financial step. Mr Soh, who won the CFO of the Year award in the under-$500 million market cap category, joined Sincere in 1993 after 15 years of working as an accountant. He had his work cut out for him: Sincere listed on the Singapore Exchange (SGX) in 1993, and has since expanded its reach into South-east Asia, Hong Kong and China, even listing on the Hong Kong Stock Exchange in October 2005.

Last year, Sincere grew operating profits by 136 per cent to $7.2 million, despite a 7.2 per cent fall in revenue from the temporary closure of two shops. It also recognised one-time gains of $10.6 million following its listing in Hong Kong. Mr Soh says that while a good CFO must possess technical skills, he must also be able to see things from a broader perspective, speak his mind, make decisions, and put himself in other people's shoes. At Sincere, he manages a team that provides the bottom-up financial reports on the company's operations, but spends most of his time thinking through strategic issues, conferring with the CEO, the financial controller and the marketing and other departments. When he first joined Sincere, the company was a three-shop retail outfit, and the challenge was to grow the business by expanding overseas. "As CFO, you hog the numbers to make sure you achieve what you want. The retail business is difficult because when you first start out, whether you sell $1 or $1 million, you are paying the same rent and wages. The burn rate is very high; as the finance person, you must know how long you can last," says Mr Soh. His financial staff currently review intra-company reports at least every week. In 1997, when the financial crisis hit South-east Asia, it affected two of Sincere's key overseas markets, Malaysia and Thailand.

The key then was to provide support to the front end and manage the balance sheet on the back end. "The priority was not market share; you don't take market share when you're burning. The bankers were jittery, but we didn't wait for them to come and tell us. You must be disciplined enough to have your own benchmarking. We made sure we cut borrowings, stored cash, and were judicious with inventory. We were hit a bit - credit is due here to the marketing boys - but people still got paid,"says Mr Soh.

Smart Management
He differentiates smart money management from simply cutting costs. "By cutting costs, you cut away your profits, and end up suffering from corporate anorexia. You think you should slim down, but you damage yourself. Watch your margins and increase sales, that's what most companies should do."

Post-crisis, with a stronger balance sheet, Mr Soh felt the market was not paying attention to what Sincere was worth and that it was time to improve the firm's valuation. He beefed up its investor relations and educated investors about the company. Sincere has been growing year on year and started to give dividends, he says. It recently executed a stock split. Although ultimately "the board and CEO make the decisions," nonetheless, "it is incumbent on the CFO to guide the board, to say, perhaps we can take this route to reach that goal," Mr Soh explains. Although Sincere now has a relatively established brand, even winning a Forbes Best Under A Billion award in 2005 (along with 10 other SGX-listed companies, including Osim and Hyflux), the challenges have grown as well. Shop managers now complain of competition from retailers in Hong Kong or the US, rather than across the street, while customers have also become knowledgeble and may know more than the salesman, Mr Soh says. To think such concerns are the CEO's job is a mistaken notion, he continues, although the overall responsibility lies with the CEO. But "before you make a business decision, you must have worked the numbers already. That's where financial input comes in." For example, in Hong Kong, Sincere leverages on HK dealers to grow the business, and does not have multi-brand shops; the business model was selected due to high rental rates there.

To hone his judgment, Mr Soh says it is necessary to be incessantly curious - he reads not only about the luxury watch business, but about luxury businesses in general - and set aside quiet time to think. He often does his thinking in the evenings, when he is driving. Mr Soh, who is 51 and the father of two girls, graduated in 1978 from then-Singapore University. He started his career as an auditor with Price Waterhouse, then worked with two other commercial firms before starting his own audit partnership. He sold his stake and joined Sincere in 1993 after Mr Tay, also his brother-in-law, approached him for help. Mr Soh says it is essential that the CEO and CFO have a good professional relationship and gives credit to Mr Tay for being a CEO who listens and cultivates an environment where alternative views can be aired. He also gives kudos to his staff: "I have a first class team, giving first class work. That's my source of pride."