Issue 39
 

SG’s Carro enters Malaysia with $30m investment in myTukar


Carro, a Singapore-based automotive marketplace backed by SoftBank Ventures Asia, EDBI and B Capital Group, has forayed into Malaysia with a $30-million investment in myTukar, a local car bidding platform. 

The company said this is the first of two planned acquisitions in Malaysia, the home market of competitor Carsome. Carro had in August announced the acquisition of consumer-to-consumer marketplace Jualo in Indonesia, along with the close of a $90-million Series B funding round. 

Founded in 2015, Carro offers a range of services including the buying and selling, financing, subscription, insurance, workshop and roadside assistance for cars. Besides Singapore and Indonesia, the company is present in Thailand. It claims to be Southeast Asia’s largest automotive marketplace with transactions of over $500 million occurring on its platform in 2018. 

“Through myTukar we plan on working with thousands of dealers across Malaysia to catalyse the growth of the used car market. Over the next few years, we plan to triple their existing transaction volume to over $500 million,” Carro founder and CEO Aaron Tan said in a statement. Tan previously told DealStreetAsia that the company has ample financial resources to pursue M&A aggressively, and is particularly interested in areas such as car financing, subscriptions, insurance and vehicle roadside assistance services. 

Kuala Lumpur-based rival Carsome remains unfazed by Carro’s entry in its home market. “Yes, they still remain a threat. But whatever it is, we continue to prove ourselves right in terms of the way we run our business at Carsome. Money is not everything, execution is key. Knowing the market is also very important, and we know our markets very well,” said Carsome CEO and co-founder Eric Cheng. Carsome is understood to be planning to raise $40 million in a Series C round by the end of 2019. 

The Kuala Lumpur-based company last raised $20 million in a Series B round led by Burda Principal Investments in 2018. Similar to Carro, Carsome operates regionally across Malaysia, Indonesia, Thailand and Singapore. The Malaysian startup, however, runs a consumer-to-business (C2B) model, while Carro operates an agent-to-business (A2B) model. 

Other competitors in the car marketplace sector include ASX-listed iCarAsia, Rocket Internet’s Carmudi, and Indonesia’s BeliMobilGue, which just closed a $30-million investment from Berlin-based Frontier Car Group last month.

 
From – Deal Street Asia

Pomelo raises $52m in Series C from Central Group, Provident Growth Fund, others


Pomelo has raised $52 million in a Series C funding round to fuel the expansion of its omnichannel fashion brand across Asia, according to an announcement. The Thailand-based e-commerce startup has secured funds from a bevy of investors – including Central Group, Provident Growth Fund, InterVest Star SEA Growth Fund, Andre Hoffman, Toivo Annus, Lombard Private Equity, Ambient Sound Investments OU, and The Luxembourg Company Deverel. 

The announcement confirms an earlier report by DealStreetAsia in July. According to a statement, Pomelo will use the fresh capital to invest heavily in technology, particularly in big data, artificial intelligence (AI) for pricing and design, and e-commerce personalisation. It will also be developing its supply chain automation platform, which forms the logistics backbone of Pomelo. 

David Jou, CEO of Pomelo said: “As a fashion-tech company, we are developing a proprietary catalogue of innovative technologies that will allow us to unlock significant hidden value that exists in the branded fashion business today. Everywhere we look we see opportunities for innovation to reinvent how things are done to create better products, better serve customers, and maximize omnichannel productivity and efficiency.” 

The Thai startup added that it currently receives close to 30 per cent of its orders through Pomelo Pick-Up – an online-to-offline (O2O) concept, which allows shoppers to try their purchases and return for a zero charge if they decide not to buy them. Since its last $19 million Series B round led by JD.com and Provident Capital, Pomelo has expanded its Gross Merchandise Value (GMV) by 7x and branched into new markets and products. 

Today, Pomelo runs a range of product categories across cosmetics, menswear and eco-friendly fashion. The company is also present in Thailand, Singapore, Indonesia, Malaysia, Hong Kong and Macau. Pomelo competes with a number of players in the fashion e-commerce space, such as Sequoia-backed near-unicorn Zilingo, Indonesia-based Sorabel (formerly Sale Stock) and Southeast Asian e-commerce giants Shopee, Lazada and Tokopedia.

From – Deal Street Asia
 


Japan’s Stripe Intl acquires 70% stake in Vietnamese fashion retail brand

Japan’s casual clothing company Stripe International has acquired a 70 per cent stake in Vietnam’s Global Fashion, which owns women’s accessories brand Vascara, for an undisclosed sum, according to a statement. 

