Identifying Private Equity Opportunities in Indonesia, Vietnam and Thailand - Private Equity-Section AB - insead
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Identifying Private Equity Opportunities in Indonesia, Vietnam and Thailand Sponsored by: JL Capital Private Equity- Section AB Hill P., Matteo Ferrante, Neha Dodeja, Pratiksha Barasia, Uday Mehra (MBA Class of 2020 July)
⮚ Executive Summary
⮚ Opportunities in Fintech in Indonesia
⮚ Opportunities in Consumer Retail in Vietnam
⮚ Opportunities in Food Manufactoring in Thailand
2
Executive Summary
• JL Capital is looking to make its first investment in SEA by focusing on promising indsutries in specific
countries
• The shortlisted industries represent (i) easy to understand market dynamics and business models (ii) potential
JL Capital opportunities within the right ticket size (iii) underinvestment in the particular sector
• Fintech space is nascent but shows promise for a massive increase in TAM led by high TPV
• Payments is the entry point for consumers, paving the future for Lending; Fintech lending can bridge the gap
for unutilized financing capacity and access to credit in Indonesia
Indonesia • SME lending is attractive and presents opportunities for investment from JL Capital
• Consumer retail is a fast-growing investment space in Vietnam with strong sales growth
• E-commerce penetration is on the rise in Vietnam, however, retail players with offline presence are expected to
succeed in online channels
Vietnam • A potential investment target, market leader in baby retail, fits the relevant factors required for success
• Thailand is the kitchen of the world: Food processing contributes 23% of Thailand’s GDP
• Packaged food shows a strong demand forecast in APAC with a focus on ready meal in Thai market
Thailand • Recommend to target healthy ready meal, frozen fruits or halal food segment by local producers
3
Process
JL Capital to shortlist Deep-dive into Identify 1-2 potential
Identify 3-4 industries
3 industries based on selected industries to deals in total (only if
in target countries
interest and core understand growing possible, or else share
capabilities sub-sectors transcripts of
conversations)
First presentation to JL Second discussion to talk Final discussion to present
Capital about shortlisted industries final results and discuss next
steps
4
⮚ Executive Summary
⮚ Opportunities in Fintech in Indonesia
⮚ Opportunities in Consumer Retail in Vietnam
⮚ Opportunities in Food Manufactoring in Thailand
5
The Fintech space in Indonesia is nascent - but shows promise for a
massive increase in TAM led by high TPV1
E-Money is a small fraction of total electronic payments in Indonesia
Total Addressable Market (TAM) for the Fintech space in
Indonesia expected to grow by ~8x by 2025… 100%
90%
80%
US$ Bn 70%
8.15x 60%
50%
95.2
40%
30%
20%
10%
0% 1.8% 8.0%
10.4
2017 2018 2019 2020E 2021E 2022E 2023E 2024E 2025E
2019 2025E E-money Credit cards Debit cards
…mainly driven by 4 key consumer trends Fintech loans in Indonesia are only 0.2% of total outstanding loans
800 0.40
730
1• Massive promotional spend: Mostly by Fintechs, e-Commerce 700
690
0.35
625
platforms and ride-hailing (mostly Payments led) 600 560 580 595 570 0.30
• Rising smartphone penetration: Risen from 25% in 2014 to >60% in 500
2 500 0.25
2019 400
400 360 0.20
• Growing internet TAM: Driven by Indonesia’s young, hyper internet-
3 engaged population, increasing disposable incomes 300 0.15
• Burgeoning offline use cases: Rising Fintech adoption by shopping 200 0.10
4 malls, Co-funding by merchants 100 0.05
0 0.00
Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19
Fintech loans outstanding (US$ Mn) Fintech loans as % of total IDR loans
Notes: (1) Total Payment Volume 6
Sources: OJK, Goldman Sachs Global Investment Research, Bank Indonesia, Macquarie Research
Payments is the entry point for consumers, paving the future for Lending
Traditional Fintech service adoption cycle by
consumers
Payments & Transactions Lending Financial Products
41 companies hold an e-Money license (as on Feb’20) 164 lending companies registered with OJK (Dec’19) E-commerce platforms are main players
x Highly concentrated market: Top 4-5 players ✔ Fragmented market landscape: No clear ~ Small market: Very small market size and
control >90% of transaction market share; market leader; Long tail of companies own >1% growth due to low capital market penetration
