Emerging Markets Investment Advisers Pte Ltd (EMIA), the Mekong focused-investment firm, is targeting to close as many as six new deals across Cambodia, Laos and Myanmar by the end of the second quarter of 2019, a top executive told this portal.
EMIA, which is an investment arm of Emerging Markets Group Holdings, will invest from its $64-million Cambodia-Laos-Myanmar Development Fund II (CLMDF II) across these new deals.
CLMDF II, which is currently 50 per cent deployed, has eight investments so far – one in Myanmar, two in Laos and five in Cambodia .
By the first quarter of 2019, EMIA is looking to close at least two additional investments in Myanmar, a third in Laos and two more deals in Cambodia.
“By 2019 I would expect that we have two transactions in Myanmar that I think are fairly well developed. We see it closed before the end of the year,” Joshua Morris, chief executive officer of EMIA.
The new investment in Laos is also expected to be done by the end of this year.
“We are looking at areas such as agriculture production and processing, financial services, food and beverage, e-commerce, media/content, education and business services,” he said, in an interaction with DEALSTREETASIA, on the sidelines of the Asia PE-VC Summit 2018.
EMIA has made a total of 15 investments through its two funds, Cambodia-Laos Development Fund (CLDF) set up in 2009 and CLMDF II closed in late 2015.
Morris said, given the robust pipeline across all three markets, EMIA is hoping to increase the capital for its second fund.
“Given the strength of the pipeline across all three markets, we are looking at the opportunity, in consultation with our current investor base, of potentially topping up the fund to increase our investible capital.”
Investment play in CLM countries
EMIA, which targets profitable operating businesses and greenfield opportunities, believes the three Mekong countries offer a lot of investment opportunities.
Morris says, the firm’s biggest traction currently is in Cambodia, where the framework and market for PE investments is by far the most developed among the three countries.
“The rules and regulations are the clearest, they’re (Cambodia) the most pro business and pro private equity with respect to the types of structures you can deploy, exit opportunities and with respect to the flow of capital,” he observed.
“Cambodia will most likely continue to be our main market for the next three to five years,” he added.
EMIA’s portfolio in Cambodia includes microfinance institution AMK, rice producer BRICo, FCC Hotels & Restaurants and First Finance, that specializes in housing finance.
Morris said, Laos is now seen as a seamless adjacent market for Vietnamese and Thai companies due to continued integration among the ASEAN economic community.
“This increasing flow of business activity across the borders makes Laos an attractive market for business expansion from these two larger markets,” said Morris.
He said for Laotian companies, exits can be the pain point due to the size of the domestic market unless there is a clear vision with respect to potential buyers and/or follow-on investors in the business.
“If you can invest in (Laotian) businesses that have a clear Thai or Vietnamese purchaser it goes a long way,” said Morris.
In Laos, it has invested in media player BlueGrass and internet service provider Plant Online.
In Myanmar, meanwhile, EMIA has made a follow-on investment in travel company Oway, which raised $14.7 million from other investors including Daiwa PI Partners Co Ltd, International Finance Corporation, Belt Road Capital Management and NSI Ventures.
“Given the size of the market and its growth potential, over the next 10 years, Myanmar will likely become a dominant market for us. But there is still a lot of reform and development required to catch up to Cambodia as a private equity market,” said Morris.
While EMIA has already proved exits in Laos and Cambodia, it is adopting a long-term view on Myanmar.
“The way we’re thinking about Myanmar is to make sure the companies that we are backing are very well capitalized with shareholders that have the additional capital necessary to help them through difficult times in the macro environment,” he said.
EMIA is also working with its portfolio companies to enable them to expand across the CLM block. “I think if you can build a really strong business across those three markets then you have the scale and the size to really start to attract big strategic buyers,” he notes.
For instance, one of EMIA’s portfolio in Cambodia, micro-insurance player Forte Micro expanded its regional footprint in March this year by acquiring Tokojaya Lao Assurance Co. Ltd from Laos. Morris said, the company will now be looking to enter the Myanmar market if the right opportunity arises.