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VinaCapital funds update:
VOF – Vietnam Opportunity Fund
VNI – Vietnam Infrastructure Limited
VNL – VinaLand Limited
LCF Rothschild Emerging Market Funds Conference 2011
Don Lam Andy Ho Tony HsunCEO, VinaCapital Managing Director, VOF Managing Director, VNI
2
The information contained herein has been prepared by VinaCapital Group Limited (the “Company") and is subject to updating, completion, revision, further verification and amendment without notice.
The information contained herein has not been approved by any listing authority or any investment regulator. The information does not constitute or form part of any offer for sale or solicitation of any offer to buy or subscribe for any securities nor shall they or any part of them form the basis of or be relied on in connection with, or act as any inducement to enter into, any contract or commitment whatsoever. Forward‐looking information is based on the estimates and opinions of the Company's at the time the statements are made. The Company assumes no obligation to confirm or update forward‐looking statements should circumstances or management's estimates or opinions change.
No undertaking, representation, warranty or other assurance, express or implied, is made or given by or on behalf of the Group or any of its directors, officers, partners, employees, agents or advisers or any other person as to the accuracy or completeness of the information or opinions contained herein and no responsibility or liability is accepted by any of them for any such information or opinions or for any errors, omissions, misstatements, negligence or otherwise for any other communication written or otherwise.
The information herein may not be reproduced, re‐distributed or passed to any other person or published in whole or in part for any purpose. By accepting receipt of this document, you agree to be bound by the limitations and restrictions set out above.
Neither these pages nor any copy of them may be taken or transmitted into or distributed in any jurisdiction where the distribution of such material would be prohibited under the jurisdiction’s applicable securities laws. Any failure to comply with this restriction may constitute a violation of national securities laws.
Disclaimer
Contents
3
1. VinaCapital introduction
2. Vietnam opportunity
3. VinaCapital fund updates:VOF – Vietnam Opportunity Fund LtdVNI – Vietnam Infrastructure LtdVNL – VinaLand Ltd
1. Questions for investors
4
Introduction – VinaCapital Group
VinaCapital Group (VCG) has over 180 investment professionals in four offices in Vietnam.
Our funds:• Vietnam Opportunity Fund (VOF)• VinaLand Ltd (VNL)• Vietnam Infrastructure Ltd (VNI)• Vietnam Fixed Income Fund (VFIF)• DFJ VinaCapital LP
The Group:
• Manages USD1.7 billion in three listed and two unlisted funds.
• Holds stakes in VinaSecurities JSC, a full‐service brokerage, and in VinaProjects JSC, a real estate project and construction manager.
• Offers class‐leading expertise in capital and debt markets, securities, private equity, real estate and infrastructure investment.
• In 2010, opened offices in Singapore and Phnom Penh.
VinaCapital Group is the leading asset management and investment banking firm in Vietnam.
VinaCapital Group was founded in 2003 and is based in Ho Chi Minh City, with branch offices in Hanoi, Danang, Nha Trang, Phnom Penh and Singapore.
Vietnam is one of the world’s fastest growing economies
• GDP grew 5.3% in 2009 despite the global economic crisis.
• GDP grew 6.8% in 2010.
• In Asia, Vietnam’s growth forecast is second only to China.
Investor sentiment recognises the strong economic fundamentals.• Citibank calls VN one of its “3G” countries
(global growth generators).
• EIU survey finds Vietnam as top non‐BRIC emerging market for the third consecutive year.
– Vietnam a top‐three market for investors over the next 24 months: China (selected by 20% of respondents), Vietnam (19%), India (18%).
Vietnam GDP expected to grow 7‐8% per year to 2015.
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VinaCapital has seen investor queries pick up noticeably over past few months.
FDI and FII attracted by Vietnam’s demographics, strong fundamentals
• One of the world’s largest markets – 90 million people in 2010; forecast at over 110 million in 2035.3
• Population is young, literate and productive:– Over 50% under 30 years old, median age 27.– Literacy rate over 90%.– Labour force forecast at 71 million in 2035.3
• One of world’s top commodities exporters (rice, coffee, pepper, seafood, and others).
• One of the most politically stable countries in Asia.
• Government supports economic liberalisation and integration into the global market:– Entered the WTO in January 2007.– Loosened restrictions on foreign ownership.
