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September 2016
ASIA PACIFIC DIGITAL LIMITED
FY16 Results Presentation
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2ASIA PACIFIC DIGITAL
DISCLAIMER
FY16 FULL YEAR RESULTS PRESENTATION
Not an offer This Presentation is not a prospectus, product disclosure statement or other offering document under Australian law or any other law. This Presentation is for information purposes only and is not an invitation or offer of securities for subscription, purchase or sale in any jurisdiction (and will not be lodged with the U.S Securities Exchange Commission).
No AdviceThis Presentation does not constitute investment or financial product advice (nor tax, accounting or legal advice) or any recommendation to acquire entitlements or shares in the Company and does not and will not form any part of any contract for the acquisition of shares in the Company. Each recipient of this Presentation should make its own enquiries and investigations regarding all information in this Presentation including but not limited to the assumptions, uncertainties and contingencies which may affect future operations of the Company and the impact that different future outcomes may have on the Company. Before making an investment decision, prospective investors should consider the appropriateness of the information having regard to their own investment objectives, financial situation and needs and seek legal, accounting and taxation advice appropriate to their jurisdiction.
Foreign JurisdictionsThis Presentation may not be released or distributed in the United States. This Presentation does not constitute an offer to sell, or the solicitation of an offer to buy, any securities in the United States.
Future performance This Presentation contains certain ‘forward looking statements’. Forward looking statements can generally be identified by the use of forward looking words such as, ‘expect’, ‘anticipate’, ‘likely’, ‘intend’, ‘should’, ‘could’, ‘may’, ‘predict’, ‘plan’, ‘propose’, ‘will’, ‘believe’, ‘forecast’, ‘estimate’, ‘target’ ‘outlook’, ‘guidance’ and other similar expressions within the meaning of securities laws of applicable jurisdictions. You are cautioned not to place undue reliance on forward looking statements. The statements, opinions and estimates in this Presentation are based on assumptions and contingencies subject to change without notice, as are statements about market and industry trends, projections, guidance and estimates. The forward looking statements contained in this Presentation are not guarantees or predictions of future performance and involve known and unknown risks and uncertainties and other factors, many of which are beyond the control of the Company, and may involve significant elements of subjective judgement and assumptions as to future events which may or may not be correct. There can be no assurance that actual outcomes will not differ materially from these forward-looking statements. A number of important factors could cause actual results, achievements or performance to differ materially from the forward looking statements, including the risk factors set out in this Presentation. The forward looking statements are based on information available to the Company as at the date of this Presentation.
Past performance Investors should note that past performance is given for illustrative purposes only and cannot be relied upon as an indicator of (and provides no guidance as to) future the Company’s performance. The pro forma historical information is not represented as being indicative of the Company’s views on its future financial condition and/or performance.
Disclaimer Neither the Company or its advisers or any of their respective affiliates, related bodies corporate, directors, officers, partners, employees and agents, have authorised, permitted or caused the issue, submission, dispatch or provision of this Presentation and, except to the extent referred to in this Presentation, none of them makes or purports to make any statement in this Presentation and there is no statement in this Presentation which is based on any statement by any of them. To the maximum extent permitted by law, the Company and its advisers, affiliates, related bodies corporate, directors, officers, partners, employees and agents make no representation or warranty, express or implied, as to the currency, accuracy, reliability or completeness of information in this Presentation.
Statements made in this Presentation are made only as the date of this Presentation. The information in this Presentation remains subject to change without notice.
