Credibility at Risk Southeast Asia’S Future Politico-Economic Roadmap in Abeyance Following the Myanmar Coup in February
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Southeast Asia – Analysis Southeast Asia – Analysis ASEAN Credibility at Risk Southeast Asia’s future politico-economic roadmap in abeyance following the Myanmar coup in February Reprint of article published in the 10th Mar, 2021 Subscribers’ Weekly April 2021 ASIA PRIVATE EQUITY REVIEW 49 Southeast Asia – Analysis Key Points ● The sudden change of the political regime in ◦ robust public market: investors are displaying appetite Myanmar on 1st Feb is reshaping the politico- for listed assets backed by private equity investors – economic landscape of SE Asia. The implication is so ▪ in Oct 2020, 3 private equity-backed companies were vast and grim that – listed – ◦ Singapore’s foreign minister commented that “ASEAN’s » Nanofilm, backed by Heliconia, UOB Ventures and credibility is at risk” EDBI, was listed on the Singapore Exchange Ltd ◦ a spokesman from the United Nations warned that SE » MR D.I.Y., backed by Creador, listed on Bursa Asia’s “stability hangs on Myanmar” Malaysia KLCI » Converge Information and Communications ● Myanmar’s military coup came when the SE Asia private Technology, backed by Warburg Pincus, listed on equity/venture capital ecosystem has just reached a the Philippines Stock Exchange level of maturity – At the close of 5th Mar, both Nanofilm and MR D.I.Y. ◦ funds: since beginning of the year, 4 funds, each with have their respective benchmark notable sizes have achieved either first or final closings outperformed indices that represent US$1.1 bn in aggregate fresh capital ◦ in the making: the ◦ investments: the pandemic has not curbed investors’ new economy ecosystem interest in SE Asia – impending merger between Gojek and PT Tokopedia, when materialises, shall create a US$18 ▪ 2020: the US$10.7 bn in transaction total is a 42.1% bn digital operation and a centrepiece in Indonesia’s increase from the US$7.5 bn in 2019 digital economy ▪ 2021: from Jan to 5th Mar, SE Asia has already recorded 3 sizeable deals with total value adding ● The lingering question is whether Myanmar’s military up to US$645 m, a development that portrays coup will erode SE Asia’s “credibility” and disrupt this investors’ keen interest in pursuit of assets in this economic bloc’s “stability” economic bloc ntil the military coup in declared that the deposing of Ms 2016 to December 2020. Myanmar on 1st February, Aung San Suu Kyi, the leader of the While the world’s superpowers USoutheast Asia was enjoying National Democracy party that won search for the best political tools to robust economic activities. The trade the November 2020 election, and rein in the impact of the coup, the war between China and the US, the forces used by the incumbent finance sector is taking the lead to coupled with the disruption caused government to quell civilian unrest put pressure on those that are in by the pandemic, helped define this had “put ASEAN’s credibility at risk”. the position to voice their dissent market as another supply chain hub. Indeed, the “non-interference” to the junta. On 3rd March, the But the sudden change of the political principle that has been the bedrock world’s biggest sovereign wealth regime in Myanmar at dawn-break on of economic harmony among the fund, the US$1.3 trillion Norwegian the first day of February is reshaping Southeast Asia nations is now being Government Pension Fund (‘Fund’) the politico-economic landscape of tested. In particular, Singapore is managed by Norges Bank Investment Southeast Asia. the largest foreign investor, having Management, announced that it In the first informal meeting invested an aggregate US$11.1 billion has “placed Kirin Holdings Co Ltd between foreign ministers of in direct investment in Myanmar in the (‘Kirin’) under observation due to ASEAN, Singapore’s foreign minister four years and nine months from April unacceptable risk that the company 50 ASIA PRIVATE EQUITY REVIEW April 2021 Southeast Asia – Analysis Southeast Asia – Analysis contributes to serious violations of around US$277.1 million. raise notable funds, deal flow has been individuals’ rights in situations of war A spokesman from the United consistent, and it has a vibrant public or conflict”. Kirin is one of Japan’s Nations recently warned that Southeast market that provides a robust exit largest brewers. The Fund pointed Asia’s “stability hangs on Myanmar”, route for assets. The biting question to “Kirin’s business cooperation a statement that highlights the central is whether the military coup in the with an organisation with ties to the position of Myanmar in the sub- economically threadbare Myanmar military in Myanmar” as the premise region’s politico-economic equation. will snowball into