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Identifying Private Equity Opportunities in Indonesia, Vietnam and ThailandSponsored by: JL Capital
Hill P., Matteo Ferrante, Neha Dodeja, Pratiksha Barasia, Uday Mehra
(MBA Class of 2020 July)
Private Equity- Section AB
2
⮚ Executive Summary
⮚ Opportunities in Fintech in Indonesia
⮚ Opportunities in Consumer Retail in Vietnam
⮚ Opportunities in Food Manufactoring in Thailand
3
Executive Summary
Indonesia
Vietnam
Thailand
• 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
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
• SME lending is attractive and presents opportunities for investment from JL Capital
• 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
• Recommend to target healthy ready meal, frozen fruits or halal food segment by local producers
• 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
• A potential investment target, market leader in baby retail, fits the relevant factors required for success
JL Capital
Process
Identify 3-4 industries
in target countries
JL Capital to shortlist
3 industries based on
interest and core
capabilities
Deep-dive into
selected industries to
understand growing
sub-sectors
Identify 1-2 potential
deals in total (only if
possible, or else share
transcripts of
conversations)
First presentation to JL
Capital
Second discussion to talk
about shortlisted industries
Final discussion to present
final results and discuss next
steps
4
5
⮚ Executive Summary
⮚ Opportunities in Fintech in Indonesia
⮚ Opportunities in Consumer Retail in Vietnam
⮚ Opportunities in Food Manufactoring in Thailand
The Fintech space in Indonesia is nascent - but shows promise for a massive increase in TAM led by high TPV1
10.4
95.2
2019 2025E
8.15x
Total Addressable Market (TAM) for the Fintech space in
Indonesia expected to grow by ~8x by 2025…
…mainly driven by 4 key consumer trends
• Massive promotional spend: Mostly by Fintechs, e-Commerce
platforms and ride-hailing (mostly Payments led)
• Rising smartphone penetration: Risen from 25% in 2014 to >60% in
2019
• Growing internet TAM: Driven by Indonesia’s young, hyper internet-
engaged population, increasing disposable incomes
• Burgeoning offline use cases: Rising Fintech adoption by shopping
malls, Co-funding by merchants
1
2
3
4
Notes: (1) Total Payment Volume
Sources: OJK, Goldman Sachs Global Investment Research, Bank Indonesia, Macquarie Research
US$ Bn
E-Money is a small fraction of total electronic payments in Indonesia
8.0%0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1.8%2017 2022E2018 2019 2020E 2021E 2023E 2024E 2025E
Debit cardsE-money Credit cards
Fintech loans in Indonesia are only 0.2% of total outstanding loans
360400
500
560 580 595570
625
690730
0.00
0.05
0.10
0.15
0.20
0.25
0.30
0.35
0.40
0
100
200
300
400
500
600
700
800
Apr-19 Jun-19Dec-18 Jan-19 Feb-19 Mar-19 May-19 Jul-19 Aug-19 Sep-19
Fintech loans outstanding (US$ Mn) Fintech loans as % of total IDR loans
6
Payments is the entry point for consumers, paving the future for Lending
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
Highly concentrated market: Top 4-5 players
control >90% of transaction market share;
High-ticket investments will be required to enter
the market
Evolving regulatory landscape: Bank
Indonesia has launched QRIS to unify QR code
based cashless payments; Reduces barriers to
entry for new players
Significant growth potential: Only 1.8%1 of
electronic payments in Indonesia happen
through e-Money; ~8% e-Money transactions
expected by 2025
Fragmented market landscape: No clear
market leader; Long tail of companies own >1%
of total loan share
Under-penetrated market: Fintech loans in
Indonesia are only 0.2% of total outstanding
loans
Unaddressable market by traditional banks:
Fintechs lending to SMEs are targeting invoice
financing; Traditional banks have lengthy credit