Sources: 1. General Statistics Office of Vietnam; 2. Business Monitor International 2010; 3. United Nations
2009 Age Distribution1
Urban Population %1
6
736567
74777880
87
Asia Region
Thailand
India
Indonesia
South Korea
Vietnam
China
Australia
Political Risk Rating in Asia2
Domestic consumption is a key driver of growth
1. General Statistics Office of Vietnam; 2. Asian Development Bank, Key Indicators 2010; 3. Nielsen, “Global Consumer Confidence Survey,” 2010; 4. PriceWaterhouseCoopers & Urban Land Institute, “Emerging Trends in Real Estate Asia Pacific,” 2010; 5. TNS, “Vietnam Consumer Trends Report ,” 2009
• Economy driven by domestic consumption – in 2009, private consumption accounted for 66.5% of total GDP.2
• Globally, Vietnamese consumers have 2nd highest level of confidence.3
• Ho Chi Minh City is placed 2nd in Asia Pacific as a retail property buying opportunity.4
• Vietnam graduated from low‐income country status in 2009, when GDP per capita surpassed USD1,000/year.
• Incomes rising, especially in urban areas – proportion of urban households earning income >USD250/month is rising rapidly, with fastest increases among those earning >USD500/month.
23.1%
58.3%
31.0% 34.9%
44.8%
33.2%26.4%
33.2%
25.4% 25.1% 25.0% 24.5%
28.4%
‐1.3%14.0% 13.0% 13.8% 14.6% 12.3% 15.2% 13.8% 13.7% 13.8% 14.0%
‐20%
0%
20%
40%
60%
Retail Sales Industrial Production
37%
21%
14%
12%
55%
55%
36%
32%
9%
24%
50%
56%
0% 20% 40% 60% 80% 100%
2008
2006
2003
2001
$500 or more $251 to $500 $250 or less
YOY industrial production and retail growth1
Consumption and retail sales growing rapidly
Urban households monthly income distribution5
Middle class purchasing power on the rise
7
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2011: Challenges we see ahead
“THE 3 Fs”F2: Food and fuel (inflation)• Inflation at 11.8% for 2010.
• Inflation m‐o‐m rates should fall (historically highest at Tet lunar new year).
Funding/financing: Liquidity in VN and abroad• Interest rates in VN very high 18‐20% VND; difficult
for companies to grow business.
• Companies borrowing in USD, taking on F/X risk.
F/X: Currency stability• Four official devaluations in past year, resulting in
almost 20% depreciation vs. USD.
• Feb devaluation of 7.2%.
Policies to address the challenges:• Stabilisation funds for consumer staples.• USD3 billion in govt spending cuts.• Gold export tax of 10%.• 7.2% devaluation on 11 February.• Emergence of ‘crawling peg’ as central rate set daily.• Tight monetary and fiscal policy now in place.
Targets:• CPI y‐o‐y inflation rate 7%.• Credit growth target now below 20% (was 23%).• More modest growth target of 6.5‐7%.• Budget deficit target under 5% of GDP (trade deficit
expected at USD14bn for 2011).
Impact of devaluation:• International reaction muted – 5‐yr CDS spreads stable.• Capital inflows should increase now that currency risk
minimised.
9
Vietnam’s equity markets – last 12 months
• HoSE index essentially flat in 2010:– MSCI VN up 11% (USD)
– HoSE was held up by large cap stocks (MSN, BVH,VIC ~ +60 Index points)
• Asia and other ASEAN markets have had stellar runs:– TIP markets returned 36.3% to 55.0%.
• Underperformance was particularly pronounced vs. ASEAN? Why?– Vietnam's weaker external position, worries
over growth bias in Govt policy.
– Progressive VND depreciations (5 instances over 2 years).
– Tight liquidity in first 9 months of 2010.
– Direction of Party congress.
11.2 11.913.5
12.5
14.813.8
17.5
9.210.3
11.4 11.1
13.411.5
14.7
0.0
5.0
10.0
15.0
20.0
Vietnam Thailand China Philippines Malaysia Indonesia India
Estimated Price/Earnings Ratios for Major Asian Stock Indices1
2010
2011
10
Attractive valuations create an investment window
On a P/E basis, Vietnam assets are priced 20‐25% below assets in neighboring markets; assets are clearly undervalued given expected earnings growth of >25% for 2011.2
Private assets are even more attractive since they can be acquired at 25% to 30% discount to public assets
1. Bloomberg, 2011 and 2012 estimates as of 18 February 20112. HSBC, “Vietnam Insights, Take a Fresh Look,” 2010
In summary…
• Macro concerns are well known – inflation, budget and trade deficits, currency, foreign exchange reserves.