This is the second acquisition by Okayama-based Stripe in Vietnam after it bought local apparel company Nem Group in 2017. Hanoi-based Nem currently operates 80 stores across the country. “We see the potential of the Vietnamese fashion market, especially the footwear and bags industry. 

Vascara is a brand that has great potential for development, so we believe that the experience and technology accumulated from many markets around the world will accompany and support Vascara to accelerate development, expand the system of stores and serve millions of Vietnamese consumers,” said Harigae Tsutomu, general director and CEO of Stripe SaiGon. 

Established in 2007, Global Fashion is a local shoes and bags manufacturer with 134 outlets across Vietnam. The company claims its brand Vascara catered to over 1.5 million shoppers in 2018. Founded in 1994, Stripe International currently owns 20 brands. Stripe largely focuses on fashion but has also expanded into restaurants and hotels. 

In the long run, the Japanese company aims to achieve sales of 8 billion yen and an operating profit margin of 25 per cent in Vietnam, Nikkei Asian Review reported. Vietnam’s fashion market has been increasingly catching the attention of Japanese investors. 

In February this year, Japanese buyout firm Advantage Partners, through its Asia Fund, acquired Elise Fashion, a local fashion brand targeted at women. The transaction marked the first acquisition of a company in Vietnam by Advantage Partners.

From – Deal Street Asia
 


Khazanah divests Prince Court Medical Centre to IHH Healthcare for $240m

Malaysian sovereign wealth fund Khazanah Nasional Bhd announced on Tuesday it has divested its stakes in Prince Court Medical Centre to IHH Healthcare Bhd for 1.02 billion ringgit cash ($240 million). 

Khazanah, via its wholly-owned indirect subsidiary Pulau Memutik Ventures Sdn Bhd, has signed a share purchase agreement with Pantai Holdings Sdn Bhd – a wholly-owned indirect subsidiary of IHH Healthcare – to divest its 100 per cent stake in Prince Court Medical Centre. 

The $33-billion sovereign wealth fund strategically acquired Prince Court Medical Centre in 2018 with the view of building up the healthcare services sector in Malaysia and to promote Kuala Lumpur as a destination of choice for quality healthcare in the region. 

“Given the recent change in Khazanah’s refreshed mandate, the decision was made to sell the business to IHH, Khazanah’s healthcare platform,” said the fund. 

The proposed divestment will enable Prince Court Medical Centre to fully benefit from being integrated into IHH’s Malaysian operations and its broader global network. It would also strengthen IHH’s overall position in the domestic healthcare services market, with Khazanah’s continued contributions through its involvement in IHH. 

“This transaction is in line with our refreshed mandate and provides Khazanah with the liquidity for our future investment capital requirements. In addition, Khazanah is confident that Prince Court Medical Centre will further benefit from IHH’s wealth of experience in providing premium healthcare, whilst solidifying IHH’s position as a leading Malaysian healthcare operator, where we remain as a substantial shareholder with a 26.04 per cent stake,” said Khazanah managing director Shahril Ridza Ridzuan. 

The deal will be completed in the first quarter of 2020, subject to the approvals of the relevant authorities and non-interested shareholders of IHH, amongst others. Khazanah’s most recent divestment has been its joint venture with Singapore’s investment fund Temasek Holdings. 

In July, Hong Kong-based private equity firm Gaw Capital and Allianz Real Estate teamed up to acquire Ophir-Rochor Commercial (ORC) from M+S for $1.2 billion. 

This March, Khazanah announced a refreshed mandate to grow Malaysia’s long-term wealth amidst an ongoing restructuring, which will see the fund classify its assets into separate commercial and strategic funds. 

In April, it divested $255 million worth of shares in one of its strategic assets – electric utility company Tenaga Nasional Bhd. A spokesperson said the sale is part of Khazanah’s ongoing strategy to restructure its portfolio. 

All the proceeds will be used for the fund’s balance sheet and reinvestment purposes. In the same month, Khazanah shut the doors of its London office – an effort to redirect its focus on Asian investments and to reduce operating costs. 

The sovereign wealth fund is also working to help Malaysia’s loss-making national carrier Malaysia Airlines Bhd (MAS) to turn around its business. 

MAS, which is fully-owned by Khazanah, had missed its target to breakeven last year, causing the fund a $1.78 billion impairment loss in 2018.

