TBR (To Be Read): US$100 for an AI translation of a fiction book? Count me out
The best thing? It will cost only US$100 (S$128) a book and be done in less than 24 hours. GlobeScribe, founded by former publishers, was launched in early July to translate English fiction titles into French, Spanish, German, Italian and Brazilian Portuguese – with more languages to come – and claims access to 'over one billion native speakers'.
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Business Times
2 hours ago
- Business Times
Will NTT DC Reit recover from its weak debut?
[SINGAPORE] It was a good week for investors in the Singapore market, except perhaps for those who took a chance on the initial public offering (IPO) of NTT DC Real Estate Investment Trust (Reit). The much-hyped data centre trust, which began trading last Monday (Jul 14), ended the week at US$0.95 – or 5 per cent below its IPO price of US$1. With its focus on a hot asset class, and GIC among its cornerstone investors, NTT DC Reit drew a lot of attention when it launched its IPO. Based on the nearly 599.9 million units available, the offering was approximately 4.6 times subscribed. An additional 51.5 million units were over-alloted. NTT DC Reit also came to market at a seemingly opportune moment. For one thing, the Straits Times Index (STI) has been on a tear since the Liberation Day sell-off in April, and has closed above the 4,000 mark on every trading day since Jul 2. On Friday, the local-market benchmark closed at 4,189.50, up nearly 2.5 per cent for the week. There has also been ample appetite in the market recently for Reits that own data centres. In fact, among the seven Reits that are components of the STI, the best performer last week was Keppel DC Reit (KDC) – which rose 4.1 per cent. A NEWSLETTER FOR YOU Tuesday, 12 pm Property Insights Get an exclusive analysis of real estate and property news in Singapore and beyond. Sign Up Sign Up This bump might have been partly due to Maybank initiating coverage on KDC, with a 12-month target price of S$2.40. In a report dated Jul 17, the research house said that KDC – which holds 24 data centres across 10 countries, worth some S$5 billion – is set to benefit from big trends such as digitalisation, cloud migration and the adoption of artificial intelligence. Maybank is forecasting KDC's distribution per unit (DPU) to grow 4.9 per cent a year to 2027, driven by rent escalation and acquisitions. KDC closed Friday at S$2.28, which reflects a 2024 DPU yield of 4.1 per cent. By comparison, NTT DC Reit holds six data centres with an appraised value of nearly US$1.6 billion. At its IPO price, it is forecast to deliver an annualised distribution yield of 7.5 per cent for the nine months to Mar 31, 2026; and a distribution yield of 7.8 per cent for the full year to Mar 31, 2027. So, why did NTT DC Reit have such a lacklustre debut? Where are all the investors who tried to get their hands on its units during the offering? Why is the market not excited about its high projected distribution yield? Rising risks for S-Reits One concern I keep hearing is that NTT DC Reit's projected yield may not be sustainable – because it is based on a 100 per cent payout of its distributable income, and the Reit's capital expenditure requirements may rise in the future. Another concern is that NTT DC Reit faces tenant concentration risks, with its top 10 tenants accounting for 62.6 per cent of its monthly base rent. Worse, its largest tenant – described in its prospectus as a Fortune 100 US automotive company – accounts for 31.5 per cent of its total monthly base rent. Many market watchers assume that NTT DC Reit's largest tenant is Tesla. However, NTT DC Reit's agreements with its customers contain confidentiality provisions that prevent disclosure of their identities. Its prospectus said: 'For many of these customers, it is critical that the geographical locations of the data centres in which (their) equipment, information and data are stored are kept confidential in order to minimise the risk of physical threats and intrusions into the relevant data centre.' The way I see it, the assumption that NTT DC Reit is heavily exposed to Tesla could haunt it in the months ahead – sending a chill down the spines of investors whenever the electric vehicle maker, or its chief executive Elon Musk, makes headlines for the wrong reasons. Responding to questions about this risk, the manager of NTT DC Reit said its largest tenant uses its data centres for mission-critical workloads, and has leases extending to 2033 with no termination clause. The manager added that the tenant is absent from the assets that NTT DC Reit may acquire from the sponsor group over time. '(Therefore), their concentration will only decrease as the Reit continues to make incremental acquisitions.' Another factor that might have contributed