Myanmar-focused private equity firm Anthem Asia is bullish about the market opportunities and is actively looking at deploying capital even as COVID-19 pandemic has severely impacted several sectors of the local economy.
Anthem Asia, which held a first close of $34.5 million for its SME Venture Fund, is currently in the process of closing a deal, Genevieve Heng, co-founder and director of the firm, told DealStreetAsia.
“We expect opportunities to arise as companies look to strengthen their balance sheets, and take the opportunity to invest and be prepared when we emerge from the COVID-19 pandemic,” she said.
If a business could manage around operational efficiencies to get through the crisis, it will emerge much stronger afterwards, she reasoned.
The COVID-19 outbreak has triggered severe lockdown measures in the country impacting certain industries such as tourism, hospitality, manufacturing, especially the garment industry, and construction.
But there are still opportunities in essential sectors like financial services, consumer services, education and healthcare, thanks to Myanmar’s emerging middle class and urbanisation rate, Heng opined.
As a fallout of COVID-19, businesses in these sectors have increasingly adopted an online presence to better engage with customers.
“Sometimes, scaling up happens at an inflexion point. COVID-19 could be one such inflexion point as the outbreak has seen increased demand for certain businesses which just happen to leverage technology,” Heng said.
Citing an example of an Anthem Asia portfolio company, she said, Rangoon Tea House has witnessed a significant jump in demand for home delivery due to the lockdown situation.
However, Heng contended that online would not be the panacea to solve all business problems, but rather supplement what they are doing.
A blend of online and offline will enable the business model to be robust enough to survive the crisis.
Anthem Asia has been a believer in tech-enabled businesses through its investments in a mix of digital and brick-and-mortar assets. “Digital scaling up depends on factors beyond having a smartphone. There has to be an ecosystem to support [it],” Heng added.
Investment opportunities will also rise as valuation expectations are tempered.
“Companies that are looking at the long view and are willing to accept lower valuations will be in a better position to attract investors to build a new factory as costs are now lower or to scale up and open new branches in other cities as rents are lower,” Heng said.
Revenues have been falling for businesses, with some players seeing sales figures decline by more than 50 per cent.
The use of force majeure has forced companies to modify their business models or even to hibernate or shut down. Heng expected that consolidation will pick up in what she called “survival of the fittest.”
“Consolidation has been difficult when times are good, as there are the usual concerns about valuation or who runs the combined business. But this crisis could lead to a willingness to put some of that aside to save the companies.”
Dubbed as the last frontier market of Asia, Myanmar has enjoyed increasing investment interest in the past years. But as the health pandemic has thrown the global economy into turmoil, the country is also facing headwinds.
Overall, Myanmar’s real GDP growth is projected to slow to 2-3 per cent in the fiscal year ending September 2020, according to the World Bank. However, the World Bank also expects that Myanmar’s economic growth will recover to 6.5 per cent in the medium term, buoyed by a pickup in both public and private investments.
The local government has announced certain relief measures to help its businesses tide over during this uncertain period, including lower interest rates, a special fund set up to extend loans to Myanmar-owned companies and deferment of payment of social security contributions, according to Heng.
However, with the presence of the pandemic or not, she opined, the Myanmar economy will still need drastic changes similar to the recent opening-up of the banking sector to foreign investors.