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FINANCING & OPTIMISING YOUR GROWTH IN ASIA
September 9,2014
Fabrice LOMBARDO, CEO
2
TABLE OF CONTENTS
q Synergies and Differencies in Approaching India, Asean and China q Modern Trade in Asia
q Consumer Landscape in Asia
q Cosmetics Industry: Market Overview & Trends in Asia
q Cosmetics Industry: Investment opportunities in Asia
q M&A Strategies and Trends q About GEREJE Corporate Finance
SYNERGIES & DIFFERENCIES IN APPROACHING ASEAN, INDIA, CHINA
4
EMERGING ASIA - SUSTAINABLE GROWTH
* GDP constant price, Source: FMI WORLD ECONOMIC OUTLOOK (April 2014), Countries’ General Statistics Office
General Slowdown in 2012-13, High probability of rebound from 2014
Average growth 2012-15: ASEAN +4,7%, India +5,2%, China +7,5%
Emerging Asia average growth 2012–2015= x11 European growth
5.4 5.2
3.6 2.5
5.6
7.5
5.4
1.2
2.8
-2.0 -1.0 0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0
2012 2013 2014e 2015f
GDP* evolution – Past and Forecast (in %)
5
Source: GCF Research & Analysis Airports Council International Data Centre, PRC Ministry of Commerce, .aseansec.org
ASEAN, THE GATEWAY TO EMERGING ASIA
1. BEIJING (77)
2. HK (53)
4. BANGKOK (48)
5. SINGAPORE (47)
3. JAKARTA (52)
6. GUANGZHOU (45)
8. MUMBAI (30)
9. DEHLI (35)
Ranking of the busiest airports in emerging Asia in 2011
(passengers in M)
7. SHANGHAI (41)
3 Giants of 3.2 Bn inhabitants started economic revolution at different times but are expected to keep booming in the 21st Century
0.2 0.2 0.3 18
54
0.0
20.0
40.0
60.0
1984 1989 1993 2007 2015f
INDIA FDI Inflow in EUR Bn
1 2 22
71
150
0
50
100
150
1984 1989 1993 2007 2015f
CHINA FDI Inflow in EUR Bn
2.5 6.5 11
50
73
0
20
40
60
80
1984 1989 1993 2007 2015f
ASEAN FDI Inflow in EUR Bn
N°2 Largest Popula1on N°12 Largest GDP
N°1 Largest Popula1on N°2 Largest GDP
N°3 Largest Popula1on Globally N°8 Largest GDP Globally
+15% CAGR
+10% CAGR
+5% CAGR
6
3 GIANTS, > 60 MARKETS
2 well known Giants (India & China), 1 hidden (ASEAN) Necessity to ensure a local approach of each state, province or country
INDIA 1,2 Bn inhabitants
28 States + 7 Union Territories 22 official dialects
CHINA 1,3 Bn inhabitants
22 Provinces + 5 autonomous regions ~10 of main Langages
> 80 dialects
Source: CIA Factbook
ASEAN 0,6 Bn inhabitants
10 Countries 12 official Langages
MODERN TRADE IN ASIA MARKET OVERVIEW
8
DRIVER – MODERN RETAILING
Increasing access to credit facilities in Emerging Asian Countries, coupled with Modern Trade development, will boost consumer spending
q Low Household Debt
§ ASEAN + India total household debt = EUR 640 Bn = 21x lower than in Europe
Source: GCF Research & Analysis Department, MPRA, Euromonitor
0
50
100
150
200
250
2009 2013E
Number of credit cardholders (in M) in South & South East Asia*
Taiwan India Indonesia Philippines Malaysia Thailand Singapore
CAGR +14.5%
75% 50%
25% 50%
0%
50%
100%
2004 2014
Shift from Traditional to Modern Trade
Traditional Trade Modern Trade fff
9
Modern trade is developing rapidly in fast growing Asia Estimated average CAGR 2012-2016: 15% (vs. 1~2% in W. Europe)
Source: GCF Research & Analysis Department, MPRA, Euromonitor, Nielsen. Bangkok Post/Asia Focus
MODERN TRADE BOOM IS IN ASIA
8%
24%
36% 45% 48% 50% 51%
25% 30%
25%
10% 8% 15%
10%
0%
5%
10%
15%
20%
25%
30%
35%
0%
20%
40%
60%
80%
India Vietnam Indonesia Phillippines Thailand China Malaysia
% Retail Sales via Modern Trade in 2011 CAGR 2012-2016 �
10
BEST OF RETAIL EXPRESSION IS IN ASIA (1/2)
LOUIS VUITTON opened its first “Maison” in mainland China in
Shanghai on July 2012.
