What are funds buying?

Follow a few savvy funds in vietnam namely SSI Vision Fund and Red River Holding Fund and below are what they bought recently

vn fund buying

Vietnam Banks PE and PB

vietnam bank pe pb

 Projected PE and PB for 2009

vietnam banks projected pe pb

Source: Vietstock

First Vietnam ETF (NYSEArca:VNM)

Though it’s still one of the last bastions of communist rule, Vietnam has long left its war-torn past to position itself as the new frontier for capitalist ways.

The country has no ADRs but Van Eck Global’s newly launched ETF, Market Vectors Vietnam (NYSEArca:VNM – News), opens the doors to the largest country in Southeast Asia.

Nearly 70% of the 28 companies in the ETF are based in Vietnam and the other 30% do at least half of their business there. The largest sector weightings are financials at 37%, energy 19%, materials 12%, industrials 12% and consumer staples 11%. About 86% of stocks in the benchmark are small and midcaps. The ETF carries an expense ratio of 0.99%.

The country’s benchmark, VN-Index, which tracks 162 companies on the Ho Chi Minh Stock Exchange, has gained 61% this year.

Macro Picture

Vietnam has attracted $8.7 billion in foreign direct investment in the first half of this year, according to Vietnam’s Foreign Affairs Ministry. A majority of the money, $4.5 billion, was licensed to the hotel and restaurant industry. Industrial and manufacturing sectors took in $1.56 billion. The director of the Foreign Investment Agency projects foreign investments will reach $20 billion in 2009 and rise 20% to $22 billion next year.

Foreign investors are lured by Vietnam’s “highly skilled labor force, young population, relatively low labor costs, and a sense of enthusiasm and entrepreneurship,” says Mark Sidel, a law professor at University of Iowa. He used to manage legal reform programs in the country through the Ford Foundation.

Following the footsteps of Japan, South Korea and China, Vietnam will be the next Asian tiger, says Chris Wolf, co-chief investment officer of Cogo Wolf Asset Management. “If you look at the horizon now, it looks like Beijing in its heyday. It’s construction cranes everywhere,” Wolf said.

Vietnam’s young work force has a 90% literacy rate but earns less than its Chinese counterparts. So Vietnam stands to benefit from outsourcing in China, Wolf added. His firm plans to invest 1%-2% of its $100 million in assets into the ETF.

As the world’s second-fastest growing economy, Vietnam’s gross domestic product may expand between 5% to 5.2% this year thanks to stimulus plans, State Bank Governor Nguyen Van Giau said in a statement this week. Its economy expanded 3.9% in the first half of the year vs. 6.5% the same period in 2008, the General Statistics Office in Hanoi reported in July.

The International Monetary Fund projects a slower pace of growth: 3.3% in 2009 and 4% the following year. It estimates that consumer prices will increase 6% this year and 5% next year.

Through the end of July, exports dropped 13.4% over the first seven months of last year, according to Moody’s Economy.com. Retail sales rose 18.3% in the first seven months of the year from the year-ago period. In 2008, exports totaled $61.3 billion, while imports came in at $77.7 billion, according to the General Statistics Office.

Industrial production in July rose 7.6% from a year earlier, driven mainly by oil and gas and other nonstate enterprises. Oil production — a key export — climbed 18.5% in July to 340,254 barrels a day. Other major export products are textiles and clothes, footwear and seafood.

Investment Risks

Categorized as a frontier market — a notch below emerging — the fledgling Asian tiger may not be suitable for those with weak stomachs.

“The threat of high inflation, a general lack of infrastructure and endemic corruption may present significant hurdles to continued growth,” Van Eck notes in the fund’s prospectus.

“Vietnam cannot be considered a free market economy, as many communist-style policies remain the norm. Also, the recent global investment crisis may derail continued growth of this early-stage emerging economy.”

Though it’s still one of the last bastions of communist rule, Vietnam has long left its war-torn past to position itself as the new frontier for capitalist ways.

The country has no ADRs but Van Eck Global’s newly launched ETF, Market Vectors Vietnam (NYSEArca:VNM – News), opens the doors to the largest country in Southeast Asia.

Nearly 70% of the 28 companies in the ETF are based in Vietnam and the other 30% do at least half of their business there. The largest sector weightings are financials at 37%, energy 19%, materials 12%, industrials 12% and consumer staples 11%. About 86% of stocks in the benchmark are small and midcaps. The ETF carries an expense ratio of 0.99%.