High-ticket investments will be required to enter of total loan share and financial literacy
the market
✔ Under-penetrated market: Fintech loans in x Low interest-generating business models:
Evolving regulatory landscape: Bank Indonesia are only 0.2% of total outstanding In a typical Fintech lifecycle, value is generated
~ Indonesia has launched QRIS to unify QR code loans through Payments & Lending first; Indonesia is
based cashless payments; Reduces barriers to not at a stage to generate meaningful returns
entry for new players Unaddressable market by traditional banks: from Financial Products
✔ Fintechs lending to SMEs are targeting invoice
Significant growth potential: Only 1.8%1 of financing; Traditional banks have lengthy credit Consumer behaviour not shifting: This
✔ electronic payments in Indonesia happen approval processes for this segment ~ sector is primarily dominated by banks in
through e-Money; ~8% e-Money transactions Indonesia; Despite e-commerce platforms, no
expected by 2025 shift seen in consumer behaviour
Notes: (1) 2019 estimates by Bank Indonesia 7
Sources: Goldman Sachs Global Investment Research, Bank Indonesia, Macquarie Research
Fintech lending can bridge the gap for unutilized financing capacity and
access to credit in Indonesia
Low percentage of loan disbursements to GDP1 indicate an Majority of SMEs, middle & lower income individuals still
unutilized financing capacity in Indonesia do not have access to credit in Indonesia2
Australia 122% Total MSMEs Total Individuals
63 Mn 186 Mn
South Korea 94%
New Zealand 92%
Thailand 78%
74% 71%
USA 78%
Japan 57%
China 49%
Low percentage of Debt wrt GDP is directly
26% 29%
Indonesia 17% attributed to lower access to credit for
SMEs and low/middle income individuals
India 11% MSMEs Middle/Lower Income
Individuals
Have access to credit No access to credit
Notes: (1) Ratio taken based on 2017 figures (2) As of 2018 end 8
Sources: International Monetary Fund, Asian Development Bank, Central Bureau of Statistics (ID), Ministry of Cooperative and MSME (ID), Central Bank of Indonesia, PwC
SME lending is an attractive business model generating higher
financing rates than traditional banks
Fintech lending market
in Indonesia
Short-term consumer loans P2P loans targeted at SMEs P2P microfinance
Avg. ticket size ($): 70 Avg. ticket size ($): 140,000 Avg. ticket size ($): 200-350
Avg. loan tenure: 1-3 months Avg. loan tenure: 0.5-6 months Avg. loan tenure: 3 months
Major players: Major players: Major players:
Platform1
• Major product offered by SME Outstanding credit (IDR Bn) 234 529 267
lenders is Invoice Financing Total credit underwritten (IDR Bn) 1,163 2,940 2,430
extending credit for up to 80% of
the receivable value. NPLs2 1.05% 2.30% 8.0%
• Traditional banks can’t engage in Active borrowers 1,776 1,193 15,436
this business due to lengthy credit Invoice financing rates (p. a.) 13-43% 12-20% 12-26%
approval processes, so they have
Borrower upfront fee 3-5% 3-5% 3%
started acquiring minority stakes
in SME lending platforms Banks having a minority stake -
Notes: (1) Numbers as of November 2019 (2) NPLs: Non-performing loans 9
Sources: OJK, Bank Indonesia, Macquarie Research, Company Reports
Only a handful of venture deals have taken place within the Fintech
SME lending space in Indonesia over the last 5 years
Mar’20: $23.5 Mn (C) Jun’19: $12 Mn (B) Feb’20: $10 Mn (B) Sep’19: $8.6 Mn (A)
Nov’19: $1 Mn (B) Aug’19: $10 Mn (B) Dec’18: $0.2 Mn (S)
Aug’18: $16.5 Mn (A)
Potential investment option1
Nov’18: $4.3 Mn (A) Apr’16: $1.2 Mn (S) Sep’19: $1 Mn (S)
Notes: (1) Investment recommendation based on industry, competitor and company analysis (not including financials) 10
Sources: PrequinModalku: A potential investment option in Indonesia for JL Capital
Indonesia Singapore, Malaysia
Present as
Dec’19: Undisclosed amount of Debt funding Apr’20: $40 Mn (C) by existing investors and
by Triodos Microfinance Fund, Triodos Fair an undisclosed bank
Share Fund Funding Rounds Apr’18: $25 Mn (B) led by SoftBank
Apr’16: $1.2 Mn (S) led by Alpha JWC Ventures, Sequoia India, Alpha JWC
Ventures and Singapore Press Holdings Ventures, Golden Gate Ventures
$900 Mn Total amount disbursed1 $948 Mn
52% loans greater than $10,000 Biggest ticket size segment 51% loans less than $11,000
8.0%3 Current default rate 3.36%
