Saigon Asset Management, a Vietnam-focused fund manager and investment banking firm, is now looking at private equity investment space with great interest given the high returns multiple and the coming of age of the southeast Asian economy.
Fresh from an investment in My Chau Pharmacy, investment veteran Louis Nguyen, who founded Saigon Asset, says, “We believe that the return potential for PE is much higher than in equity or real estate.”
Nguyen, the Vietnamese-origin American investor with notable stints with IDG Ventures and VinaCapital, talks to DEALSTREETASIA about Saigon Asset Management’s investment approach, investment banking business, and opportunities in the tech space.
What is Saigon Asset Management’s PE strategy given some recent deal activity?
I was part of the PE world in the US and Vietnam during the early part of my career. When I started Saigon Asset Management in 2007, investors were more interested in the stock market and real estate sector, than in PE. That’s why we launched funds focused on listed equities and real estate. Now that we’ve been doing listed equity for a good eight years and have been the top performing fund the past few years, we are moving toward PE as foreign investment in this area has increased significantly. The PE investment we make is Saigon Asset Management’s principal money.
We believe that the return potential for PE is much higher than in equity or real estate. Most investors around the world would be pleased if the return in listed equity is 15 per cent in dollar terms, as the average interest rate for deposits is still less than 5 per cent. In private equity, the return has to be much higher, or what you call “multiples”. The return is higher but the risk is also higher. It depends on the appetite of the investors: how much risk you are willing to take for a higher return? We realise there are significantly higher risks in PE than listed or real estate investments.
What’s your assessment of investment banking business which seems to be really quiet in Vietnam?
There aren’t too many true investment banks like UBS, Goldman Sachs, Morgan Stanley or JP Morgan in Vietnam. Here, you have securities firms like VietCapital, Saigon Securities and Ho Chi Minh City Securities. Within such firms, they have advisory or investment banking groups. This is still a tough business mainly due to a gap in expectations between buyers and sellers.
We’re different because we have the visibility into other deals through our investments. For example, you have a company and I come and invest. While I invest, I analyze what you do and observe that you have other deals. For instance, you might have invested in land, and in a company. Now you need to raise capital and diversify your investments. Then I’d say “Why don’t you let my investment banking company help you, because I have already invested in you?” It’s easier if I am already well-versed with your investments, so the relationship and the transaction has more probability of success. So to answer your question about what our strategy is, we leverage our buy side to drive our sell side.
Which are other markets that you are operating in?
The fund’s mandate is to focus 100 per cent on Vietnam. But, in investments, we focus on ASEAN. We also focus on cross-border deals between Vietnam and the US, like Heritage Beverage, which sells Sabeco beer in North America. I believe in building an investment bridge between the US and Vietnam. I have a partner, Kevin Flaherty, the founder of Tiberon Minerals (which has major investment in Nui Phao project, one of the world’s largest tungsten mines), who focusses on ASEAN. So it depends on which group you’re talking about. If you talk about the buy side, we focus on Vietnam only, if you talk about the sell side, we focus our principal money broadly between Vietnam, US and ASEAN.
From your experience of being associated with two VC firms, how do you see the technology investment space pan out in Vietnam?
In the days that I worked in venture capital, it was not attractive because it was too early. I started IDG Ventures in 2003 and VinaCapital in 2006; both had moderate success. But the technology landscape has changed a lot since 2003. The country’s population of 100 million people is a big opportunity, and is attracting big internet companies such as Uber, Lazada, Google, Facebook, but Vietnamese tech companies are still finding it difficult to reach valuations of more than $100 million. Perhaps VNG is the only one in this group. More foreign venture funds have entered Vietnam, and they realize the need to stay invested for the long term and be extremely patient. Tech entrepreneurs could use help from successful US tech founders who are already here in Vietnam.
How many tech companies have you invested in?
Our fund Vietnam Equity Holding has invested in FPT and Elcom. In the listed market, there are not many technology companies to invest in.
What were your main reasons for investing in Mỹ Châu Pharmacy?
We invested in the company because there’s major concern about safety of food and medicines, and of fake goods being imported by certain countries. We look for ‘pain points’ and do not invest in ‘me too’ products. There are several pharmaceutical companies out there that others have invested in. We chose Mỹ Châu because that’s a 30-year old trusted brand in Vietnam, and the Vietnamese people believe in quality medicine from this pharmacy chain.