L Capital Asia has faith in Chinese consumer market

Mr Ravi Thakran
Mr Ravi ThakranPHOTO: L CAPTIAL ASIA

Sasseur, in which private equity firm has a stake, will open its sixth outlet mall in China

L Capital Asia continues to view China as a strong growth market for its investments, thanks to healthy mainland demand for lifestyle and consumer products even as the economy there slows down.

This month, the Singapore-based Asian private equity arm of fashion giant LVMH will see Sasseur - a Chinese outlet mall developer and operator that it invested in in 2014 - open its sixth mall, this time in Kunming.

An outlet mall features multiple brands with lower prices. Nine such malls by Sasseur will be up and running by the end of next year, and L Capital Asia chairman and managing partner Ravi Thakran is excited about the company's outlook.

"We are strong believers in the growth prospects for the Chinese outlet sector, given the ever increasing brand awareness among the growing middle class, fashion brands' need for inventory clearance and the proliferation of discount concepts in China," he said.

L Capital Asia's funds target the region's lifestyle and consumer businesses, having acquired stakes in Singapore brands such as Charles & Keith and Crystal Jade.

REMAINING CONFIDENT

We are strong believers in the growth prospects for the Chinese outlet sector, given the ever increasing brand awareness among the growing middle class, fashion brands' need for inventory clearance and the proliferation of discount concepts in China.

MR RAVI THAKRAN, L Capital Asia chairman and managing partner.

It has also invested in six companies in China, including multi-fashion brand platform Trendy International and skincare company Marubi. Some US$100 million (S$136 million) was said to have been invested to buy a minority stake in Sasseur.

These moves may look like a gamble now with China's economic growth slowing to below 7 per cent, but Mr Thakran is not concerned.

"China remains one of the core markets for us to evaluate investment opportunities, given its ever increasing consumption power and continuous rise of the middle class. We believe that the slowdown is mainly led by decelerating investments in infrastructure creation and exports, whereas domestic consumption will be a major growth engine in the foreseeable future."

During a visit to Singapore late last month, Sasseur founder and chairman Vito Xu noted the resilience of his business.

"In the year to date, our total revenue has hit over 4 billion yuan (S$816 million) with profit of around 200 million to 300 million yuan. At the moment our profit margin is compressed due to three ongoing mall developments, but the margin will only improve as new malls open for business," Mr Xu said.

"I expect Sasseur to maintain a pipeline of three mall openings every year, with a 30 per cent annual revenue growth. We have a target of reaching at least 20 malls in five years - and even that wouldn't be enough, given how big the Chinese market is. Ravi and I have joked about opening 70 malls."

Outlet malls' offering of an affluent lifestyle at a more affordable price level means that Sasseur is in a business that is able to withstand or even thrive amid economic headwinds, Mr Xu added.

His visit included meetings with L Capital's portfolio companies to discuss potential partnership. "Brands like Jones the Grocer, Crystal Jade and Charles & Keith are all a good fit for our malls," Mr Xu said.

He has also visited Country Garden's estates in Iskandar, Johor, exploring the feasibility of opening Sasseur malls in the area.


Correction: An earlier version of the story stated that Sasseur will open its sixth mall in Xi'an, instead of Kunming, based on information provided. This has been corrected.

A version of this article appeared in the print edition of The Straits Times on September 13, 2016, with the headline 'L Capital Asia has faith in Chinese consumer market'. Print Edition | Subscribe