• Modalku is one of the 3 leading Fintech lending providers for SMEs in Indonesia, however it has not raised an equity round since 2016
• Modalku’s 2 main competitors – Investree and KoinWorks – have raised fresh funding in the last 1 year to increase their geographic
footprint in Indonesia and for expansion to other Southeast Asian countries
• Modalku raised debt in 2019, showing promise of using Leverage to boost Equity returns for the company’s business model
• Comparison of both geographies shows that Modalku will require an influx of capital in Indonesia to improve its infrastructure for bringing
down default rates and expanding its geographic reach in Indonesia
Notes: (1) As of Q2 2020 (Ongoing – Figures for 19 Apr 2020) (2) As percentage of overall loans disbursed (3) As per Macquarie Research 11
Sources: Modalku website, Funding Societies websiteExpanding the coverage for Indonesia’s “Credit Invisible” requires a tailored and innovative approach
1 • Since 2018, 70% of borrowers have been SMEs/individuals that had no prior credit access
• As Java gets saturated, innovation is required to reach out to SMEs outside of Java, and in sectors currently untapped
Credit worthiness verification is essential before NLPs start blowing up
2 • Debt refinancing is one of the top 3 loan purposes, indicating a potential “over-leveraged” debt behaviour
Things to • This behaviour might be more prevalent in conventional-to-online rather than purely online borrowers
keep in mind
before Important to monitor TKB901 along with NLPs for developing sustainable business models
• OJK is currently implementing TKB90 to ensure players disclose their loan performance
investing in 3 • This is an important measure to track irresponsible disbursement, and Fintechs should adapt their
the Fintech business models based on TKB90 metrics as well
Lending
space in Fintechs will need to collaborate with financial institutions for stable financing
4 • By collaborating with financial institutions, Fintechs will have a more stable source of funds
Indonesia • This also allows them to have wider use-cases within their loan portfolio
Indonesia’s Fintech Lending ecosystem is similar, but not comparable, to other countries
• Majority of underserved SMEs not only have limited data but also limited physical access to due Indonesia’s
5 topography
• Replicating business models of other countries will be ineffective compared to targeted business models
Notes: (1) TKB90 is a metric measuring debt repayment success rate over 90 days past due, the opposite of a Non-Performing Loan 12
Sources: Desktop Research⮚ Executive Summary
⮚ Opportunities in Fintech in Indonesia
⮚ Opportunities in Consumer Retail in Vietnam
⮚ Opportunities in Food Manufactoring in Thailand
13Consumer retail is a fast-growing investment space in Vietnam with
strong sales growth
Vietnamese retail sales growth remain robust through-out …underpinned by 4 key macroeconomic trends in the
economic cycles… country
Retail revenue and growth in Vietnam (2013-2020),
Revenue, USD Billion ; Growth, % 1• Strong economic growth: Vietnam’s GDP has
been increasing at 7% due to strong harvest and
surging manufacturing sector
180
180 30
27%
160
142 25 2• Rapid growth in consumer spending with higher
140
disposable income: Private consumption is 68% of
126 the overall GDP, highest in SEA, with a growing
120 115 20
103 middle class and heightened concerns about
100 85 94 hygiene and food safety
13% 13% 15
80 11% 11% 3
10% 10%
60 10 • Increase in foreign investment: 40% of
supermarkets currently owned by foreign investors
40
5 due encouragement by govt policies
20
4
0 0 • Free-trade agreements: Better FTAs and bilateral
2013 2014 2015 2016 2017 2018 2020
agreements have made international food
accessible to middle-classes
Notes: (1) Total Payment Volume 14
Sources: OJK, Goldman Sachs Global Investment Research, Bank Indonesia, Macquarie Research; Vietnam General Statistics OfficeVietnam’s modern grocery market is expected to grow at 25.8% p.a. over
the next 5 years, with a potential for further growth
Grocery is the largest retail category by value, fastest growing Modern segment grocery penetration is expected to grow as
in the SEA region GDP per capita increases
Breakdown of Vietnam retail market, %, 2018, 100% = USD 108 Bn
Other Modern grocery size, 40
Non-store USD bn, 2018
s 35
Apparel &retail
Footwear 6%
2% 30 Thailand
Leisure 5%
Goods 25
6%
Grocer
20 Indonesia
Health & Beauty 9% 44% y 15 Philippines