– BOP crisis is unlikely, given most imports are tied to exports, and semi‐closed capital account.
– FDI will surprise on the upside (labor cost advantages) and VN’s attractive consumption story.
• Party Congress has settled the leadership question. PM Dung and State Bank are business‐oriented, have made comments to settle the market:
– Macro stability stated as their top priority, have acted decisively so far;
– Pledges toward greater transparency; clear targets and policies;
• Given an earnings growth outlook, Vietnam is relatively cheaper than ASEAN peers.
– Stock prices and earnings growth are highly correlated over the medium term. Earnings visibility for 2011 will become clearer as management issues 2011 guidance.
– 9.2x FY11E earnings and 2.0x book value at end FY11E. A normal PE for Vietnam should be at least 15.0x earnings and 3.0x book, given ROEs over 20%.
– Vietnamese companies continue to produce good earnings growth, avr 10‐15%, now from operations and not non‐core investments.
• Two major SOEs have set timelines to equitise – Petrolimex and Vietnam Airlines.
• Debt concerns will not stop strategic investors from taking stakes in SOEs when they list.
• VN market is inexpensive, and institutional investors have been busy bargain hunting.
11
12
VinaCapital Vietnam
Opportunity Fund Ltd
VinaLand Limited Vietnam Infrastructure Limited
Closed‐end fund Closed‐end fund Closed‐end fund
• Opportunity fund tapping growth and development of Vietnam.
• Equity and debt in listed, OTC‐traded and private companies.
• Investment in existing properties and new developments in Vietnam.
• Infrastructure and related assets in Vietnam and surrounding Asian countries.
NAV: USD783m NAV: USD688m NAV: USD235m
VinaCapital funds
VinaCapital AIM‐traded fundsCombined NAV: USD1.7 billion (31 Jan 2011)
Diversified Real estate Infrastructure
13
Vietnam Opportunity Fund Ltd (VOF)
Privately negotiated investments in private and listed companies, with a focus on:
‐ Sectors that support domestic growth
‐ SOE privatisations
‐ Selective real estate investments
Fund launch September 2003
NAV of fund (Jan 11) USD783m
NAV per share USD2.41
NAV gain since launch 148.8%
NAV 2010 change ‐0.8%
Market cap (Jan 11) USD628m
Investment mandate
Vietnam Opportunity Fund (VOF)
VOF overview
14
VOF is Vietnam’s benchmark diversified fund.
Portfolio breakdown at Jan 2011:
31.3%
41.6%
9.3%
5.8%1.5%
10.5%
0%
20%
40%
60%
80%
100%
by asset class (%)
Cash and other assets 10.5%
Bonds 1.5%
Private equity 5.8%
OTC stocks 9.3%
Listed equity 41.6%
Real estate 31.3%
Top 5 holdings by asset class
15
Listed securities Stake (%) Sector
Eximbank (EIB) 5.0% Financial services
Vinamilk (VNM) 2.6% Consumer goods
Hoa Phat (HPG) 4.8% Industrial
Quoc Cuong (QCG) 11.4% Real estate
Kinh Do (KDH) 15.2% Consumer goods
OTC securities Stake (%) Sector
An Giang Plant 7.4% Agriculture
Halico 23.6% Consumer goods
Nam Viet Oil 11.6% Energy
Lam Thao 7.1% Fertiliser
Binh Dien 9.0 Fertiliser
Private equity Stake (%) Sector
Prime Group 7.1% Materials
Hoan My Hospital 28.9% Healthcare
Cofico 25.1% Real estate
IBS 100.0% Materials
Thang Loi Textile 100.0% Consumer goods
Real estate projects Stake (%) Sector
Sapphire 50.0% Hotel
Jupiter 18.0% Township
Cambridge 21.0% Township
Nile 15.5% Mixed use
Volta 30.0% Mixed use
Arranged by value of holding (as of 31 Dec 10):
VOF portfolio is highly diversified within each asset class sector.
VOF 2010 performance highlights
• Eximbank, Khang Dien Housing and DIC Corp were among the 12 VOF holdings that listed during the year.
