Stephen Law: a man on a journey

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As Finance Director of MTR Corporation, Stephen Law has helped to make train travel in Hong Kong and beyond possible. Now, as he prepares to move on, he explains how his own varied career journey gave him the experience necessary to handle the many commercial complexities of this role.

Unlike Hong Kong commuters, who make short, fast rides on the city’s subway network, Stephen Law embarked on a long and intriguing journey to becoming Finance Director (FD) of MTR Corporation (a role he was preparing to leave when he spoke to Reporting). His career path wound across continents and business sectors before arriving at MTR headquarters at Kowloon Bay. On the way, he managed private equity funds across Asia, was CFO of China’s second largest outdoor advertising operator, founded an interactive marketing agency and structured IPOs.

Being stationed back home after 13 years working in Asia’s burgeoning private equity sphere offered two key enticements. “As an investor, I helped companies to develop new strategies and expansion plans,” Law explains. “I always say that, as an investor, you probably understand the company 60%, and as an auditor you understand it 40%. But if you are a management team, you understand the business 100%, and I wanted to be a part of that. Also, I am Hong Kong-born, it is my home, and this role gave me an opportunity to serve the Hong Kong people.”

It’s almost three years ago that Law took up the challenge of being FD for a company that is not just a titan of the Hong Kong business world, but an intrinsic part of everyday life. The Hong Kong subway has patronage (i.e., total number of customer journeys) of more than 5.4 million each day, and MTR’s under-construction new lines and property developments are visible across the landscape. In addition to the four new lines being constructed, the Government has announced plans to build seven more rail lines to reach areas beyond the current network coverage.

For me, there is a real sense of achievement from getting the special deal.
  • A broad portfolio

    As FD of a global leader in railway operations, which employs more than 16,000 people in Hong Kong alone, Law has had a broad portfolio of six departments. In addition to financial control and management, treasury, investor relations, information technology, and materials and stores, he was tasked with creating a new function.

    “I started the investment control and financial management department, which looks after MTR’s investments beyond Hong Kong,” he explains. “We review the feasibility study, evaluate the risk assessment and perform financial analysis for potential investments. Then, with input from other divisions, we can decide whether we should make the investment. If we decide to do so, my team will continue to monitor the financial aspects of the project. It’s a bit like managing a portfolio of companies, which is what I used to do in private equity.”

    This aspect of Law’s role reflects how MTR’s core competencies in its home market – railway operations and property development – are being adapted beyond Hong Kong. The company was established in 1975 as the Mass Transit Railway Corporation to construct and operate Hong Kong’s urban metro system. Twenty-five years later, in June 2000, 23% of its share capital was issued to private investors in an IPO, and it was listed on the Hong Kong Stock Exchange in October 2000.

    Today, MTR’s diverse operations include railways, residential and commercial real estate development, leasing and management, advertising, telecommunications and international consultancy services. Globally, MTR operates and manages London Overground, as well as TfL Rail (the first phase of the new Crossrail service), in the UK; Stockholm Metro and MTR Express (an intercity railway between Stockholm and Gothenburg) in Sweden; and Melbourne Metro in Australia, where it is also a shareholder in the Sydney Metro Northwest project.

    Hong Kong remains central to MTR’s operations, however. “Here, almost 90% of people use public transport, and 48% of those use the MTR. This huge volume of passenger traffic makes us one of the most used subways in the world,” says Law. “Each year, we need to invest around HKD7b (approximately US$0.9b) just to maintain our existing level of service.”

    As a public transport company listed in Hong Kong, MTR’s main stakeholders fall into two groups: investors and the general public. “Investors will focus on MTR’s financial performance, financial position, dividend policy and any changes in key performance factors, such as the performance of business segments, the market share, the patronage, and so on,” Law explains. “However, the general public will view MTR through the lens of our service quality and focus on how we deploy resources to maintain it, and how we develop the railway network in Hong Kong. To satisfy the needs of both groups, the reporting needs to be comprehensive and to cover financial performance as well as our contribution to society.”

  • Chinese connections

    The emerging superpower to the north of Hong Kong is considered a key growth market, and MTR constructed and operates three metro lines in Beijing, one in Shenzhen and one in Hangzhou. It also has property interests in Shenzhen and Tianjin.

    “Mainland China is becoming more and more commercial, and for many industries it is now the number one market in terms of business opportunities,” says Law. “The railway sector is expanding very fast across China, and for MTR, as an experienced railway operator in Hong Kong, there are a lot of opportunities because we are seen as a reliable partner.”

    There are challenges, though. “Probably our biggest challenge in mainland China is human resources. Unlike in Western countries, we cannot employ sufficient trained people, because the modern railway sector is evolving fast – it’s almost like a new industry. So, as we expand in China, we will have to train a lot of people and set up all the HR functions and processes at the same time.”

    These comments are made with the authority of Law’s proven business credentials in China. While holding senior positions with TPG, Morningside Group and Wheelock Group, Law spent considerable time working in mainland China as the wheels of commerce began to spin faster in an economy that is now the world’s second largest.

