VinaCapital Vietnam Opportunity Fund Limited
Andy Ho – Managing Director
VinaCapital Investor Conference
16 October 2014
Hanoi, Vietnam
1
Disclaimer
The information contained herein has been prepared by VinaCapital Investment Management Limited (the “Company") and is subject to updating,
completion, revision, further verification and amendment without notice.
The information contained herein has not been approved by any listing authority or any investment regulator. The information does not constitute
or form part of any offer for sale or solicitation of any offer to buy or subscribe for any securities nor shall they or any part of them form the basis
of or be relied on in connection with, or act as any inducement to enter into, any contract or commitment whatsoever. Forward-looking
information is based on the estimates and opinions of the Company's at the time the statements are made. The Company assumes no obligation to
confirm or update forward-looking statements should circumstances or management's estimates or opinions change.
No undertaking, representation, warranty or other assurance, express or implied, is made or given by or on behalf of the Company or any of its
directors, officers, partners, employees, agents or advisers or any other person as to the accuracy or completeness of the information or opinions
contained herein and no responsibility or liability is accepted by any of them for any such information or opinions or for any errors, omissions,
misstatements, negligence or otherwise for any other communication written or otherwise.
The information herein may not be reproduced, re-distributed or passed to any other person or published in whole or in part for any purpose. By
accepting receipt of this document, you agree to be bound by the limitations and restrictions set out above.
Neither these pages nor any copy of them may be taken or transmitted into or distributed in any jurisdiction where the distribution of such
material would be prohibited under the jurisdiction’s applicable securities laws. Any failure to comply with this restriction may constitute a
violation of national securities laws.
2
Contents
1. Macroeconomic review
2. Performance
3. 2014 performance highlights
4. Top holdings
5. Strategy going forward
6. Appendix
3
How our view on risk have evolved
Last year: Investing in Vietnam, the risks…
What we saw happen over the course of the year…
Macroeconomic risks:
Concerning the economy:
• Currency devaluation
• Currency remains stable with 1-2% devaluation
• Inflation
• Inflation is at historical lows and forecast to remain so
• Banking system
• But banking system reform progress has been slow
Fund risks:
Concerning Vietnam funds:
• Lack of returns
• Returns have outperformed regional markets thanks
to a strong listed equities market
• Discount to NAV widens
• Shares are illiquid
• Investments are illiquid
• Discount levels are narrowing particularly for capital
markets focused funds
• Liquidity has improved in line with the listed equities
market
• Strong level of interest from domestic and
international investors address investment liquidity
4
Investing in Vietnam – the macroeconomic risks
The current market trends depend upon the continuation of declining inflation, falling interest rates and a stable
currency.
A market reversal is a possibility in the event of policy decisions that interrupt the current course.
The major risk revolves around the return of inflation and it can materialize from a variety of sources including:
Monetary policy
• Loose monetary policy leading to excessive credit growth and a return of inflation.
Fiscal policy
• Attempts to stimulate economic growth with aggressive fiscal policy resulting in a
return of inflation.
Rising interest rates
• Monetary expansion to finance the deficit leading to a high costs of funding.
Weak consumer demand
• Continued weak aggregate demand resulting in stimulus packages that exert upward
pressure on price levels.
5
Investing in Vietnam – growth and returns
•
GDP growth
•
•
•
VN Index
•
•
NAV growth
•
•
Increase in share price
•
Increase in volume traded
•
•
GDP expanded 6.19% in the Q3 2014 over the same quarter of the previous year.
GDP growth rate averaged 6.13% from 2000 until 2014, reaching an all time high of
8.46% in Q4 2007 and a record low of 3.14% in Q1 2009.
We project a GDP growth rate at 5.5% – 6.0% for 2014.
The VN Index continues to outperform regional peers, having increased 20.4% in USD
terms over calendar year 2013.
The index climbed a further 25.6% year-to-date to 31 Aug 2014, in USD terms.
VOF NAV / share movement (and Capital Markets portfolio movement):
•
CY2014 YTD – increased by 16.9%, Capital Markets portfolio increased 26.5%.1
•
FY2014 – increased by 14.2%, Capital Markets portfolio increased 24.3%.