to NTT DC Reit's weak debut is the uncertainty about the direction of long-term global interest rates. Ten-year US Treasury bonds currently yield about 4.42 per cent; in 2019, the yield was significantly less than 3 per cent. This is affecting all the Singapore-listed Reits (S-Reits), of course. The iEdge S-Reit Index chalked up a total return of 54.4 per cent during the five-year period up to end-2019, which trounced the STI's total return of 14.9 per cent. The tables turned, however, as interest rates soared following the pandemic; and as companies such as Keppel, Sembcorp Industries and Singtel unlocked value and refocused their businesses. Over the five-year period up to last Friday, the iEdge S-Reit Index returned just 4.6 per cent, while the STI returned 99.3 per cent. The iEdge S-Reit Index has lagged since the beginning of this year as well, with a total return of 5.2 per cent versus STI's total return of 13.4 per cent. While income-oriented investments remain hugely popular with local investors, the most exciting new listings over the next couple of years may well not be in the S-Reit field. Hot data-centre trusts To be clear, I'm not suggesting that NTT DC Reit will not recover from its rocky debut. While higher interest rates since the pandemic have weighed on S-Reits recently, two of the three best-performing components of the iEdge S-Reit Index over the past decade are focused on data centres – namely, KDC (with a total return of 254.4 per cent) and Mapletree Industrial Trust (total return of 133.6 per cent). It is entirely possible, in my view, that NTT DC Reit will eventually find its feet and perform strongly. Of course, much depends on it achieving or surpassing the forecasts and projections in its prospectus, and acquiring an additional asset or two from its sponsor group on terms accretive to its DPU. There is certainly a lot riding on the success of NTT DC Reit. This is, after all, the most significant new listing in the Republic since the Monetary Authority of Singapore formed the Equities Market Review Group last year. The measures announced by the review group so far revolve around spurring demand in the local market, and making it easier for companies to list in Singapore. Perhaps the review group should also look into whether enough is being done to ensure that companies that do list are able to effectively engage with investors, and inclined to quickly address their concerns. Drawing more new listings to the Singapore market will matter only if they are exciting to local investors, and enhance the vibrancy of the market ecosystem.
Business Times
2 hours ago
- Business Times
Money in, promises out: Red flags in Vietnam's PE and VC dealmaking
[HO CHI MINH CITY] A planned stake sale by shareholders of EQuest Education, one of Vietnam's biggest private education groups, is facing setbacks after a school acquisition in Hanoi collapsed, in a case highlighting the broader risks of doing business in the country's fast-growing, but often unpredictable, business sector. KKR, the largest shareholder with a 54.8 per cent stake in EQuest, held through its Singapore-based vehicle Equinox II, invested more than US$200 million into the Vietnamese group in two funding rounds in 2021 and 2023. The PE juggernaut and other shareholders of EQuest were eyeing a stake sale this year, in hopes of raising funds and paving the way for KKR's exit four to five years since its investment in EQuest, sources familiar with the matter told The Business Times. That plan now hangs in limbo. The dispute has delayed negotiations and the due diligence process, causing uncertainties, particularly over valuation-related matters, a source noted. KKR did not respond to BT's queries. In 2021, a member company of EQuest signed deals worth one trillion dong (S$49 million) to acquire 80 per cent stakes in two schools in Hanoi. At the time, EQuest had already consolidated some 20 education institutions in Vietnam. A NEWSLETTER FOR YOU Friday, 8.30 am Asean Business Business insights centering on South-east Asia's fast-growing economies. Sign Up Sign Up The schools were part of the Ngoi Sao school system, a prominent private education network co-founded by Pham Bich Nga, a 66-year-old educator. The transaction for the second school, which was established in 2023, hit a deadlock. In a statement issued on Wednesday (Jul 16), EQuest alleged that Nga and her team withdrew funds from the first school and declined to transfer the agreed stake and management control of the second school. EQuest said it has lodged a police report on the matter, alleging embezzlement, misappropriation and fraud. In a Facebook post on Jul 16, Nguyen Quoc Toan, co-founder, chairman and chief executive of EQuest Education, alleged that the former partners claimed they 'did not understand' or had a 'different interpretation' of the contract, while retaining all the investor's funds over the past few years to develop the schools. A day earlier on Jul 15, Nga wrote on Facebook that she had proactively ended the partnership, citing major differences in educational direction and operational culture during their 2022 collaboration. 