A poll at the Asian Financial Forum revealed that 39 percent believe Southeast Asia to be the best investment prospect in 2019, favored over other choices like China (35 percent) and the United States (16 percent).
This vote took place during the 12th Asian Financial Forum held on January 14 and 15 in Hong Kong and respondents of the poll view Southeast Asia to have the best potential investment returns, as businesses are shifting production out of China to countries in the region.
At the same time, another poll for Chief Executives at Asia-Pacific companies by PwC identified Vietnam as the hotspot among Southeast Asian countries.
“We surveyed CEOs across the region where they wanted to put their money in the next 12 months. For two years in a row, Vietnam has come out on top,” said Raymond Chao, the Chairman for PwC in the Asia Pacific and Greater China.
He added that this has much to do with what is happening around the world, and some CEOs are making adjustments to their supply chain in response to the ongoing trade war between the United States and China.
Victor Fung Kwok-king, Chairman of the Fung Group and moderator of the event panel, said his companies are seeking to find a new base for manufacturing outside China.
“We really need to think twice before finishing your products in China and attaching the ‘Made in China’ label, which will have tremendous duty problem in the US,” explained Fung.
However, he also pointed out that the manufacturing sector in Vietnam has capacity constraints which may cause some manufacturers to max out their production capabilities.
“Then the question becomes, which country is the one you would pick after Vietnam. Eventually, this could be countries within the ‘Belt and Road’ region,” said Fung. Southeast Asia is included in this extension.
Other factors also play a role in driving investor interest in the region, which includes an emerging middle class and economic growth.
Thanks to smartphones, increasing internet users has pushed the forecast for Southeast Asia’s digital economy to reach US$240 billion by 2025.
This leaves plenty of opportunities for tech and online businesses, and by extension investment and venture capitalists. In fact, investors have already taken action.
A look at the report by Cento Ventures on 2018 Southeast Asia tech investment revealed that there is a sustainable growth momentum for technology funding in the country, with last year record crossing US$11 billion.
This amount almost doubles the US$5.8 billion investment in 2017 and suggests a healthy and growing interest in the investment and innovation space for Southeast Asia. For 2019, Cento Ventures predicts that that internet technology-related startups like Grab, Go-Jek, Tokopedia, and Traveloka will continue to attract capital this year.
In fact, it is these five companies which accounted for 70 percent of that total – Grab (US$3 billion), Lazada (US$2 billion), Go-Jek (US$1.5 billion), Tokopedia (US$1.1 billion), and the SEA Group (formerly known as Garena) which raised a US$575 million convertible note offering.
Unicorn asides, late-stage companies in the region are also raising larger rounds and inching towards a billion dollar valuation, with some of the notable deals being:
Besides, follow-on Series B funding round is also gradually growing as various startups move into a more mature ecosystem.
Surprisingly, looking at last year accounts — Indonesia takes up more than 70% of the capital invested in Southeast Asia.
“Jakarta becomes Southeast Asia’s startup capital surpassing Singapore in terms of the number of deals and investment amount,” Wilson Cuaca from East Ventures told TechCrunch.
The early stage investor further predicts that as Indonesia’s startup scene heats up, regional seed and series A funds will move away from Indonesia and target Vietnam, Malaysia, Thailand, and the Philippines.
In 2018, the distribution of deals had illustrated activity across the region. By deal count, allocations to Singapore, Thailand, Malaysia, and Vietnam appear to be consistent with the past few years. whereas the Philippines has been cooling off in both investment amount and number of deals since 2016.
Looking ahead, Southeast Asia in 2019 remains a very attractive region for investors, as it will continue to gain the attention of institutional investors looking for growth markets outside of China and India.
With high-quality startups exits in the plan, it is likely that the year ahead will bring more successful exit stories that will help inspire more founders to start companies and attract investors in Southeast Asia.
Southeast Asia’s leading PE firm Navis Capital Partners is set to launch its eighth fund in 2018. The vehicle will be significantly larger than the firm’s current fund Navis VII worth US$1.5 billion.
According to Navis, its seventh fund is currently in its third and final year at 70 percent drawn – a stage where most PE players have started to actively plan their new successor fund.
But so far no plans have been finalized for the size or timing of a successor fund, though the firm is said to be looking to raise up to US$2 billion for its next fund.
As an investor with a large presence in Southeast Asia and Australia, Navis focuses on building a portfolio related to food processing, restaurant dining, manufacturing, fast-moving consumer goods, outdoor advertising, auto rentals, consultancy, healthcare, and professional business services.
The Kuala Lumpur-based firm has invested in Chinese restaurant chain Imperial Treasure, Indonesian medical equipment distributor Tawada Healthcare, Vietnam’s Hanoi French Hospital and furniture and lifestyle brand Christian Liaigre, among some.
With Navis VIII, the PE firm plans for smaller investments below US$50 million to further extend its investments into the region. These investments in the range of US$10 million to US$50 million, which Venture Capital firms often find too big and Private Equity players find too small, can work to fill the requirements for certain players.
