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Bukalapak and Sea partner with old economy tycoons – positive for ASEAN tech

  • The aspirants for ASEAN 'super app' status are allying with old economy giants

  • Sea is allied to Kuok – a the vast conglomerate with strong ties to government. Bukalapak has tied up with Salim Group

  • We are bullish on ASEAN tech, which is avoiding the pitfalls that Chinese tech has faced

Bukalapak and Sea partner with old economy tycoons – positive for ASEAN tech
Nirgunan Tiruchelvam
Nirgunan Tiruchelvam

Head of Consumers Equity Research

Tellimer Research
3 September 2021
Published byTellimer Research

Two of ASEAN's major emerging tech companies (known as 'Baby Amazons'), Sea Ltd and Bukalapak, are partnering with 'old economy' giants, Kuok Group and Salim Group, respectively.

We see this alliance between the old and new economies – the former based on the trading of goods (Kuok Group processes and supplies sugar, for instance), the latter driven by the exchange of information – as a positive development for the Baby Amazons, and one that should accelerate their growth and potentially protect them from regulatory backlash.

In China, tech companies are reeling from regulatory attacks, but Kuok Group and Salim Group (in the guise of its subsidiary, IndoFood Group) have held government concessions in Southeast Asia for many years. They are adept at managing relationships with regulators, which appears to be a failing of many tech companies.

Bukalapak-Salim partnership

E-commerce company Bukalapak – which raised US$1.5bn in Indonesia's largest IPO, in August – is partnering with Anthoni Salim's vast Salim conglomerate, which operates in plantations, banking, retail and telecommunications. Bukalapak announced the link-up in its maiden results release on Wednesday.

The partnership could involve joint marketing of Bukalapak's e-commerce network. Bukalapak operates in one-tenth of Indonesia's cornershops (known as warungs). Salim Group owns IndoFood Group, whose convenience store network covers more than 80% of Indonesia's population. It distributes noodles, flour and vegetable oil throughout the archipelago of 270mn people.

PT Elang Mahkota Teknologi (Emtek) is Bukalapak's largest shareholder. The Sariaatmadja family owns 23% of Emtek and Anthoni Salim holds a 9% stake.

Kuok-Sea partnership

Sea Ltd, meanwhile, dominates e-commerce, gaming and payments in ASEAN, and has a fledgling alliance with the Kuok Group.

Kuok Group is a family-controlled conglomerate, with interests in sugar, palm oil, hotels and real estate. Its founder is 97-year-old Robert Kuok, Malaysia’s richest man. His nephew Kuok Khoon Hong runs Wilmar International, the largest palm oil processor.

Robert Kuok started his career in 1942 as an office boy with Mitsubishi’s rice trading unit during the Japanese occupation of Singapore. After the war, Kuok prospered as a rice trader, acquiring the agency for rice supply in British Malaya. Kuok's prosperity was rooted in securing government concessions for the supply of essential items.

The Kuok family were earlier investors in Sea – which was founded by Forrest Li, a Chinese national with a Stanford MBA – and may now have a total stake of 9%. It has proved to be one of the family's finest investments, with Sea's market cap now nine times that of Wilmar, Kuok's listed flagship. In fact, one-third of the Kuok family's net worth could now be attributed to its Sea investment.

Market capitalisation

The partnership between Li and the Kuok Group has now been cemented, with Li sitting on the board of the Shangri-La Group, Kuok’s flagship. We could well see joint marketing of Sea's e-commerce and payments services, given the strength of Kuok's distribution.

We welcome both of these alliances, and are positive on Sea and Bukalapak due to these developments.

Another example of a link between the old economy and tech companies in ASEAN is Djarum Group of Indonesia, a tobacco firm with interests in multiple other sectors, owned by the billionaire Hartono brothers. Djarum is considering an IPO of its e-commerce start-up, Blibli.

Sea v Kuok

Bukalapak v Salim Group