•
FY2013 – increased by 16.7%, Capital Markets portfolio increased 22.3%.
VOF NAV / share as of 30 Sep 2014 was USD3.49.
VOF share price movement:
•
FY2014 – increased by 17.7%
•
FY2013 – increased by 43.9%
11 Oct 2014, VOF share price was USD2.70 per share
USD1.6m average per day
Second highest only after the VN ETF for VN focused funds
Source : Government Statistics Office of Vietnam (GSO), Bloomberg
1. CY2014 YTD up to 30 Aug 2014. FY2014 and FY2013 is 1 Jul to 30 Jun of each year. Capital Markets includes Listed and OTC securities.
6
VN Index and 3yr Vietnam Government Bonds
The VN Index is at 5 year highs off the back of high volumes, while bond yields continue to decline.
Source : Bloomberg 08 Oct 2014. VN Index and VN government bonds (3 year tenor) auction midprice.
7
Capital market review
VN Index performance
The market performed strongly, closing at 637 by the end of
August (up 7% MoM, 26% CYTD, 10% FYTD) and
outperforming regional markets with rising liquidity.
• Main index movers (CYTD 2014) were GAS (up 86%), VIC
(26%), VCB (22%), PVD (79%), HPG (62%), FPT (
(53%) while BID (down 21%), DPM (-20%), VNM (-6%)
were among underperformers.
─ Oil and gas, construction material, brokerage
outperformed thanks to high earnings growth while
agriculture lagged on current down trend of
agriculture products. Consumers were also weak due
to low retail consumption.
31 August 2014
• Most of the increase was due to P/E expansion. Market
12-month trailing P/E reached 15.9x (Aug-end), up from
Number of tickers
12x at 2013-end with discount to regional markets
Index
narrowing to 16% (from 30%).
% change vs. 31 December 2013
─ Earnings growth for Vietnam stocks remains modest at
Market cap (USDb)
3% in 2014.
• Main drivers for the increase were declining inflation,
P/E (x)
lower interest rate and a stable macro conditions.
P/B (x)
─ Inflation bottomed at 4.3% YoY in August amid weak
ROE (%)
local consumption and low global oil price. This
coupled with growing surplus trade balance has
Avg. daily trading value
resulted in Moody’s recent upgrade of Vietnam credit
3 months (USDm)
rating to B1.
as % of market cap
HOSE
HNX
Total
308
388
696
636.7
87.0
26%
28%
53.6
6.7
60.3
15.9
15.0
15.8
2.1
1.2
2.0
13.4
7.8
12.7
57.8
0.1%
31.0
0.5%
88.8
0.1%
8
Capital market review
• Early sign of economic recovery. Production recovered with
PMI staying above 50 for 12 consecutive months.
• Strong cash flow into public equities . Declining deposit rates
(4.8-5.0%) urging more local money towards the stock market.
• Foreign investors were very active with YTD Aug 2014 net
inflow of USD327m thanks to lower valuations vs. regional
markets. However, they turned to be net-sellers in August
(USD15m). This could simply be short-term profit-taking
activities as the net-sell amount was much smaller than the
net-purchase amount from April to July, a period of recovery
after the China tension.
• Although the progress of the Trans-Pacific Partnership and
extension of foreign room limits have been below expectation.
Market outlook
• Our outlook for the VN Index toward the end of 2014 is
positive and could be higher than today with a potential for
further growth in 2015 (driven by earnings growth).
• Earnings growth estimate for Vietnam stocks is 3% in 2014 and
10% in 2015.
• Downside risks are the return of China related issues.
Trailing P/E: VN saw the most improvement.
