VinaCapital’s flagship fund, Vietnam Opportunity Fund (VOF), invested approximately $45 million into two subsidiaries of PetroVietnam including PV Power and Binh Son Refining and Petrochemical (BSR) in their initial public offering (IPOs) conducted in January.
According to its latest announcement, VOF purchased the BSR shares at a discount of 4 per cent compared to the average price of VND23,000 ($1.01) for the equitization. The fund was able to secure around 10 per cent of the available shares on offer with an investment of nearly $25 million in the refinery operator.
BSR’s large market capitalization and its 33 per cent market share of the oil refinery business in the country made it an attractive target. The refinery business, VOF observed, tends to be less affected by oil price volatility than other segments of the oil and gas sector.
Meanwhile, VOF invested more than $20 million into PV Power, the second-largest power generator in Vietnam, with a total capacity of 4.2 GW and a current market cap of $1.5 billion. This is also an attractive investment with an estimated P/E of 11.5x at the starting price of VND14,400 ($0.63).
“We participated in PV Power and BSR because we feel that the upside potential is very strong and these assets are poised to deliver an IRR north of 25 per cent over a three to five year period and maybe even longer,” Andy Ho, VinaCapital’s Chief Investment Officer told DEALSTREETASIA in an interaction.
The IPOs of PV Power and BSR, which raised $308 million and $245 million respectively last month, marked a milestone in the equitization process of state-owned enterprises of Vietnam.
“I thought they were great opportunities for many parties including the government and investors, both domestic and international. The government generated significant proceeds while investors were able to take stakes in great assets with potential future upside. We are waiting for more such opportunities to come in 2018,” Ho said.
The strong market and high valuations gave the fund the opportunity to significantly trim a few of its holdings and re-deploy money. “We believe the combination of a reasonable valuation and significant medium-term growth potential of these two companies offer a substantial upside to the starting IPO price,” the VOF report noted.
Founded in 2003 and targeting multiple asset class, VOF focusses on private equity deals. While the consumer and industrials sector accounts for the majority of its portfolio, the financial sector takes up nearly 10 per cent.
VOF’s net asset value (NAV) per share was $6.03, an increase of 9.2 per cent from the previous month. The discount between share price and NAV per share narrowed to 14.2 per cent.
VinaCapital’s chief investment officer Ho had earlier told this portal that the fund manager had parcelled out $200 million for its private equity plan, and had $120 million in cash. VOF will continue to scout for companies valued between $100 million and $500 million to make investments in the range of $10-50 million.