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3VALUATION & INVESTMENT HIGHLIGHTSVALUATION & INVESTMENT HIGHLIGHTS
FY16 FULL YEAR RESULTS PRESENTATION
INVESTMENT HIGHLIGHTS
After platform build,
on track to move to sustained profitability
in FY17
p.24
South East Asia
is the world’s highest growth
digital market
p.19
APD is uniquely
positioned to participate in this
growth
p.20
Largely de-risked
with regional platform established
p.11-12
Expert team with
deep industry experience and tech
track record
p.7-8
Valuation
undemanding relative to market peers and transaction metrics
p.29
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OVERVIEW OF APD
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OVERVIEW OF APD
OVERVIEW OF APD
APAC’s largest
independent digital services company
ASX: DIG ~400-strong team in
nine countries
$55m FY16 revenues
FY16 FULL YEAR RESULTS PRESENTATION
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6OVERVIEW OF APD
DIGITAL STRATEGY
DEVELOPMENT & TECHNOLOGY
PERFORMANCE MARKETING
CRM SOLUTIONS
360˚Across the spectrum of the digital landscape, APD offers services to deliver digital growth throughout
customer journey.
360 DEGREE DIGITAL
FY16 FULL YEAR RESULTS PRESENTATION
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EXECUTIVE TEAM
Newton SmithSingapore
Chief Executive Officer
Formerly Head of Emerging Markets eCommerce for IBM,
Partner with PWC
Damien O’DonohoeSingapore
Chief Financial Officer
Formerly CFO for Sapient Nitro (Asia), Nitro (Global)
and Proximity (Global)
Significant experience in integration and profit
improvement
Roger SharpSingapore
Peter HyndSydney
Executive Director
Over 20 years experience in advising, financing and
investing in emerging
companies
Executive Chairman
25 years investing in, financing and running
growth businesses
Formerly Global Head of Technology for ABN AmroBank (London) and CEO of
ABN Amro Asia (HK).
OVERVIEW OF APD
FY16 FULL YEAR RESULTS PRESENTATION
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MAJOR SHAREHOLDER
OVERVIEW OF APD
FY16 FULL YEAR RESULTS PRESENTATION
• North Ridge Partners is an active investor and advisor to technology companies across Asia Pacific
• 63% shareholder in Asia Pacific Digital
• Strong track record in building SX-listed technology companies: TVL.ASX
Active Role: Major shareholder, board & semi-executive, corporate advisorStatus: Sold to Wotif in takeover, 85% IRR
SOE.NZX
Active Role: Major shareholder, board, corporate advisorStatus: Sold to Henry Schein in takeover, 57% IRR
GEO.NZX
Active Role: Major shareholder, board, corporate advisorStatus: NRP built private SaaS company, recently merged with GEO, strong
running IRR and high forward growth prospects
DIG.ASX
Active Role: Major shareholder, board, executiveStatus: Unique regional platform built, trending to profitability, partial sale
process underway
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9OVERVIEW OF APD
SERVICES
STRATEGY & TECHNOLOGY
DIGITAL
STRATEGY
DEVELOPMENT
& TECHNOLOGY
DESIGN &
USABILITY
MARKET
RESEARCH
CREATIVE
SERVICES
eCOMMERCE
PERFORMANCE MARKETING
AFFILIATE
MARKETING
DISPLAY
ADVERTISING
PAY PER
CLICKCONVERSION RATE
OPTIMISATION
LEAD
GENERATION
SEARCH ENGINE
OPTIMISATION
CRM
CRM
SOLUTIONS
DATA &
INSIGHTS
MARKETING
SOCIAL
MEDIA
FY16 FULL YEAR RESULTS PRESENTATION
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10OVERVIEW OF APD
FY16 FULL YEAR RESULTS PRESENTATION
(1) TNS Marketing Monitor Study (2016)
The number of digital platforms on which brands can engage consumers is causing confusion among marketers
Companies don’t know which platforms their customers are using and how best to engage with them
Only a third of APAC marketers feel in control of the online and offline channels they're using to reach consumers (1)
That’s why APD has developed its 360 Degree Digital Services approach
24%
29%
30%
32%
33%
35%
36%
50%
NZ
Singapore
Australia
Philippines
China
Indonesia
Malaysia
Thailand
% of marketers who say digital channel fragmentation is manageable
FRAGMENTATION OF DIGITAL MEDIA DRIVES APD's 360 DEGREE APPROACH
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Building capability in Asia since 2012
Now 60% of personnel and ~30% of revenues
Serving local blue chip and MNC clients with integrated approach across geographies, cultures and disciplines
Scaling through a combination of local relationships and offshore delivery
Partnering with MNC clients across APAC in the FMCG, telco, banking, insurance, hotels, technology and building materials sectors
Velocity is growing: from one to six regional mandates across 15 countries in FY16
PRC
Malaysia
Singapore
Australia
New Zealand
Indonesia
GEOGRAPHIC REACH
Serving clients in these countries from APD locations
Korea
Taiwan
Philippines
Vietnam
Brunei
CambodiaBangladesh
India
UAE
Technology & operations hub
360 degree digital services
OVERVIEW OF APD
FY16 FULL YEAR RESULTS PRESENTATION
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• Proven ability to integrate and scale small acquisitions
• Progressive build of infrastructure and capabilities is now driving regional mandates
SUCCESS IN SCALING VIA INTEGRATION
OVERVIEW OF APD
FY16 FULL YEAR RESULTS PRESENTATION
Kuala Lumpur
Singapore
Manila
2012: acquired five person team in Malaysia.
