AC Ventures

WHO WE ARE
The world has continued to experience tremendous digital transformation, opening up new business opportunities to provide better products and services that would be simpler and more accessible to a broader consumer market. Digitalization and interconnectivity have integrated man and machine, the physical and the virtual, boosting capabilities and efficiencies and disrupting the way industry incumbents are doing things. Big data, artificial intelligence, machine learning, edge computing, and Internet-of-Things are some of the technology trends that could disrupt existing industries, some of which Ayala has presence in already. AC Ventures aims to lay the foundation for Ayala amid the fast pace at which disruptive changes are taking place. It is Ayala’s platform for peeking into new technologies and business models that are relevant to Ayala.

AC Ventures brings together Ayala’s various strategic investments. It aims to be an enabler by investing in adjacent businesses that are complementary to Ayala’s existing business units and a pathfinder by investing in new sectors, emerging trends, and innovative businesses. Through AC Ventures, Ayala intends to embrace disruptive technologies and business models as it endeavors to grow its existing businesses and explore new business verticals. In 2019, AC Ventures together with various Ayala group business units, set up a US$195 million fund called Ayala Corporation Technology Innovation Venture Fund or ACTIVE Fund. The fund is advised by Globe’s corporate venture capital firm, Kickstart Ventures.

AC Ventures holds a 43.9 percent stake in Zalora Philippines, the largest fashion and lifestyle ecommerce platform in the country as well as a 7.6 percent stake in Mynt, a fintech venture with Globe and Ant Financial of the Alibaba Group that operates the fast-rising digital wallet GCash. In 2019, AC Ventures in partnership with BPI and the Indivara Group of Indonesia invested in fintech platform Cartera Exchange.

Further, AC Ventures oversees Ayala’s offshore investments through AG Holdings. Over the past several years, AG Holdings has served as Ayala’s vehicle for its investments in the US and Asia as well as its interests in private equity and real estate funds, property co-investments, and technology business ventures. In 2019, Ayala made its first significant foray into Myanmar through AG Holdings, investing US$237.5 million for a 20 percent stake in diversified conglomerate Yoma group.

MARKET OUTLOOK
The ASEAN region holds tremendous potential in reaping the benefits of this digital shift, with a young and tech-savvy population boosted by improving economic fundamentals. According to a 2019 study by Google and Singapore sovereign fund Temasek, the ASEAN Internet economy has attained US$100 billion of gross merchandise value in 2019, a more than three-fold increase over only four years. Additionally, it is projected to reach US$300 billion by 2025 at the current run rate. This trend is driven by 360 million Southeast Asians who use the internet, 90 percent of whom access via their mobile phones. Indonesia and Vietnam had the highest growth, increasing their internet economies four-fold since 2015. These were followed by the Philippines, Thailand, Malaysia, and Singapore. The main use cases driving the digital economy are e-commerce, ride-hailing, online travel, and online media, spaces where AC Ventures holds interest in.

The same study cites that the internet economy in the Philippines has a lot of upside potential among the six largest ASEAN economies. It is expected to grow to US$25 billion by 2025. The country continues to have the second largest internet user base of 68 million users in Southeast Asia. However, challenges such as the speed and affordability of internet access and the insufficient adoption of digital payment solutions continue to persist. AC Ventures’ fintech investments in Mynt and Cartera aim to address the adoption gap and push for increased financial inclusion in the country.

Lastly, Myanmar has moved to liberalize its economy and catch up with its ASEAN counterparts. Myanmar’s underpenetrated market is the second fastest growing in the region, with GDP growth of over six percent over the last three years. With its unique geographic location between India and to the west China to the north, Myanmar incentivizes the construction of multiple infrastructure projects and Special Economic Zones. Its government’s broad liberalization initiatives have also opened several key sectors to foreign investments, with real estate alone acquiring over US$4 billion in foreign investments since 2012 when Myanmar transitioned to a democratic rule. Ayala’s investment in the Yoma group is a testament to its confidence in the country’s economic progress.