'Trying to forcibly maintain a partnership when the other party no longer wishes to continue – or attempting to claim what doesn't belong to them – cannot lead to a positive outcome for either side,' she wrote. Familiar red flags The case underscores the travails of doing business in Vietnam, which experts warn could weigh on investor confidence and undermine dealmaking in the long term. In fact, observers say disputes after deal closure between investors and Vietnamese target firms are fairly common, especially in PE and VC circles; legal experts cite mismatched expectations and poor mutual understanding as key sources of friction. David Harrison, a partner for global law firm Hogan Lovells in Ho Chi Minh City, said: 'We do a lot of transactions with Vietnamese targets – family businesses in many cases – where there's no law firm on the other side to help them understand what they're signing.' They may be eager to close the deal and secure cash for their business by taking a pragmatic view, which, in the long run, may not serve their best interests, he added. Tran Duy Canh, managing partner at Dentons LuatViet in Ho Chi Minh City, said post-deal disputes often arise when critical conditions in sale agreements are not met. These do not always arise out of bad faith; more often, it comes from 'overconfidence' or misunderstanding, he said, adding that some local firms assume they can sort things out later or renegotiate if the deal veers off course. One notable case involved Vietnamese plastics firm Rang Dong and Japanese investor Sojitz Pla-Net, over a 2017 deal in which Sojitz bought five million shares in Rang Dong's Long An Plastic unit for more than 174 billion dong. Sojitz later alleged that Rang Dong failed to meet post-closing obligations. On its part, the Vietnamese firm claimed that there were 'unreasonable' terms in the contract, such as requiring it to sign employment contracts with 700 people that Sojitz appointed. Their conflict lasted about three years, from 2020 to 2023, including arbitration at the Singapore International Arbitration Centre in 2022 and subsequent onshore court proceedings in Vietnam. The ruling ultimately went Sojitz's way. However, it remains uncertain whether Rang Dong can fulfil its financial obligations to Sojitz, because the Vietnamese company is now facing bankruptcy proceedings. Lessons from soured deals Such cases worry investors, who often bear the bulk of financial losses and face lengthy investigations and legal battles. Legal counsel typically recommend mediation over taking the matter to court, especially when both sides genuinely want to resolve the misunderstanding. Another high-profile case was VinaCapital's Vietnam Opportunity Fund (VOF) investing US$32.5 million for a 34 per cent stake in Vietnamese egg and poultry giant Ba Huan in early 2018. The deal quickly unravelled after founder Pham Thi Huan publicly sought to cancel it, claiming the investor's terms risked eroding family control. She claimed VinaCapital imposed a 22 per cent annual return rate without consent, and that the Vietnamese contract included clauses missing from the English version, such as penalties for missed targets and a possible transfer of at least 51 per cent of the company's shares. VinaCapital maintained that all terms were lawful and in line with market norms, but later agreed to an amicable exit from the deal. Vu Nguyen Khanh, managing director and lead portfolio manager at VinaCapital's VOF, told BT: 'We may have a very clear view of what those terms mean, but at the same time, we want to make sure that the person on the other side of the table also understands that.' Founded in 2003 and managed by VinaCapital, VOF is a closed-ended investment trust listed on the London Stock Exchange with net assets exceeding US$970 million as at the end of June; it invests in listed equities and private companies in Vietnam. Khanh said the fund has invested in more than 200 companies in Vietnam over the past two decades. Harrison from Hogan Lovells stressed the importance of robust financial, legal and technical due diligence and forging direct ties with local partners, rather than relying on 30- to 40-page term sheets drafted for deals in other markets. He also highlighted the value of including downside protection mechanisms for investors – in the form of put rights, redemption rights, pull-back clauses, or earn-outs, for example – in case deals do not go as expected. 