SCPE ready to bet big on Vietnam

The acquisition of significant minority interests in restaurant operator Golden Gate and agribusiness player An Giang Plant Protection JPS (AGPPS) for $35 million and $90 million, respectively, represent the captive private equity unit's first investments in the country. It is comfortable doing more.

"On a macro level, there are favourable economic indicators and demographic tailwinds that have created an environment of significant, untapped growth in a number of sectors," says Bert Kwan, SCPE's head of Southeast Asia excluding Indonesia. "On a micro level, we are finding fundamentally attractive opportunities to back best-in-class management teams in flagship enterprises and emerging champions."

Both assets have previous experience of PE. Mekong Capital made a full exit from Golden Gate through SCPE's investment, generating a net multiple of 9.1x and an IRR of 45.1%. Mekong also invested in AGPPS in 2008, although the PE firm is now primarily focused on the consumer sector.

A second investor, VinaCapital, sold its 23.6% stake in AGPPS for $63.1 million, representing an IRR of 23.7% over a five-year holding period. Deutsche Asset Management also exited its interest in AGPPS on SCPE's entry, generating an IRR of 19.7% and a multiple of 1.7x. 

AGPPS' core business is producing crop protection chemicals, where it has a 25% market share. Since 2010, the company has aggressively expanded into the rice processing and trade business, with a view to becoming an integrated agricultural services provider. It has a nationwide distribution network of 25 branches and works with 500 large wholesale agents.

In addition, AGPPS runs Farmer's Friends, a support service that provides education and technical assistance. Revenue came to $354 million last year, with net profit has grown at an annual rate of 28% between 2008 and 2013.

With the latest round of funding, SCPE expects to work with company management to bolster overall profitability of this value chain.

"With its position as the market leader in crop protection and inputs, AGPPS occupies a unique position within the agricultural value chain in Vietnam - a country in which agriculture employs nearly half the population and is responsible for nearly one-fifth of gross domestic product," Kwan says.

He sees AGPPS as an opportunity to earn an attractive risk-adjusted return, with an expected holding period of 4-5 years. The company could soon be joined in the SCPE portfolio by other Vietnam investments.

"Standard Chartered has been on the ground in Vietnam for a long time," Kwan adds. "It only makes sense that we, as Standard Charterer's private equity arm, leverage the knowledge and experience that stems from this privileged institutional heritage."

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• Topics
• Expansion
• Consumer
• Industrials
• Southeast Asia
• Southeast Asia
• Vietnam
• Growth capital
• Standard Chartered Private Equity