CVC funeral business bet on the growth of the living market

A large dragon structure at the Nirvana Memorial Park outside the Malaysian capital Kuala Lumpur on June 23. The air-cooled dragon structure stores 6,700 onion units for burning ash. Photo taken on June 22, 2000

HONG KONG, Sept 27 (Reuters Breakingviews) – The concept of nirvana, a transcendent state or escape from suffering, may not sit well with battered market participants today. It’s a different choice for a growing business in an underserved market, though. That’s the goal of European buyout shop CVC Capital Partners, whose business is considering offerings for “death care” services, and whose focus on Southeast Asia is a gauge of broad investor interest in the region’s growing middle class.

CVC bought Nirvana Asia for $1.1 billion in 2016, less than two years after the Malaysia-based group floated in Hong Kong for the same price. Then, he concentrated on selling the main burial plots so that all the families could be laid to rest together, as well as on large burials, abandoning any traditional reluctance to discuss matters such as death and succession.

Nirvana’s sale may now change the situation for potential buyers. The market for death care services, especially the so-called “pre-need” product, is often likened to life insurance – indeed, China Insurance was a cornerstone investor in the company in 2014. In many of Asia’s fast-growing emerging markets, coverage from insurers such as $28 billion Prudential and Richard Lee’s primary rival FW is common.

In fact, in Nirvana’s home and biggest market, Malaysia, life insurance penetration is less than 4%, compared to more than 10% in wealthier places including Singapore and Taiwan, according to a recent filing by FWD.

The $2 billion deal, which equates to the same multiple of 20 times earnings CVC paid in 2016, suggests net profit has been growing at a staggering 12% annual compound rate since that point.

Growth will be hampered by the pandemic’s impact on Nirvana’s sales force’s ability to canvass for new business. At $1.6 billion, compounded growth would have been 9 percent. This is higher than the rate quoted by FWD for the Malaysian life insurance market and would be a more reasonable rate.

In the year In 2014, Nirvana made a glorious Hong Kong debut, dropping 11% on its first day. Southeast Asian investments have been largely overshadowed by euphoria over China’s potential. That is not the case now. This time around, the strong value for Nirvana will help bring life to Southeast Asian conventions.

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Context news

European private equity firm CVC Capital Partners is considering offers for Malaysia-based funeral service provider Nirvana Asia, Reuters reported on September 15, citing sources.

Bidders have entered the second phase of the business, which is selling premium products for early demand, such as a family plot in a cemetery. The price is expected to be between $1.6 billion and $2 billion.

Nirvana Asia It went public in Hong Kong in 2014. It was taken private by CVC in 2016.

Editing by Thomas Shum

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