Chris Freund, Partner of Mekong Capital, said his Vietnam-focused Private Equity firm aims to exit around 3 deals per year in 2014, 2015 and 2016. Vietnam Business Forum interviewed Chris Freund about Mekong Capital’s plan for exits and new investments in the time to come. Huong Ly reports.
Why did your company choose to divest from such potential growth companies instead of holding it longer?
Our business model is private equity, and each of our funds has a 10 year life. So normally when we make an investment we expect to hold it for 5 years. Sometimes we can make exceptions and hold an investment longer, like 7-9 years, but eventually the shareholders of the funds expect us to sell the investments and return the money to them.
How about your plan for investment in An Giang Plant Protection JSC (AGPPS) after Vina Capital sold their shares to Standard Chartered?
We see AGPPS has future growth potential. Although the price per share at which VinaCapital sold represents a 4.2x return for us, we see a lot more upside in this investment, especially as they continue to transform into a total solutions provider to farmers, and continue to grow their virtually-integrated rice business. I believe that AGPPS has an important role to play in transforming the future of agriculture in Vietnam, in a way that benefits farmers, and it’s fun for us to be a part of that.
Moreover, Mekong has been working with the company in some areas such as the management reporting systems, evaluating ERP software, building the domestic rice business, and creating alignment between the various stakeholders in terms of our value-added activities.
After several exits from the beginning of the year, do you have any plan for new investments?
Our existing funds are now fully invested; however, we are about to launch our 4th Fund, Mekong Enterprise Fund III. We are currently spending a lot of resources to source new deals that fit with the investment criteria and sector focus of MEF III. We expect to make about three new investments per year in the new fund.
Which sector will you focus on in the time to come?
MEF III will target consumer-driven sectors that benefit from the growth in Vietnamese consumer demand and the adoption of international business practices in those sectors in Vietnam.
Currently, the highest priority sectors include the following: Retail; Branded consumer goods and Consumer services (education, health care, online consumer services, etc.)
What is your comment on the performance of Vietnamese private companies in this difficult economic situation and the possibility for them to overcome?
Firstly, the economic situation in Vietnam is excellent – GDP is growing more than 5 percent per year which is fantastic. We have seen that companies that apply best practices, have a strong management team in place and set clear and bold goals are able to achieve strong growth in whatever economic environment. A very good example is our investment in MobileWorld, which on average has grown its profit by more than 90 percent per year since we became an investor in 2007, yet for many years the mobile phone market wasn’t even growing. They gained market share by developing a much stronger management team and implemented more best practices compared to their competitors.
Almost all of Mekong Capital’s portfolio companies are fast growing companies like Traphaco, PNJ and Nam Long, yet, it’s seen that MeKong Capital has been keeping investments in those three companies for a bit long time while they’re already listed with the attractive price on stock market. How is your schedule to realize returns from them?
We believe that significant upside still remains in Traphaco, PNJ and Nam Long driven by operational improvements and applying international best practices, and we want those companies to successfully implement more of those operational improvements before we exit. As discussed above, we plan to exit around 3 companies per year in the next few years.
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