Exclusive: Malaysian PE firm CMS Opus makes retail debut, picks 31.5% in MBG Fruits

Image from company's Facebook page.

Malaysian private equity firm CMS Opus Private Equity Sdn Bhd has picked a 31.5 per cent stake in fresh fruit business MBG Fruits Sdn Bhd, for an undisclosed amount, marking its debut in the retail sector.

In an interview with DEALSTREETASIA, MBG founder and chief executive officer Adnan Lee said, he and his mother remain the majority shareholders in the company, holding 68.5 per cent.

Both Lee and CMS Opus declined to reveal the total investment made by the private equity firm.

The MBG deal was done under national private equity management firm Ekuiti Nasional Bhd’s (Ekuinas) Outsource Programme, as CMS Opus is among the outsource partners, Lee mentioned. CMS Opus is the private equity unit of Cahya Mata Sarawak Bhd.

The PE firm has previously invested in the oil & gas sector, engineering and manufacturing companies and even a water treatment chemical distributor. It had in April last year divested entirely from the oil and gas sector.

Also read: CMS Opus divests all O&G investments, to amp up diversification strategy

Although the firm has said that it has been working on diversifying its portfolio, an executive at CMS Opus told DEALSTREETASIA that it was not a formal strategy to go into the retail sector but rather an effort in spotting an unrivaled investment opportunity in MBG.

“We did not plan to go into retail. Our investments are made on a case by case basis. Retail is generally very competitive, we have to see what the competitive advantages each business has,” he said.

In recent months, a few other private equity firms have been investing in grocery businesses, such as Navis’ investment in BIG Independent Grocer, CIMB Private Equity and Mitsubishi Corp’s deal in Jaya Grocer, and KV Capital’s investment in TF Value Mart.

Explaining the rationale behind investing in MBG, the executive noted that the MBG business model is a blue ocean strategy.

“They penetrated into a segment where no other players were in. They have expanded to a size where there are no other competitors within the convenience fruits retail concept operating within that size. The perishable retail industry is a hard segment to manage,” he added.

When asked why the company decided to take on private equity capital after two decades of operating, Lee admitted that MBG had not been actively looking for capital.

“They approached us. I had not known about private equity or venture capital prior to this,” Lee said.

Lee took over his grandfather’s fruit retailing business in 1994 in the wet markets, and expanded the business into malls in 2004.

MBG has grown into a company with various departments like finance, human resource, marketing, operations and more. Lee felt that it made sense for the company to engage better expertise in certain areas where its core team lacked expertise.

“With CMS Opus, we can strengthen our finance team,” he added.

Lee noted that despite having CMS Opus on board as a notable shareholder, he will continue to steer the direction of the company.

With the investment, MBG aims to open another 50 outlets focused around Klang Valley over the next five years.

“For the past 10 years, we have mostly grown through internal cash flow. This investment will give the company enough capital to open another 50 outlets without utilising the company’s cash flow,” he said.

The group now runs 32 outlets in the Klang Valley.

Beyond Malaysia, MBG has plans to expand into Indonesia.

Lee said, the group will look at how to integrate technology into its business plans, but will need to build a team of experts for that to happen.

“We will need a different team and strategy to do that. We need to know how to sell and how to manage our perishable products online. It’s not easy. For a lot of the grocery delivery businesses, fresh food remains a small portion of the customers’ purchase,” he said.

On the company’s finances, Lee said, “the group, on the whole, has been making profit.”

The executive from CMS Opus noted that the group’s revenue momentum is not slowing down. The group’s revenue for FYE 2015 is MYR56.7 million, growing at a CAGR of 19.4 per cent from 2013 to 2015.

Also read:

CMS Opus aims for $133m AUM via 16 new investments this year

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.