The country’s benchmark, VN-Index, which tracks 162 companies on the Ho Chi Minh Stock Exchange, has gained 61% this year.

Macro Picture

Vietnam has attracted $8.7 billion in foreign direct investment in the first half of this year, according to Vietnam’s Foreign Affairs Ministry. A majority of the money, $4.5 billion, was licensed to the hotel and restaurant industry. Industrial and manufacturing sectors took in $1.56 billion. The director of the Foreign Investment Agency projects foreign investments will reach $20 billion in 2009 and rise 20% to $22 billion next year.

Foreign investors are lured by Vietnam’s “highly skilled labor force, young population, relatively low labor costs, and a sense of enthusiasm and entrepreneurship,” says Mark Sidel, a law professor at University of Iowa. He used to manage legal reform programs in the country through the Ford Foundation.

Following the footsteps of Japan, South Korea and China, Vietnam will be the next Asian tiger, says Chris Wolf, co-chief investment officer of Cogo Wolf Asset Management. “If you look at the horizon now, it looks like Beijing in its heyday. It’s construction cranes everywhere,” Wolf said.

Vietnam’s young work force has a 90% literacy rate but earns less than its Chinese counterparts. So Vietnam stands to benefit from outsourcing in China, Wolf added. His firm plans to invest 1%-2% of its $100 million in assets into the ETF.

As the world’s second-fastest growing economy, Vietnam’s gross domestic product may expand between 5% to 5.2% this year thanks to stimulus plans, State Bank Governor Nguyen Van Giau said in a statement this week. Its economy expanded 3.9% in the first half of the year vs. 6.5% the same period in 2008, the General Statistics Office in Hanoi reported in July.

The International Monetary Fund projects a slower pace of growth: 3.3% in 2009 and 4% the following year. It estimates that consumer prices will increase 6% this year and 5% next year.

Through the end of July, exports dropped 13.4% over the first seven months of last year, according to Moody’s Economy.com. Retail sales rose 18.3% in the first seven months of the year from the year-ago period. In 2008, exports totaled $61.3 billion, while imports came in at $77.7 billion, according to the General Statistics Office.

Industrial production in July rose 7.6% from a year earlier, driven mainly by oil and gas and other nonstate enterprises. Oil production — a key export — climbed 18.5% in July to 340,254 barrels a day. Other major export products are textiles and clothes, footwear and seafood.

Investment Risks

Categorized as a frontier market — a notch below emerging — the fledgling Asian tiger may not be suitable for those with weak stomachs.

“The threat of high inflation, a general lack of infrastructure and endemic corruption may present significant hurdles to continued growth,” Van Eck notes in the fund’s prospectus.

“Vietnam cannot be considered a free market economy, as many communist-style policies remain the norm. Also, the recent global investment crisis may derail continued growth of this early-stage emerging economy.”

Source: http://finance.yahoo.com/news/Van-Eck-Launches-First-ibd-1567192866.html?x=0&.v=1

Phu My Bridge

Phu My Bridge is up Yay! The location of the bridge is highly strategic because it will connect District 7 (Phu My Hung in particular) to District 2 ( Thu Thiem area- the new center of Ho Chi Minh city)

phu my bridge

phu my bridge

phu my bridge

Golden Land turned into swamp in Dist 8, HCM

Thousands of square meters of prime location land in Dist 8, HCM have now turned into swamp or mini jungle due to the negligence of the managing parties.

Dat Vang in Quan 8

These areas are located along King Duong Vuong, one of the major highways in  Ho Chi Minh city. This situation remained unknown until recently a group of government inspectors discovered it

Currently, in this area, price of landed property stays at 20-30 millions vnd/ m2 , and condo price stays at 15-20 millions vnd/m2.

kinh duong vuong

Financial data

I received lots of comments and emails from friends who are interested in Vietnam investment opportunity. One of the common questions is: what is the current P/B, P/E of vietnam market, which share is cheap and which  one is expensive, etc..

Should you need to take a quick look at Vn market valuation, please click on “Financial Data” button on the top menu (http://vnmoney.wordpress.com/financial-data/).

Keep an eye on these key financial ratios cuz you may find a golden needle in a haystack. 

 

vn investment opportunity

 

Major highways in Ho Chi Minh city

Major highways namely Dong Tay and Nguyen Huu Tho will be put into operation soon to ease the traffic jam in the city.

