Last year was a gloomy time with failures of local and foreign investment funds, but this year they have started gaining success in the Vietnamese market. An impressive growth rate and profitability of domestic firms are boosting the investment funds’ disbursement. This is now a major encouragement for funds to invest in enterprises.
High profits
The most important factor for the success of fund’s investment in Vietnamese private enterprises is the fast local economic growth. During the global economic downturn, up to 90 per cent of companies’ operations were reduced, discouraging the funds. Therefore, disbursement rates dropped sharply. At present, when the inflation rate is controlled and the country is reaching economic growth of over 6 per cent, it is a suitable time for investment funds to expand their operations in the Southeast Asian market.
Chris Freund, General Director of Mekong Capital, said Mekong Enterprise Fund’s annual average revenue rate is approximately 46.9 per cent. Its annual net profit increased twice compared to when it started operations. “The impressive net profit growth in 2009 contributed to a considerable increase in Internal Rate Of Return (IRR) of its three funds in the year”.
Mekong Capital has published information about business results in 2009 of 21 companies under its investment portfolio. Despite the impact of the world economic slowdown, the firms in the portfolio still gained average revenue growth of 103 per cent against 2008. All three Mekong Capital funds achieved good growth based on average revenue growth of 21 companies.
For VinaCapital, Net Asset Value (NAV) of its three funds VOF, VNL and VNI reached US$1.746 billion.
Andy Ho, Managing Director of VinaCapital, said NAV of VOF in the first quarter of this year grew by 29.7 per cent compared to US$785 million in the same period of 2009. In VOF’s asset structure, listed shares account for 39.5 per cent of its NAV (equal to US$310.075 million), followed by realty with 28.2 per cent (equal to US$221.37 million), cash and other assets 13.1 per cent (equal to US$102.835 million), OTC with 9.1 per cent (equal to US$71.435 million).
Besides, NAV of Vietnam Infrastructure Limited (VNI) was estimated at US$267 million by December 31, last year, up 5.5 per cent compared to late 2008. In addition to managing three mentioned-above funds, VinaCapital and Draper Fisher Jurvetson (DFJ) are also operating DFJ VinaCapital LP (DFJV) Fund which specialises in investing in Internet and telecom firms.
Opportunities for small and medium-sized enterprises (SMEs)
SMEs account for up to 90 per cent of Vietnam’s total enterprises. Most of them are private; therefore, private equity investment will be the top choice of investment funds after the global economic crisis.
VinaCapital, Mekong Capital and Dragon Capital are top among foreign investment funds investing in Vietnam in terms of capital scale. Indochina Capital stopped its investment fund in Vietnam last year, which partially discouraged foreign funds which planned private equity investment in the market. When the Vietnamese economy shows signs of recovery, local companies, particularly, SMEs always need capital for expanding their operations to make high profits.
Recently, VinaCapital announced a US$15 million investment in Prime Group, the biggest ashlar facing stone producer in Vietnam. Prime Chairman Nguyen The Vinh said, “In the context of current fierce competition, firms want to seek competent investors to develop their business plans.”
Chairman of Ngo Han Joint Stock Company, Ngo Thi Thong, said when the investment funds pour their money into businesses, it means that, they will go along with them. This will help to raise the company’s capacity based on international practices for corporation administration.
One other advantage to encourage investment fund disbursement is the open capital market. The development of both the financial market and the finalised legal framework, as well as investors’ experience, are also important factors to boost disbursement. Big funds such as Mekong Capital and VinaCapital plan to expand their operations in the years to come. This proves that they want to grasp opportunities as soon as the Vietnamese economy recovers, through aiming at potential private companies.
Economists said consumer goods producers and exporters are seen as “good addresses” for investment funds. The funds’ investment, with the role of a big shareholder, will help increase the firms’ share value. A number of businesses have gained impressive growth thanks to the funds’ participation, despite being affected by the world economic downturn. For instance, An Giang Plant Protection Joint Stock Company posted an on-year net revenue rise of 125 per cent, while Masan Food Company gained 75 per cent last year.
Huong Ly
Vietnamese
