Singapore, Singapore, February 27, 2011 --(PR.com
)-- After years of cherry-picking China growth companies, private equity firm CMIA Capital Partners is now hoping to add Singapore companies into its basket.
The fund manager is expanding its geographical mandate to sniff out opportunities in Singapore's SME (small and medium enterprise) space.
Lee Chong Min, managing partner of CMIA Capital Partners told BT that he is looking for opportunities to co-invest with the government under the latter's Budget initiative this year to match private sector investments in SMEs. On his radar screen are local companies in the food and property sectors.
"We have investors who asked us to seek opportunities in Singapore," Mr Lee said in an interview. "In China, we might see volatility while in Singapore, we are expecting a fairly stable environment, so there has been investor interest to find assets."
Undaunted by a failed investment in FerroChina, CMIA is still on the lookout for new targets in China, where it perceives upside in the agriculture, healthcare and consumer sectors.
The fund manager plans to launch a China agricultural fund within a year and invest US$30 million into projects it has studied in the past six months.
Since 2003, CMIA has invested some US$600 million into more than 20 growth companies in China, delivering a gross internal rate of return (IRR) of above 54 per cent on invested capital.
Mr Lee told BT that over the next two years, CMIA hopes to list three portfolio companies ' two in China and one in Hong Kong' and fully exit from two other private companies.
The latest company it brought to listing is China Minzhong, a Fujian vegetable producer that made a debut on the Singapore mainboard last week, paring CMIA's stake from 23.3 per cent to 15.5 per cent.
Four other S-chips it has invested in have yielded strong positive returns. CMIA has fully exited from Longcheer and now-privatised Midsouth, while keeping its stakes in C&O Pharmaceutical and Ying Li.
But tainting its report card are troubled S-chips Sino-Environment and FerroChina.
Though CMIA divested its stake in Sino-Environment way before troubles in the company set in, return on the capital was negative. The FerroChina shares that it obtained via a share swop became worthless when the company went into insolvency in late 2008.
However, Mr Lee attributed these missteps to 'a matter of timing'.
"If you ask me if FerroChina was a good investment when we bought in, I would tell you 'yes it was'," Mr Lee said. "We made a big return on equity, especially at the early stage when the local banks were lending them money to build a big facility and to become a leading player in the galvanised steel industry.
"But from August 2008, it was no longer a good investment because the tide was changing and it was the time to get out of companies that were highly geared. Then the question is how much time do you know you have to get out 'Did we know we only have one month.'"
FerroChina collapsed in October 2008 when its creditors refused to roll over its debts. The failed investment has also become a bone of contention between CMIA and CMIA China Fund II that was holding some of the shares.
Directors of Fund II are suing Mr Lee and CMIA in Singapore for alleged breach of fiduciary duties. CMIA and Mr Lee are counter-suing the directors for defamation and breach of investment management agreement, among other things.
Though the aggregate loss of US$10-15 million in FerroChina shares did not significantly impact CMIA or Fund II, which is still achieving an annualised return of over 30 per cent, the legal tussle has made a dent in CMIA's deal-making.
CMIA had missed the window to raise a US$600 million China fund when the directors of Fund II started making broad allegations against Mr Lee to other CMIA investors.
"We have put in a lot of effort to clarify issues pertaining to the litigation with investors," Mr Lee said. "We have actually been very transparent.
"But as long as investors read newspapers or articles on the Internet that are sensational or speculative, they get worried," he added. "Instead of having a fair opportunity to present ourselves, now we have a group of investors who have closed their minds when they read the Internet or the newspapers. That's the reality.
"Thankfully, there are still 'serious investors' who are willing to scrutinise the merits of the lawsuit and continue to engage us," Mr Lee said.
He is also taking the lawsuit and allegations levelled against him in stride.
"What doesn't kill you makes you stronger," he said. "As we work on the litigation issues, some of my partners take on bigger roles to alleviate the pressure which is good. I actually have more time for family and charity work," he chuckled.