approval processes for this segment
Small market: Very small market size and
growth due to low capital market penetration
and financial literacy
Low interest-generating business models:
In a typical Fintech lifecycle, value is generated
through Payments & Lending first; Indonesia is
not at a stage to generate meaningful returns
from Financial Products
Consumer behaviour not shifting: This
sector is primarily dominated by banks in
Indonesia; Despite e-commerce platforms, no
shift seen in consumer behaviour
✔
~
x ✔
✔
✔
~
x
~
Traditional Fintech service adoption cycle by consumers
7Notes: (1) 2019 estimates by Bank Indonesia
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
unutilized financing capacity in Indonesia
Majority of SMEs, middle & lower income individuals still
do not have access to credit in Indonesia2
New Zealand
49%
USA
Australia
South Korea
Thailand
Japan
China
Indonesia
57%
India
122%
94%
92%
11%
78%
78%
17%
Low percentage of Debt wrt GDP is directly attributed to lower access to credit for SMEs and low/middle income individuals
26% 29%
74% 71%
MSMEs Middle/Lower IncomeIndividuals
No access to creditHave access to credit
Total MSMEs
63 MnTotal Individuals
186 Mn
8Notes: (1) Ratio taken based on 2017 figures (2) As of 2018 end
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
P2P loans targeted at SMEsShort-term consumer loans P2P microfinance
Avg. ticket size ($): 70
Avg. loan tenure: 1-3 months
Major players:
Avg. ticket size ($): 140,000
Avg. loan tenure: 0.5-6 months
Major players:
Avg. ticket size ($): 200-350
Avg. loan tenure: 3 months
Major players:
• Major product offered by SME
lenders is Invoice Financing
extending credit for up to 80% of
the receivable value.
• Traditional banks can’t engage in
this business due to lengthy credit
approval processes, so they have
started acquiring minority stakes
in SME lending platforms
Platform1
Outstanding credit (IDR Bn) 234 529 267
Total credit underwritten (IDR Bn) 1,163 2,940 2,430
NPLs2 1.05% 2.30% 8.0%
Active borrowers 1,776 1,193 15,436
Invoice financing rates (p. a.) 13-43% 12-20% 12-26%
Borrower upfront fee 3-5% 3-5% 3%
Banks having a minority stake -
9Notes: (1) Numbers as of November 2019 (2) NPLs: Non-performing loans
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)Nov’19: $1 Mn (B)
Aug’18: $16.5 Mn (A)
Feb’20: $10 Mn (B)Aug’19: $10 Mn (B)
Sep’19: $8.6 Mn (A)Dec’18: $0.2 Mn (S)
Nov’18: $4.3 Mn (A) Apr’16: $1.2 Mn (S) Sep’19: $1 Mn (S)
Potential investment option1
10Notes: (1) Investment recommendation based on industry, competitor and company analysis (not including financials)
Sources: Prequin
Indonesia Singapore, Malaysia
Present as
Dec’19: Undisclosed amount of Debt funding
by Triodos Microfinance Fund, Triodos Fair Share Fund
Apr’16: $1.2 Mn (S) led by Alpha JWC Ventures and Singapore Press Holdings
Funding Rounds
Apr’20: $40 Mn (C) by existing investors and
an undisclosed bank
Apr’18: $25 Mn (B) led by SoftBank
Ventures, Sequoia India, Alpha JWC 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: A potential investment option in Indonesia for JL Capital
• 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
11Notes: (1) As of Q2 2020 (Ongoing – Figures for 19 Apr 2020) (2) As percentage of overall loans disbursed (3) As per Macquarie Research
Sources: Modalku website, Funding Societies website
Things to
keep in mind
before
investing in
the Fintech
Lending
space in
Indonesia
1
5
2
3
4
Expanding the coverage for Indonesia’s “Credit Invisible” requires a tailored and innovative approach
• 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
• Debt refinancing is one of the top 3 loan purposes, indicating a potential “over-leveraged” debt behaviour
• This behaviour might be more prevalent in conventional-to-online rather than purely online borrowers
Important to monitor TKB901 along with NLPs for developing sustainable business models
