Singapore timber trading scion sets sights on financing business in Indochina

Singapore

SINGAPORE'S Evergreen Assets Management is looking to sink its roots in Indochina, with plans to raise S$100 million to expand its financing business in this part of the fast-growing region.

This comes after the company secured a financial institute (FI) licence in March 2020 that allows it to conduct micro-financing in Cambodia, offering credit lines to cash-strapped small and medium-sized enterprises (SMEs). It is now in the process of securing similar licences in Vietnam and Myanmar by the end of 2021, said its CEO and second-generation business leader David Yong. (see amendment note)

According to the latest publicly-available report by the National Bank of Cambodia in 2019, there are 75 such microfinance institutions and other financial institutions in the country.

Mr Yong told The Business Times that the group's financing business has doubled, from 2018 to 2019. When the group embarked on its financing business via private equity about six years ago, it was just a fraction of its timber-dominated business. It now makes up 60 per cent of the group's turnover and is anticipated to go up even further to 80 per cent once the other licences are in the bag, he said.

This is all part of Mr Yong's deliberate plans to transform Evergreen from a timber-focused business to a broad-based enterprise with financing in Indochina and Singapore as its core business.

Started in 1990 by his father Yong Ing Fatt, who is now group advisor, Evergreen started out in the timber exporting, processing and trading business in Myanmar.

The younger Mr Yong joined the family business in 2010, fresh from completing his law degree and internship at a law firm. But in 2014, Evergreen faced an existential challenge precipitated by Myanmar's ban of the export of raw timber logs, which drove the business to find new ways to survive. It has since diversified into a variety of fields that include corporate financing, real estate and automobile business.

Even so, he said that the diversification into new industries was partly a "natural progression". As Evergreen became known for financing trade deals, more businesses from different industries started coming to them, which exposed them to new industries, he noted.

Today, the younger Mr Yong oversees close to 600 employees, with a turnover of S$58.7 million at the group level in 2019. Evergreen Assets Management was set up by him two years ago as a holding company for the family-run Evergreen Group to house all the businesses, including the teak business, under one roof.

Mr Yong said that what makes Evergreen stand out from the pack is its decades of experience in the Indochina market.

"For us, we are very much on the ground. We curate every deal that we do because of our experience - we don't rely on intermediaries to create deals," he said.

Deals typically range from S$20,000 to S$1 million, and could come in various structures, said Mr Yong. For companies that show promise, the deal could be in a convertible bond structure instead of a pure loan, so that Evergreen could grow together with them, he added.

While the company's roots are in timber trading, Mr Yong said that Evergreen finances SMEs from a wide range of industries from lifestyle to food and beverage to real estate.

He has a team of about 50 across Indochina in the financing business, and about 20 in Singapore.

In Singapore, Evergreen's plans are focused on two main areas: the first is its automotive business and the second is a potential move to offer business financing on a larger scale, which is currently in the midst of getting the necessary approvals from regulators.

The new S$100 million fund targeted at accredited investors and institutions has already seen over S$30 million raised so far.

Passion Venture Capital, a fund manager licensed by the Monetary Authority of Singapore, will be managing the funds.

Mr Yong pointed out that the award of the FI licence in Cambodia was "timely", as Covid-19 saw the demand for loans go up by SMEs as they required assistance and lacked resources. This was where Evergreen came in to fill the gap, he said. With the fund, it will give them "more ammunition" to serve SMEs across the region, he said.

"We also intend to reach out to other demographic segments such as women in Cambodia who are usually overlooked by banks, to empower them to make their own livelihood," he added.

The FI licence in Cambodia does not allow it to take deposits, but Evergreen intends to apply to the authorities to do so in mid-2021.

While the business has its own in-house technology and compliance team for credit assessments, Mr Yong said one feature that makes Evergreen stand out is its experience in the region.

"This is a region where information is not easily accessible," he said.

"We have to have the right people, the right network to obtain all this information before we make our decision. The process of doing business in those countries is also different - you need to build a relationship, have mutual trust before you embark on any deals."

Even as digital bank contenders across the region look to serve the underbanked in Asean, he does not view them as direct competition.

"They are serving micro loans to the masses, but for us, we are focusing more on growing companies," he said, referring to the stakes that Evergreen would take in enterprises.

While family businesses are known to be more traditional in their ways, Mr Yong said that the team now has a good mix of young professionals together with those with decades of experience in the Indochina market.

"The emerging markets in Indochina still have a lot of potential for growth," he noted. "It's a huge area we can tap with our expertise and experience - I see it like a win-win situation, for us and for them to grow together, especially during the time of Covid-19."

Amendment note: In an earlier version of the story, it was stated that Evergreen intends to secure financial institute licences in Vietnam and Myanmar by end-2020. It should be end-2021.