Leading Conglomerates in Singapore, Malaysia, and Thailand Experience Significant Value Erosion: Bain Report
In Southeast Asia, the landscape of business and conglomerates has undergone a significant shift, as pure plays have outpaced conglomerates, especially in mature markets like Singapore, Malaysia, and Thailand. Bain & Company’s recent report highlights this transformation, attributing it to the impact of market maturity on conglomerate performance.
The concept of a conglomerate premium, evaluating a company’s value by integrating the intrinsic value of its divisions, subsidiaries, and its parent company’s market capitalization, underpins this analysis. Conglomerates, over the decades, have witnessed a decline in their performance, resulting in a widening performance gap compared to pure plays.
This decline has been further accelerated by macroeconomic slowdowns across Southeast Asia’s economies, culminating in the recent crisis induced by the COVID-19 pandemic. During this period, many conglomerates faced challenges due to a lack of agility and efficiency in responding to the crisis.
However, amidst the challenging landscape, some conglomerates stood out as ‘all-weather stars,’ excelling in healthcare and technology sectors, achieving top-quartile Total Shareholder Returns (TSRs). These companies, including VinGroup, Phinma Corporation, and Emtek, showcased consistent growth and resilience, reinforcing the potential for conglomerates to thrive through strategic focus areas.
Bain’s analysis underscores the critical role of technology investment and optimization of capital structures for conglomerates to enhance efficiency and create value in a rapidly evolving market. Leading conglomerates have demonstrated success by investing in long-term technology initiatives, leveraging data analytics and automation for improved productivity across their operations.
Moreover, the significance of restructuring and lean approaches cannot be understated. Conglomerates are urged to embrace decisive strategies and consider distinct structures, such as listed holding companies with fully-owned subsidiaries or privately-owned holdings, to navigate and succeed in the evolving market landscape.
In conclusion, Southeast Asian conglomerates are at a pivotal juncture, requiring strategic shifts and resilient strategies to reposition themselves, enhance performance, and bridge the growing performance gap with pure plays. Strategic investments, technological adoption, and efficient capital structures will be instrumental in shaping their trajectory towards sustained growth and value creation.