'The diligence, monitoring and the engagement process throughout the investment should pick up a lot of the flags,' VOF's Khanh added. He said if a situation calls for renegotiation, the first step should be to revisit the original agreements, which ought to include an avenue to resolve the issues before turning to the court. 'At the end of the day, our objective as investors is to create value and exit at a return. Disputes rarely create that kind of return,' he noted. Cultural gaps Hoang Minh Duc, special counsel at Duane Morris Vietnam, said investors are usually open to dialogue if founders stay transparent and actively work towards the best solutions for the businesses when obligations become difficult to meet. Drawing on his experience advising deals between foreign VCs and Vietnamese startups, he said many disputes stem from cultural gaps between Vietnamese business norms and those in more developed markets. He noted that Vietnamese startup founders often sign agreements without fully grasping the terms, sometimes without legal counsel or under guidance by inexperienced advisors. And when problems arise, some try to sidestep the investors. 'Vietnamese founders often value flexibility, while most venture capital investors, many of whom are from Singapore, prioritise transparency and an agreed structure,' he said, adding: 'This cultural gap can lead to painful partings, which may ultimately undermine dealmaking in Vietnam over the long term.'
Business Times
2 hours ago
- Business Times
Look beyond AI hype to find compelling semiconductor investments as supply chains shift
[SINGAPORE] Artificial intelligence (AI) is undeniably full of hype. In fact, it has become almost impossible, even, for seasoned professionals to keep up with the latest developments. Every week seems to bring a new wave of language models, foundation models, generative tools and autonomous agents. Recently, I participated in a panel discussion focused on practical approaches to navigating beyond the AI frenzy. One of the most important points we discussed was precisely this: the need to avoid chasing the crowded trends and instead look for less obvious, more sustainable opportunities. In this regard, semiconductors have surfaced as one of the most intriguing fields deserving more attention. Few notable startups have emerged in Singapore and South-east Asia, and venture funding has traditionally concentrated elsewhere. Yet increasingly, I feel the semiconductor AI sector in South-east Asia and India presents compelling venture capital opportunities, especially as global supply chains undergo fundamental restructuring. While AI software markets face intense competition and command all the media attention, infrastructure-enabling semiconductors offer a less-crowded investment landscape, bolstered by substantial government backing and structural demand shifts. The region's expanding manufacturing capabilities, combined with the accelerating supply chain diversification driven by US-China trade tensions, create unique windows for entrepreneurs to capture value. This could be by developing cutting-edge solutions, or by being fast followers who tap into the demand created by this geopolitical and economic realignment. BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up Government support Singapore's share of the global semiconductor output – at about 10 per cent – along with Malaysia's dominant role in packaging and assembly provide a strong foundation for the region's ambitions. Malaysia has an ambitious plan to create local semiconductor champions in integrated circuit design, and recently worked with ARM to provide semiconductor companies with critical intellectual properties for chip development. This builds on Penang's existing ecosystem around backend expertise. In fact, IC design companies listed on the Kuala Lumpur Stock Exchange have recently commanded surprisingly high valuation multiples. Other emerging players in the region have been building robust domestic ecosystems. India is deploying incentives to accelerate manufacturing and design capabilities, while Vietnam has attracted nearly 100 business entities across different parts of the value chain in recent years. Indonesia, for its part, is leveraging its abundant reserves of raw materials such as nickel and bauxite, which are critical for semiconductor and battery supply chains. Government policies increasingly favour local content and domestic value capture. We have heard that Malaysia is considering policies that require a higher share of local content in data centres. In addition, Vietnam's tariff structures tie import duties to domestic component usage, creating built-in demand for regional suppliers. India, driven partly by national security considerations that echo policy trends in the United States and Europe, is encouraging domestic players to build capability in critical sectors. Beyond government push factors, there is also a powerful