Nguyen Huu Tho

 

Dong Tay highway

Sabeco – Overview

sabeco

Market position: 

Sabeco is currently the biggest beer manufacturer in Vietnam. Its 2008 beer output is 900 mil liters, of which the mother company accounts for 340 mil liters and the subsidiaries make the rest. Habeco, the second largest beer manufacturer in Vietnam can only produce half of the output of Sabeco.  

In terms of distribution, Sabeco has the best distribution network in Vietnam at the moment. Habeco ‘s distribution network is no where near that of Sabeco. 

Subsidiary strategy

Sabeco comes up with the strategy of placing beer factories throughout Vietnam to cut down the transportation cost. Some of the factories are 100% owned by Sabeco. Some are 51% owned.

Challenges and Issues

a) Manage the subsidiaries.

It seems that as the company is growing too fast and too big, Sabeco lost control of its subsidiaries’ activities. Sabeco invested more than 2000 ti (1 ti is equivalent to 100 K SGD) in subsidiaries, yet it doesnt really know what is happening at these companies.  Noone seems to know at what price Sabeco sells the ingredients to the subsidiaries and at what price subsidiaries sell back the beer to the mother company. There is no proper documentation on the working process between mother and subsidiaries, as well as among subsidiaries themselves. There are problems of conflicts of interest among subsidiaries, problem of controlling the beer quality, cutting costs, etc… 

There are also concerns that subsidiaries are created in the interest of the management executives  rather than the interest of the company as a whole. Management can set up an entity in which 51% is owed by Sabeco and the rest of the shares are owned by themselves. The subsidiary with the back up of mother company can generate very good cash dividend each year.

2) Financial investment

Sabeco currently has an investment portfolio worth 800 ti (1 ti is equivalent to 100 K SGD) According to the CEO, the majority of investments are in bank and index fund shares. These are restricted shares which were bought in private placement.

Sabeco had difficulty in restructuring their portfolio because cutting loss will make government (its biggest shareholder) lose money. And this is considered a serious crime.

3) Financial ratio

With the current charter capital of 6400 ti while revenue is only 9000 ti, the return on earning is quite low. Sabeco has no leverage at the moment. Sabeco has never ever borrowed any single cent from banks since the date it was founded. Instead, it has extra cash to lend back to banks. Its financial ratio doesn’t look attractive since the charter capital is just too big.

 The CEO blamed the government for giving it such a big charter capital at IPO. EPS growth and PE projection haven’t been worked out by the  board of directors yet.

Conclusion:

Sabeco is a very profitable company. Eventhough the company is too bulky to control, it is still making good profits every year. For this type of company, traditional evaluating methods like P/E and EPS may not work. I guess we need to put its potentials and its assets into consideration. Its current OTC price is 4 times par value which i find is good enough for long term investment.

Sabeco shareholder meeting, 18 July 2009

sabeco ipo

 

Last Saturday, Sabeco shareholder meeting took place at the Independence Palace. Had a very –hard – to-describe- feeling as this is the first time I attended a shareholder meeting of a big government corporation that was recently IPO. Sabeco is among the first few pioneer government corporations that are recently privatized, yet the government still holds the controlling  position of more than 80% of the company. 

Felt kinda blessed and honored to have a chance to witness, what I believe, a significant milestone in Vietnam financial development history. We are at the start of the privatization period, when Vn government is trying very hard to privatize big government corporations in the hope to make them more efficient and more independent. And of course, in the process of conversion, many obstacles are found along the way, such as : 

1. These companies are super huge and its almost impossible to accurately valuate all the asset that they have.
2. The change in management mindset and their working attitude. The management cant no longer run the company based on the government instructions, regardless of whether the instruction is doing good or bad for the company. Now, as being a public entity, the company needs to be transparent, and fair to all the shareholders, including the small individual investors.Its hard to strike the balance between being transparent and fair and yet still being influenced by the biggest shareholder which is the government. Guess this will put lots of pressure on the management board. And it’s interesting to see how the management will pull through this.

Besides Sabeco, there are many similar companies that are recently IPO like Vietcombank (VCB), Vietinbank (CTG). Following their footstep will be Mobiphone, Vinaphone, etc.. Will this be a chance for us to make big money or we should stay away from these guys? Hm..

Ho Chi Minh City Landscape

Two major bridges in Vietnam are up. What is next