• OJK is currently implementing TKB90 to ensure players disclose their loan performance
• This is an important measure to track irresponsible disbursement, and Fintechs should adapt their
business models based on TKB90 metrics as well
Fintechs will need to collaborate with financial institutions for stable financing
• By collaborating with financial institutions, Fintechs will have a more stable source of funds
• 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
topography
• Replicating business models of other countries will be ineffective compared to targeted business models
12Notes: (1) TKB90 is a metric measuring debt repayment success rate over 90 days past due, the opposite of a Non-Performing Loan
Sources: Desktop Research
13
⮚ Executive Summary
⮚ Opportunities in Fintech in Indonesia
⮚ Opportunities in Consumer Retail in Vietnam
⮚ Opportunities in Food Manufactoring in Thailand
Consumer retail is a fast-growing investment space in Vietnam with strong sales growthVietnamese retail sales growth remain robust through-out
economic cycles…
• Strong economic growth: Vietnam’s GDP has
been increasing at 7% due to strong harvest and
surging manufacturing sector
• Rapid growth in consumer spending with higher
disposable income: Private consumption is 68% of
the overall GDP, highest in SEA, with a growing
middle class and heightened concerns about
hygiene and food safety
• Increase in foreign investment: 40% of
supermarkets currently owned by foreign investors
due encouragement by govt policies
• Free-trade agreements: Better FTAs and bilateral
agreements have made international food
accessible to middle-classes
1
2
3
4
…underpinned by 4 key macroeconomic trends in the
country
85 94103
115126
142
180
0
5
10
15
20
25
30
0
20
40
60
80
100
120
140
160
180
13%
2013
11% 11%
2014 2015
10%
2016
10%
2017
13%
2018
27%
2020
Retail revenue and growth in Vietnam (2013-2020),
Revenue, USD Billion ; Growth, %
14Notes: (1) Total Payment Volume
Sources: OJK, Goldman Sachs Global Investment Research, Bank Indonesia, Macquarie Research; Vietnam General Statistics Office
44%
17%
11%
9%
6%
5%
6%2%
Grocery
Electronic & Appliances
Non-store retail
Leisure Goods
Home & Garden
Health & Beauty
Apparel & Footwear
Others
Vietnam’s modern grocery market is expected to grow at 25.8% p.a. over the next 5 years, with a potential for further growth
Breakdown of Vietnam retail market, %, 2018, 100% = USD 108 Bn
0
5
10
15
20
25
30
35
40
0 5 10 15 20 25 30 35
PhilippinesIndonesia
Modern grocery Growth 2018-2013 CAGR %
Malaysia
Thailand
Modern grocery size,USD bn, 2018
Vietnam
Modern segment grocery penetration is expected to grow as
GDP per capita increases
Grocery is the largest retail category by value, fastest growing
in the SEA region
• Vietnam is fast-growing retail market with grocery as the largest
segment making up 44% of overall market
• There are 4 key factors for this trend:
1. Increased urbanisation coupled with increased awareness
2. Consolidation of top players (Satra acquired Auchan)
3. Entry of international players like 7-eleven, Big C
• Vietnam’s modern trade penetration is currently at 8% which is lowest
amongst the SEA countries
• The market is on the verge of significant modernization and is likely to
follow the S-curve of other developed Asian markets
• As GDP per capita rises, modern grocery retail market is expected to
grow from $4 bn to $20 bn by 2025 (5X growth)
15Sources: Deloitte report: Retail in Vietnam, Feb 2019; McKinsey report: Seizing the fast-growing retail opportunity in Vietnam, Sept 2019
Consumer markets in Vietnam are still fragmented and there is ample room for modern trade channels
75%68%
55%
25%32%
45%
2015 2017 2020
Modern Retail Channels
Tradtional Channels
...with smaller format leading the modern retail chain
emergence recently
Accelerating value contribution from modern trade channel...