pull: Western buyers, eager to diversify away from overreliance on Chinese supply chains under a 'China +1' strategy, are creating predictable and growing demand for new suppliers in South-east Asia and India. All of these considerations create unprecedented opportunities for entrepreneurs and investors who are willing to look past the obvious headlines. Talent arbitrage, returning expertise One of the perennial questions about the semiconductor sector in our region is whether there is sufficient talent to support ambitious scaling. On the one hand, we have encouraging examples such as Tan Lip-Bu, the Malaysia-born CEO of Intel, and the late Sehat Sutardja, the Indonesia-born co-founder of Marvell Technology. Such individuals show the potential of South-east Asian talent on the world stage. On the other hand, it is true that most countries here are starting from a relatively low base in terms of specialised semiconductor expertise. The good news is that governments are responding decisively. Vietnam is targeting the training of 50,000 semiconductor engineers by 2030. Thailand aims for 86,000 by the same year, and the Philippines has set a goal of 128,000 by 2028. These targets are ambitious but realistic, particularly because the average cost of technical talent in these markets remains 30 to 50 per cent lower than in Silicon Valley or other mature hubs. More critically, we are seeing a steady return of experienced professionals, engineers and managers who built their careers in the US, Taiwan, South Korea or China. Historically, Asian talent has held a strong position in the global semiconductor industry due to the region's emphasis on science, technology, engineering and mathematics (Stem) education and rigorous technical training. India and Vietnam already have vibrant IC design-outsourcing sectors that are expected to grow even faster, thanks to supportive domestic policies. In particular, India has 20 per cent of the world's semiconductor design workforce. The term 'sea turtles', once used mainly to describe Chinese professionals returning from overseas, has now become familiar in South-east Asia and India as well. Over the next decade, I believe we will see more world-class talent returning home with experience, know-how and relationships, combining these with local cost advantages to build globally relevant companies. Technology pragmatism wins over ambition While Singapore often showcases world-class technology opportunities, the reality is that true, globally disruptive technology breakthroughs remain rare across the broader region. But this is not a disadvantage; rather, it is an opportunity. For anyone who has studied the development of Taiwan and China over the past 30 years, one lesson is clear: pragmatism often wins over pure technological ambition. Earlier-generation suppliers that focused on import substitution, often with slightly less advanced technology but with strong cost advantages, responsive local support and more effective communication, laid the groundwork for what eventually became Shenzhen's ecosystem of world-class manufacturers. This pattern is repeating itself across South-east Asia and India, but at an accelerated pace. In many AI applications, there is simply no need for the bleeding edge of process technology. When you combine this pragmatic approach to technology with a favourable policy environment and global supply chain realignment, it levels the playing field for emerging-market manufacturers and design houses. Companies that can deliver reliable, cost-effective solutions with strong local support stand to grow rapidly, without having to fight head-on with TSMC or Samsung on leading-edge process nodes. The convergence of supply chain diversification, supportive policy frameworks, returning talent and a pragmatic approach to technology adoption is creating a once-in-a-generation investment environment. Against this backdrop, we made the decision to invest in BigEndian Semiconductors in India, and are actively exploring many other opportunities across the region. Investors can capitalise on this 'infrastructure play' by backing companies that leverage manufacturing scale, affordable and growing technical talent pools, as well as strong local demand. It is not difficult to imagine that the next generation of world-class semiconductor companies could emerge right here, being more cost-effective, more numerous and perhaps more pragmatic than their predecessors. Of course, the question remains: where exactly will these companies be found? That is the hard job for investors to figure out. But the signal is clear: while everyone else is chasing the AI hype, the real structural opportunity may be quietly taking shape in the supply chains and factories in our own neighbourhood. The writer is partner, investment at Vertex Ventures South-east Asia and India