    “Those were exciting days,” says Law. “I started in private equity in 2000, at the beginning of the internet fever in this part of the world. My firm was investing in many Chinese companies that are now household names, like internet services provider Sohu and travel company Ctrip. Back then, internet-based companies in China needed help to develop their financial structures and business models, because, although they were gaining high IPO valuations, they had very low revenues. So we had to create a plan to rapidly increase earnings.”

    During China’s dazzling growth in the first decade of the new millennium, Law undertook a range of roles, serving as a director of one of China’s top three online gaming operators and as CFO of the second largest outdoor advertising operator in China, before leading its sale to global giant JCDecaux. He founded and consolidated the Communication Central Group, the largest independent interactive marketing agency in China (it was later sold to Publicis), and developed a brewery joint venture in Tianjin in partnership with Foster’s of Australia. In 2014, his expertise was recognized by China’s Ministry of Finance, which appointed him as an expert consultant to provide advice on finance and management accounting.

    Fast forward to 2016, and a major China project – the Express Rail Link between Hong Kong, Shenzhen and Guangzhou, China’s third most populous city – has been a significant focus during Law’s tenure at MTR. Once it is completed in 2018, the express railway will connect Hong Kong with China’s rapidly expanding high-speed intercity network and enhance Hong Kong’s positioning as the southern gateway to mainland China.

    The Hong Kong Government is the owner of the Express Rail Link and MTR is the project manager. The railway ran into complications, however, when the projected budget of HKD65b (approximately US$8.4b) escalated to HKD84b (approximately US$10.8b) as a result of a number of external factors. This triggered a review by the Hong Kong Legislative Council (LegCo) to approve the additional funding.

    “It was a very complex process, because we had to talk to all the stakeholders, including investors and LegCo members, to seek their approval,” says Law. “There were numerous financial, engineering and political issues to consider.”

    The long-term economic benefits for Hong Kong remained the driving force, but finding the right funding package was critical. Eventually, 99.8% of the shareholders who voted agreed that a special dividend of approximately HKD26b (approximately US$3.35b) would be payable to the shareholders, including the Government. The carefully structured financial resolution was a viable and pragmatic deal and was approved by both the shareholders and the LegCo.

    The experience was, says Law, both instructive and rewarding. “For me, there is a real sense of achievement from helping the company to get through the shareholder meeting and getting the finance for the special deal. I spent a lot of time structuring the right deal to secure approval from LegCo and the shareholders. Now that we have the funding in place, we can provide a valuable service for the Hong Kong people.”
  • Back to the future

    Law credits his accounting background, which began at Arthur Andersen in the UK, for enabling him to succeed in his various roles. “Looking back, it was important to start my career with a Big Eight accounting firm. The experiences I gained there broadened my understanding of the business world and served as a platform for my future career path,” he says.

    As the finance role continues to evolve, so too does his personal appreciation of its strategic status in the corporate world. “In the real world, everything has to be supported by finance. Accounting used to be driven by auditing, but today it is about how to use the company’s financial figures to find its critical strengths and weaknesses. This knowledge forms the basis for the overall business strategy,” he says.

    Being FD of a company whose business transcends continents, the opportunities and challenges of new technology have also been top of mind. “MTR is a listed company, so every investment we make has to be justified by both financial and non-financial considerations,” says Law. “But, as the company expands, we also need to use newer and better management systems. Every company is now looking at big data to serve its customers better, or to gain a competitive advantage.”

    While technology and accounting find new ways to coalesce, Law credits working in the private equity world with honing his appetite for adding value. “The private equity world is exciting, but it is hard work,” he says. “You have to source deals, enter discussions with new partners, monitor company and sector performance, complete rigorous due diligence and create a post-deal business plan before you even enter the critical negotiation phase.”

    As he prepares for the next stage in his career journey, he concludes: “What I learned mostly is that, at every stage, the important thing is to add value to the company – and that has been very relevant to my role at MTR.”
  • Stephen Law’s CV

    • He earned BSc (Civil Engineering) degree from the University of Birmingham, UK, in 1984. He joined Arthur Andersen as a chartered accountant trainee in Birmingham.
    • Law returned to Hong Kong in 1989 as an audit manager for KPMG.
    • He was appointed as Regional Financial Controller of Acer Consultants, a civil engineering consultancy, in 1991.
    • In 1995, he joined Wheelock Group as an investment control manager, and obtained an MBA from the University of Hull in the UK.
    • In 1999, he led i-Cable (a Wheelock group company) from a single revenue to a triple revenue model, and completed its IPO in Hong Kong and the US.
    • He took on the role of Director of Morningside Group in 2000 to manage a portfolio of private equity investments.
    • In 2006, he joined TPG Growth Capital (Asia) Limited as Executive Director, and managed a fund targeting growth companies in China and Vietnam. He was promoted to Managing Director in 2009.
    • He became a council member of the Hong Kong Institute of CPAs in 2010.
    • In 2013, he became the Finance Director of MTR Corporation and a member of its executive directorate.
    • He was appointed by China’s Ministry of Finance as an expert consultant to provide advice on finance and management accounting in 2014.
    • In 2016, working with other executives, he successfully persuaded shareholders and Hong Kong LegCo to approve new funding for the Express Rail Link.
    • Also in 2016, he became an adjunct professor of the Hong Kong Polytechnic University.

August 2016


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