2016:Revenues have grown 10x. 80+ team. Market leader
2014: Regional Operations Centre opened in Manila to scale the business
2016: 85 person team, double shift planned.
2015:acquired small team in Singapore.
2016:Revenues up 2.5x in 12 months. Winning regional clients
2016: Option agreement to buy in Jakarta
Jakarta
Shanghai
Chinese language operations hub
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13OVERVIEW OF APD
20 YEARS OF CLIENT SUCCESS STORIES
FY16 FULL YEAR RESULTS PRESENTATION
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14OVERVIEW OF APD
REVENUE SNAPSHOT
Other APAC31%
Australia69%
Solutions38%
Performance54%
CRM7%
Other1%
Recurring61%
Project39%
By Geography
By Service
By Tenure
FY16 FULL YEAR RESULTS PRESENTATION
Project: campaign-based + technology projects
Recurring: medium term contracted, open-ended contracts
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is the world’s largest publicly traded property and casualty insurer. With operations in 54 countries, Chubb provides
commercial, personal property and casualty insurance, personal accident and supplemental health insurance, reinsurance and
life insurance to a diverse group of clients.
Transforming the way Chubb deals with its partners and customers
Our partners & our customers are changing, how do we
change with them?
PROBLEM:
CASE STUDY
OVERVIEW OF APDF
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In 2015, Chubb Travel Insurance (then known as ACE Travel Insurance) was seeking to achieve aggressive business growth and recognised
that intensive use of digital to do so was the right move.
An RFP to identify an agency partner to help meet this objective was initiated. APD won the account and was appointed in July 2015
Tasked to develop a robust, comprehensive digital strategy for Chubb Travel Insurance in Singapore in the initial RFP, this relationship has
been extended to operations across Asia Pacific in 2016. APD’s services to Chubb Travel Insurance include website design, email
marketing and media buy, among others.
