“The Shy Investor: CryptoCurrencies” is a fictional case written from the point of view of an investor carrying out investment risk analysis. The protagonist is a reasonably wealthy woman in Russia who wishes to diversify her investment portfolio. The case uses a fictitious cryptocurrency called URLBoyzCoyn issued by or on behalf of an equally unreal thrash heavy metal band called the URLBoyz. The overall theme is the assessment of risk and the factors to consider before investing in cryptocurrency. The case contrasts the high returns that can be and have been made by early speculators in cryptocurrencies generally. With the risks that later entrants to the market may have to shoulder.
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1764
In 2018, the Lo family of Hong Kong held a combined 68% of Great Eagle Holdings (GEH), a publicly listed and one of the largest real estate conglomerates in Hong Kong, 33.5% through a family trust and the remainder through individual holdings. Only 32.5% of the company was in public hands. The case opened with Dr. LO Ka-shui (KS), chairman and managing director of GEH, musing about a deep and serious split in the family.
Trained as a cardiologist, KS helped his father with the family business since 1980 and played a critical role in rescuing the company from near bankruptcy. Between 1984 and 2018, the Net Asset Value (NAV) of GEH expanded by 350 times as Hong Kong property values boomed. KS felt that he could take the credit for the company’s success, as his father’s right-hand man for most of that time, and chairman for the 12 years since his father’s death in 2006, during which he expanded the company’s assets, paid off debt, and raised HK$23 billion from capital markets.
With the increase in his personal shareholdings to 27%, it raised questions among some of his eight siblings, despite the fact that his personal holdings were a matter of public knowledge. In 2016, KS’ mother, Lo To Lee-kwan (Madam Lo), three of his brothers and two sisters challenged his control of the company, in a painful and very public family dispute focusing on the governing structure of the Lo family trust. The challenge not only put family control of GEH in jeopardy; it also raised questions about the ability of trust structures to maintain family unity in an Asian family business, where family unity and harmony, as well as wealth preservation and family values, are top priorities.
1892
The case is based on the fixed income investment team at Value Partners Group Limited (VP), a publicly-listed, Hong Kong–based fund and asset management company founded in 1993, focusing primarily on Greater China and Asian investments and following an investing approach referred to as value investing.
Set in December 2014, the cumulative returns from September to November 2014 for the Value Partners Greater China High Yield Income Fund (The Fund)—the firm’s flagship fixed income fund—were negative. The year had started out slowly, but momentum picked up in the summer until a number of external events affected returns, including: Occupy Central in Hong Kong; the market’s concern about the end of the US Federal Reserve’s quantitative easing; Chairman Xi’s anticorruption campaign in Beijing; and the Chinese property market suffering from excess inventory. Investors reacted to these events by pulling their money out of The Fund, and September returns for The Fund were down 2.2% for the month.
The December bond market movement was drastic enough that Gordon Ip, Fixed Income Fund Manager for VP, and his team needed to react. Ip was under intense pressure to increase performance, since December was the last month of the year and investors would more closely scrutinize his performance. He needed to make a decision.
1891
This is a follow up chapter to the original case The Neat Account: Fintech Innovation in Hong Kong.
As a young fintech company in Hong Kong offering individuals, startups, and SMEs an alternative to a bank account, Neat has struggled to address a number of challenging issues since its inception in 2015. Set in 2019, as the company was entering the next stage of growth, co-founder and CEO, David Rosa had to decide what the next steps are for the company. In order to do so, he had to redesign the brand, re-calibrate their risk-reward ratio, target a more lucrative audience, and navigate a complex regulatory environment as well as secure a new round of funding.
1867
Since China Resource Enterprise Ltd. (CRE) acquired a majority stake in Pacific Coffee in 2010, the coffee chain had experienced tremendous expansion particularly in mainland China. Yet, Hong Kong remained the core of the business, and Pacific Coffee could not afford to lose its leadership position in its home base. The competitive environment became more intense and Hong Kong coffee consumers became more sophisticated.
Jonathan Somerville, the CEO, realized that while he needed to stay involved, and on top of the business in Hong Kong, he no longer had the capacity to be involved on a day-to-day basis. However, he needed to motivate his Hong Kong team and give them direction when implementing strategies. He decided the Balanced Business Scorecard would be an effective tool to link and align the company’s strategy to its operations.
