Buyers and Builders
00:25:09 · Eric Tan
In in many case, it functions a little bit like online marketplace where it takes a while to really build up the brand reputation. If you wanna buy a house in The US, you go to Zillow, right? So it's like online marketplace where, you know, all the people who wants to buy a house will go there, all the people who sell houses will go there. In in the offline sense, it is like that as well in, in the B to B trade expo where, whoever that wants to, you know, transact, and these are typically big transactions where you can't, you don't really decide on based on what you read on the internet, you might spend 1,000,000 or 10,000,000 a year on your procurement budget and you want to meet the buyer, the seller, to really decide whether you want to transact or not. So that is a sort of like a offline marketplace dynamics where you have strong network effect as you build to scale. And when you're on a known brand in a particular country, you always come back. And for us, it's also a buy and build approach. So we took a 60% stake in a company. 40% is held on by the founders and the CEO of the business, and we're executing a a buy and build approach. So when we took over the business as a 60% partner, it has two shows. Earlier this year, we added the FNB shows to the portfolio, and we... That's a company we bought from, which is a sovereign wealth fund out of Singapore adding to the portfolio. So going forward, we'll work very closely with the with Roger, who is our CEO, to continue acquire independent SMEs in this space as a kind of a buy and build approach. So that's the b two b trade expo business.
00:26:57 · Mikk
[00:26:57] S0: I wanna add here. Why is it a great business? Why is it a great business?
00:27:02 · Eric Tan
[00:27:02] S1: Yeah. Why is it a great business is because a few things. One, it's very hard for a a new player to come into a b two b trade expo space because it's very hard to convince exhibitors to come to a new show when you don't, you can't guarantee that there will be visitors coming. Likewise, on the other end, it's also very hard to convince a buyer to visit a new show if you can't guarantee there will be exhibitors coming. So, it's a little bit like online marketplaces where you need the supply to get the demand, but you also need the demand to get the supply, and it typically takes a while to, to get there, that's one dynamics that's very favorable for a stable show, Two is, once you get to like the number one or number two, you typically have quite good predictability in the business in in that one, you know you can raise price of above inflation, because people want to come back to you, so the price increase will not be a challenge over time. Two is, as you become the number one or number two player in the expo space, you naturally gets allocated a budget in your customers at the end of the year when they are planning for the next year. So, like, for the gold standard of the, the trade expo businesses that we, we look at, typically when they finish the show this year, let's say, we finish the show this today, July 10, they already know, like, 80% of the revenues locked in for next year's edition, and that's a part that we really like, about the business where you, you, you can really predict how the business, performs next year, barring, you know, like trade war and external factors, it's quite a predictable business, that's why we like it quite a lot.
00:28:37 · Mikk
[00:28:37] S0: Okay, and now the, now the third pillar.
00:28:41 · Eric Tan
[00:28:41] S1: Yeah, so the third pillar, it's, it's really software driven, so today we have one portfolio company. So this is quite a similar kind of thesis with Constellation software where we invest in vertical market software in a niche market. So today, one of our... The the only portfolio we have, it's a CRM for the real estate developer, so it's used by the sales and marketing team of, real estate, property developers, and sells houses to, to consumers. We, the, the slight difference in our approach is that, we, in, in the market that we're in in Southeast Asia, there are not a lot of, very mature software businesses where they don't grow by adding customers anymore, but only from price increase, which is typically where Constellation Software would look for, Stable business at scale, no more growth from new customers, and they take over from the owners 100%. In our case, we we find that there are still quite a lot of businesses that still growing between 20 to 40% on a year to year basis simply because the market is just a little bit behind when it comes to software adoption. So our approach is a little bit different where we tend to partner with the owner with, like, multiyear kinda earn out. In some cases, some we don't have earn out. Like, we just take a stake in the business because there's still growth in the sectors that we operate in. So I would say that while the kind of overarching thesis when it comes to business model that we like is quite similar to Constellation, the execution is slightly different due to the dynamics of the market here.
00:30:14 · Mikk
[00:30:14] S0: Now the digital media, the first pillar, 85% of the portfolio. You've been able to grow the business, you said from 6,000,000 to 25 over the last five years. Can you talk me about the value creation, what you guys are doing? Has it been just an M and A or what you guys are doing? Because that's always like the special part. It's not just like the financial part. It's actually like knowing the industry, knowing what to do, how to do it, and maybe you can share a bit more.