How FFG became a leading tech venture firm that posted 10x returns over the last 12 months
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The company is reaping the benefits of a selective portfolio strategy in the key south-east Asian market.
Tech venture firm FatFish Group (ASX:FFG) caught the market’s attention in February, with a run of positive news flow that caused its share price to surge.
The gains followed some strong market updates from two of FFG’s fintech subsidiaries, including the launch of Singapore-based BNPL provider Smartfunding and strong revenue growth for online price comparator platform Fatberry Insurance.
From a trading range near 1c in early 2020, shares in FFG ripped higher in February and have consolidated their gains above 10c in early March.
But speaking with Stockhead recently about the company’s history, CEO Kin Wai Lau said the recent momentum is the result of a multi-year strategy to build out a regional tech investment group.
The company traces its roots back to 2012, when it was founded as a tech incubator partner in Singapore.
“Our initial remit was to manage an early-stage startup funding program on behalf of the Singapore government,” Kin said
“But we quickly expanded outside Singapore to south-east Asia, largely because it was the early phase of the digital revolution taking place in those markets.”
“So we saw a very clear opportunity to expand to places like Indonesia and Malaysia – attractive markets with large populations and a fast-growing middle class.”
A few years after launch, FFG listed on the ASX in 2014. At that time, it was one of the first companies to give Australian investors exposure to a listed tech venture model.
Kin said that as an investment group, macro trends play a key role in where the company chooses to allocate capital.
“In that context, we saw an opportunity with gaming in south-east Asia because over the last 5-10 years, everyone became more connected – through both their home line and via smartphones,” he said.
“So we saw that beyond productivity and communication, they’d be looking for entertainment. Then we also saw an opportunity in fintech where people are getting more used to making payments online.”
Until recently, using a credit card over the internet in FFG’s core target markets was “not the norm”, Kin said.
“But we saw that trend going very fast. And it’s a sector that will only continue growing as people get more comfortable shopping online and using their credit card.”
FFG shares jumped again at the end of February after announcing that Smartfunding had entered into a strategic partnership with KryptoPOS, a leading cloud-based point-of sales (POS) software provider that serves more than 5,000 merchants in Malaysia and Indonesia.
The company also holds a stake in gaming platform iCandy Interactive (ASX:ICI), which found success at the end of last year with a popular new mobile gaming title Masketeers: Idle has Fallen.
Having established a footprint in south-east Asia, Kin said that by 2016/17 the FFG group started looking at other global markets where it could “get access to smart ideas and smart people”.
That led to an investment in Abelco, its Sweden-listed subsidiary which recently reported a surge in net profits.
Sweden has a “long heritage and legacy of innovation”, Kin said, as the home of leading international companies like IKEA and Volvo.
“We also faced no language barrier because English is more or less the default language of business there,” he said.
“So now we have that regional footprint and we look for ways to marry those two markets together.”
“For example, there are business innovations in south-east Asia that we could potentially replicate in Europe. So that’s how we ended up where we are today.”
Looking ahead, Kin said FFG will remain focused on a portfolio approach based on different macro indicators.
“When we get feedback from investors, that’s one of the key things they like about our model,” Kin said.
“Most investors understand that a portfolio approach is the best way to de-risk so you don’t have a single point of failure.”
That said, the FFG executive team is also mindful of spreading itself too thin. And more recently, the main focus has been on building out its fintech advantage.
“Our recent focus has largely been on Smartfunding and Fatberry Insurance,” Kin said.
“iCandy obviously gives us exposure to gaming, but that operates as a separate entity now.”
“So fintech and gaming are the two big areas we’re focused on, and 80-90% of our efforts are dedicated towards those markets.
This article was developed in collaboration with FatFish Group, a Stockhead advertiser at the time of publishing.
This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.