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Asian family businesses reap over 30% annual returns

Asian family businesses reap over 30% annual returns

The shares of Asia’s family-owned businesses have returned over 30% per annum on average over different time periods, ranging from three to 10 years.

A Credit Suisse study, which examines 530 family-owned, publicly-listed companies in the region, found that more than 50% of the 30 best-performing companies were from India, coupled with a strong representation of Chinese and Malaysian companies.

These top performing companies offered better top-line growth and cash flow return profiles to stakeholders than the rest of their family-owned counterparts in Asia.

Around 70% of the businesses generated revenue growth of more than 10% annually over the past 10 years. In terms of profitability, nearly 90% of the companies generated cash flow returns on investment of above 10% on a three-year basis.

Surprisingly, none of the 72 Hong Kong-based companies made it to the top 30 list on a total return basis.

Table: Best-performing families in non-Japan Asia using sector relative total shareholder returns since inclusion

The study covered 11 Asia ex-Japan markets and family-owned businesses with a total of over $4 trillion in market capitalisation. A majority of companies were headquartered in China, India and Hong Kong.

From all the Asian family-owned businesses covered in the study, Chinese companies performed the best, with an average return of 20% in terms of share price performance.

This represents a 15% outperformance versus non-family-owned businesses and 10% outperformance versus other Asian family-owned companies.

In fact, the research found that family-owned companies across Asia have been outperforming their local non-family counterparts since 2006.

This follows the global trend, driven by a combination of factors including better top-line growth, higher profit margins, conservative balance sheets and reduced reliance on external funding.

What’s more, Asia-based family-owned businesses have also generated much higher returns than their global peers over the past 10 years, with annual average revenue growth of 19.5%.

North American and European family businesses, in contrast, have generated returns of 6.3% and 7.4% since 2006.

Looking at global figures, out of the top 50 most profitable companies globally, 24 were from Asia, with a total market capitalisation of $748 billion.

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