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VinaCapital: Unlocking Vietnam for western investors

Published: 00:30 10 Aug 2016 AEST

Hanoi Vietnam
Vietnam’s economy has made substantial progress over recent years

VinaCapital Vietnam Opportunity Fund (LON:VOF) is one of the largest and oldest Vietnam-focused funds.

It provides exposure to the economy's evolution via investment across listed equities, companies in the process of privatisation, private equity and real estate.

The board has been taking action to address the wide discount the shares trade on, including the recent move of listing from AIM to the Main Market of the London Stock Exchange, leading to FTSE index inclusion.

VinaCapital follows a bottom-up equity selection process and in the last year has strengthened its in-house research capabilities.

Investments are made on a three to five-year view. Identification of opportunities, particularly in the private equity and pre-privatisation areas, is facilitated by the group’s established network of relationships in business and government, working closely with investee companies to create value.

Fund manager

The fund managing director and chief executive is Andy Ho.

Ho oversees the capital markets, private equity, fixed income, and venture capital investment teams.

The diversification and investment flexibility is designed to contribute towards the objective of achieving medium- to long-term capital appreciation and investment income, while a high-conviction, concentrated approach to listed equities provides differentiation from more index-focused funds.

VinaCapital provides broad exposure to the Vietnamese economy and growth, across a range of asset classes.

The diversification and investment flexibility is designed to contribute towards the objective of achieving medium- to long-term capital appreciation and investment income, while a high-conviction, concentrated approach to listed equities provides differentiation from more index-focused funds.

While the fund’s mandate permits investment in neighbouring countries, its underlying exposure is almost wholly towards Vietnam.

Substantial progress

Vietnam’s economy has made substantial progress over recent years, according to the group, highlighting that GDP per capita almost doubled between 2010 and 2014, with interest rates and inflation declining significantly from their 2011 peaks and the manufacturing PMI index following a broadly rising trend since 2013.

Fund manager Ho views Vietnam’s forecast economic growth of 6% to 6.5% as sustainable, noting the strong contribution from foreign direct investment – disbursements rose 17.4% to US$14.5bn in 2015 and commitments reached US$22.8bn – which is continuing in 2016.

Investment selection is based on the manager’s assessment of the best risk-adjusted rate of return. New investments are focused on those sectors the manager believes will support Vietnam’s growing economy, such as financial services, real estate, consumer goods for domestic consumption and healthcare.

List of investments

At 30 June 2016, 51.4% of the portfolio was invested in listed equities (including 10.6% in real estate securities and 2.9% in overseas equities), 8% in directly held real estate projects, 9% in operating hotel assets, 13.2% in private equity and 6.9% in OTC stocks, with the balance in cash and bonds.

The group holds stakes in VinaCapital-managed investment companies, VinaLand and Vietnam Infrastructure, rebating the management fees on the investment.

The VinaLand holding was acquired at an average discount of around 44%, compared with the current level of around 31%. A number of VinaCapital’s direct real estate projects are co-investments alongside VinaLand.

Move from AIM

The group completed its move from AIM to the Premium segment of the Main Market of the London Stock Exchange in March 2016.

Listed company exposure is concentrated and high-conviction, with c £300mln of investment spread across just 19 holdings. 

The board has imposed a maximum limit of 20% of NAV on any one investment or project at the time of purchase but, in practice, investments have been appreciably below this level. At the end of June 2016, Vinamilk was the single largest holding and accounted for 14.5% of assets.

The manager has scaled back direct exposure to real estate projects from 16% to around 8% over the last nine months, with a view to exiting altogether eventually. Recently announced divestments include Century 21, Danang Golf and Project Pham Hung.

 

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