Louis Vuitton Shanghai, opened in 2012 Louis Vuitton Singapore, opened in 2011
11
7 of the 10 largest shopping malls in the world are in Asia!
Hanjie Wanda Square shopping mall, Wuhan, China
BEST OF RETAIL EXPRESSION IS IN ASIA (2/2)
12
Source: CBRE Global ViewPoint, Chyxx
CHINA AT THE FOREFRONT OF RETAIL GROWTH
8 Chinese cities were in the Top 10 in terms of new retail space in 2013!
q Retail boom in China = Room for new entrants § Total cosmetics imports in China = USD 1.5 B in 2013 (+50% vs. 2011)
0 200 400 600 800 1000 1200
Guangzhou, China (Tier 1) Jakarta, Indonesia
St Petersburg, Russia Chennai, India
Dalian, China (Tier 2) Hanoi, Vietnam
Shenyang, China (Tier 2) Manila, Philippies
Wuhan, China (Tier 2) Istanbul, Turkey
Beijing, China (Tier 1) Hangzhou, China (Tier 1) Shenzhen, China (Tier 1)
Chongqing, China (Tier 1) Shanghai, China (Tier 1)
Tianjin, China (Tier 2) Chengdu, China (Tier 2)
Cities with >100,000 sq m of new shopping centre space in 2013
‘000 sq m
Chengdu, China (Tier 2) Tianjin, China (Tier 2)
Shanghai, China (Tier 1) Chongqing, China (Tier 1) Shenzhen, China (Tier 1) Hangzhou, China (Tier 1)
Beijing, China (Tier 1) Istanbul, Turkey
Wuhan, China (Tier 2) Manila, Philippies
Shenyang, China (Tier 2) Hanoi, Vietnam
Dalian, China (Tier 2) Chennai, India
St Petersburg, Russia Jakarta, Indonesia
Guangzhou, China (Tier 1)
CONSUMER LANDSCAPE IN ASIA OPPORTUNITIES & TRENDS
14
HOUSEHOLD SPENDING POWER IN MEGACITIES* �
Main cities in booming Markets are catching up in household spending power Middle Income Households in China and India x4 between 2011-2025
*Megacity: Population > 10 Mn **HNWIs: people with more than 10M CNY (=1.6M USD) in assets Source: CGF Research & Analysis, McKinsey, Morgan Stanley, Bain & Co.
5.2
5.2
2.3
3.3
5.9
6.1
8.0
16.1
0 5 10 15 20
Germany: Rhein-Ruhr
France: Paris
India: Dehli, Mumbai, Kolkata
China: Beijing, Shanghai
2025e 2011
Number of households (in M) with annual incomes >USD 20K in Megacities in 2011 & 2025e�
q China : Rising Middle Class influence
§ Urban household disposal income x3 between 2000 and 2012 § About 1 M HNWIs** in 2013 (+18% vs. 2012)
15
RISING HOUSEHOLD SPENDING IN CHINA
Shanghai & Beijing will have about 16 M middle income households (>USD 20K/y) in 2025: x5 vs 2011!
Source: GCF Research & Analysis, The Diplomat
16
CHINA : RISING MIDDLE CLASS INFLUENCE�
In 2020 >50% of the Population will earn > USD 10K X10 compared to 2005�
83%
61%
40% 21%
12%
24%
31%
28%
3% 7%
13%
18%
2% 7% 16%
33%
0%
20%
40%
60%
80%
100%
2005 2010 2015E 2020E Low Income (< USD 5K)
Middle Income (USD 5 - 10K)
Upper Middle Income (USD 10 - 15K)
High Income (> USD 15K)
Chinese Household Income Distribution�
Source: National Statistic Bureau, Boston Consulting Group, CIA factbook�
q 650 M urban population (~50%) (+15% 2000-2011), § Forecast 2015 = 60% urbanization rate
q Urban household disposal income x3 between 2000 and 2012
q 1.1 M HNWIs = huge demand for higher level of products and services
COSMETICS INDUSTRY MARKET OVERVIEW & TRENDS IN ASIA
18
A STRONG INDUSTRY IN EUROPE
Western Europe per capita expenditure ~ EUR 150/year vs. ~EUR 30/year in booming Asia
q 4,000+ SMEs seek for international development opportunities: § Revenues of 80%+ of these companies < EUR 10 M: fierce competition vs. MNCs § Estimated market share <30%: limited space for growth in Europe
Source: Euromonitor /Colipa Statistics Working Group, Eurostat International, Deloitte report
2.3% 1.5%
2.3%
-0.3% 0.9%
3.0%
0.5%
2.6% 2.1% 3.2%
-1.0% 0.0% 1.0% 2.0% 3.0% 4.0%
0
10
20
1.4 8.8 9.8 0.9 6.5 2.4 5.4 1.4 1.5 9.3
140 160
150
120 125
160 150 140
170 150
100
150
200
0
4
8
12
Main Cosmetics* Market Value & Per Capita Expenditure 2012
Market Value Per Capita Expenditure
EUR B EUR
Market Value CAGR 2012-2016
19
W.Europe 66%
North America
14%
Asia Pacific
8%
Latin America
0% MEA 1%
% Share of Cosmetic Patents (2007-2010)
