Real estate services provider APAC Realty, the operator of the ERA brand, is increasing its stake in ERA Vietnam to 60% from an initial 38% stake acquired in February 2020.
The Singapore Exchange (SGX) Mainboard-listed company also announced on Jan 9 that it is acquiring 22% of the issued share capital of Eurocapital Joint Stock Company.
Eurocapital is the sub-franchisor of the ERA brand to ERA Vietnam. APAC Realty has, in turn, granted Eurocapital the right to sub-franchise the ERA brand.
Upon completion of the transaction, APAC Realty will increase its shareholding in ERA Vietnam and Eurocapital to 60% each.
Together, the sum payable upfront is $4.9 million with an earn-out incentive of up to $10.5 million. “The earn-outs were structured in order to incentivise the sellers to achieve the performance targets and further the growth and success of ERA Vietnam and Eurocapital,” says APAC Realty.
Of this earn-out figure, $2.8 million is subject to certain conditions and based on the revenue and net income generated by ERA Vietnam and Eurocapital from July 1, 2023 to June 30, 2024. To unlock this sum, ERA Vietnam must achieve $35 million in revenue and at least $1.75 million in profit after tax within this period.
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The remaining $7.7 million in earn-out incentive is slated for the period from Jan 1, 2025 to Dec 31, 2025. The target for this period is $70 million in revenue and $3.5 million in profit after tax.
APAC Realty had invested $1.5 million for a 38% stake in ERA Vietnam in February 2020. In 4Q2020, the Group also put in a loan of $1 million for expansion.
APAC Realty had invested $1.5 million for a 38% stake in ERA Vietnam in February 2020. In 4Q2020, the Group also put in a loan of $1 million for expansion.
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Along with this acquisition, APAC Realty plans to extend a shareholder loan of $1.5 million to ERA Vietnam. According to APAC Realty, the loan proceeds will be used to support ERA Vietnam’s plans to expand its offices and to secure new project launches and capture more market share.
ERA Vietnam has the right to draw down on the loan from its agreement until June 30, 2023. The loan will mature five years from the drawdown date with a 5% per annum interest rate.
For the six months ended June 30, 2022, ERA Vietnam posted net profit of $0.1 million and revenue of $5.5 million; Eurocapital reported a net loss of $0.03 million and revenue of $0.4 million over the same period.
The proposed acquisitions will drive growth in the Group’s business in Vietnam, strengthen the ERA brand regionally and promote multi-country collaboration across the Group’s different subsidiaries and associated companies in Southeast Asia, says APAC Realty. The company’s increased stake will also allow the company to consolidate both ERA Vietnam and Eurocapital in its financial statements, it adds.
Vietnam CEO reduces stake to 15%
The sellers in this acquisition are Pham Thanh Tuan, chief executive officer of ERA Vietnam; along with Vu Duy Khuong, Vu Duc Hieu, Vu Trung Phong, Tran Dong An and Tong Nam Tran.
Pham is selling 4% of his 19% stake such that his shareholding post-acquisition will be 15% in both ERA Vietnam and Eurocapital. Pham is thus retaining a significant stake in ERA Vietnam and Eurocapital.
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Post-acquisition, the remaining 25% in both ERA Vietnam and Eurocapital will be held by KTP & Partners Joint Stock Company. KTP is an investment holding company and has supported ERA Vietnam’s growth and success since its establishment, says APAC Realty. “KTP is a local strategic partner that will support the Group’s strategy for the Vietnam real estate brokerage market going forward.”
Founded in 2017, ERA Vietnam is based in Ho Chi Minh City. Under the leadership of Pham, the agency has grown its agent base from slightly over 1,500 salespersons as at Dec 31, 2020 to nearly 3,900 salespersons as at Dec 31, 2022.
For its FY2023 pipeline, ERA Vietnam has secured marketing mandates for 23 new home projects with a total of 6,460 units, says APAC Realty.
“The growth capital extended during our initial investment was the catalyst which sparked ERA Vietnam’s tremendous growth over the past two years both in terms of revenues and agent headcount,” says Marcus Chu, chief executive officer of APAC Realty. “We are confident that our second investment will support ERA Vietnam’s next phase of growth and allow us to realise greater value for APAC Realty shareholders over the long-term.”
For its 2023 pipeline, ERA Vietnam has already secured marketing mandates for 23 new home projects with a total of 6,460 units. This includes The 9 Stellars by Sonkim Land, Zeit River Thu Thiem by GS E&C, Cadia by Phat Dat, iD Junction by Tay Ho, and Grand Marina Saigon by Masterise.
2023 plans
Could APAC Realty replicate its success in Vietnam throughout the region? Chu outlines the company’s “majority ownership business model” in a subsequent interview. “Over the past few years, we’ve been making acquisitions.”
APAC Realty holds a 90.6% stake in ERA Indonesia and an 80% stake in ERA Thailand. In Malaysia, APAC Realty invested a total of RM490,000 for a 49% stake in ERA Malaysia, which is 51%-owned by a country master franchisor, owing to regulations there.
APAC Realty harbours a target of $1 billion revenue. It neared this goal in FY2021 ended December, when revenue swelled 87% y-o-y to $739.8 million. “Going beyond Singapore is our ultimate goal in order for us to expand our revenue. If we want to do it in Singapore, we’ll probably have to include all Singapore agents in order to achieve that. But even if you do so, there are also a limited number of new launches and transactions, and [it is] also capped by the population in SIngapore compared to overseas.”
One of the unique selling points of ERA is its regional branding, says Chu. “The franchise to majority-owned company business model is our plan. How fast are we going to do this? It depends on the countries that we are focused on. Right now, our focus is on Vietnam and Indonesia; these two countries are our immediate goal to help us achieve our target.”
Shares in Apac Realty closed at 60 cents on Jan 9.
Photo: Albert Chua/The Edge Singapore