10 Malaysi
Vietna
5 a
m
Home & 11% 0
Garden 0 5 10 15 20 25 30 35
17% Modern grocery Growth
Electronic & 2018-2013 CAGR %
Appliances
• Vietnam is fast-growing retail market with grocery as the largest • Vietnam’s modern trade penetration is currently at 8% which is lowest
segment making up 44% of overall market amongst the SEA countries
• There are 4 key factors for this trend: • The market is on the verge of significant modernization and is likely to
1. Increased urbanisation coupled with increased awareness follow the S-curve of other developed Asian markets
2. Consolidation of top players (Satra acquired Auchan) • As GDP per capita rises, modern grocery retail market is expected to
3. Entry of international players like 7-eleven, Big C grow from $4 bn to $20 bn by 2025 (5X growth)
Sources: Deloitte report: Retail in Vietnam, Feb 2019; McKinsey report: Seizing the fast-growing retail opportunity in Vietnam, Sept 2019
15Consumer markets in Vietnam are still fragmented and there is ample
room for modern trade channels
Accelerating value contribution from modern trade channel... ...with smaller format leading the modern retail chain
emergence recently
Distribution of the retail sales from between Modern retail channels Average monthly shopping frequency of Vietnamese of modern trade
and traditional channels, %
25.2
2010
18.2 2018
25%
32%
45%
8.9 9.5
4.5 3.3 2.5
1.3 2.2 0.8 1.2
0.0
Wet market Traditional Convenient Minimarts Personal Supermarkets
Grocery Stores Case/ Drug
75% Stores Stores
68%
55%
2015 2017 2020
Modern Retail Tradtional
Channels Channels
Sources: Vietnam's Distribution and Retail Channels 2018 by EVBN; Nielsen, VCSC 2018 16There are six success factors that stand out as keys to making the most
of retail opportunities in Vietnam
Retail leaders exhibit 6 key success factors
▪ Ability to grow dense network of smaller stores in urban
areas Retail players are
1 Network and scale ▪ Require access to funding and dedicated team finding right
locations facing growing
competition from
Compelling value ▪ Successful retailers differentiate themselves by focusing on both local and
2
propositions
specific dimensions like price, assortment, experience etc. international
players.
Strong business ▪ Develop capabilities to tackle payment solutions, logistics,
3 proprietary products and loyalty programs Leveraging lessons
enablers
in innovative
▪ Strengthen brand equity through marketing and build loyal technologies and
4 Strong brand equity customer base
more advanced
▪ Local players have advantage over foreign
markets, players
▪ Extensive on-the-ground experience can achieve
5 Local knowledge ▪ Understand local tastes, rules and regulations and trends success
Innovation and ▪ Provide both offline and online channels to serve customers
6 ▪ Innovation into smart stores
omnichannel platforms
Sources: McKinsey report: Seizing the fast-growing retail opportunity in Vietnam, Sept 2019 17E-commerce penetration is on the rise in Vietnam, however, retail players
are diversifying to tap the entire ecosystem
Online retail sales make up only 5% of total online sales, Retail players are pursuing omnichannel strategy to capture
however it likely to grow with increase mobile penetration the market share in online
Online B2C sales vs online retail sales (2012-2020), Example 1:
Sales, USD Billion ; % total online sales
20 Online B2C sales 8 ▪ Korean supermarket chain, LOTTE Mart
Online retail launched SPEED LOTTE mobile app to
sales 7
combine traditional and online retail
15 6 ▪ The online version has more than 1000
5.0%
5 SKUs and delivers within 15kms
3.6% 10.0
10 4
2.8% 3.0%
6.2 3
1.8% 2.1% 5.0 Example 2:
5 0.7 4.1 2
2.2 3.0
0.7% 1
0 0 ▪ Bach Hoa XANH has 1000+ retail stores
2012 2013 2014 2015 2016 2017 2020 and has moved online with over 600
• Vietnam’s e-commerce industry is one of the fastest growing in the SKUs
region, growing at 27% CAGR ▪ Parent company Mobile World has
• E-commerce sector however is still in its early days with many players announced $43m investment to grow
operating at a loss the business
• Key success factors include overcoming logistics challenges and e-
payment solutions
Sources: Deloitte retail survey (2018) 18Vietnam Consumer Retail: Recent PE &VC Investment
Date Targets Acquirer ($US) Stake
Growth 2017 Vua Nem (Mattress company) Mekong Capital $6 mn. 57.5%
Stages 2019 VinGroup GIC Singapore $500 mn.