• Expected listings during 2011 include VOF holdings Lam Thao Fertiliser, An Giang Plant Protection and Nam Viet Oil.
16
IPOs during FY2010 12
Capital deployed USD101.7 million
Shares sold USD 106.7 million
Total realised gains USD 34.0 million
Capital markets return 26.4%
VN Index gain 13.1% (in VND terms)
VN Index gain 5.8% (in USD terms)
Competing capital market funds average return
13.4% (in USD terms)
VOF in 2010:
Deployed cash into PE and OTC equities that can list within 18 months.
12 IPOs during FY2010 which generated returns and sparked reinvestment.
Divested from mature real estate assets.
Avoided bonds due to lower‐than‐expected yields.
Benefited from residential real estate sales at Danang Beach Resort, Dai Phuoc Lotus.
VOF FY2010 performance driven by gains in OTC holdings prior to listing – this trend should continue.
New investments in FY2010
17
HealthcareHoan My Medical Corporation is Vietnam’s top private healthcare provider. The private healthcare sector is growing at over 30 percent yearly, and Hoan My is the market leader with four operating hospitals and one under construction. VOF holds a 28.9 percent equity stake in Hoan My.
VOF remains focused on sectors that will benefit from Vietnam’s domestic economic growth, particularly the rise of an urban middle class with higher disposable income.
AgricultureAn Giang Plant Protection JSC is Vietnam’s market leader in pesticide distribution and manufacture. The fertiliser market is expected to grow 10 percent yearly given the low penetration of modern crop protection chemicals compared to regional countries. VOF increased its stake in An Giang during FY2010 and at 31 December 2010 held a 15.1 percent stake valued at USD20.4 million.
MaterialsPrime Group JSC is Vietnam’s leading ceramics manufacturer. With the market for construction materials growing rapidly, Prime’s 2009 earnings of USD16 million are expected to grow at 30 percent yearly for at least the next three years. VOF invested USD15 million for a 7.0 percent equity stake.
Four key investment sectors: Consumer goods, healthcare, education, banks.
Significant disposals in 2010 and 2011
18
Consumer goodsHanoi Liquor JSC (Halico) is Vietnam’s leading Vodka producer and distributor. VOF sold a 23.6 percent stake in Halico to Diageo plc for USD51.6 million, for a 5.3x return.
VOF remains Vietnam’s most active deal‐maker, closing the largest‐ever private equity deal (ex. infra and real estate) in January 2011.
Real estateResidential real estate sales and reservations (villas and condo units) totaling almost USD40 million at projects including Niagara and Danube in Danang, and Jupiter in HCM City. VOF has minority stakes in the largest portfolio of residential real estate developments in Vietnam.
Consumer goodsVinacafe is Vietnam’s leading instant coffee producer, focused on Robusta beans. Current investee Thai Hoa Coffee focuses on Arabica beans. VOF sold its stake in Vinacafe for an IRR of 45 percent over five years.
Upcoming divestments: Real estate, education, consumer goods, and food & beverage.
0.00
1.00
2.00
3.00
4.00
5.00
Jan‐04 Jan‐05 Jan‐06 Jan‐07 Jan‐08 Jan‐09 Jan‐10
NAV and share price performance
• VOF’s NAV and share price recovered substantially in 2009 and 2010.
• VOF’s share price discount has closed substantially since Q1‐2009, and is now closer to other comparable Vietnam funds.
• Board has enacted policies to address the share price discount (see final VOF slide).
% ChangeAs of 31 Jan 2011
NAV Share Price
2010 (31 Dec 2010)
‐0.8% 24.5%
Since lowest share price (29 Dec 2008)
29.2% 193.9%
Since inception (Sept 2003)
148.8% 94.0%
19
Total NAV: USD783m (31 Jan)
NAV per share: USD2.41
Watermark: USD3.35
Price per share: USD 1.94 (as of 31 Jan)
Discount: 19.5% (as of 31 Jan)
NAV vs share price performance
2.41
1.94
Share price update (28 February)
20
From 8‐24 Feb, VN Index fell 17.1% in USD terms: • 11.4% loss VND terms, plus • 7.2% loss from VND devaluation.
VOF share price 8‐24 Feb fell 13.2%.
