Southeast Asia private investments rose in 3Q16, focus on tech-based business, says report

Posted on 10 January 2017

Source: The Edge

The third quarter of 2016 (3QCY16) saw a considerable increase of capital investments across Southeast Asia (SEA), with a significant amount put into technology-based business models, according to Ernst & Young Advisory Services Sdn Bhd (EY).

Its EY private equity briefing: Southeast Asia December 2016 report released today revealed that 32 private equity (PE) deals were completed in 3QCY16 in SEA for a value of US$1.91 billion, outstripping the total US$1.56 billion invested in the first half of 2016 (1HCY16).

“However, the majority of the capital came from four transactions,” the report said, which amounted to US$1.58 billion.

The five biggest deals in 3QCY16 comprises three investments on mobile app-based business models.

They include Singapore’s GrabTaxi Holdings Pte Ltd in Singapore (US$750 million), Go-Jek Indonesia PT (US$550 million), Siloam Internatonal Hospitals Tbk Pt in Indonesia (US$165.3 million), Broadway Industrial Group in Singapore (US$111.4 million) and Carousell Pte Ltd Singapore (US$35 million).

The report also revealed 85% of total capital invested across SEA was splashed on two ride-hailing applications, with a focus on Indonesia.

“3QCY16 saw a staggering US$1.31 billion raised by the region’s two ride-hailing apps, Go-Jek and GrabTaxi.

“The two investments have a common theme being a focus on Indonesia. While Go-Jek is entirely focused on Indonesia at present, Grab has stated that its key goal is to further penetrate the Indonesian market,” the report said.

“The market for ride-hailing applications in Indonesia is estimated at US$15 billion, signalling significant growth opportunities. Further[more], with the potential for diversification into food delivery and logistics, this market segment looks to increase further,” it added.

The two investments highlight the evolution of SEA’s technology sector, it said, citing liquidity needs in companies as an opportunity for PE firms to invest in technology-based business models in the region.

“Technology remained the most active in terms of sectors (14 deals), but for 2016 year-to-date, it is still down by circa 20% on the levels that were observed across 2015.

“However, there are an increasing number of sizeable deals across this sector.”

The report further noted that PE firms are diversifying and exploring into emerging markets, after having focused on Malaysia, Singapore and Indonesia in the past five years, which accounted for over 85% of all PE investments previously.

“The Philippines, Thailand and Vietnam, which have been dominated by local funds to date, are being actively targeted by regional PE houses currently. However, political instability remains one of the key concerns for investments.

“For the frontier markets, investments are still focused on building infrastructure such as banking and communications currently,” the report said, adding many PE players still view these markets as part of their long-term growth story.

Investments into frontier markets such as Cambodia, Laos and Myanmar remain limited for now, it added. 

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