Total: 530 patents worldwide
W.Europe 43%
North America
48%
Asia Pacific
8%
Latin America
1% MEA 0%
% Share of Cosmetic Patents (1990-2006)
Total: 168 patents worldwide
INNOVATIONS BY REGION
* Date from 1990-2010, report by Union for Ethical BioTrade Source: www.formulascan.com
W. Europe is is at the forefront of patented cosmetics formulations → Critical competitive edge for cosmetics players
q 5 out of 10 Top patent assignees for cosmetics ingredients are from Europe*: L’OREAL, UNILEVER, HENKEL, BEIERSDORF, HINDUSTAN UNILEVER
COSMETICS INDUSTRY INVESTMENT OPPORTUNITIES IN ASIA
21
INVESTMENT LANDSCAPE
China, India and ASEAN present 3 different competitive landscapes
CHINA The largest market
- ~4000 cosmetics companies, 1 local Companies in the top 10 - Strong M&A activity from MNCs
(e.g. L’OREAL/MININURSE)
→ Strong foreign presence → Low market share available
Number of Companies in 2011
INDIA The youngest market
ASEAN The hidden market
- 2 local companies in the top 5 - MNCs commitment is low
(e.g: L’ OREAL: € 200 M sales vs € 1.8 Bn in China)
→ Burgeoning market
• lack of infrastructure (road to market concern) • low modern trade
- ~20 local companies with significant markets shares and sales between € 10 to 50M - Access to China and India
→ Mature local firms looking for partners to grow overseas
→ Highest consumption per capita rate in booming Asia
Turnover (In EUR M)
0 5 10 15 20 25 30 35 40 45
10 < X < 50
50 < X < 100
100< X< 500
500< X
China Asean India
M&A STRATEGIES & TRENDS
23
TRANSACTION MULTIPLES IN COSMETICS
Source: Capital IQ, Zephyr, FACSET
q Market consolidation in Emerging Asia offering unique JV opportunities
§ Fragmented market due to the boom of cosmetics products demand during the last decade § Synergies between foreign players and established local brands eying to expand overseas
- Western Europe players = industry expertise, brand-building know-how, - Local players = manufacturing in compliance with local standards and Asian consumer taste know-how
Date Acquirer Target Business Overview
Deal Value
(M EUR) Stake
(%) EV Turnover (M EUR)
EBITDA Margin
(%) EV/
EBITDA
Sep 2012
MARKWINS INTERNATION
AL (USA)
PHYSICIANS FORMULA
(USA)
Premium cosmetics & skin care manufacturer 62 100% 77 81 11% 8,0x
Sep 2012 Management
PRINCE FROG INTERNATIONAL
(China)
Personal care and household hygiene
products manufacturer 4 1,65% 163 193 19% 5,2x
July 2012
Baring Asia PE
(HK)
Magic Holdings (HK)
R&D, manufacture of skincare products 14.6 5% 154 119 18.9% 8.4x
Apr 2012
L'OREAL (US)
CADUM INTERNATIONAL
(France)
Personal care and homecare products
manufacturer 170,5 100% 170,5 70 19% 12,8x
Jan 2012
BARING PRIVATE EQUITY (Asia)
MAGIC HOLDINGS
INTERNATIONAL (China)
Skincare products manufacturer 45 15% 200 150 17,7% 8,8x
Dec 2011
ROTHSCHILD INVESTMENT PARTNERS
(France)
MAESA (France)
Perfumes and cosmetics
manufacturer 9,2 23% 66 76,3 8,6% 10,1x
24
J&J / DABAO: SYNERGIES & COMPLEMENTARITIES
In July, 2008 JOHNSON & JOHNSON (US) acquired DABAO (CN) for ~USD 330 M
Source: Euromonitor, GCF Research & Analysis
§ Global leader in personal care
§ Strong R&D, Marketing capabilities
§ Strong Dist. Network in T1 cities
§ Portfolio > 100 brands
§ N1 local skincare brand in volume
§ High mass market penetration § Strong Dist. network in T2 and T3
§ Sod Milk brand (1 product) = 90% of total sales
25
J&J / DABAO: SALES x2 WITHIN 4 YEARS�
Source: GCF Research & Analysis, Euromonitor�
“We plan to develop the brand further with the help of DABAO's unsurpassed local market knowledge and our experience in marketing, research and
product innovation” - Jesse Wu, President of J&J China, July 2008
q Expansion of the products portfolio / market share
§ DABAO: 20+ products in 2012 vs. 1 star product before 2008 (DABAO SOD Milk) § JOHNSON&JOHNSON: Market share in Chinese skincare grew by 50% (2007-2012)
94 110
222
0
50
100
150
200
250
300
2001 2005 2006 2007 2008 2012
