Mekong trims Mobile World stake, looks to IPO

The two companies occupy different market segments and Mekong Capital, which invested in both, got involved with Mobile World at a much earlier stage than Masan. But each company exhibited rapid growth that marked them out as potential superstars in a Vietnam consumer story that has so far produced few obvious PE-backed successes.

Mekong completed its exit from Masan in 2010, securing a gross multiple of 2x and a gross IRR of 61%. The company has since gone from strength to strength, receiving $359 million from KKR across two rounds in 2011 and 2013 in what remain by far the largest PE commitments in Vietnam's consumer sector.

Having initially invested $3.5 million in Mobile World in 2007, the private equity firm has now trimmed its stake from 32.5% to 25.8%, securing an 11x return. The plan is to take the company public in Ho Chi Minh in the first three months of 2014. "It's an opportunistic exit," says Chris Freund, Mekong's managing partner. "Most of our exit would be through the IPO but we wanted to take some money off the table and the buyer was proactively pursuing this deal."

Freund sees the success of Mobile World as a model for what's possible in Vietnam when the founders and top management are open-minded and develop a strong team. The company also has much in common with Masan in this respect as well.

"Masan was proactive in recruiting strong professionals while for Mobile World it has been more about internal training and development," he explains. "Mobile World's founders come from a telecom background and they have previously worked for multinationals. A lot of companies discount the experiences of others but the Mobile World founders have been proactive about learning."

When Mekong first invested in Mobile World it had only five stores under the TheGioiDiDong (TGDD) brand but has since expanded its network to 230 outlets and is responsible for about 20% of mobile phone sales nationwide. The company has also created another brand, Dienmay, which operates 12 consumer electronics stores in southern Vietnam.

Mobile World posted a net profit of $5.9 million for 2012, with revenues of $353 million. While TGDD has been responsible for driving growth, Dienmay is expected to become the prime mover. This is a function of the consumer electronics market being larger than mobile phones and less penetrated by Mobile World.

"In pretty much every Asian market you have two players that dominate consumer electronics and that is what we are aiming for," says Freund. "The largest company is Nguyen Kim with a 7% share and then there are several other companies, including Dienang, on about 2%."

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