21.0 20.7
20.7
16.0
17.2
18.0
12.2
Vietnam
Indonesia
Philippines
Aug-14
14.5
Thailand
17.0 17.8
Malaysia
Dec-13
Bond yield (3 year): VN saw a sharp decline
7.5
7.7 7.8
5.4
Vietnam
Indonesia
3.2 2.9
2.6 2.6
Philippines
Aug-14
Dec-13
Thai
3.5 3.4
Malaysia
Stock market performance: Jan-Aug 2014
26%
20%
20%
20%
0%
Vietnam
Indonesia
Philippinnes
Thailand
Malaysia
Currency appreciation / depreciation
0%
1%
Vietnam
-5%
Indonesia
-4%
Philippines
Thailand
-4%
Malaysia
9
VND compared to other regional currencies – relative volatility since Jan 2012
The VND continues to remain one of the most stable currencies against the USD compared to regional peers.
140
130
120
VND
IDR
THB
110
MYR
INR
PHP
100
90
80
Jan-12
Apr-12
Jul-12
Oct-12
Jan-13
Apr-13
Jul-13
Oct-13
Jan-14
Source : Bloomberg. Period 1 Jan 2013 to 30 Sep 2014, All currencies rebased to 100.
Apr-14
Jul-14
10
Economic prospects for the next 12 months
Political situation
• Stability continues to prevail. Next Party Congress in early 2016 will pick new leadership team.
• Geo-political tensions with China have abated with early removal of oil rig in July.
Economic policy framework
• Major unresolved problems:
Non-performing loans
– Vietnam Asset Management Company has bought USD2.8 BN of NPLs as of end August 2014.
– The goal is to purchase USD3.3 – 4.7 BN at the end of 2014.
– VAMC plans to start auctioning bad debts in H2 2014.
– Foreign investors are interested in buying NPLs, and a framework is being developed to facilitate their participation.
State owned enterprises
– Accounting for 35% of GDP, but less efficient than domestic private or FDI sectors.
– Reforms are difficult: involvement of powerful interest groups.
– In a bid to reinvigorate the reform program, the Prime Minister has set an ambitious goal of equitizing 432 SOEs in
2014-2015 (versus 180 over 2011-2013).
– So far progress has been slow. Major forthcoming IPOs: Vietnam Airlines (Nov 2014) , Mobifone (2015)
11
Economic prospects for the next 12 months
Fiscal policy
• Fiscal deficit to remain significant in 2014 – 2015, between 5.0% – 5.5 % of GDP.
• Due to a need to expand government spending and public investment to boost growth.
– Injection of capital into VAMC so it can buy NPLs at market prices.
– Package of USD1.4bn (VND30 trillion) to help the housing sector.
– Reduction of corporate income tax from 25% to 22% in 2014, and 20% in 2016.
Monetary policy
• Accommodative to promote GDP growth: Latest policy rate cut by SBV in Jun 2014. The cap on VND deposits is now 6%
• VGB yield curves shifted down mainly in the shorter maturities, reducing government borrowing cost.
FX policy
• The SBV estimated 2014 capital inflows at USD26bn, leading to an overall balance of payments surplus.
• SBV continues to buy USD to build up its reserves (currently at USD35bn).
• Low FX risk as SBV is committed to keep VND depreciation at 1%-2% for 2014 (versus 2%-3% in 2013).
Conclusions
• A resurgence of interest in the market. The VN Index gained 20.4% in 2013 and 25.6% YTD Aug 2014 (in USD terms).
• However, economic growth will remain below trend for 2014 and 2015 (in range of 5.5% - 6.0%).
12
Investment environment outlook
Favorable environment
Risk of higher inflation returning
• A few major economic trends emerged with favorable
effects on the market, including low inflation and
declining interest rates.
• ATM, we see a continuing decline of inflation and
lower interest rates.
• Projections for VNI performance clustered in the range
of 580-600 at the start of 2014, but shifted up to 620650 based on revised lower CPI and interest rates.
• Liquidity is ample and banks possess a cushion of idle
funds devoted to purchasing government bonds.
Rotation in investment class
• As inflation and interest rates decline, depositors
migrate to investment channels offering higher
returns, namely stocks and real estate.
• Gold no longer favorable as restrictive measures
implemented to reduce “Golderization”.
• The increased volume of margin lending also implies
that credit may be less constrained for securities
companies than for general business enterprises.
