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Hardly passive, Mekong Capital is an active investor in its portfolio companies
With a nationwide distribution network of 25 branches and nearly 500 large-sized wholesale agents, the company controls 30 per cent market share of CPC. Since 2010, An Giang has expanded into the rice processing and trading business, with a goal of becoming the leading vertically-integrated agricultural service provider in Vietnam by 2015.
As the result of this strategy, An Giang had four rice factories in operation by the end of 2012 with maximum designed capacity of 200,000 tonnes of paddy per year from each factory. In next six years, the agriculture company plans to own 12 rice processing factories serving a total farming area of 316,000 hectares, equivalent to 8.1 per cent of Mekong Delta farming area.
There are many reasons for the success of An Giang in recent years - the financial investment from Mekong Capital in 2008 is one of those. After partnering with An Giang, Mekong Capital has made contributions to the company’s strategic and high-level development.
Most recently, for example, during the process of developing a financial plan for An Giang’s rice business for 2012-2015, Mekong Capital advised An Giang on financial modeling techniques and ways to optimise profits. As a result, the company has finalised a robust financial plan to achieve its vision of becoming the leading vertically integrated agriculture company in Vietnam.
An Giang Plant Protection Joint Stock Company is just one of more than 20 fast-growing Vietnamese companies that Mekong Capital has invested in. Some of the firm’s portfolio include MobileWorld, Golden Gate, Phu Nhuan Jewelry (PNJ), Traphaco, Asia Chemical Corp Nam Long, Masan Food, International Consumer Products Corporation (ICP) and Saigon Gas.
As in the case of An Giang, Mekong Capital says its goal is to add value to each of investments, beyond what would be expected from a passive investor. Therefore, Mekong Capital works closely with investee companies to empower their management, leadership and corporate cultures in ways that lead to sustainable net profit growth and long-term shareholder value creation.
“During the course of working closely with more than 20 investee companies on post-investment value creation projects, we have continuously refined our approach by identifying what was working, what was not working, and what was missing,” said Mekong Capital managing partner Chris Freund.
MobileWorld, for instance, has added over 200 retail outlets, assumed national market leadership in mobile device retailing, created a new concept and brand around consumer electronics. Its revenues have grown at a 60 per cent annual rate with the turnover in 2011 of $255 million, during the partnership with Mekong Capital. Since 2007, Mobile World has created nearly 8,000 jobs spread across every province in Vietnam.
“We trust each other and can share anything, and they support us with valuable guidance,” said Nguyen Duc Tai, CEO and co-founder of MobileWorld. “Sometimes we are in touch several times a week. At the end of the day, we are all committed to the same long-term objective of building Mobile World into the leading retail company in all the product segments it operates.”
PNJ is considered another successful story. “We found a mutual understanding and trust while working with Mekong Capital,” said Nguyen Thi Cuc, vice general director of PNJ. “An investment by Mekong Capital not only reflects the success of PNJ but also fuels the company to strengthen its market leadership while pursuing long-term growth strategy.”
Since investing in PNJ, Mekong Capital has supported the company reach out to experts in retail sales management with the intention of implementing key performance indicators for sales management as the industry leaders in the retail sector. In addition, Mekong Capital introduced PNJ to best practices in the investor relations function and provided coaching on best practices in financial budgeting to the finance team to implement significant improvements in its investor relation programme and budgeting process in 2013.
Another company that has achieved significant success since the investment of Mekong Capital is Nam Long, a property developer. Recently, Nam Long has made remarkable progress in developing their EHome brand of affordable housing in the Ho Chi Minh City area.
Despite the dire property market, Nam Long company sold 239 of 333 apartment units at the EHome3 project in Binh Tan district, and 85 of 140 townhouses at the EHome4 project in Binh Duong province during the last five months of 2012. This sales performance reaffirms the strong consumer interest for the EHome brand, and the viability of the affordable housing segment of the market in general.
“We partner with the senior management of our investee companies to create a clear vision for their future, with measurable targets, normally for a five-year period. This will be a vision in which we can both own, and this shared vision is the foundation of our partnership,” said Mekong Capital’s principal Pham Vu Thanh Giang
At Nam Long, Mekong Capital encouraged the company to focus its business model on a single business line—affordable housing—while the luxury segment is oversupplied. So far, the company completed its 2012 to 2017 planning for EHome, yielding approximately 13,000 affordable housing units in total across eight projects, with about 2,000 units launched annually.
Mekong Capital’s post-investment value creation programme began with the launch of its first fund, Mekong Enterprise Fund, in 2002. As the first investment fund established in Vietnam after the Asian financial crisis, Mekong Enterprise Fund was also the first private equity investor in Vietnam to employ a comprehensive post-investment value creation programme.
With a commitment to making significant positive impact on the long-term value of each of investee companies, Mekong Capital says it seeks to constantly provide support to investee companies to increase long-term value by setting long-term targets and formulating clear strategies to achieve those targets, recruiting and developing extraordinary management teams, promoting excellence in financial reporting and corporate governance, working out to eliminate anything standing in the way of achieving those targets.
“Mekong Capital is one of the few private equity focused fund management firms in Vietnam that committed in long-term growth and adding significant value to investee companies as a shareholder,” said ICP’s CEO Phan Quoc Cong. “During our partnership, Mekong Capital greatly contributed into setting up our transparent corporate governance and strong corporate culture.”