Site refresh withUX/UI overhaul
Responsivedesign
SEO best practice
Integrated acquisition & CRM
ROI-focusedmedia plan
Analytics to optimise results
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Traffic to conversionpage increased
RESULTS:
Bounce rate reduced
Chubb has retained APD to roll out its digital strategy
across 12 APAC markets. Policy value increased
AND THE JOURNEY CONTINUES…F
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MARKET & OPPORTUNITY
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19MARKET & OPPORTUNITY
FY16 FULL YEAR RESULTS PRESENTATION
MARKET OPPORTUNITY
World’s Fastest Growing Internet Region
SEA is adding 3.8m new internet users per month
14 14
4
1 1
ASEAN India China US EU
2015-20 Growth in Internet Users (CAGR )
0.8
6.4
2015 2025
eComm as % of Total Retail Spend
SEA eCommerce Spend Rapidly Expanding
eCommerce spend will grow 16x from 2015-20
Online Advertising Increasing as a Result
SEA online advertising will grow 5x by 2025
0.2
0.7
0.1
0.30.4
0.3
0.91
1.51.6
2.3
2.7
MY SG PH VN TH ID
Online Ad Market ($b)
2015 2025(f)
Source: Google | Temasek: e-conomy SEA Report (2016)
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20MARKET & OPPORTUNITY
APD is positioned at the crossroads of technology and digital marketing
The global technology companies are moving into digital services
The global advertising companies are investing heavily in digital
The consulting and professional services firms have entered the market
Asia is the next battleground; everyone has a mandate to grow there
Organic growth is difficult and slow - and there is little of scale to acquire
APD is the only scale independent in the region
COMPETITIVE LANDSCAPE / MARKET POSITION
FY16 FULL YEAR RESULTS PRESENTATION
Advertising and marketing companies
Consultants and technology companies
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FY16 RESULTS OVERVIEW
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PROGRESS v 3 YEAR KPIs
FY16 RESULTS OVERVIEW
Completed
~35% - on track
~60% - completed
25% in H1
Breakeven in June 2016
Targeting sustained profit during FY17
1. Build core capabilities in Asia
2. 50% of revenues outside Australia
3. Locate 50% of employees in Asia
4. 30% growth rate in Asia
5. Profit
KPI OUTCOME
FY16 RESULTS OVERVIEW
FY16 FULL YEAR RESULTS PRESENTATION
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49%
-1% -21%
2%
Asia (ex. Gl.Clients)
AU / NZ Global Clients Total Group
Revenue Growth
REVENUES
FY16 RESULTS OVERVIEW
FY16 FULL YEAR RESULTS PRESENTATION
Asia (ex Global Clients) : Up 49%
Asia (excluding Global Clients division) revenues up 49% year-on-year.
MY - continuing multi-year top and bottom line growth trend
SG - heavy investment in team and infrastructure. Q4 major regional engagement
with Chubb Insurance will drive significant revenue growth in FY17.
PH - Regional Operations Centre operated well (moving to double shift to
accommodate growing volumes). First Philippines client won.
Australia/NZ: Flat
AU - revenues increased moderately as market conditions remained subdued and
360 Degree Digital integration took longer than anticipated.
NZ - revenues down as Enterprise clients migrated from legacy technology
platform to the IBM Marketing Cloud. APD launched its 360o Digital Services
business unit.
Global Clients: Down 21%
Revenues from largest account declined by 21% due to a major technology re-
platforming that has constrained broader digital activity.
Declines offset by new business wins. 69%4%
26%
Geographic Split
Australia
Asia
NZ
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PROFITABILITY
FY16 RESULTS OVERVIEW
FY16 FULL YEAR RESULTS PRESENTATION
$2m
$3m
$4m
J F M A M J
H2Y16 Financial Progression
Revenue, net of direct variable costs
Other Expenses
H2 Progression towards Breakeven Target
APD’s build phase is nearly complete. Infrastructure and teams are now
in place and operating at scale across the region.
At completion of first half, APD outlined target to bring cost base in line
with current revenue levels.
Investment has been scaled back and businesses that will not achieve
target profitability have been exited.
~$4m of sustained cost savings delivered. With improving revenues,
led to a breakeven EBITDA result in June 2016.
Next Steps and Outlook
APD is integrating premises, financial and HR systems to deliver a
single, streamlined delivery and support platform to enable the business to scale with attractive margins.
The process will be completed by the end of CY16.
APD now has the ability to scale revenues and drive more incremental
margin to the bottom line (given that regional management, teams and infrastructure are already established).
New management team has a mandate to deliver sustained profitability
in CY17. The path from breakeven to profitability will not be linear because of seasonal variations.
Forward Revenue Growth Required to Achieve Range of Margins
Annual Revenue Growth to
June 20185% 11% 18% 27%
360o Digital Revenue 61,000 68,000 77,000 89,000
360o Digital EBITDA 3,000 5,100 7,700 11,100
EBITDA Margin 5.0% 7.5% 10.0% 12.5%
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FY16 FULL YEAR RESULTS PRESENTATION
FY16 RESULTS OVERVIEW
FINANCIAL RESULTS
Commentary on FY16 result:
Costs of integration and upgrading of financial and support systems to
allow improved resource planning, margin transparency and speed of reporting to ensure future growth is delivered at appropriate margins.