Margin lending is a significant factor in maintaining
trading volume & upward momentum for the market.
• However, the latest VGB auctions produced bond
yields of 6.95% and 7.48% for maturities of 10 and 15
years, respectively, suggesting inflation at 7% to 7.5%
for as long as ten years out.
• Higher inflation could lead to weaknesses in the VND
instigating a flight to other assets. Further, the SBV
could stimulate exports by depreciating the VND. Both
scenarios lead to a devaluation of the VND against the
USD, dampening the enthusiasm of foreign investors.
Reform efforts continue
• The probability of such risks materializing is low at this
time.
• Political will exists to move forward with fundamental
economic reforms started in 2011, and while slow at
times, progress continues and we do not detect any
signs of backtracking by Vietnam’s top leadership.
13
Contents
1. Macroeconomic review
2. Performance
3. 2014 performance highlights
4. Top holdings
5. Strategy going forward
6. Appendix
14
Fund performance summary – Jun 2014 to Aug 2014
VOF NAV performance in FY2015 YTD August
• VOF NAV at 31 August was USD831.8m, an increase of
6.2% compared to USD783.4m at 30 June 2014.
• Share buybacks amounted to USD4.0m since 30 June
2014 (total USD166.5m since the beginning of the
program).
• NAV per share was USD3.51, up 6.9% or 22 cents
compared to USD3.29 in 30 June 2014, in which:
─ 21 cents from the increase in value of investments.
Capital market return was 10.7%, in line with the VN
Index.
─ 1 cent from share buybacks.
• Capital Markets, including OTC shares amounted to
USD506.0m1, gaining 10.7% and is in line with the VN
Index performance. Strong performers were construction
material (HPG), food & beverage (VNM, KDC) and
mining/oil & gas (PVD, PVS).
• Private Equity amounted to USD22.5m, gaining 11.0%
thanks to full divestment of Mai Linh.
• Real estate and Hospitality projects remained unchanged
at USD117.3m and USD64.5m
NAV: 30 June 2014
NAV changes
Capital market
Private equity
Overseas equity
Real estate projects
Hospitality projects
Bonds
Cash and others
Preliminary total
Share buy back
NAV: 31 August 2014
Total NAV
USDm
783.4
52.4
51.3
2.2
0.5
0
0
0.5
(6.1)
835.8
(4.0)
831.8
NAV per share
30 June 2014
31 August 2014
Change in NAV per share
USD
3.29
3.51
Attributable to share buy back
Attributable to investments
0.01
0.22
1.
Return
%
10.7%
11.0%
2.1%
0.0%
0.0%
1.3%
Contribution per
share
USD
0.24
0.01
0
0
0
0
(0.04)
6.7%
6.2%
6.9%
0.2%
6.7%
Capital markets includes Listed and OTC shares, but excludes Overseas Shares, and shares in
VNL and VNI.
15
VOF peer comparisons
Diversified peers
• For CY2014 YTD, VOF outperformed the
comparable peers: 16.9% vs. 15.6%.
• For FY2015 YTD, VOF underperformed its
peers: 6.9% vs. 7.2%.
18.00%
16.00%
14.00%
12.00%
10.00%
8.00%
6.00%
4.00%
2.00%
0.00%
16.9%
15.6%
7.2%
6.9%
CY2014 YTD
FY2015 YTD
VOF
Diversified Peer
Average
Capital markets peers
• For CY2014 YTD, the VOF Capital Markets
component outperformed its peers: 26.5%
vs. 17.5%.
• For FY2015 YTD, the VOF Capital Markets
component returned 11.7%, outperformed
the VN Index (10.8%) and peers (7.4%)
thanks to strong performance of VNM,
PVS, PVD and KDC in our portfolio.
30.00%
26.5%
25.6%
24.1%
25.00%
20.00%
15.00%
25.7%
17.5%
11.7%
11.8%
10.8%
10.00%
13.3%
CY2014 YTD
FY2015 YTD
7.4%
5.00%
0.00%
VOF CM
1.
2.
3.