Distribution of the retail sales from between Modern retail channels
and traditional channels, %
Average monthly shopping frequency of Vietnamese of modern trade
25.2
8.9
1.3 0.83.3
18.2
9.5
4.52.2 1.2 2.5
Wet market SupermarketsTraditional Grocery Stores
Convenient Stores
Minimarts Personal Case/ Drug
Stores
0.0
2010
2018
16Sources: Vietnam's Distribution and Retail Channels 2018 by EVBN; Nielsen, VCSC 2018
There are six success factors that stand out as keys to making the most of retail opportunities in Vietnam
Retail players are
facing growing
competition from
both local and
international
players.
Leveraging lessons
in innovative
technologies and
more advanced
markets, players
can achieve
success
1
2
4
▪ Ability to grow dense network of smaller stores in urban
areas
▪ Require access to funding and dedicated team finding right
locations
3
5
6
Network and scale
Compelling value
propositions
Strong business
enablers
Strong brand equity
Local knowledge
Innovation and
omnichannel platforms
▪ Successful retailers differentiate themselves by focusing on
specific dimensions like price, assortment, experience etc.
▪ Develop capabilities to tackle payment solutions, logistics,
proprietary products and loyalty programs
▪ Strengthen brand equity through marketing and build loyal
customer base
▪ Local players have advantage over foreign
▪ Extensive on-the-ground experience
▪ Understand local tastes, rules and regulations and trends
▪ Provide both offline and online channels to serve customers
▪ Innovation into smart stores
Retail leaders exhibit 6 key success factors
17Sources: McKinsey report: Seizing the fast-growing retail opportunity in Vietnam, Sept 2019
E-commerce penetration is on the rise in Vietnam, however, retail players are diversifying to tap the entire ecosystem
Retail players are pursuing omnichannel strategy to capture
the market share in online
Online retail sales make up only 5% of total online sales,
however it likely to grow with increase mobile penetration
• Vietnam’s e-commerce industry is one of the fastest growing in the
region, growing at 27% CAGR
• E-commerce sector however is still in its early days with many players
operating at a loss
• Key success factors include overcoming logistics challenges and e-
payment solutions
0.72.2
3.04.1
5.06.2
0
1
2
3
4
5
6
7
8
0
5
10
15
20
0.7%
10.0
2012
1.8%
20152013
2.1%
2014
3.6%
2.8% 3.0%
2016 2017
5.0%
2020
Online B2C salesOnline retail sales
Online B2C sales vs online retail sales (2012-2020),
Sales, USD Billion ; % total online sales
Example 1:
Example 2:
▪ Korean supermarket chain, LOTTE Mart
launched SPEED LOTTE mobile app to
combine traditional and online retail
▪ The online version has more than 1000
SKUs and delivers within 15kms
▪ Bach Hoa XANH has 1000+ retail stores
and has moved online with over 600
SKUs
▪ Parent company Mobile World has
announced $43m investment to grow
the business
18Sources: Deloitte retail survey (2018)
Exits
Date Targets Acquirer ($US)
2016MM Mega Market Vietnam
Big C Supercenter
EUR 655 mn.
2013 Ichiban Co. Berli Jucker $73 mn.
2014 VinMart VinGroup $12 mn.
2017 An Khang PharmacyMobile World Investment
Notable acquisitions
Growth
Stages
Investments
Vietnam Consumer Retail: Recent PE &VC Investment
Date Targets Acquirer ($US) Stake
2017 Vua Nem (Mattress company) Mekong Capital $6 mn. 57.5%
2019 VinGroup GIC Singapore $500 mn.
2008 Maison Mekong Capital $ 5mn.
IPO
19Sources: Tracxn June 2018 & CB Insights Jan 19
Vietnam has seen exits to IPO from previous VC/PE backed deals
Year: 2007
Investor: Mekong and
Vina Capital
Amount: USD 8mn.
