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Asean conglomerates do better than those in the West: study

PUBLISHED JUNE 13, 2014

Asian conglomerates do better than those in the West: study

Robust international strategies become critical as their economies mature

MICHELLE QUAH

MICHQUAH@SPH.COM.SG   @MichelleQuahBT

Conglomerates in Asia are more successful than most of their Western counterparts, defying conventional wisdom that such entities are anachronistic in the current business landscape and are ripe for break-up – PHOTO: SPH

[SINGAPORE] Conglomerates in Asia are more successful than most of their Western counterparts, defying conventional wisdom that such entities are anachronistic in the current business landscape and are ripe for break-up.

A new study by American global management consulting firm Bain & Company, titled Who Says Dinosaurs Can’t Dance: Why conglomerates thrive in South-east Asia, has found that these Asian giants are:

  • Continuing to dominate the corporate landscape, accounting for more than a fifth of the top-listed stocks in their countries;
  • Outperforming their more focused counterparts in the same markets, and consistently delivering higher shareholder returns; and
  • Achieving a “conglomerate premium”, that is, trading at a premium to their sum-of-the-parts, which only very few Western conglomerates manage to do.

For the study, Bain & Company examined 49 large, publicly-listed conglomerates in Indonesia, Malaysia, the Philippines, Singapore and Vietnam over the last 10 years.

Their sample covered both family and state-controlled groups and included the likes of Sime Darby and Boustead Holdings in Malaysia, Keppel Corp and SembCorp Industries in Singapore, Siam Cement Group in Thailand, Astra and Indofood in Indonesia, and the Ayala Group in the Philippines.

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About bambooinnovator
KB Kee is the Managing Editor of the Moat Report Asia (www.moatreport.com), a research service focused exclusively on highlighting undervalued wide-moat businesses in Asia; subscribers from North America, Europe, the Oceania and Asia include professional value investors with over $20 billion in asset under management in equities, some of the world’s biggest secretive global hedge fund giants, and savvy private individual investors who are lifelong learners in the art of value investing. KB has been rooted in the principles of value investing for over a decade as an analyst in Asian capital markets. He was head of research and fund manager at a Singapore-based value investment firm. As a member of the investment committee, he helped the firm’s Asia-focused equity funds significantly outperform the benchmark index. He was previously the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. KB has trained CEOs, entrepreneurs, CFOs, management executives in business strategy, value investing, macroeconomic and industry trends, and detecting accounting frauds in Singapore, HK and China. KB was a faculty (accounting) at SMU teaching accounting courses. KB is currently the Chief Investment Officer at an ASX-listed investment holdings company since September 2015, helping to manage the listed Asian equities investments in the Hidden Champions Fund. Disclaimer: This article is for discussion purposes only and does not constitute an offer, recommendation or solicitation to buy or sell any investments, securities, futures or options. All articles in the website reflect the personal opinions of the writer.

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