Investments
2008 Maison Mekong Capital $ 5mn.
IPO Notable acquisitions
Date Targets Acquirer ($US)
MM Mega Market Big C EUR 655
2016
Vietnam Supercenter mn.
Exits 2013 Ichiban Co. Berli Jucker $73 mn.
2014 VinMart VinGroup $12 mn.
Mobile World
2017 An Khang Pharmacy
Investment
Sources: Tracxn June 2018 & CB Insights Jan 19 19Vietnam has seen exits to IPO from previous VC/PE backed deals
Business Description:
• Established in 1988, PNJ is the leading
jewelry manufacturer and retail in Vietnam
Year: 2007
Investor: Mekong and Reasons to invest:
Vina Capital • Increasing revenues: Revenues from retail
Amount: USD 8mn. jewelry store continuing to increase 28% YoY;
retail network grown from 330 to 370 in 2019
Growth envisioned from: • Large customer base: Large number of
(i) Revenue Growth customers over the last 30 years with high PNJ retail network
(ii) Margin improvement 370
switching costs for jewelry purchases
324
• Growing market: Jewelry retail sales likely to
Exits seen: grow as consumers rely on trusted brands 269
Mekong was able to • Established reputation in the jewelry 219
liquidate the investment business: Having been established 30 years 189
after 9 years with a gross back, PNJ has the reputation of being the
return multiple of 2.2x country’s leading jewelry brand with high-
quality, sophisticated products
• Continuous innovation: PNJ has been
continuously adapting to consumer trends and 2015 2016 2017 2018 2019
launching new collections
Sources: Pitchbook 20Citimart, a supermarket chain, was acquired by Aeon with the aim of
increasing to 500 stores by 2025
Business Description:
Year: 2015 • The company engages in operating
Investor: Aeon Company supermarket chains and offers groceries,
Amount: 49% acquired food products, clothes, housewares and other
products to its customers throughout Vietnam
Growth envisioned from:
(i) Revenue growth Reasons to invest:
(ii) Profitability increase • Significant room for revenue growth: Aeon
Citimart Revenue
will assist Citimart in building the new brand
Exit: and controlling product quality in the hopes of
(i) Acquisition by Aeon increasing the number of Aeon Citimart +15%
69
Group, one of the stores to 500 by 2025, which will have about 60
largest retailing groups 10,000 products
(ii) Similar supermarket • Increase in profitability: As supply chain
chains have a good improve and economies of scale kick-in, likely
chance being acquired to see increase in margins
by a larger company • Increase in customer loyalty: Customers
that is looking to likely to increase their loyalty to branded
increase its presence stores where they can find quality and
reasonable products 2015 2016
Sources: Pitchbook; DealstreetAsia, Desktop research, Mekong Capital presentation 21Pharmacity can expect increased profitability with investors seeing an
exit to another PE firm or straight as an IPO
Business Description: Number of stores
• Founded by 3 young entrepreneurs,
Pharmacity originally operated a chain of
Year: 2019 and 2020 pharmacy stores; expanded its store
Investor: Mekong and assortment to include health & beauty
undisclosed investors products from 2016
Amount: USD 30mn. • Currently, largest pharmacy retail chain in
Vietnam in terms of number of stores.
