It was the second successive year that the fund won an award from Private Equity International. In 2013, it received the Operational Improvement Firm of The Year Award.
In 2014, Mekong Capital’s investee companies saw a weighted average net profit growth of 128 per cent. Its Mekong Enterprise Fund II exited restaurant chain operator Cong Vang (Golden Gate) for $35 million, generating a nine-fold return compared to its initial investment of $2.6 million in 2008. The buyer was Standard Chartered Private Equity.
The fund also partially divested from Mobile World Group (MWG), where it originally invested in 2007, at a 21 time return before the company listed shares in July last year. The remaining MWG shares in Mekong Enterprise Fund II’s portfolio have gained in price by 50 times since 2007.
Also read: Mekong Cap divests 2% Mobile World stake
Chris Freund, founder and partner of Mekong Capital, said in a statement: “This reflects the strong track record that is emerging in Vietnam’s private equity industry.”
He added that the operation of the investee companies have affirmed their effective management, investment in developing corporate cultures and the openness to apply global best practices, which have been “an absolute game-changer” for both sides’ returns.
Companies in Mekong Capital’s investment list are consumer driven businesses in fast growing markets, which offer attractive growth opportunities. DEAL STREET ASIA looks at several firms that led Mekong Capital’s investment returns.
The leader in the Vietnamese mobile device retail market has witnessed a stock price jump of over 60 per cent since its debut in the markets. Mobile World’s 2014 profit figure grew at 161 per cent year-on-year, to reach VND674 billion ($31.6 million). In January, the company reported a revenue of VND1.77 trillion ($83 million), completing 7.5 per cent of the year 2015’s target, while profit after tax reached VND69 billion ($3.2 million). As of the end of the month, Mobile World owned nearly 400 stores across the country. It estimates last month’s sales exceed VND2 trillion ($93.9 million).
After selling over 11 per cent of the company, Mekong Capital still holds about11.6 per cent in the company.
Mekong Capital is the largest foreign shareholder in pharmaceutical company Traphaco, holding a 24.6 per cent stake in it. At a company meeting in March, 2014, Freund proposed six strategic moves for the development of Traphaco, including partnering with an international pharma firms to take advantage of the company’s facilities and distribution network, lifting the company’s holding in Traphaco Hightech JSC from 51 per cent to 90 per cent, expanding distribution network, enhancing the capability of the research department, reforming its bonus payment and adding more people to the board of directors.
Currently, Traphaco has 15 branches, six subsidiaries and affiliates. The company hopes that by the first quarter of next year, it will become the leading listed pharma firm in terms of distribution.
After a spate of M&A deals in the pharmaceutical industry, Traphaco has helped a lot of businesses, namely Dak Lak Pharmaceutical Medical Equipment, Quang Tri Pharma Medical Equipment and Thai Nguyen Pharmaceutical and Medial Equipment, increase their revenue or payment for employees as well as restructure for a better governance.
Last year, Traphaco posted a profit of VND133.6 billion ($6.27 million), virtually unchanged compared to the profit a year earlier.
Nam Long Investment Corp
Nam Long Investment Corp is an emerging high growth real estate company in Vietnam. Its profit growth in 2014 reached VND103.2 billion ($4.8 million), rocketing 200 per cent year-on-year.
Last year the real estate company increased its presence in a number of companies in the sector: Nguyen Son Construction and Trade (from 72.34 per cent to 83.71 per cent), Nam Khang Investment (55.37 per cent to 100 per cent), Nam Long ADC (from 56 per cent to 97.14 per cent), Nam Long DC Development (from 51 per cent to 77.74 per cent).
Phu Nhuan Jewelry
Phu Nhuan, one of Vietnam’s largest jewelry retailers, enjoyed cumulative annual profit growth of 6 per cent since Mekong Capital’s investment (from 2007). Its profit last year increased 41 per cent over 2013 to VND256.57 billion ($12 million). Mekong Capital is holding nearly 6.6 per cent in Phu Nhuan Jewelry and plans to exit the investment by 2017.
Asia Chemical Corporation
This company commits to be a $1 billion company by 2022 and Vietnam’s biggest firm in chemical ingredients. Its current products include, high-quality specialty ingredients, chemicals and non-oil related commodities. It was ranked 373th in the VNR500 list of Vietnam’s top 500 private companies and 280th spot in the 500 fastest growing enterprises in Vietnam (FAST500).
In 2011, Mekong Capital poured $3.4 million in the top three chemical distributor, whose weighted average profit growth reached an annual rate of 23 per cent since then.