Mix of revenues resulted in higher direct costs relative to PCP.
Revenues from Global Clients division decreased as client
commenced a major technology re-platforming. APD maintained experienced bench strength and redeployed into Asia at a short term cost to margin.
Completion of the regional APD network cost more than anticipated
but 360 Degree Digital moved into profitability in Q4.
Management is now focused on achieving industry level margins as
the business scales.
$’000 FY16$m
FY15$m
360 Degree Digital
Revenues 55.2 54.3
Operating Expenses (57.9) (52.6)
Operating EBITDA – 360 Degree Digital (2.7) 1.7
Restructuring Costs (0.5) (0.3)
Venture (discontinued) (1.1) (0.6)
Profit on Sale of Investment - 0.7
Listed Company Corporate Costs (2.8) (3.0)
Share Option Expenses (non-cash) (0.2) (0.3)
EBITDA (7.0) (1.8)
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26FY16 RESULTS OVERVIEW
BALANCE SHEET
$’000FY16
$m
FY15
$m Note
Cash & equivalents 2.3 1.0
Trade and other receivables 11.6 12.0 (1)
Other current assets 0.8 1.3 (2)
Fixed assets 1.0 0.7 (3)
Goodwill and other intangibles 12.5 13.0 (4)
Other non current assets 2.4 2.2 (5)
Total Assets 30.6 30.2
Trade and other payables 8.8 7.7 (6)
Current loans 3.6 2.0 (7)
Other current liabilities 3.0 3.1 (8)
Non current loans 5.1 4.7 (7)
Other non current liabilities 0.8 0.5 (8)
Total Liabilities 21.3 18.1
Net Assets 9.3 12.1
• [x]
FY16 FULL YEAR RESULTS PRESENTATION
Receivables balances flat in alignment with revenues. Balance represents ~ 70
receivables days. Project underway in early FY17 to improve contract-to-cash processes and deliver material improvements in working capital requirements.
Other Current Assets reduced as term deposits supporting premises were reduced through integration processes and largely re-classified as non-current
Primarily represented by office equipment and leasehold improvements
Intangibles reduced as amortisation of existing intangibles exceeded new capitalised
investment (cash).
Includes $0.7m minority shareholding in SEA end-to-end eCommerce logistics provider,
deferred tax assets, and property lease deposits
Payables balances increased year-on-year as mix of revenues in May & June led to higher
direct costs.
Loan balances increased as a result of new convertible note funding that completed in
November 2015 from professional investors associated with Prime Partners in Singapore. Notes carry a 10% interest rate, convert at 45 cents per share and expire in November 2017. Offsetting this issue was decreases in the balance of secured working capital
facilities and prior tranches of convertible notes.
Includes provisions associated with employees, database member rewards, taxation and
leasehold make-goods.
Increased largely due to shift of leasehold make good provisions from current to non-
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$’000FY16
$m
FY15
$m
EBITDA (7.0) (1.8)
Non cash share option expense 0.2 0.3
Gain on sale of investments - (0.7)
Interest payments (1.1) (0.6)
Income tax paid (0.1) (0.2)
Increase in trade and other receivables (0.5) (2.0)
Increase in trade and other payables 1.1 1.0
Net other working capital movements (0.3) (0.3)
Operating Cash Flows (7.7) (4.4)
FY16 FULL YEAR RESULTS PRESENTATION
CASH FLOWS
Working capital managed to ensure any increases in receivables are matched or
exceeded by movements in payables – further improvements identified as available in bringing down receivables balances and freeing up working capital in FY17
Increase in interest due to timing of payments
$’000FY16
$m
FY15
$m
Operating Cash Flows (7.7) (4.4)
Payments for plant & equipment (0.5) (0.5)
Payments for intangibles (0.4) (1.0)
Acquisition of subsidiaries - (0.5)
Proceeds from sale of investments 1.0 -
Other investing cash flows 0.4 0.3
Total Investing Cash Flows 0.4 (1.6)
Proceeds from share issues 5.7 3.2
Net proceeds from borrowings 3.5 1.8
Other financing cash flows (0.6) (0.5)
Total Financing Cash Flows 8.6 4.6
Net Cash Flow 1.4 (1.4)
Operating cash outflows and payments associated with acquisitions (i.e. investment in
rollout & expansion of regional network) were funded via the sale of an investment asset and two capital markets initiatives:
• Convertible Note issue in November 2015 ($4.1m);
• Rights Issue in April 2016 ($5.8m).