Growth envisioned from:
(i) Revenue Growth Reasons to invest:
(ii) Margin improvement • Increase in customer loyalty: Customer
(iii) Multiple expansion shopping from branded retail stores Number of customer loyalty card
might exist for those • Steady increase in number of stores: holders
that invested early- Pharmacity will expand from 1,000 stores by 1,660,000
stage in select 2021 and over 1,700 stores by 2025
companies • Improvement in store level profitability:
Average basket size has been increasing by
Exits envisioned: 14.8% CAGR from 2018-2025 and
(i) Sell to a late stage • Same store sales: Continuous growth in
VC/ PE firm average transaction/store/month by 5.4% 30,000
(ii) IPO CAGR
2017 2019
Sources: Pitchbook; DealstreetAsia, desktop research, Mekong Capital presentation 22BIBO MART, market leader in baby retail is identified as a potential
investment target in Vietnam
Bibo Mart is the market leader in baby stores in Vietnam with a BiBo Mart clearly satisfies all the success factors
large retail footprint and growth potential outlined that make it a solid potential target
Network and scale: Rapid growth with largest
number of stores in baby retail
Compelling value proposition: Speciality store
Name: Bibo Mart
for mom and baby products with only 1
international competitor
Description: Largest retail chain for mom and
baby products in Vietnam Strong business enablers: Strong partnerships
with international brands including Bubs Australia
Established in: 2006
Strong brand equity: Number 1 company in
Number of stores: 140 (as of Jan 19), across 22
Vietnam for selling high quality, branded products
cities, 15K SKUs
Valuation: $140 mn. (as of 2018) Local knowledge: Founder and CEO, Mrs Trinh Lan
Phuong has built company on local consumer trends
Investors: 80% owned by founder, 20%
investment from ACA Omnichannel platforms: Online platform, with call
centre to support online customers
Recommend to pursue Bibo Mart as a potential investment for JL Capital
Sources: Pitchbook; DealstreetAsia, Desktop research 23⮚ Executive Summary
⮚ Opportunities in Fintech in Indonesia
⮚ Opportunities in Consumer Retail in Vietnam
⮚ Opportunities in Food Manufactoring in Thailand
24Thailand is the kitchen of the world: Food processing contributes 23%
of Thailand’s GDP
Minimally processed Moderately processed Highly processed
Agricultural meat and seafood Canned and freeze-dried Packaged food (ingredients,
produces snacks and meals)
• Ranked 2nd largest exporter of
rice and sugar in the world • 1st as exporter of canned tuna • 6th food seasoning exporter and
• Top 5 for chicken and shrimp and canned pineapple 1st in Southeast Asia
exports • 11th ready meal exporter in the
• Major exporter of other seafood world, accounting for a 3.7%
products
Major players include both domestic and international conglomerates:
Sources: Thailand Board of Investment 25Packaged food shows a strong demand forecast in APAC with a focus
on ready meal in Thai market
Packaged food outperformed global market in Packaged food is expected to continue
APAC and Thailand outperforming global market
(Historical Growth 2015 to 2019) (Forecast growth 2020 to 2024)
In 2019, Ready meal
10.8%
sales was $613M in 9.8%
Thailand and $3B in
APAC
4.8%
3.4% 3.3% 3.6% 3.8%
2.9%
2.5% 2.3% 2.4%
1.5%
World APAC Thailand World APAC Thailand
Packaged Food Ready meal
Sources: Euromonitor, Thai National Food Institute 26In 2019, market for packaged food in Thailand reached $14B, with ready
meals as the fastest growing sector
Dairy is the largest category, followed by rice, pasta and Ready meal shows the highest forecasted growth
noodle through 2024
Rice, Pasta Edible Oils Annual Consumption Growth from 2020 to 2024 (%)
and Noodles Ready Meals
Processed Sauces,
Meat and Dressings
Seafood and 12.0% 10.8%
Processed Condiments
Fruit and 10.0%
Vegetables Soup
8.0% 7.4%
Breakfast
Cereals Sweet
Spreads 6.0% 5.3%
Baked 4.8% 4.8%
Goods Baby Food 3.5% 3.8%
4.0% 3.0% 3.0% 2.8% 2.9%
2.5% 2.7%
1.8% 1.4%
Sweet 2.0%
Snacks 0.2%
0.0%
Savoury
Snacks
Ice Cream
and Frozen Dairy
Desserts Confectioner 25%
y
Sources: Euromonitor, Thai National Food Institute 27Packaged food industry is highly developed in Thailand with Frozen and
Chilled meals accounting for ~500m USD in sales in 2019
Frozen Ready Meal has the largest sales while Chilled Ready Four key trends explain the fast growth of Ready Meal
Meal is growing the fastest at 14.7% CAGR industry in Thailand
Sales of Ready Meals in Thailand by Category
Retail Value RSP – USD million 1• Rising middle- and upper-income consumers seek convenience
premium meal options that are both healthy and hygienic
• Both frozen and chilled ready meal is taking more market share
from instant noodles as consumers reach for more exotic
flavours and healthier options
2• Consumers seek fresher ingredients and less MSG in their meal
• Organic fruit and vegetable is still a niche segment but is growing
quickly
• Produces can also command 2x to 3x in price
3• Ready meal serving aging population present an untapped growth
opportunity
