Mekong, CDH set for partial exits from Vietnam's Mobile World

The two private equity firms are already in the process of selling a small portion of shares via a pre-IPO private placement. The placement, which is said to be substantially oversubscribed by both local and international investors, is taking place in order to meet free float requirements.

Nguyen Duc Tai, Mobile World's CEO, told Reuters last week that 7.5 million shares were being sold through the private placement at VND85,000 apiece and a further 62.7 million shares would be sold in the IPO. He estimated a valuation of at least $253 million.

Mekong and CDH will complete another partial exit through the public listing but neither is in a hurry to make a full sell down.

Mekong invested $3.5 million in Mobile World in 2007, taking a 32.5% stake. The private equity firm cut its holding to 25.8% by selling shares to CDH in early 2013. The Chinese GP, which makes selective investments outside of its home market, took a 19.88% interest for around $20 million, mainly acquiring shares from the founders.

When Mekong invested in Mobile World, which operates under the The Gioi Di Dong brand, it had just seven stores, but the PE firm was impressed by the founders. There were five of them, a relatively unusual dynamic in Vietnam; they came from relevant professional backgrounds; and with the exception of the chairman they were all in their mid-30s.

"They were entrepreneurs," said Chris Freund, partner and founder at Mekong. "There was a lot of open debate and discussion and they didn't always agree with each other, which was a positive."

The combination of strong management and new capital enabled Mobile World to ride the wave of growth that saw the number of mobile phone subscribers in Vietnam rise from 18.9 million in 2006 to 131.6 million in 2012. The store count rose to 31 in 2008 and then 211 in 2011.

Mobile World expects to have 253 stores by the end of this year. It controlled more than 20% of the mobile phone retail market in 2013 - the next largest player, VTA, is on less than 10% - and wants to be at 30% by 2016 as the market consolidates further, squeezing the mom-and-pop segment.

"Several chains have followed us, such as VTA and FPT, but we had a few years' head start and have expanded our lead over time," Tai told AVCJ. "We estimate about 50% of the market is now controlled by modern retailers and most of the other 50% is in the countryside. We plan to attack that market segment this year and next, and consolidate further."

He also wants to boost Mobile World's online business. While the market leader, only 6% of revenues come via e-commerce and the goal is to double it by 2015.

Three years ago the company expanded into the consumer electronics space, under the Dien May brand, and has built up a network of 13 stores. Twelve more will be opened this year.

Mobile World recorded $452.3 million in revenue for 2013 and the company is looking to reach at least $600 million this year and $900 million by 2016. Profit is forecast to come in at $21 million for 2014 - up from $12.3 million last year - and then $32.1 million by 2016.

Thomas Lanyi, deputy head of Southeast Asia at CDH, has been working to establish ties between Mobile World and other retailers in the region so they can share experiences. Visits have been made to companies such as Indonesian mobile phone retailer Erajaya, which has successfully managed to roll out a network of small stores in rural areas.

For more on Mekong, CDH and Mobile World, follow this link.

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• Topics
• Exits
• Southeast Asia
• Consumer
• Exit
• IPO
• Vietnam
• CDH Investments Management
• Mekong Capital
• Consumer