DABAO Revenue Growth (in USD M)
+20% CAGR Investment from J&J
< 1% CAGR
ABOUT GEREJE
27
THE “GEREJE” PHILOSOPHY
The GEREJE, first diplomatic passport, ensuring safe and secure cross border transactions, is a powerful symbol matching perfectly our mission and goals
In the 13th century, Marco Polo was one of the first European to travel across Asia by the Silk Road on horseback. His journey lasted 24 years, including several years at the court of Kublai Khan. The Emperor awarded Marco Polo a gold tablet having the form of a long piece of currency named GEREJE which ensured many privileges to whoever had it. With this “golden passport” Marco Polo obtained all the necessary protections, supplies and assistance such as horses, food or equipment and returned safely to Venice with his immense fortune. GEREJE team members share a common passion in dealing with cross border transactions and are united around the GEREJE symbol reflecting our mind set as well as our working philosophy.
28
We are a Euro-Asian M&A firm with a “boutique” culture providing both strategic and financial advisory services ensuring
excellence of execution thanks to our 100% in house offices and team
ABOUT GEREJE Corporate Finance
25 multi-cultural professionals between Europe and Asia acting as a “single” team § 7 Management Committee members leading the company § 10 Research & Analysis team members & 8 Senior Advisors bringing sector, country and
financial expertise
Origination & Execution § Paris § Singapore
Origination § Bangkok, Berlin § Shanghai, Mumbai
29
PE Funds 55%
HNWI 24%
Others 2%
Family Offices 14%
France 37%
ASEAN 21%
China 13%
Others Asia 13%
W. Europe 17%
OUR PROPRIETARY DATABASES OF INVESTORS
We have a direct access and strong relationships with 500+ Private Equity funds, 100+ Family offices and 200+ Private Investors / HNWI
Geographical split Typology
30
F&B 40%
ASEAN 38%
India 8%
China 8%
France 33%
OUR PROPRIETARY DATABASES OF CORPORATES
We have established direct and privileged relationships with 6,500+ companies (small, mid cap, MNCs) in Europe and Emerging Asia including 350+ in the
luxury industry only
Geographical split Sectors split
Health & Beauty 40%
NewTech 5%
Industry & Cleantech
15% W. Europe 14%
q Direct access to key shareholders/management of luxury companies mainly in:
§ Wine & Fine Foods:
§ Jewelry & Haute Horlogerie § Cosmetics & Fragrances
§ Apparels, Furniture & Accessories…
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This presentation is being distributed solely for the benefit of the persons to whom it is distributed. Consequently, it shall not be shown or given to, copied by or discussed by, in whole or in part, with any other person without the prior written approval of GCF. This Presentation may not be photocopied, reproduced or distributed to others at any time without the prior written consent of GCF. GCF designate the companies, whilst legally they are independent entities, sharing GEREJE corporate identity, logo, documents, working methodology & ethical rules. All GCF offices are working as an integrated group of companies under the governance of an exclusive agreement for the interest of the clients. GCF offices are privately owned and independent structures. GEREJE Advisory Asia Pte Ltd Singapore is formerly known as “Arpels” Advisory Pte ltd.
GCF solely offers advisory services in connection with corporate financial transactions or evaluations. In no way whatsoever does GCF itself underwrite, acquire or place any securities, or lend any sums or hold funds on behalf of its clients. GEREJE Advisory Asia & GEREJE Corporate Finance are registered companies with MAS (Monetary Authority of Singapore) and AMF (The France Financial Markets Authority) - ORIAS n° 13004146 – Member of ACIFTE as Conseil en Investissement Financier (Financial Investment Adviser)
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