• CPRAM target elderly segment and hospital patients with easy to
chew meals such as boiled pork rice with low sodium
4• Halal meal export market also present a significant growth
opportunity
• Global market estimated to worth $1.6T in 2018 (16% of total
global food industry)
• In Thailand, there are more than 8,000 factories and over
150,000 products that received halal certification
Sources: Euromonitor, Thai National Food Institute 28Thailand Packaged Food Manufacturing: Recent PE & VC Investments
Date Targets Acquirer ($US) Stake
09-09-2019 Srithai Daily Foods Navis Capital Partners N/A N/A (Minority)
Minority
Dusit Thani PCL
Investments 03-02-2018 NR Instant Produce Co Ltd $21,06M 25,98%
09-08-2011 S&P Syndicate PCL Minor International PCL (MINT) $11.51M 5.04%
IPOs Valuation Notable acquisitions
Date Targets Acquirer ($US)
Thai Foods
Exits 17-06-2019
Group
$9.26M
$40.16m raised $4.8m raised
corresponding corresponding
to 26.09% of to 20% of Nippon Pack
equity equity 21-07-2016 $2.5M
PCL
Sources: Euromonitor, Pitchbook 29Recommend to target healthy ready meal, frozen fruits or halal food
segment by local producers
Ride the domestic ready meal boom
⮚ Seek small to medium sized manufacture catering to premium urban consumers
⮚ Products offering should focus on premium healthy ingredient that are low in MSG
▪ It is important to identify point of differentiation from market leader such as CP, who offers various selections of
ready meal through a strong network of owned convenience stores (7-eleven)
⮚ Consider alternative channels to serve consumers
▪ Several “clean food” players utilize deliver directly to home and offices
▪ Alternatively vending machine at residential condominium is an emerging route to reach young urban consumers
Focus on businesses that export halal, fruits and ingredients to APAC
⮚ Help halal certified manufacturers expand their export market and geography
⮚ Identify processed fruits business with strong distribution partners in China and domestic supply chain with
growers
▪ Differentiate produce through different processes such as freeze drying, baking or steamed sulfuring
▪ Mango, durian, mangosteen and coconut are the primary exports to China
⮚ Identify manufacturer of ingredients such as seasonings and condiments that are in demand in APAC
• Thailand has significant cost advantages as raw materials such as sugar, chilies and spices are locally produced
Sources: Euromonitor, Desktop research 30Potential target: JM Food, a major frozen and chilled ready meal
provider captures both domestic and export market
JM Food provides ready-to-eat Thai meal and ingredients including chilled and frozen meals & fruits, stir-fried
kits, sauce, and bakery. The company also offers food catering services and operates food court stalls
Product selection: Diverse product selections
that include chilled and frozen meal and fruits.
Potential to increase selection of healthy options
Certification and safety standard: Facilities are
Name: JM Food Industry Halal and HACCP certified; FDA registered
Business line :
Distribution network: Strong domestic
1) Manufacturer of chilled and frozen meal
distribution through large discount supermarket.
2) Provide catering services to event and banquet
Well known OEM capability for importers. Potential
3) Operate food stalls (food court)
to leverage owned-brand for exports and direct
distribution to local urban consumers
Market: Export 20%/ Domestic 80%
Market potential : JM Food can leverage the
Established in: 1982 strong growth trend of domestic healthy meal and
international demand of halal food
Sources: JMFthailand.com; Bangkokcompanies 31Backup
32Manufacturing is seeing recent growth given global trade wars; Large
retail stores are stealing market share from traditional stores
1 2
Manufacturing Large retail stores
Macro factors: Macro factors:
• Improvement logistics and real estate; increase consumption • Rapid urbanization; rapid growth of middle-class population
due to growing middle class • Wtinessing 11% growth since 2016; ranked 6th best destination
• Given current trade wars with China, increased emphasis on for retail investment
manufacturing locally for value-added products • Heightened concern factors for food safety and hygiene
• International companies (e.g. Samsung) shifting to Vietnam for • 75% still owned by mom and pop stores – ripe opportunity for
manufacturing to diversify supply chains growth of chains
Business model factors:
Business model factors:
• High investment multiples in the retail (MobileWorld divested
• Risks: Finding qualified professionals to work in the
for a 57x return)
manufacturing space
• Risks: Uncerntainity of government regulations impacts import
of food; US products still expensive to middle class HHs because
high high import duties
Past deals: Past deals:
• 2019: VinaCapital Group (USD 21.4 mn.) invested in Ngoc • 2008: Mekong and Vina Capital (USD 8 mn.) invested in Phu
Nghia Industry Nhuan Jewelry
• 2016: AIF Capital (USD 15mn.) invested in Rochdale Spears • 2019 and 2020: Mekong and undisclosed investors (USD 30 mn.)
