A new private equity firm based in Phnom Penh is scouring the Mekong region for opportunities after making its first investment in the parent company of a leading Cambodian online real estate portal.
Established in late 2017, Belt Road Capital Management (BRCM) has secured $50 million in committed capital from predominantly Asia-Pacific (APAC) investors and is looking for investment opportunities in Southeast Asian markets, particularly Cambodia, Laos, Myanmar, Thailand and Vietnam.
Alex Odom, the firm’s chief investment officer, said the economies in this region are expanding rapidly and China is accelerating the growth as it steps up infrastructure development and investment under Beijing’s Belt and Road initiative.
“We’ve seen a dramatic shift in investment from APAC countries,” he said. “Specifically, there is a lot of FDI coming from China and the increased appetite from Chinese investors in these markets has created a rising tide in all sectors.”
BRCM’s first investment, announced in January, was in Digital Classifieds Group (DCG), an Australia-based developer of online classifieds websites. The four-year-old tech company’s flagship product is Cambodian real estate portal and marketing firm realestate.com.kh, while it also owns classifieds and real estate portals in Papua New Guinea, Fiji and Laos.
Odom said the firm invested A$2.25 million (US$1.8 million) in DCG in exchange for a “significant minority stake” in the company and a seat on its board. He said the capital will be used to grow and strengthen DCG’s operations in Cambodia and build out an online classifieds platform in Laos. It could also be used for potential acquisition targets in other regional markets.
According to Odom, BRCM’s interest in DCG was piqued by its solid management team and its business strategy of moving into frontier markets with innovative tech-enabled platforms to establish itself as a clear market leader.
“We’re looking for technology-enabled businesses with good operations and good management,” he said. “We have a strong appetite for tech-driven platforms that are proven concepts across the world but haven’t been enabled in these markets yet.”
Odom said despite rapid economic growth, some countries in the Mekong region – particularly Cambodia and Laos – have not yet appeared on the radars of large private equity firms. He said the potential for investment is high in these countries, as are risks, and BRCM is looking to diversify its portfolio and will remain flexible on growth and exit strategies.
“We don’t want to limit ourselves to a single sector because the opportunities in these markets are just not there yet,” he said. “And we’re trying to keep things as flexible as possible. It’s tough to use a standard private equity model here – these markets are not ready for it.”
Odom said that eight years working in the region has made him comfortable with its operating environment, but many investors are hesitant to invest given the regulatory climate, standards of accounting and level of transparency.
“There is more activity now in markets like Vietnam and Thailand, and we expect it will spill over into frontier markets like Laos, Myanmar and Cambodia,” he said.
BRCM is looking to close a deal in Myanmar soon and make at least two more investments in Cambodia before the end of the year, he added.