VN-Index
CM Peer
Average
VNM ETF
FTSE ETF
Source : Edmond de Rothschild Securities Emerging Markets Funds Daily Parity Sheet as of 30 Aug 2014 NAV per share (latest published NAV per share).
Bloomberg (VOF LN) share prices 31 Aug 2014
16
VOF performance and VOF Capital Markets performance as of 31Aug 2014.
VOF NAV and share price performance
VOF NAV and share price since inception (Sep 2003 – Aug 2014) (USD)
$5.0
$4.5
$4.0
USD3.51
$3.5
USD2.65
$3.0
$2.5
$2.0
$1.5
$1.0
$0.5
$Dec-03
Dec-04
Dec-05
Dec-06
Dec-07
Dec-08
VOF share
Dec-09
Dec-10
Dec-11
Dec-12
Dec-13
NAV per share
• VOF share price increased over 20% CYTD Aug 2014 and reached 7 year highs of USD2.65/share as at 31 Aug 2014.
• The discount has contracted from 42% at the start of the buyback program in Nov 2011, to 24.7% as at 31 Aug 2014.
• Share buybacks has contributed 39 cents (or 13%) accretion to NAV since the commencement of the program to 31
Aug 2014.
1.
2.
3.
As of 30 Aug 2014 NAV per share (latest published NAV per share).
Bloomberg (VOF LN) share prices 31 Aug 2014
VOF share price movement from 30 Sep 2003 to 30 Sep 2014
17
VOF discount management and share buyback programme
•
•
CY2014 to 31 Aug 2014, the fund has repurchased 11.3m shares, spending USD27.8m.
Since the commencement of the share buyback programme in Nov 2011 to Aug 2014 the fund has repurchased 87.9m
shares for USD170.4m, or 27.1% of the outstanding shares.
Buyback has contributed 39 cents (or 13%) accretion to NAV since the commencement of the programme to 31 Aug 2014.
VOF discount has progressively narrowed: 30 Jun 2012, 30 Jun 2013, 30 Jun 2014 and 31 August 2014 discount levels were
37.7%, 25.5%, 23.9% and 24.7% respectively.
10.0
0%
Share price
USD2.65
15%
6.0
Discount
(24.7%)
5.0
20%
25%
4.0
30%
3.0
Shares bought back
1.
2.
3.
Discount to NAV
Aug-14
May-14
Apr-14
Mar-14
Feb-14
Jan-14
Dec-13
Nov-13
Oct-13
Sep-13
Aug-13
Jul-13
Jun-13
May-13
Apr-13
Mar-13
Feb-13
Jan-13
Dec-12
Nov-12
Oct-12
Sep-12
Aug-12
Jul-12
45%
Jun-12
0.0
May-12
40%
Apr-12
1.0
Mar-12
35%
Feb-12
2.0
Discount to NAV/share (%)
7.0
Jan-12
0
5%
10%
Dec-11
1
8.0
Nov-11
2
VOF shares purchased (millions)
VOF share price (USD)
9.0
Jul-14
3
Jun-14
•
•
VOF share price (USD/share, VOF share price plotted with no axis)
VOF NAV USDm, inclusive of share buybacks.
VOF NAV/share and share price from 1 Nov 2012 to 31 Aug 2014.
Discount based on Bloomberg closing price of last trading day of NAV month reported eg 31 Aug NAV/share compared to 29 Aug share trading price.
18
VOF long-term performance: Risk-adjusted returns1
Returns
• Between FY2009 to FY2014, VOF outperformed the VN-Index in 4
out of the 6 years. VOF returns was much less volatile than the
VN-Index owing to VOF’s diversified portfolio.
─ FY2013 – VOF outperformed the VN-Index on the back of the
sale of Prime Group (PE), strong performance across key listed
holdings, including Vinamilk, Kinh Do, Hoa Phat Group and Lam
Thao Fertiliser and the accretion effect from share buy back.
─ FYTD 2014 – VOF was behind VN-Index however, Capital
Market outperformed VN Index on the back of strong
performance of key holdings including Hoa Phat Steel, Kinh Do,
Hau Giang Pharma, An Giang Plant Protection, PetroVietnam
Service, PetroVietnam Drilling and the accretion effect from
share buy back.
