Here comes the sauce
Just to elaborate a bit, Masan Consumer is the current market leader in Vietnam when it comes to fish, chili, and soya sauces, and is the second largest producer when it comes to branded instant noodles. Masan is already one of the largest private companies in Vietnam, and it is riding a fairly long wave of Vietnamese economic expansion. The company's total revenue increased to around $272 million in 2010 from $96 million in 2008, and its net profit jumped to $60 million in 2010 from $19 million in 2008. The net profit margin surged to around 22% in 2010 from 19.8% in 2008. As Vietnam has grown, so has Masan, it seems.
But can KKR justify its purchase?
Masan represents a pretty good play at sustained Asian growth. That much is obvious, but does KKR have the financial backup to justify its purchase? Let's see.
The very first thing that I want to check with KKR is if it is efficiently using its invested capital and whether it is seeing strong returns on its investments. That'll give us a flavor for how well the company is managing its money.
Investors who are considering taking a slice of KKR might want to take a look at the return on assets metric. Last year, KKR's ROA was around 22%, which is pretty good when compared with those of some of its private equity brethren. Fortress Investment Group
So, the company is efficiently using capital, but can it afford the deal? Well, its debt-to-equity ratio dropped to 4.1% in 2010 from 8% in 2009. KKR can probably afford to lever up a bit and swallow some smaller players. Even its current ratio has been loitering above 3, suggesting that liquidity is in decent shape.
So, what's the deal about the deal?
To sum it up, KKR is in a good position to do some shopping. Masan Consumer seems to have great potential, which is further evidenced by the fact that it has already been able to raise around $500 million in private equity over the past couple of years.
In addition, Asian markets are bound to grow over time and are likely to play a major role in the world economy. This is the fourth Asian investment of KKR and a well-thought one since it gives even better Asian leverage to KKR.
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Fool contributor Suman Chatterjee does not own shares of any of the companies mentioned in this article. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.