News have surfaced that the Teng Family might be looking at selling some stakes in the highly popular Jaya Grocer. There isn’t really much information on Jaya Grocers since they are still a private company. What we do know is that they were established in the mid-2000s with the funding of Mitsubishi, CIMB, and Development Bank of Japan through the private equity firm, AIGF. Let’s see some of the things that we can discern from the Jaya Grocer business and consider whether it will go public in the near future.
Jaya Grocer is backed by private equity firm, AGIF and the Teng Family.
Asean Industrial Growth Fund, AIGF is funded by money from Mitsubishi, CIMB and Development Bank of Japan. The Teng Family started off as a grocery in Bangsar and used to manage the Giant chain store. AIGF holds 45% stake in Jaya Grocer while assumedly, the Teng Family owns a controlling stake which could mean they own 55%. This means Jaya Grocer has deep pockets from AIGF.
Teng Family has a track record of running groceries store, and is now focused on upper scale groceries
The Teng Family used to run the Giant stores when they were still good in the past, before they sold it in 1999. In essence, the Teng Family from day one managed groceries, and has shown that they can make shopping for groceries feel like an experience on itself. Giant is now rebranding after a period of hardship where they needed to close some outlets down. Jaya Grocer has 35 stores worldwide and is still expanding now.
The shift from the mass market to upper scale groceries has proven an effective pivot for the Teng Family, where there was untapped demand in the upper income market especially in cities. It is no surprise then that most of its stores are concentrated in urban areas where the concentration of people are higher.
Jaya Grocer will continue implementing its strategy of focusing on the upper scale market as the incomes of Malaysians have grown steadily and is expected to do so moving forward.
Jaya Grocer would want to list its shares sooner or later, so that its shareholders can cash out.
AIGF is essentially a private equity, and they will be looking to cash out its investments in Jaya Grocer in the near future. So far, rumors have placed Jaya Grocer’s valuation at $200 million or RM826 million. AIGF and the Teng Family might be trying to test the appetites for Jaya Grocer’s shares, by releasing news on selling a stake in Jaya Grocer.
There are no financial data yet on Jaya Grocer so it is hard to judge whether this valuation is feasible. AIGF reportedly invested RM300 million in May 2016, for a stake of 45%, which indirectly puts Jaya Grocers valuation at RM667 million. This means that Jaya Grocer would have gained 23.8% in total from 2016, or a 5.5% yearly gain.
Purely from a private equity point of view, a 5.5% yearly gain is considered relatively underwhelming. Fixed deposit rates at least were about 3.5% to 4.5% the past couple of years, which leaves AIGF with an additional return of 1% to 2%. For a private equity, these type of returns are deemed a bit too low for the amount of risks it is taking.