Growth envisioned from:
(i) Revenue Growth
(ii) Margin improvement
Exits seen:
Mekong was able to
liquidate the investment
after 9 years with a gross
return multiple of 2.2x
Business Description:
• Established in 1988, PNJ is the leading
jewelry manufacturer and retail in Vietnam
Reasons to invest:
• Increasing revenues: Revenues from retail
jewelry store continuing to increase 28% YoY;
retail network grown from 330 to 370 in 2019
• Large customer base: Large number of
customers over the last 30 years with high
switching costs for jewelry purchases
• Growing market: Jewelry retail sales likely to
grow as consumers rely on trusted brands
• Established reputation in the jewelry
business: Having been established 30 years
back, PNJ has the reputation of being the
country’s leading jewelry brand with high-
quality, sophisticated products
• Continuous innovation: PNJ has been
continuously adapting to consumer trends and
launching new collections
189219
269
324
370
20182015 2016 2017 2019
PNJ retail network
20Sources: Pitchbook
Citimart, a supermarket chain, was acquired by Aeon with the aim of increasing to 500 stores by 2025
Year: 2015
Investor: Aeon Company
Amount: 49% acquired
Growth envisioned from:
(i) Revenue growth
(ii) Profitability increase
Exit:
(i) Acquisition by Aeon
Group, one of the
largest retailing groups
(ii) Similar supermarket
chains have a good
chance being acquired
by a larger company
that is looking to
increase its presence
Business Description:
• The company engages in operating
supermarket chains and offers groceries,
food products, clothes, housewares and other
products to its customers throughout Vietnam
Reasons to invest:
• Significant room for revenue growth: Aeon
will assist Citimart in building the new brand
and controlling product quality in the hopes of
increasing the number of Aeon Citimart
stores to 500 by 2025, which will have about
10,000 products
• Increase in profitability: As supply chain
improve and economies of scale kick-in, likely
to see increase in margins
• Increase in customer loyalty: Customers
likely to increase their loyalty to branded
stores where they can find quality and
reasonable products
60
69
20162015
+15%
Citimart Revenue
21Sources: Pitchbook; DealstreetAsia, Desktop research, Mekong Capital presentation
Pharmacity can expect increased profitability with investors seeing an exit to another PE firm or straight as an IPO
Year: 2019 and 2020
Investor: Mekong and
undisclosed investors
Amount: USD 30mn.
Growth envisioned from:
(i) Revenue Growth
(ii) Margin improvement
(iii) Multiple expansion
might exist for those
that invested early-
stage in select
companies
Exits envisioned:
(i) Sell to a late stage
VC/ PE firm
(ii) IPO
Business Description:
• Founded by 3 young entrepreneurs,
Pharmacity originally operated a chain of
pharmacy stores; expanded its store
assortment to include health & beauty
products from 2016
• Currently, largest pharmacy retail chain in
Vietnam in terms of number of stores.
