Vietnam-based asset management firm VinaCapital said it will evaluate investments into privatised state-owned business, as the local government is looking to push a spate of listings this year.
Its multi-asset vehicle, Vietnam Opportunity Fund (VOF), has been investing in such opportunities, and currently holds equities in firms such as Vietnam Dairy Products JSC (commonly known as Vinamilk), Phu Nhuan Jewelry, Quang Ngai Sugar, Loc Troi Group (formerly An Giang Plant Protection JSC), Vietnam National Textile and Garment Group, and Airports Corporation of Vietnam (ACV), among others.
“VOF’s investment strategy is to focus on investment opportunities not available to market participants. Hence, we have built a reasonably large portfolio of privatised SOE (state-owned enterprise) or OTC assets, private equity deals and pre-IPO deals. Needless to say, privatised SOEs are an important part of our portfolio,” said Andy Ho, the firm’s CIO.
However, he added private equity investments still represented the largest component of the fund portfolio.
VOF has also secured several full exits from government-backed companies, including coffee producer Vinacafe Bien Hoa and Loc Troi Group. Some other state majors remain important holdings to the fund, such as Vinamilk, Quang Ngai Sugar and ACV.
“As with any investment we make, we tend to focus on companies that are part of Vietnam’s domestic consumption growth story. Sectors we like include food and beverage, construction and materials, infrastructure, healthcare and education. All are continuing to grow as Vietnam’s middle class grows,” Ho said.
Ho saw Mobifone’s privatisation an intriguing transaction, and also pointed out that stake sales in Vietnam’s beer companies would be attractive to foreign beer makers.
VinaCapital, in its latest monthly update, said that VOF’s capital market portfolio, which increased 3.6 per cent over January, underperformed the VNIndex because the fund did not hold stocks in Sabeco and Habeco, which contributed a significant portion to the benchmark index.
VOF has chosen not to invest in these stocks, and attributed the decision to the fact that its assessment had shown that these companies were not growing at a justifiable rate.
“A fair amount of the premium in their stock prices is related to the expectation that strategic buyers will take large stakes in these companies in the near term,” the update report said.
Ho also added: “As for other companies, it’s tough to generalise. Good assets will attract investors, poor ones will not. But ultimately, we believe privatisation is positive. There’s no need for the state to operate most businesses. The private sector and market forces are more efficient and tend to work better.”
While VOF declined to mention its near-term future investment pipeline, the fund applauded the government for accelerating the liberalisation – the listing of state-owned companies – and added that it would look at appropriately valued companies benefiting from Vietnam’s strong domestic consumption story.