• 2016: Stellus Capital Management (USD 6 mn.) invested in T.F invested in Pharmacity
Hudgins • 2019: GIZ (USD 500 mn.) invested in WinGroup
33Education and logistics are growing segments in Vietnam given the high
rate of urbanization and shift to middle class
3 4
Logistics Education
Macro factors: Macro factors:
• E-commerce is growing rapidly and being dominated by • 3rd largest young population; rapid urbanization; 41% population less
international players allowing for local companies to help with than 24 years old ‘golden demographic’
logistics • Rising middle class who desire to send kids to international school; new
• E-commerce logistics and the industry expected to reach an average decree accepts 50% locals in international schools
growth of 42 percent every year until 2022 • Strong desire to excel in the English language
• Logistics accounts for 18% of GDP (higher than most countries) with • State-owned universities and colleges only have capacity for 600,000 of
scope for improvement the 1.8 million candidates who undertake the national university
Business model factors: entrance examination
• 100% foreign owned logistics company not allowed under the laws Business model factors:
of Vietnam giving room to local players • Lean and capital efficient business models for some of the more
• 75% of e-commerce happening in two ciites allowing for focused innovative education platforms
logistics opportuniteis • Raised investment level for foreign investors decreasing compeititon of
• A series of M&A deals in the logistics industry took place in 2019 investors
reflecting consolidation in the industry • Focus areas: International schools, private schools, testing centres,
• Risks: Primairly cash-based economy limiting use of online logistics online education platforms
platform; • Risks: High taxation; complicated entry barriers for investors
Past deals: Past PE deals:
• 2016: Mekong invested in ABA Cooltrans • 2017 and 2019: Mekong (USD 4.9 mn.) and Kaizen (USD 10 mn.)
• 2016: Bravia Capital invested in Bac Ky Logistics invested in Yola
• 2017: Mekong invested in Nhat Tin Logistics • 2017: LBO by TPG in Vietnam Australia International School
• 2019: Navis Capital buyout of Than Than Cong education platform
34Opportunity for Thai food manufacturer to serve the growing Asia Market;
Rising middle class and tourists drive F&B demands
1 2
Manufacturing (especially in food) Food & Beverage & Hotels
Macro factors: Macro factors:
• Rich natural resoruces and raw material (80% of raw material • Tourism has been the fastest growing sector with revenue from
is locally produced) forist tourist representing a CAGR of 16.5% from 2009 to 2018
• Supportive skileld labor resource • Food Retail has experienced a tremendous growth
• $45B governemnt investment in Eastern Economic Cooridor.
$15B is dedicated to transforming manufacturing industries • Large active corporate accquirers such as Thai Beverage and
Minor international
Business model factors: Business model factors:
• Producing of healthy, functional (eg high-fiber) or specialty food • Tap into rising urban consumer spending power: upper end
(halal) coffeeshop and restaurants, driven by western food trend
• Production of high valued added food such as organic fruits,
dried/frozen fruits
• Target facilitates for foreign food corporates for expansion in SE
Past deals:
Asia.
• 2019: Bonchon (Chicken Time) was acquired by Minor
International for $63 M
• 2019: Santa Fe Steakhouse was aqquired by Boonrawd Brewerly
Past deals: for $50 M
• 2019: BTM Thailand was acquired by Breaktalk for $5.14M • 2019: MK Restaurant Group acquired in early September a 65%
• 2018 Mighty International was acquired by Frutarom stake in Laem Charoen Seafood for ~700M
Industries for $20M to expand capabilities in Asia • 2017: Express Food (Restaurant operator) received $15M from
• Other startup:… Lombard capital (PE firm)
• Other startup: Hungry Hub (A), Happy Fresh(C) ,Eatigo (B) 35Internet-based businesses have the highest potential in Indonesia,
market not saturated yet
1 2
Fintech lending (specifically B2B) Online Gaming (specifically mobile)
Macro factors: Macro factors:
• E-Payments market has grown at 15-20x over last 5 years • Increasing time spent by people on social media
• CC penetration is quite low • Rising internet penetration outside of Java
• Regulatory environment is becoming more favorable
Business model factors: Business model factors:
• Fintech loans are quite low in terms of overall transaction volume • Content/development side of gaming has high potential; high
• Fintech ecosystem is broken for B2B – not many lenders margins
• Small gaming revenue relative to population, low penetration
Past deals: Past deals:
• 4 major players exist in the e-money space right now: Ovo, • xx
Gopay, Dana, Linkaja. ShopeePay is emerging as the 5th player
• 100+ Fintech players for B2B lending, no clear leader
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