a major disruptor for its decision. In Myanmar, Kirin For private equity investors the that sets back private equity investment partners with Myanmar Economic disruption caused by the military in activities by years. The answer and the Holdings Ltd which is controlled by Myanmar came at a tenuous time ability to address this situation that the country’s military. Currently, the when the private equity ecosystem could erode investors’ confidence Norwegian sovereign wealth fund is in Southeast Asia had just reached a in the ASEAN rest not with private one of Kirin’s shareholders. The value level of maturity: independent fund equity investors but with concerted of its holding in the beer maker is management firms have been able to efforts by global political leaders. n SE Asia: Maturing Private Equity/Venture Capital Ecosystem (2019 – 5th Mar 2021) SE Asia-Focused Funds – Selective (Jan – 5th Mar 2021) Fund Geographical Fund Closing Closing Management Fund Name Focus Category Date Size th Firm From Jan to 5 Mar, SE Asia records the closings Asia Partners Growth/ Asia Partners SE Asia Mar 2021 384 of 4 funds, all managed I LP Expansion by independent fund Novo Tellus Novo Tellus PE Growth/ management firms. The SE Asia Jan 2021 250 Capital Partners Fund 2 LP Expansion uninterrupted record of fund closings in this sub-region is Tower Capital Tower Capital Generalist/ an expression of investors’ SE Asia Jan 2021(1) 250(1) Asia PE Fund I LP All Stages absolute confidence and the coming of age of private Mekong Mekong Capital Generalist/ equity in SE Asia. Enterprise Fund Vietnam Jan 2021 246 Ltd All Stages IV LP All amounts in US$ m (1) 1st closing date and size Source: ASIA PRIVATE EQUITY REVIEW Accelerating Investment Pace (2019 – 5th Mar 2021) • In 2020, despite being ravaged by the pandemic, (US$ bn) transaction sum in SE Asia soars to US$10.7 bn, 16 245 up 42.1% from that for 2019 188 No. of Deals • Just before the end of 2020, Myanmar captured the 14 spotlight when CVC Capital Partners agreed to an 12 10.7 estimated US$700 m buyout of Irrawaddy Green 47 Towers Ltd. If consummated, it would be among 10 the largest deals in this economic bloc. The deal is 8 7.5 unlikely to proceed due to uncertainty in the country after the military coup 6 • So far into the year, private equity investment 3 activities in SE Asia have been vibrant with investors having participated in US$1.4 bn in deal value. Of 2 1.4 the 47 deals, 3 sizeable commitments have been 0 recorded – 2019 2020 Jan - Mar 2021(1) ◦ US$300 m in Grab Financial Group ◦ US$175 m in Globe Fintech Innovations Inc (1) as of 5th Mar 2021 ◦ US$170 m in PT SiCepat Ekspres Indonesia Source: ASIA PRIVATE EQUITY REVIEW April 2021 ASIA PRIVATE EQUITY REVIEW 51 Southeast Asia – Analysis SE Asia: Maturing Private Equity/Venture Capital Ecosystem (2019 – 5th Mar 2021) (cont’d) Robust Public Market – a Main Conduit to Liquidity Performance of Nanofilm & Straits Times Index (30th Oct 2020 - 5th Mar 2021) (%) 120 Nanofilm: 84.6% 100 80 60 40 STI: 23% 20 In Oct 2020, SE Asia hosted the IPOs of 3 0 private equity-backed companies. It is the first time that this market hosted the listings of a -20 string of such assets, suggesting the public Nov 2020 Dec 2020 Jan 2021 Feb 2021 Mar 2021 market has the appetite for such sizeable IPOs – • Singapore: Nanofilm Technologies Performance of MR D.I.Y. & FTSE Bursa Malaysia KLCI International Ltd, backed by Temasek’s (26th Oct 2020 - 5th Mar 2021) Heliconia Capital Management, UOB Venture (%) Management and EDBI. It was the first IPO 180 on the Singapore Exchange’s mainboard since 160 MR D.I.Y. : 143.1% Mar of the same year 140 • Malaysia: MR D.I.Y. Group (M) Bhd that 120 counts Creador as its investor. At the home 100 improvement retailer’s IPO, Creador sold part of its interest and clocked 217.6 m ringgit 80 (US$52.4 m) in distribution 60 FTSE Bursa Malaysia • Philippines: Converge Information and 40 Communications Technology Solutions Inc KLCI : 7.1% 20 that counts Warburg Pincus as its investor. 0 At the fixed broadband internet services -20 provider’s IPO, Warburg Pincus sold a portion Nov 2020 Dec 2020 Jan 2021 Feb 2021 Mar 2021 of its shares and recorded 17 bn Philippine pesos (US$350.3 m) in distribution Performance of Converge & PSEi Index As of 5th Mar, both Nanofilm and MR D.I.Y. (26th Oct 2020 - 5th Mar 2021) (%) have outperformed their respective domestic 20 indices by over 60%; while Converge is closing its gap with the PSEi Index. 15 PSEi Index: 6.1% 10 5 0 -5 -10 -15 Converge: 2.1% -20 Nov 2020 Dec 2020 Jan 2021 Feb 2021 Mar 2021 NB: Converge = Converge Information and Communications • dates for each of the companies are from their respective debut dates to 5th Mar Technology Solutions Inc • IPO prices of each of the companies are base prices used to measure the share MR D.I.Y.