2012 Southeast Asia Challengers

[offshore-engineer]

Emerging champions highlight asean dynamism, Thai promise

Writer: Boston Consulting Group Published: 9/04/2012 at 12:00 AM Newspaper section: Business
Fifty companies, the Southeast Asia Challengers, have been expanding rapidly, competing in the Asian and global economies, and throwing a spotlight on a region that has experienced an economic renaissance that has largely escaped attention.

Recent research by The Boston Consulting Group details insights into the region's fastest-growing companies and the strategies behind them. While some aspects of this research are not a surprise, the diversity of paths to growth and magnitude of success achieved demonstrates the region's growing dynamism and diverse opportunities.

The Southeast Asia Challengers are growing more swiftly and are more profitable than almost any group of comparable multinationals. An investment of $100 in January 2000 in a hypothetical Southeast Asia Challengers index would have been worth more than $590 in December 2011. That's an attractive 14% annual return. The figure compares with $359 for a similar investment in the broader MSCI Emerging Market index and $208 for an S&P 500 investment.

This poses three questions. Who are these companies, what are they doing right, and what does it mean for the opportunities in the broader economy overall?

The 50 Southeast Asia Challengers range in size, geographies and sectors, with revenues between $500 million and $63 billion annually. Thailand has 11 companies on the list: Banpu, Central Group, Charoen Pokphand Group, Indorama Ventures, Minor International, Mitr Phol Corp, Pruksa Real Estate, PTT, Siam Cement Group, Sri Trang Agro Industry and Thai Union Frozen.

At the regional level, companies from the food and beverage and agricultural-commodities industries are the most frequently represented on the list. Real estate and construction, transport and logistics, and utilities industries also feature on the list.

Selected examples of the Thai challengers help illustrate what they are doing right. Each of them has built on success in home markets into adjacent markets or geographic regions. While some have used mergers and acquisitions extensively, others have focused more on organic extension. All of these companies have stepped outside Thailand, some significantly so. Here's a brief look at four of the standouts:

- Indorama Ventures is now the largest producer of polyethylene terephthalate (PET) in the world. This common material, used in plastic bottles, was overlooked by many. Indorama has pursued a contrarian investment strategy to build a manufacturing presence in the United States, Europe and Asia. Its growth has been driven by a unique M&A engine to rapidly acquire distressed players across the value chain. Supporting this with a model that lowers M&A risk through control and rapid integration has delivered 56% year-on-year growth since 2006.

- Minor Group, a diversified hotel and quick-service food player, further demonstrates what can be achieved from successful M&A. While always a significant part of its strategy, the recent move toward larger acquisitions, such as Oaks Hotels in Australia, illustrates the opportunities available for those leveraging a strong home-country base in Thailand into other markets.

- Thai Union Frozen became one of the world's leading frozen and canned seafood producers in less than 20 years. TUF built a significant presence in developed economies, such as the US and France, by selectively buying branded food assets. These moves appear to have insulated it from the impact of factors that might have affected it had it been a pure Thai OEM player. Its subsequent focus on brand portfolio building, delivery of premium brands to global markets, and a platform to address Asean emerging consumers is paying off handsomely.

- Banpu started as a coal producer in Thailand and now has ambitions to become the region's top producer and leading coal-based energy player. Over three decades, Banpu has successfully navigated strong but volatile commodities demand and a variety of challenges. Bold investments as far afield as Australia, Mongolia and closer to home in Indonesia have delivered growth in excess of 20% per year.

There are, of course, many more than 50 noteworthy Southeast Asian companies and we've illustrated just a few here. However, perhaps surprisingly, the growth and returns delivered by these challengers appears to have accelerated despite the gloomy global context. We believe this is a sign of both opportunities available to those with sufficient ambition, and perhaps a warning of increased divergence between the region's winners and the average.

We are excited by the prospects that these challengers, and others who follow in their path, have in the region. The increasing integration of Asean's markets represents a great opportunity for those with ambition and markets comparable to China or India for those who are up to the game.

While China and India have been receiving most of the headlines over the past 10 years, many Southeast Asian companies have been quietly and confidently creating international businesses. The success of the Southeast Asia Challengers and the region they represent is one of the world's best-kept secrets.

The Boston Consulting Group (BCG) is a leading management consulting firm with 72 offices globally and offices in each of Southeast Asia's largest economies. Vincent Chin leads BCG in Southeast Asia. Tongjai Thanachanan and Carl Harris are Partners in BCG's Bangkok office.

[offshore-engineer]

รายงานฉบับเต็ม
http://www.bcg.com/documents/file100219.pdf

[a_clumsy16]

Thx a lot kub. U're very informative.

[sakkaphan]

ขอบคุณครับ

[offshore-engineer]

Of the 11 Thai companies, 4 are also in the list of 2011 BCG Global Challengers. They are CPF, IVL, PTT and TUF.

[VI Wannabe]

รายงานฉบับเต็ม
http://www.bcg.com/documents/file100219.pdf

Good read krub. Thanks.
Is there a full paper detailing the 50 companies' growth path and strategy krub?

[dome@perth]

Thanks Hong,

Happy Songkran krub

[offshore-engineer]

รายงานฉบับเต็ม
http://www.bcg.com/documents/file100219.pdf

Good read krub. Thanks.
Is there a full paper detailing the 50 companies' growth path and strategy krub?

I don't think so krub. I think it may be available to BCG's members.

[offshore-engineer]

Thanks Hong,

Happy Songkran krub

Happy songkran too krub p'Dome. Are you going to go to the temple this Sunday?

[dome@perth]

Thanks Hong,

Happy Songkran krub

Happy songkran too krub p'Dome. Are you going to go to the temple this Sunday?

Yeb, see you there.