Reasons to invest:
• Increase in customer loyalty: Customer
shopping from branded retail stores
• Steady increase in number of stores:
Pharmacity will expand from 1,000 stores by
2021 and over 1,700 stores by 2025
• Improvement in store level profitability:
Average basket size has been increasing by
14.8% CAGR from 2018-2025 and
• Same store sales: Continuous growth in
average transaction/store/month by 5.4%
CAGR
Number of customer loyalty card
holders
30,000
1,660,000
2017 2019
Number of stores
22Sources: Pitchbook; DealstreetAsia, desktop research, Mekong Capital presentation
BIBO MART, market leader in baby retail is identified as a potential investment target in Vietnam
Name: Bibo Mart
Description: Largest retail chain for mom and
baby products in Vietnam
Established in: 2006
Number of stores: 140 (as of Jan 19), across 22
cities, 15K SKUs
Valuation: $140 mn. (as of 2018)
Investors: 80% owned by founder, 20%
investment from ACA
Network and scale: Rapid growth with largest
number of stores in baby retail
Compelling value proposition: Speciality store
for mom and baby products with only 1
international competitor
Strong business enablers: Strong partnerships
with international brands including Bubs Australia
Strong brand equity: Number 1 company in
Vietnam for selling high quality, branded products
Local knowledge: Founder and CEO, Mrs Trinh Lan
Phuong has built company on local consumer trends
Omnichannel platforms: Online platform, with call
centre to support online customers
Bibo Mart is the market leader in baby stores in Vietnam with a
large retail footprint and growth potentialBiBo Mart clearly satisfies all the success factors
outlined that make it a solid potential target
Recommend to pursue Bibo Mart as a potential investment for JL Capital23Sources: Pitchbook; DealstreetAsia, Desktop research
24
⮚ Executive Summary
⮚ Opportunities in Fintech in Indonesia
⮚ Opportunities in Consumer Retail in Vietnam
⮚ Opportunities in Food Manufactoring in Thailand
Agricultural meat and seafood
• Ranked 2nd largest exporter of
rice and sugar in the world
• Top 5 for chicken and shrimp
exports
• Major exporter of other seafood
products
Canned and freeze-dried
produces
• 1st as exporter of canned tuna
and canned pineapple
Packaged food (ingredients,
snacks and meals)
• 6th food seasoning exporter and
1st in Southeast Asia
• 11th ready meal exporter in the
world, accounting for a 3.7%
Thailand is the kitchen of the world: Food processing contributes 23% of Thailand’s GDP
Major players include both domestic and international conglomerates:
Minimally processed Moderately processed Highly processed
25Sources: Thailand Board of Investment
4.8%
3.4%
2.5%
World APAC Thailand
1.5%
3.3%
9.8%
Packaged Food Ready meal
3.6% 3.8%
ThailandWorld
2.3%
APAC
2.4%2.9%
10.8%
Packaged food outperformed global market in
APAC and Thailand
(Historical Growth 2015 to 2019)
Packaged food shows a strong demand forecast in APAC with a focus on ready meal in Thai market
In 2019, Ready meal
sales was $613M in
Thailand and $3B in
APAC
Packaged food is expected to continue
outperforming global market
(Forecast growth 2020 to 2024)
26Sources: Euromonitor, Thai National Food Institute
Dairy is the largest category, followed by rice, pasta and
noodle
Ready meal shows the highest forecasted growth
through 2024
Edible OilsReady Meals
Sauces, Dressings
and Condiments
Soup
Sweet Spreads
Baby Food
Dairy25%Confectioner
y
Ice Cream and Frozen
Desserts
Savoury Snacks
Sweet Snacks
BakedGoods
Breakfast Cereals
Processed Fruit and
Vegetables
Processed Meat and Seafood
Rice, Pasta and Noodles
4.8%
10.8%
3.5%
1.8%2.5%
0.2%
3.0%3.0%2.8%3.8%
4.8%5.3%
2.9%
1.4%
7.4%
2.7%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
Annual Consumption Growth from 2020 to 2024 (%)
In 2019, market for packaged food in Thailand reached $14B, with ready meals as the fastest growing sector
27Sources: Euromonitor, Thai National Food Institute
28
• 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
• 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
