J-curves and franchises
With nearly 40% of its population under 20, the Asean labour pool is
surging while China is facing a labour crunch and regulatory risk has
risen in India. FDI flows to the region are already surging. Buying power
is rising with the middle class projected to rise 50% and the number of
wealthy to double over five years. We identify 13 companies building a
business franchise, generating an average annual EVA® spread of 8% and
estimated to provide 70% three-year total returns.
Demographics and the Asean economies
The region’s labour force is projected to rise from 388m to 444m this decade.
Asean’s combined GDP slightly larger than India’s and the region set to attract FDI
as China becomes increasingly expensive as a manufacturing base.
The Asean nations are gradually integrating with an FTA in place, which will lead to
M&As that will establish pan-regional businesses.
Middle class expansion, rapid rise of the rich
More than 50m to enter the middle class in five years taking the total close to
160m by 2015.
Discretionary spending power to rise more than 50% in this period.
Number of HNWIs less than 0.1% of adult population but set to double in five years.
We estimate an additional US$900bn in wealth for Asean HNWIs by 2015.
Exponential, logarithmic or linear?
Per-capita spending on consumables tends to slow above US$10k; most of the
Asean population is well below this level.
Spending on cigarettes, computers and air travel show linear growth.
J-curve spending pattern pronounced for wine, soft drinks and apparel.
Returns from franchises
Franchise companies: high return on capital and durable competitive advantage.
Asean companies with a franchise best positioned to capitalise on the opportunities
include United Tractors, Gudang Garam, Genting Berhad and the Singapore
subsidiary, AirAsia, Universal Robina, ICTSI, F&N and CP Foods.
Bank Rakyat, Public Bank, UOB and Bangkok Bank also have strong franchises.
Download file : ASEAN ARISING