VOF return over 2009-2014 as of Aug 2014
Volatility
1
year Consistent
returns1
Volatility
3
year Consistent
returns
Volatility
5
year Consistent
returns
VOF
7.3%
Average of
peers
12.5%
VNIndex
USD
13.3%
2.8
2.0
2.6
14.7%
26.5%
36.2%
3.4
2.6
1.3
20.3%
35.9%
50.1%
0.8
0.0
2.2
Medium to long-term strategy
• Capital Markets and PE were major contributors to VOF’s return. Going forward, VOF will continue to focus on Capital
Markets and PE opportunities:
─ VOF shareholders want exposure to the capital markets and this allocation will increase to 50% - 60% level (from 3035% level historically).
─ PE opportunities allow VOF to participate in large, meaningful stakes of private businesses (family-owned businesses
and SOE’s) with substantial minority rights and exit options (exit via trade sale or IPO). In the case of an IPO, a PE entry
allows VOF to establish a foothold and own a meaningful stake of a well run business, usually before other financial
investors can participate, who would eventually buy from us once these companies enter into a benchmark index.
1.
Consistent returns reflects a funds' historic returns, adjusted for volatility, relative to its peers. Compound monthly return of NAV
divided by volatility (std. dev of monthly NAV return multiple with square root of number of months)
19
Contents
1. Macroeconomic review
2. Performance
3. 2014 performance highlights
4. Top holdings
5. Strategy going forward
6. Appendix
20
Investment and divestment highlights of 2013 – 2014
Investment
Oil and gas
• PV Drilling is the largest drilling contractor in Vietnam, owning a fleet of 5 rigs (4 ocean and 1 land),
representing 22% share in Vietnam’s rig market. The company also operates a leased rig fleet and
performs high-tech technical drilling-related services for oil contractors in Vietnam. VOF holds 2.4% of
PVD and CYTD, the share prices have increased by 59%1.
Industrial materials
• South Basic Chemical Company. VOF participated in the equitization process of this SOE in Sep 2013. The
company is preparing to list on the HOSE. Revenues for 2013 and 2014 (E) are USD47m and USD68m,
respectively. PAT for 2014 (E) is USD6.1m and VOF entered at a PE 2014 of 4.5 times.
Divestment
Agricultural chemicals
• VOF completed its divestment of its 24% stake in An Giang Plant Protection JSC (AGPP) in Sep 2014.
• Proceeds received was USD63.1m in cash or VND85,000 per share, representing an IRR of 23.7% over a
period of five years.
• VOF invested in AGPP as a private equity investment and has since seen it become a public company with
over 100 shareholders.
• In 2013, AGPP delivered revenue of USD354m, an increase of over 17.0% year-on-year. During the same
period, AGPP’s earnings grew over 18.8%, reaching USD24.0m. Revenue for the first half of 2014 was
approximately USD200m, roughly half of the company’s full year target of USD399m, while first half 2014
net income was USD12.0m.
1.
CYY2014 YTD up to 30 Sep 2014.
21
Portfolio valuation by assets class
Strong cash position. Ongoing goal of reducing real estate
exposure.
0
NAV Aug 2014 (USD'000)
100
200
300
400
Aug-14
Amount (USD'000)
% NAV
Jun-14
Aug-14
60.8%
461,291
506,013
51.8%
387,207
431,039
OTC
9.0%
74,083
74,974
Overseas equity
3.1%
25,543
26,082
Private equity
2.7%
20,234
22,452
Bonds
4.3%
35,379
35,830
Hospitality projects
7.8%
64,529
64,529
Real estate projects
14.1%
117,363
117,363
Cash1
3.9%
20,122
32,443
Others2
3.3%
38,939
27,135
100.0%
783,400
831,848
3.29
3.51
Classification by asset
class
Capital market
500
Listed
Listed equities
Real estate projects
OTC
Hospitality projects
Bonds
Cash
Others
Overseas equity
Total NAV
Private equity
NAV per share
1.