• 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
• Halal meal export market also present a significant growth
opportunity
• Global market estimated to worth $1.6T in 2018 (16% of total
global food industry)
• In Thailand, there are more than 8,000 factories and over
150,000 products that received halal certification
Packaged food industry is highly developed in Thailand with Frozen and Chilled meals accounting for ~500m USD in sales in 2019
Frozen Ready Meal has the largest sales while Chilled Ready
Meal is growing the fastest at 14.7% CAGR
Four key trends explain the fast growth of Ready Meal
industry in Thailand
Sales of Ready Meals in Thailand by Category
Retail Value RSP – USD million 1
2
3
4
Sources: Euromonitor, Thai National Food Institute
Exits
IPOs Valuation
Date Targets Acquirer ($US)
17-06-2019Thai Foods
Group$9.26M
21-07-2016Nippon Pack
PCL$2.5M
Notable acquisitions
$4.8m raised
corresponding
to 20% of
equity
Minority
Investments
Thailand Packaged Food Manufacturing: Recent PE & VC Investments
Date Targets Acquirer ($US) Stake
09-09-2019 Srithai Daily Foods Navis Capital Partners N/A N/A (Minority)
03-02-2018 NR Instant Produce Co LtdDusit Thani PCL
$21,06M 25,98%
09-08-2011 S&P Syndicate PCL Minor International PCL (MINT) $11.51M 5.04%
$40.16m raised
corresponding
to 26.09% of
equity
29Sources: Euromonitor, Pitchbook
⮚ 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
Ride the domestic ready meal boom
Recommend to target healthy ready meal, frozen fruits or halal food segment by local producers
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
30Sources: Euromonitor, Desktop research
Potential target: JM Food, a major frozen and chilled ready meal provider captures both domestic and export market
Name: JM Food Industry
Business line :
1) Manufacturer of chilled and frozen meal
2) Provide catering services to event and banquet
3) Operate food stalls (food court)
Market: Export 20%/ Domestic 80%
Established in: 1982
Certification and safety standard: Facilities are
Halal and HACCP certified; FDA registered
Distribution network: Strong domestic
distribution through large discount supermarket.
Well known OEM capability for importers. Potential
to leverage owned-brand for exports and direct
distribution to local urban consumers
Market potential : JM Food can leverage the
strong growth trend of domestic healthy meal and
international demand of halal food
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
31Sources: JMFthailand.com; Bangkokcompanies
Backup
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1Manufacturing
Manufacturing is seeing recent growth given global trade wars; Large retail stores are stealing market share from traditional stores
2Large retail stores
Macro factors:• Improvement logistics and real estate; increase consumption
due to growing middle class• Given current trade wars with China, increased emphasis on
manufacturing locally for value-added products • International companies (e.g. Samsung) shifting to Vietnam for
manufacturing to diversify supply chains
Business model factors:• Risks: Finding qualified professionals to work in the
manufacturing space
Past deals:• 2019: VinaCapital Group (USD 21.4 mn.) invested in Ngoc
Nghia Industry • 2016: AIF Capital (USD 15mn.) invested in Rochdale Spears• 2016: Stellus Capital Management (USD 6 mn.) invested in T.F
Hudgins
Macro factors:• Rapid urbanization; rapid growth of middle-class population • Wtinessing 11% growth since 2016; ranked 6th best destination
for retail investment • Heightened concern factors for food safety and hygiene • 75% still owned by mom and pop stores – ripe opportunity for
growth of chains
Business model factors:• High investment multiples in the retail (MobileWorld divested
for a 57x return) • Risks: Uncerntainity of government regulations impacts import
of food; US products still expensive to middle class HHs because high high import duties
Past deals:• 2008: Mekong and Vina Capital (USD 8 mn.) invested in Phu
Nhuan Jewelry• 2019 and 2020: Mekong and undisclosed investors (USD 30 mn.)