VOF’s NAV is estimated to decline 7.6% as a result:• 3.4% from capital market component loss (covering 51% NAV and losing 6.8%), and
• 4.2% from the VND devaluation.
The 11.4% decline in the VN Index was mainly due to impact of tightening monetary policy to fight inflation.
VNIndex ‐17.1%
VOF price ‐13.2%
21
VOF performance vs. competitors
Period VOF VN‐IndexAverage of Key
Competitor Funds*
FY20101 Jul 2009 – 30 Jun 2010
16.8% 5.8% 2.9%
20101 Jan 2010 – 31 Dec 2010
‐0.8% ‐7.2% ‐4.5%
FY2011 YTD1 Jul 2010 – 31 Jan 2011
‐1.6% ‐1.7% ‐4.3%
Comparison of VOF, VN Index and competitor funds’ NAV returns (in USD terms)
* Source: LCF Rothschild.
• VOF has consistently outperformed the comparable peers due to performance of OTC holdings and IPO results. Pre‐IPO investment strategy paying off well.
• VOF capital market portfolio up 26.4% for FY2010, outperforming peer return of 13.4%. Although the cap markets holdings have dropped 2.8% since 1 Jul 2010, this still beats peer group performance of ‐5.4%.
VOF strategy for 2011
Investment strategy:
• Continue to focus on private placements in pre‐listing opportunities.
• Actively search out M&A deals (eg. Halico).
Actions to close the discount being considered with our advisors:
• Broaden investor base and increase knowledge of VOF by improving communications with investors:
Marketing and promoting our fund
More research coverage
• Distribute 4% of NAV per year in two payments per year, starting May 2011.
• Seek shareholder approval for a share buyback programme.
• Consider migrating listing to LSE Main or Singapore SX.
Ultimately, discounts reflect the marginal supply/demand balance. If there is a small overhang of stock, then buybacks can be effective.…. Specialist mandates such as Vietnam, sentiment will inevitably suffer significant swings over time. Given that valuations now look far more attractive, we believe that there is scope to attract new buyers through marketing.
22
23
Vietnam Infrastructure Limited (VNI)
Investment in infrastructure assets including energy, transport, industrial parks, telecoms and the environment:
‐ Vietnam (primarily)‐ Cambodia and Laos.
Fund launch July 2007
Return since launch ‐30.2% (Jan 11)
NAV of fund (Jan 11) USD235m
NAV per share USD0.59
NAV 2010 change ‐11.7%
Market cap (Jan 11) USD150m
Investment mandate
Vietnam Infrastructure Limited (VNI)
VNI introduction
24
0.00
0.20
0.40
0.60
0.80
1.00
1.20
Jul‐07 Jan‐08 Jul‐08 Jan‐09 Jul‐09 Jan‐10 Jul‐10 Jan‐11
USD
NAV vs share price performance (31 Jan 11)
0.59
0.37
VNI portfolio holdings
25
Current market opportunities favour OTC holdings preparing for listing, and the development of IP land holdings.
0%
20%
40%
60%
80%
100%
by sector
Transport & logistics, 9.8%
Energy, 18.7%
Telecom, 10.7%
Industrial Parks, 14.1%
Other, 12.1%
Cash & equivalents, 34.6%
Top 10 holdings
Type Sector % NAV
Long An SEA PE Industrial park 8.2%
PVD Listed Energy 4.8%
Phu My OTC Transport & Logistics 4.6%
Nam Viet OTC Energy 4.2%
CII Listed General Infrastructure 3.9%
VNC‐55 PE Telecom 3.8%
VALC OTC Transport & Logistics 3.4%
MIDC PE Telecom 3.2%
ITA Listed Industrial park 2.7%
PVS Listed Energy 2.6%
VNI portfolio breakdown (Jan 11)
VNI 2010 year in review
26
VNI in the past 12 months has:
Increased # BTS towers owned by 50%.
Invested in two PE hydropower assets.
Invested in Nam Viet Oil, which owns Vietnam’s only private refinery.
Invested in CII, one of most successful Vietnamese infrastructure development companies.
Invested in two port/land logistics companies.
Partial exit from GLT at listing.
Dong Tam Group brought in as partner for Long An IP project.
Commenced development of Ba Thien II IP project.
VNI remains the only investment fund for infrastructure assets in Vietnam (primarily), Cambodia and Laos.