2.
Balance and movement is Cash is mainly due to proceeds received from divestments and cash dividends paid.
Balance and movement is Others is mainly attributable to the cash used for share buybacks, management and custody fees
paid, receivables/payables, and short and long term loans from RE projects.
22
Portfolio valuation by sectors
Classification by sector
Real estate & construction
Food & beverage
Agriculture
Construction Materials
Hospitality
Financial services
Mining, Oil & Gas
Pharma & health care
Consumer discretionary
Industrials
Other sectors
Infrastructure
Cash1
Others2
Total NAV
NAV per share
Aug-14
% NAV
22.0%
14.9%
11.1%
10.4%
7.8%
6.4%
9.0%
3.4%
1.9%
1.7%
3.5%
0.8%
3.9%
3.3%
100.0%
1.
2.
Amount (USD'000)
Jun-14
Aug-14
177,842 182,848
109,839 123,913
88,998
92,161
82,441
86,642
64,529
64,529
53,623
53,344
57,572
75,014
28,886
27,877
12,729
15,893
13,148
14,449
28,650
29,060
6,082
6,541
20,122
32,443
38,939
27,135
783,400
3.29
Refer to footnote 1 on previous slide.
Refer to footnote 2 on previous slide.
831,848
3.51
The portfolio remains actively managed and
diversified over key sectors of the economy.
•
As of 31 August 2014, Real estate & RE related
sectors, including our holding in VNL shares
accounted for 30% of total NAV.
– Our target is to reduce exposure in
development risks or RE projects and
investments over the next 12-24 months.
•
Food and Beverages, the second largest sector,
accounted for 15% of total NAV.
– Target to maintain exposure at 18% over the
next 12-24 months.
•
Agriculture & Construction materials ranked the
third and forth, accounting for 11% and 10%,
respectively.
– Target to reduce agriculture to 10% and
increase allocation to construction material to
13% over the next 12-24 months.
23
Contents
1. Macroeconomic review
2. Performance
3. 2014 performance highlights
4. Top holdings
5. Strategy going forward
6. Appendix
24
Top listed holdings
Top five listed holdings add to USD258m, accounting for 31% of total VOF NAV as of 31 August 2014
P/E
Mkt
Cap
USDm
Price
31
August
VNDk
FOL
Premium
%
Profit
2013
x
2014
x
2013
USDm
2014P
USDm
VOF holding 31 August
chg
%
NAV
USDm
Prem
NAV2
USDm
% of
NAV
%
VNM
Vinamilk
5,286
111.0
7%
17.0
17.5
311
302
-3%
85
91
10%
HPG
Hoa Phat Group
1,331
58.0
0%
14.3
10.5
93
127
37%
70
70
8%
EIB
Eximbank
749
12.8
0%
1.11
1.11
31
38
23%
38
38
5%
PVD
PV Drilling
1,421
98.5
0%
15.8
12.8
90
111
23%
34
34
4%
KDC
Kinh Do
752
74.5
0%
31.3
30.1
24
25
5%
32
32
4%
Total 5 stocks
259
265
31%
Total listed portfolio
431
Total VOF NAV
832
1.
2.
EIB (banking stock), the price-to-book value multiple is used instead of price-to-earnings multiple.
Premium to NAV is the expected uplift to market price in a negotiated block sale, given the foreign premium expected on stocks at or near their foreign ownership limits.
25
Contents
1. Macroeconomic review
2. Performance
3. 2014 performance highlights
4. Top holdings
5. Strategy going forward
6. Appendix
26
VOF strategy
Investment strategy to continue enhancing
total NAV:
• Privately negotiated investments in private
and listed companies, with a focus on:
Actions to close the discount based on the
Manager’s and Board’s continuing commitment
to the share buyback program:
•
Share buyback program: Since
commencement to 31 Aug 2014, VOF has
distributed USD170.4m to repurchased 87.9m
shares.
•
As a result of the Company’s share buyback
program - USD0.39 cumulative accretion,
equating to an 13.1% benefit to VOF’s net
asset value per share.