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VALUATION & INVESTMENT HIGHLIGHTS
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29VALUATION & INVESTMENT HIGHLIGHTS
29
• [x]
FY16 FULL YEAR RESULTS PRESENTATION
PEER GROUP VALUATIONS
-
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
10.0
Trading Transactions APD (Current)
• Relatively few accurate proxies due to unique service and geographic nature of APD
offering (most comps focus on part of the digital value chain / e -commerce only)
• Broad-based comps include (a) ASX companies that focus on digital economy / digital
marketing (b) international companies exposed to digital marketing and e -commerce (c) international advertising agencies.
• Significant proportion of comps not profitable, therefore data on earnings limited
• Traded revenue multiples sit between 0.3x – 5.0x; average of 2.0x
• Regular corporate activity in the digital and e-commerce sectors in the past three years
• Transaction revenue multiples in the range 2x – 8x (majority of target companies were unprofitable); 2x - 4x baseline range for strategic assets, with average of 4.3x
• APD currently trading at ~0.7x historical revenues
Comparable Revenue Multiples
Multiple Range
Average = 2.0x
Average = 4.3x
0.7x @ 31 cps
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30VALUATION & INVESTMENT HIGHLIGHTSVALUATION & INVESTMENT HIGHLIGHTS
FY16 FULL YEAR RESULTS PRESENTATION
INVESTMENT HIGHLIGHTS
After platform build,
on track to move to sustained profitability
in FY17
South East Asia is the
highest growth digital market in the
world
APD is uniquely
positioned to participate
in this growth
Largely
de-risked withregional platform
established
Expert senior team
with deep industry experience and
tech track record
Valuation
undemanding relative to peer group and
transaction
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APPENDIX
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32MARKET & OPPORTUNITY
FY16 FULL YEAR RESULTS PRESENTATION
APPENDIX - MARKET OPPORTUNITY (DETAILED)
World’s Fastest Growing Internet Region
SEA is adding 3.8m new internet users per month
What is driving growth in SEA?
Young population: 70% under age of 40 (vs 57% in China)
Rapidly growing middle class (forecasted GDP growth of 5.3% over next 10 years)
Lower availability of physical retail (1/3 the number of retails stores per capita vs US)
Improving payments systems and increased access to financial system
14 14
41 1
ASEAN India China US EU
2015-20 Growth in Internet Users (CAGR )
0.8
6.4
2015 2025
eComm as % of Total Retail Spend
eCommerce Spend Rapidly Expanding
SEA eCommerce spend to grow by 16x from 2015 –20 to ~$90b as 1) total retail market grows, and 2)
eCommerce increases share
Current Challenges / Future Opportunities
Infrastructure:
All SEA markets (except SG) have internet speeds lower
than global average
Last mile delivery remains challenging outside SG
Banking & Payments:
60-70% of adults are unbanked in PH and ID (US = 5.2% unbanked)
Need to build consumer trust online – ID, MY and PH
have higher levels of fraud than global average
Online Advertising Benefiting
SEA online advertising market expected to increase 5x by 2025
0.9
1
1.5
1.6
2.3
2.7
0.2
0.7
0.1
0.3
0.4
0.3
MY
SG
PH
VN
TH
ID
Online Ad Market ($b)
2015 2025(f)
Source: Google | Temasek: e-conomy SEA Report (2016)
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THANK YOU
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