VinaCapital’s Vietnam Opportunity Fund (VOF) has said that it will increase private equity investment and holdings in the OTC (over-the-counter) market, focusing on the food and beverage sector.
The food and beverage industry in Vietnam “anticipates strong earnings growth as consumers benefit from low inflation, increased spending power and wealth creation”, VOF wrote in a report.
The fund revealed its size of investment often ranged between $10-40 million, which it described as “meaningful size”.
Late last year, it made a $45 million co-investment with Japanese private equity firm Daiwa PI Partners to acquire 70 per cent of International Dairy Products, which VOF called the “mini-Vinamilk”.
Also read: VOF & DPIP invest $45m into dairy co IDP
In August 2014, VOF divested 3.6 million shares from Vinamilk, Vietnam’s leading company in the dairy product market, at VND123,333 ($5.77) per share, gaining a 9.7 per cent premium. After the transaction, however, Vinamilk still tops the fund’s listed holdings, representing 11 per cent of its net asset value as of January 31 (79 million out of the total $739 million).
In the process of strengthening its presence in the sector, VOF has been negotiating to purchase a 2.6 per cent stake in another Vietnamese leading food and beverage company, planning to increase the stake gradually to 5 per cent for $23.2 million.
The target firm is traded on the OTC market, with an implied market capitalisation of $391 million, generating revenue and profit of $305 million and $38 million, respectively, last year. It has gained a dominant market share of 78 per cent in the drink producing segment, the fund said.
Experts in market have predicted the target company is possibly Quang Ngai Sugar Company. According to the company’s latest annual financial report for 2013, its revenue and profit reached VND5.54 trillion ($260 million) and VND582.5 billion ($27.35 million).
It has leading products in the Vietnamese soymilk market such as Vinasoy and Fami.
DEALSTREETASIA contacted VinaCapital but the fund declined to comment, while an executive from Quang Ngai Sugar could not immediately respond.
If it is not Quang Ngai Sugar, there is another possibility of Tan Hiep Phat, a comparatively large beverage company with last year’s revenue at $300 million and popular bottled tea brands such as Dr Thanh, Olong Tea Plus and Zero Degree.
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