Zalora Philippines
In 2019, Zalora Philippines continued its growth momentum as net merchandise value (NMV) grew over 55 percent year-on-year. Zalora registered its highest NMV level to date on its 11.11 sale event in November 2019. This achievement is anchored on Zalora Philippines’ expansion initiatives, particularly in its product assortment with new key brands listed locally and cross-listed from the regional warehouse in Malaysia. During the year, Zalora Philippines through AC Infrastructure, started construction of a new state-of-the-art e-fulfillment center. The new facility is set to double Zalora Philippines’ productivity with investments in automation and latest technologies.

Zalora Philippines also further built on its omnichannel strategy, complementing its online shopping platform with physical Zalora Pop-up Stores and Click+Connect Kiosks in Ayala Malls. Zalora Pop-up Stores elevated the customer’s shopping experience with in-store features such as the virtual fitting room, customization booths, and weekly fitness classes with partner gyms.

Mynt
In 2019, Mynt continued to gain ground in embedding fintech in daily life, leveraging on the smartphone savvy and technology-enabled lifestyle of the Filipino. Last year, Mynt’s GCash app surpassed competition in the Philippine mobile wallet space, recording a 2.5x year-on-year growth in monthly transacting users. This increasing adoption was boosted by the broadening of the GCash ecosystem, with 75,000 accepting merchants and 30,000 cash-in agents by year-end, enabling transaction growth to cash-in, buy load, transfer cash, pay monthly bills, borrow money, buy insurance, and invest in funds. Mynt also launched new use cases such as GSave, a mobile money savings feature earning high interest rates enabled by CIMB Bank, and GCash Forest, which engaged users to help fund tree planting efforts in the Ipo watershed in Norzagaray, Bulacan. Moving forward, Mynt aims to solidify its position as the e-wallet provider of choice, with a strong, secure system, a wider partner network, and use cases that resolve pain points or expedite the flow of finance in the life of the Filipino.

Cartera
In July 2019, AC Ventures invested in a 25.5 percent stake in Cartera, another fintech venture in partnership with BPI and the Indivara Group, one of the largest technology investment holding companies in Indonesia.

Cartera aims to provide a digital payment and loyalty exchange platform which integrates various payment systems, including e-wallets, credit cards, and banks. The Cartera platform will have the capability to allow for interoperability between different payment ecosystems, which would promote a more extensive adoption of digital payments in the country.

ACTIVE Fund
AC Ventures committed to invest US$100 million out of the US$195 million towards ACTIVE Fund, a venture capital fund to be formed by the Ayala group. The fund is a technology-focused fund to be formed in partnership with Kickstart Ventures. ACTIVE Fund will invest globally in the areas of data and analytics, machine learning, artificial intelligence, cloud computing, fintech, automation, real estate, retail, transport, energy, water, and health and wellness. Through the ACTIVE Fund, the Ayala group hopes to build on an ecosystem that can provide visibility into these emerging trends and gear up its businesses for the future.

Yoma Group
In November 2019, AG Holdings, through its subsidiary VIP Infrastructure Holdings Inc., invested in Myanmar-based Yoma group through the acquisition of a 20 percent stake in Yoma Strategic Holdings and another 20 percent stake in First Myanmar Investment for US$237.5 million.

Founded by Serge Pun in 1962, the Yoma group has over 30 different subsidiaries with operations primarily in Myanmar and has listed companies in the Singapore and Myanmar stock exchanges.The transaction supports Ayala’s strategy to pursue international expansion opportunistically, particularly in markets and sectors where it can bring its strengths and expertise. Myanmar is an underpenetrated frontier market with a promising economic growth story, supported by its government’s broad liberalization initiatives. As a diversified conglomerate in Myanmar with overlapping interests in real estate, power, financial services, automotive, and healthcare, the Yoma group will serve as Ayala’s platform for strategic investments in Myanmar.