Two other related cases in this series include:
1. Pacific Coffee: Making the Numbers Count
2. Pacific Coffee: Long Run Investment Decisions
1865
Pacific Coffee had experienced a major expansion of its network in Hong Kong since CRE took control in 2010. By March 2018, most but not all districts in Hong Kong had Pacific Coffee stores. Yet, with turnover in leases and new potential markets, there continued to be opportunities to expand into new store locations.
In March 2018, Pacific Coffee’s business development and leasing team found two locations up for rent. One was a ground-floor space at a new building on the campus of the Hong Kong University of Science and Technology (HKUST), while the other option was a street-level store in Central district.
For Pacific Coffee’s management, the investment process did not entail just only financial return. Other intangible factors, such as brand building, were essential for the chain’s long-term growth strategy.
Two other related cases in this series include:
1. Pacific Coffee: Making the Numbers Count
2. Pacific Coffee Balanced Scorecard: Operationalizing Strategies
1866
Pacific Coffee operated several stores in Central Hong Kong, the heart of the city’s financial district. One of these stores (“Store X”) was situated on the ground floor and near the main lobby of a Grade A commercial building and a five-minute walk away from Lan Kwai Fong, a popular area for drinking, dining, and clubbing frequented by the city’s professionals. Store X’s opening hours were from 7 a.m. to 8 p.m. daily. Profitability was constantly challenged by increased competition as well as pressures from cost inflation, including rent, labor, and raw material price increases. Jonathan Somerville, the group COO, had been contemplating a number of different strategies to optimize profitability at the store.
Two other related cases in this series include:
1. Pacific Coffee Balanced Scorecard: Operationalizing Strategies
2. Pacific Coffee: Long Run Investment Decisions
1760
Creating Shared Value at the Mills: A Billion Dollar Experiment in Corporate Social Entrepreneurship
(UST073)
When the Hong Kong billion-dollar revitalization of a set of derelict cotton mills in Hong Kong was first conceptualized by property heiress Vanessa Cheung, the project had a clear direction around which it was to be oriented. The Mills was to be a social institution: a space in which an otherwise poor and fragmented local community could connect with both its past, as a center of textile production, and its future. Financed by Nan Fung Group, Vanessa’s multigenerational family business and one of Asia’s most valuable property development companies, the Mills was underwritten without the diligence that might proceed projects of a comparable scale. Three years from project inception but still several months away from the facilities opening to the public in late 2018, the Mills struggled to operationalize the three business models it had evolved to encompass, namely, an incubation platform including co-working space; shopping space targeting pop-up stores and smaller retailers; a heritage center to operate as a non-profit museum. Vanessa also wondered how her project will deliver on its original vision of creating shared value for its stakeholders.
1875
This case is intended to take students through the cycle of a direct investment, during which a number of decisions has to be made by the financial investor as the shareholder of the investee company. In a situation where the financial investor is a minority shareholder, it is of the investor’s best interest to be sensitive to the alignment of shareholders, especially with the controlling/strategic shareholder. When faced with a decision as to whether to maximize value for itself, or share value with the controlling/strategic shareholder, the financial investor should look harder to find creative solutions which can add value to both the minority and the controlling shareholder. Often times, additional investment means additional risk, and the then-current reward/risk balance should be carefully considered, including the then-current fundamentals of the investee company, and the competitive environment of the industry.
1763
The Esquel, one of the world’s largest cotton-based textile and apparel manufacturing companies, produces shirts for from scratch through a vertically integrated supply chain for many major brands, including Tommy Hilfiger, Hugo Boss, Ralph Lauren, Lacoste, and Nike, and department stores around the world. Its leadership, comprising Chairman Marjorie Yang, Vice Chairman Teresa Yang, and CEO John Cheh, had made significant strides over the past two decades, fostering and developing sustainability practices across their supply chain. Set in the early part of 2012, this case tracks their decision-making process as they saw an opportunity to develop a greenfield site in the city of Guilin in Guangxi Province, China. They named this new development project “Integral”, following the Buddhist concept of harmony between the natural and surrounding environment, the workplace and the workforce culture, and the pursuit of innovation, community, and excellence. The main issues the Esquel leadership faced were to define the vision and mission for Integral around the short and long-term value proposition of the Integral site. What could be the contribution of the Integral site to the Esquel network, and in what ways could they make the Integral site a showcase for the sustainability focus of the organization?