VNI invested and cash balance
27
Committed and under DD
(USD)
Committed 15m
BTS/IBS 7m
Industrial Park 7m
Hydropower 1m
Under due diligence 5m
Hydropower 5m
• 65% of NAV (USD153m) is invested at Jan‐11
• 26% of NAV (USD61m) is free cash.
39% 35%26%
61% 65%
2%7%
0%
20%
40%
60%
80%
100%
Jan‐10 Jan‐11 Cash Allocation (Jan‐2011)
Invested funds and cash available
Approved & Committed
Under due diligence
Free cash
Invested
Cash
CommittedUnder DD
Free cash
VNI pipeline
28
• Acquisition of BTS towers in Cambodia.
• Additional acquisitions of new BTS companies in Vietnam.
• Acquisition of In‐building system (IBS) companies in Vietnam.
• Strategic investment with a local partner in an infrastructure investment trust to be listed on HOSE.
• Exploration of agribusiness infrastructure in Cambodia and Laos.
VNI strategy for 2011
29
Investment strategy:
• Focus on pre‐listing and pre‐IPO asset for quicker value appreciation.
• Broaden scope to include agriculture‐related assets such as rubber plantations and logistics (storage facilities, etc).
• Seek exits or partial exits in industrial parks.
• Seek listing opportunities for at least two holdings.
We are enacting the following plan to address the discount issue in consultation with our advisors:
• Increase two‐way communications with investors.
• Improve reporting (now releasing NAV monthly, more info on holdings).
• Distribute 5‐10% of NAV per year starting in 2011.
• Consider migrating listing to LSE Main or Singapore.
30
VinaLand Limited (VNL)
31
VinaCapital real estate
VinaCapital has a dedicated team of real estate professionals, including specialists in asset management, development and hospitality.
VinaCapital is the largest foreign investor in Vietnam’s real estate market.
Two AIM funds with substantial exposure to Vietnam’s real estate growth.
VNL: USD688m NAV.
VOF: USD245m in real estate (31% of NAV).
Total: USD933m in real estate investments (NAV value).
VinaCapital’s dedicated real estate investment team:• 53 core staff in four offices.• Optimal mix of local and international expertise.• Fully integrated, highly experienced development
team.• 58 deals since 2003 and USD881 million equity
invested.
Strong real estate track record
32
Exits 13
Capital Invested USD177.9 million
Realised Proceeds USD224.9 million
Unrealised value USD99.8 million
Realised IRR 33%
Multiple 1.83x
Realised investments (gross figures)*
VinaCapital has the top real estate track record in Vietnam.
* Includes dividends, shareholder loans. All figures gross of taxes and fees, and include fully and partially realised exits.
• Realised IRR of 33% over 13 fully and partially realised exits since 2006.
• Total 58 investments (VNL currently invested in 38 assets).
• 2009‐2010 performance due mainly to residential unit sales:
USD116 million in gross residential unit sales and reservations in FY2010.
USD58 million in H2 2010.
Vertically integrated development and sales platform
DevelopmentCore strategic value‐add. Must be in‐house
Sales and brandingMarket leading team in‐house with own infrastructure
Project and construction management Joint venture created in 2009 to allow outsourcing and scaling
InvestmentOptimum mix of local knowledge and international expertise
Project visioning with investment team
Project approvals with local authorities
Project feasibility studies & option case studies
Marketing and sales input during design & sales
Debt procurementJV partner relationship
management
VinaCapital has created a fully vertically integrated development platform to maximise value‐added to projects.
33
Vietnam’s real estate investment opportunity
34
Vietnam’s urban landscape is low‐rise and over‐crowded.
86m population in 201026m urban dwellers
100m population in 202045m urban dwellers
o Residential (Low, mid‐end)
o Retail
o Mixed‐use
o Industrial
o Residential (High‐end)
o Hospitality
o Office
Residential
• 26 million urban‐dwellers in 2010, projected to grow to 45 million by 2020.1
• Estimated 10 million sq.m/year of new housing needed to meet demand.2
• Mortgages available but still not much used.
Retail
• Very low and poorly configured retail stock.
• Increasing purchasing power translating into increased sales.
• Consumer credit still undeveloped.
• Major international retailers are just getting started but lack the expertise to successfully structure land deals in Vietnam.
• Modern suburban retail still in its infancy.
Where are the best opportunities in Vietnam today?