•
Broaden investor base and increase
knowledge of VOF by improving
communications with investors:
• Sectors that support domestic growth;
• SOE privatisations;
• Selective real estate equity investments.
•
Focus on deep discounted listed shares with
strong fundamental and potential business
growth, distressed assets, and M&A
opportunities.
•
Rebalance RE portfolio with focus RE
Companies instead of Projects.
•
Actively search out for trade sales of
matured assets at premium to market price.
• Marketing and promoting our fund
• More research coverage
27
VOF strategic update
Capital Market
• VN Index is going through a correction in September due to profit taking activities having risen rapidly the
previous month. This will present an opportunity for us to redeploy some cash back into the market at
more attractive valuation.
• To increase our existing holding in companies with good growth potential over the next 6-12 months.
– Cyclical stocks: oil and gas, property, construction, construction materials, tires, & technology.
– Actively participate in privatisation opportunities of SOEs and pre-listing opportunities.
• To focus on strategic exits together with other shareholders.
– Reduce weight in defensive consumer stocks or stocks that are over-weight in the portfolio.
– Continue to divest small holdings and mature companies.
• Target to deploy meaningful amounts of available cash in the next 6-12 months.
28
VOF strategic update
Private Equity
• Seek attractive deal structures with down-side protection in high-growth businesses, supported by strong
and experienced management teams.
• Sector – Focus on domestic driven businesses, primarily in the education, financial services, food &
beverages, media and healthcare sectors.
• Exits – Trade sales and listing.
• Target to increase PE portfolio to 10% of VOF’s NAV within the next 12 – 24 months.
• Deal pipeline of approximately USD100m. Target investment amount for the next 6-12 months: USD50m.
RE and Hospitality portfolio
• Limit capital injection to current development projects only. Continue to actively divest real estate projects
(together with VNL).
29
Contents
1. Macroeconomic review
2. Performance
3. 2014 performance highlights
4. Top holdings
5. Strategy going forward
6. Appendix
30
Selected macroeconomic indicators from 2010 to 2014F
2010A
2011A
2012A
2013A
2014F1
2014F 2
GDP growth (%)
6.8
5.8
5.0
5.4
5.5-6.0
5.5
CPI (%)
11.8
18.1
6.8
6.0
4.0 – 4.5
5.5 – 6.0
Trade Deficit /Surplus (USD Bn)
-12.4
-9.5
0.3
0.9
2.0
n/a
Exports (USD Bn)
71.6
96.3
114.6
132.2
157.0
...
Imports (USD Bn)
84.0
105.8
114.3
131.3
155.0
...
FDI Commitments (USD Bn)
18.6
14.7
13.0
21.6
28.0
25.0
FDI Disbursement (USD Bn)
11.0
11.0
10.5
11.5
12.0
12.0
Credit Growth (%)
27.6
10.9
7.0
11.0
10.0-12.0
12.0-14.0
FX Reserves (USD Bn)
15.4
17.2
26.0
32.0
40.0
35.0
SBV Refinancing Rate
9.0
15.0
9.0
7.0
6.5
7.0
Deposit Rate (%)
10.0 - 11.0
14.0
8.0
7.0
6.0
6.0
Lending Rate (%)
13.0 - 13.5
18.0 – 20.0
12.0 – 15.0
8.0 - 12.0
6.0-10.0
11.3
21,030
21,200
20,880
21,250
21,000-21,500
21,682
485
352
414
505
...
620-650
Indicators
USD/VND (market rate)
VN Index
1.
2.
VinaCapital forecast.
Market consensus forecast : average projections from VN Government, World Bank, EIU, Citibank, HSBC, ANZ, BIDV, SSI, HSC.
31
VinaCapital Group
17th floor, Sun Wah Tower
115 Nguyen Hue, District 1, Ho Chi Minh City, Vietnam
P: (84 8) 3821 9930 F: (84 8) 3821 9931
Email: [email protected]
Website: www.vinacapital.com
Ho Chi Minh City
32
Hanoi
Danang
Nha Trang
Singapore
Yangon