From – Deal Street Asia
 


Philippine fast food chain Jollibee to explore M&A options to expand in US, China

Jollibee Foods Corp, the Philippine fast food specialist known for fried ‘Chickenjoy’ and chopped hotdogs in sweet spaghetti sauce, is doubling down on expansion plans in the United States and China that are likely to include more M&A. 

Helped by the purchase of California-based Coffee Bean & Tea Leaf in July and having taken full control of Denver-based Smashburger in 2018, it wants to earn 30% of its revenue in the United States in a decade’s time, executives told Reuters. 

It is also aiming to lift revenue in China to 30% of overall sales, while the Philippines would fall to 30%. That would represent a major rejig of revenue streams for Jollibee, which ranks No. 4 among Asia’s listed quick service restaurant firms, and would build upon plans to cut its reliance on its domestic market to 50% of sales in the “medium term”. Prior to its acquisition of Coffee Bean, the Philippines accounted for 73% of sales while the United States represented 15% and China 12%. 

“We want to spread our portfolio and risk,” Jollibee CEO Ernesto Tanmantiong said in an interview. “There’s huge opportunity out there.” Jollibee, which is valued at $4.8 billion and has 16 brands or franchises to its name, aims to have six brands each in the United States and China, just as it does in the Philippines. 

In the U.S. market, it currently has five including its namesake Jollibee restaurant chain and a minority investment in Tortas Frontera, run by Michelin-starred chef Rick Bayless and which offers Mexican-inspired sandwiches at just three outlets in Chicago’s O’Hare airport. It has three brands in China – the Dunkin Donuts franchise, as well as the Yonghe King noodle and Hong Zhuang Yuan congee restaurant chains. 

TRUSTING ONE’S GUT 

Jollibee likes to acquire quite small, loss-making firms at low prices and turn them around. It receives business proposals frequently but acquisitions are more often stumbled upon during one of Chairman’s Tony Tan Caktiong long food tasting trips than sought out through bankers. 

“Most of the acquisitions resulted from Tan Caktiong eating in a restaurant, liking the food and asking ‘who runs the place?’,” said Erwin Elechicon, former chief of Jollibee’s international operations. That was the case with Tortas Frontera. Tan, also founder of the company and brother of CEO Tanmantiong, had eaten one of its sandwiches at the airport. While noting they tend to buy small, Jollibee executives say they are open to any type of acquisition if the food is good. 

But they acknowledge their immediate focus is on turning around Smashburger and Coffee Bean – both loss-making and bigger than Jollibee’s usual acquisitions with $210 million spent on Smashburger and Coffee Bean costing $350 million including debt. Investor concerns that Jollibee is overextended were exacerbated by first-half profit sliding by a third to 2.66 billion pesos ($51 million) due to losses at Smashburger and deliveries problems with its Red Ribbon Bakeshop. 

Its stock has lost 18% since late July when it announced its purchase of Coffee Bean. “It would be better for them not to do another acquisition at least of this scale until Smashburger and CBTL become profitable,” said Renzo Louie Candano, analyst at DBP-Daiwa Capital Markets in Manila. Jollibee believes, however, that it has not overreached. Nor is it concerned that any of its targeted markets are saturated or that it might not be able to compete with the likes of Starbucks. “Every restaurant in the Philippines has fried chicken, in Vietnam there are maybe 10 coffee shops on every block. 

In the midst of all of this competition, there’s always a standout one or two,” said Chief Financial Officer Ysmael Baysa. “How are you going to do it? Our formula is very simple. 

Offer the best-tasting food at the right price and you’re going to make it.” He noted that Coffee Bean had a strong presence in Southeast Asia and the Middle East, regions where coffee culture still has a lot of room to grow and that its Highlands Coffee stores in Vietnam logged revenue growth of around 32% last year. It has also taken on big chains before. 

Not long after Jollibee, originally an ice cream parlor, started selling burgers in 1978, friends advised Tan Caktiong and his brothers to quit, warning the imminent arrival of U.S. giant McDonald’s in Philippines would decimate Jollibee’s six branches. 

Undeterred, the firm took on McDonald’s by surrounding each big branch with smaller Jollibee outlets, and measuring the U.S firm’s sales by counting trash outside its branches. 

Since 1984, Jollibee has outsold McDonald’s domestically. Outside the Philippines, Jollibee restaurant locations tend to be in areas with large expat Filipino populations. But executives point to its growing popularity with non-Filipinos, particularly in Vietnam, Singapore and Hong Kong. 

It also has big plans to expand the Jollibee chain in North America, aiming for 150 U.S. stores and 100 in Canada over five years, up from 37 and 4 respectively.

From – Deal Street Asia
 
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