invested in Pharmacity • 2019: GIZ (USD 500 mn.) invested in WinGroup
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Education and logistics are growing segments in Vietnam given the high rate of urbanization and shift to middle class
3Logistics
4Education
Macro factors:• E-commerce is growing rapidly and being dominated by
international players allowing for local companies to help with logistics
• E-commerce logistics and the industry expected to reach an average growth of 42 percent every year until 2022
• Logistics accounts for 18% of GDP (higher than most countries) with scope for improvement
Business model factors:• 100% foreign owned logistics company not allowed under the laws
of Vietnam giving room to local players• 75% of e-commerce happening in two ciites allowing for focused
logistics opportuniteis • A series of M&A deals in the logistics industry took place in 2019
reflecting consolidation in the industry • Risks: Primairly cash-based economy limiting use of online logistics
platform;
Past deals:• 2016: Mekong invested in ABA Cooltrans • 2016: Bravia Capital invested in Bac Ky Logistics• 2017: Mekong invested in Nhat Tin Logistics
Macro factors:• 3rd largest young population; rapid urbanization; 41% population less
than 24 years old ‘golden demographic’ • Rising middle class who desire to send kids to international school; new
decree accepts 50% locals in international schools • Strong desire to excel in the English language • State-owned universities and colleges only have capacity for 600,000 of
the 1.8 million candidates who undertake the national university entrance examination
Business model factors:• Lean and capital efficient business models for some of the more
innovative education platforms • Raised investment level for foreign investors decreasing compeititon of
investors • Focus areas: International schools, private schools, testing centres,
online education platforms • Risks: High taxation; complicated entry barriers for investors
Past PE deals:• 2017 and 2019: Mekong (USD 4.9 mn.) and Kaizen (USD 10 mn.)
invested in Yola• 2017: LBO by TPG in Vietnam Australia International School • 2019: Navis Capital buyout of Than Than Cong education platform
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1Manufacturing (especially in food)
2Food & Beverage & Hotels
Macro factors:• Rich natural resoruces and raw material (80% of raw material
is locally produced)• Supportive skileld labor resource• $45B governemnt investment in Eastern Economic Cooridor.
$15B is dedicated to transforming manufacturing industries
Past deals:• 2019: BTM Thailand was acquired by Breaktalk for $5.14M• 2018 Mighty International was acquired by Frutarom
Industries for $20M to expand capabilities in Asia• Other startup:…
Macro factors:• Tourism has been the fastest growing sector with revenue from
forist tourist representing a CAGR of 16.5% from 2009 to 2018• Food Retail has experienced a tremendous growth
• Large active corporate accquirers such as Thai Beverage and Minor international
Past deals:• 2019: Bonchon (Chicken Time) was acquired by Minor
International for $63 M• 2019: Santa Fe Steakhouse was aqquired by Boonrawd Brewerly
for $50 M• 2019: MK Restaurant Group acquired in early September a 65%
stake in Laem Charoen Seafood for ~700M• 2017: Express Food (Restaurant operator) received $15M from
Lombard capital (PE firm)• Other startup: Hungry Hub (A), Happy Fresh(C) ,Eatigo (B)
Business model factors:• Producing of healthy, functional (eg high-fiber) or specialty food
(halal) • Production of high valued added food such as organic fruits,
dried/frozen fruits• Target facilitates for foreign food corporates for expansion in SE
Asia.
Business model factors:• Tap into rising urban consumer spending power: upper end
coffeeshop and restaurants, driven by western food trend
Opportunity for Thai food manufacturer to serve the growing Asia Market; Rising middle class and tourists drive F&B demands
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1Fintech lending (specifically B2B)
2Online Gaming (specifically mobile)
Macro factors:• E-Payments market has grown at 15-20x over last 5 years• CC penetration is quite low• Regulatory environment is becoming more favorable
Past deals:• 4 major players exist in the e-money space right now: Ovo,
Gopay, Dana, Linkaja. ShopeePay is emerging as the 5th player• 100+ Fintech players for B2B lending, no clear leader
Macro factors:• Increasing time spent by people on social media• Rising internet penetration outside of Java
Past deals:• xx
Business model factors:• Fintech loans are quite low in terms of overall transaction volume• Fintech ecosystem is broken for B2B – not many lenders
Business model factors:• Content/development side of gaming has high potential; high
margins• Small gaming revenue relative to population, low penetration
Internet-based businesses have the highest potential in Indonesia, market not saturated yet
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