The firm’s exits for this year include the divestment of its controlling stake in retail apparel South Africa’s The Foschini Group to Australia’s Retail Apparel Group (RAG) in a deal worth US$225 million. The firm also sold its interest in Guardian Early Learning Group, a child care business operating a network of 71 child care centers across Australia, to funds managed and advised by Partners Group.
Navis Partners Capital currently manages several private and public equity funds totaling to US$5 billion in equity capital and has made more than 70 controlling investments since its inception.
It has one of the largest private equity professional teams in Asia, consisting over 60 individuals and supported by over 30 administrative staff in eight offices across the region.
Singapore’s food and beverage company Katrina Group announced today that it has entered into a subscription and shareholder’s agreement with Big Benefit Group, a wholly-owned subsidiary of Ajisen (China) Holdings.
The deal will see Katrina holding a 30 percent stake in the joint-venture company which manages and operates snack bars, cafes, restaurants and other food services serving Vietnamese-style dishes under the brand – So Pho in Hong Kong and China.
Alan Goh, the Founder, CEO and Executive Chairman of Katrina said, “We are excited to partner Ajisen China, which is one of the largest and most successful restaurant chains in China. This collaboration will extend our geographical reach in China and help us enter the Hong Kong market.”
“It is a bold step in the right direction in further strengthening Katrina as a regional F&B group. We look forward to a long-lasting partnership with Ajisen China and further opportunities to come,” he added.
HKEX-listed Ajisen China is one of the leading restaurant chain operators with a retail network of close to 700 restaurants in 120 cities and 30 provinces in China and Hong Kong.
Meanwhile, Katrina Group is a food and beverage business specializing in multi-cuisine concepts and restaurant operations. It owns and operates 33 restaurants in Singapore under nine different brands including Bali Thai and Streats.
In terms of funding, Katrina and Ajisen China will provide a working capital for So Pho International of up to US$450,000 and US$1.05 million respectively, through interest-free shareholder’s loan.
Katrina will also trademark So Pho International as a sole and exclusive right to use, sub-license and franchise the trade name of “So Pho” and associated logos, designs and trade names in mainland China.
Wai Poon, the Founder, Chairman and CEO of Ajisen China said, “We are glad that this collaboration has come to fruition. With our strong track record and Katrina’s brand development capabilities, we look forward to growing the “So Pho” brand in China and Hong Kong to build mutual success for both Ajisen China and Katrina.”
International Finance Corporation (IFC), a member of the World Bank Group is making an equity investment up to US$25 million in North Haven Thai Private Equity L.P.
IFC said the private equity fund is looking to raise up to US$300 million in total commitments, and the company will not hold more than 20 percent of the Thai investment vehicle.
Managed by Morgan Stanley Private Equity Asia Inc, North Haven Thai Private Equity is a newly-formed PE fund with an initial 10-year term.
The fund targets mid-market companies with significant operations in Thailand and is jointly led by two co-heads Eric Ma and Chong Toh.
Last October, Morgan Stanley’s North Haven Private Equity Asia Angel made its first Thai investment by acquiring a 25.63 percent stake in baby-and-adult diaper maker DSG International.
“We believe that the Thai market overall is one of the most attractive markets with positive long-term potential,” said Kingsley Chan, the managing director of Morgan Stanley Private Equity Asia.
Darma Tech Labs, the Kyoto-based operator behind the Makers Boot Camp (MBC) hardware startup-focused accelerator, announced on Tuesday that it is forming an investment fund worth 2 billion yen (about US$18 million) with Kyoto Bank as an anchor limited partner.
The fund is known as MBC Shisaku No. 1 Investment LP and its redemption period extends through a period of 10 years. The fund will mainly support the trial production and investment of domestic and international IoT startups as they did in the accelerator program Makers Boot Camp which has supported the trial production of IoT startup Monozukuri.
Additionally, the fund will intensively invest in early stage hardware startups in Japan, North America, and Europe. While looking at priority investment areas including IoT, robotics, sensing, networking, big data analysis, medical devices, nursing care, lifestyle, environment, and energy.
The Makers Boot Camp, previously being initiated in August 2015 by Darma Tech Labs in cooperation with Shimogyoku-based Kyoto Prototype Net has previously aided the prototyping efforts in more than 10 startups including wearable AI Bonbouton, smart digital window Atmoph, and e-money reader Coban, among some.
Along with the formation of this fund, Mikuni Kimura, the former chief investment officer for Future Venture Capital and the certified public accountant, Manabu Kuwahara will participate as managing directors at Darma Tech Labs.
At the same time, the company will also expand their alliance partnership with New York-based FabFoundry, in addition to appointing CEO Nobuhiro Seki as a director of Darma Tech Labs, in order to prepare for investments in startups which are centered on the East coast of New York, Boston, Pittsburgh etc.
Ultimately, this fund will also serve as a further investment to strengthen and accelerate the growth of Kyoto as a manufacturing city of IoT.
By Vivian Foo, Unicorn Media