1. General Statistics Office of Vietnam; 2. Ministry of Construction of Vietnam
35
• Vietnam is experiencing high population growth rates, pushing higher density.
• Annual population growth is 1.2%, compared to 0.6% in Thailand and 0.5% in China.
• Population density almost as high as Japan; urbanisation rate over 3% yearly.
• Poor quality of existing housing stock, only 47% of housing structures considered permanent.
• Lifestyle changes are accelerating household formation:
– Increasing trend of young couples moving out of the family home.
– Young professionals now desire their ‘own space.’
– Increasing marriage rate (12.1 per thousand per annum, one of the highest in the world).
350
278
142 132 126
33
0
50
100
150
200
250
300
350
400
Japan Vietnam China Thailand Indonesia US
Population Density (person/sq.km)
4.53.8
3.93.2 3.1
2.6
0
1
2
3
4
5
VN 1999 VN 2009 Thailand China Japan US
Persons per Household
Drivers of new housing demand
36
VNL overview
VNL is the top performing Vietnam fund over past three years.
Background
• Inception: March 2006
• USD688m NAV (31 Dec 10)
• USD1.38 NAV per share
• USD1.61 high watermark
Investing highlights
• 38 assets in the portfolio.
• Three project exits in 2010, above NAV.
• USD164 million in residential units sales and sales reservations in past 18 months.
Performance highlights
• 42.3% return on NAV/share since inception.3.8% 2010(‐9.2%) 2009 (due to unrealised writedowns)17.1% 200833.8% 2007
Conservative valuation policy sees assets revalued only after receiving IL or other significant project milestone.
37
Valuation breakdown (% NAV)
Assets held at cost 10%
Assets revalued 90%
Holdings breakdown (% NAV)
Top 10 projects 61%
Remaining 28 projects 39%
Development status (% NAV)
Landbanking assets 17%
Development stage assets 72%
Operating assets 11%
0.00
0.25
0.50
0.75
1.00
1.25
1.50
1.75
Mar‐06 Sep‐06 Mar‐07 Sep‐07 Mar‐08 Sep‐08 Mar‐09 Sep‐09 Mar‐10 Sep‐10
38
VNL share price discount
The discount is slowly moderating; distributions should further reduce discount.
NAV vs share price performance (31 Jan 11)
• Share price discount is currently 28.3%, down from over 70% at Mar 09.
• Investor sentiment has not fully recovered from 2008 low.
• Exits continue to demonstrate validity of VNL’s NAV.
• Only 10% debt across entire portfolio.
VNL Jan‐10 Jan‐11 % change DISCOUNT at end‐Jan‐11NAV 1.33 1.38 3.8% 28.3% Share price 0.89 0.99 11.2%
1.38 NAV
0.99 SP
Distribution policy announced in October 2010 is expected to further decrease discount.
VNL portfolio by sector
39
Office3 assetsNo projects active
Residential10 assets5+ projects active (sales/marketing)
Mixed‐use/retail5 assets3 projects under construction in 2010
Townships (large scale)7 assets3 projects under construction in 2010
Hospitality13 assets5 operating hotels
Note: VNL also has several land bank assets.
Geographic split %NAV
North 7%Centre 27%South 66%
VNL development progress
40
Completion in 2010 Construction in 2011 Construction in 2012 (estimate)
Projects Location Refurbishment Construction On‐going Start StartPearl (hotel)Silver (hotel)
HCM CityNha Trang
Niagara 1 (resort villas)Gardenia (residential)Danube 1 (residential/mixed‐use)Niagara 2 (resort villas)Emerald (resort villas)Jupiter (township)Venus (township)Niagara 3
DanangHCM CityDanangDanangHoi AnHCM CityNha TrangDanang
Nile (mixed‐use)Rhine (residential/mixed‐use)Mars (township)Tiber (mixed‐use) Jasmine (residential)
HCM CityHCM CityHCM CityHanoiHCM City
Danube 2 (retail)Mekong (mixed‐use)Cambridge (township)Cedar (office)Fraser (mixed‐use)Preston (mixed‐use)
DanangHCM CityHCM CityHCM CityDanangHCM City
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No. Investment Location Development type Site area(ha)
% NAV Current status
1 Cambridge HCM City Residential 30 11% Construction underway
2 Niagara DanangIntegrated luxury resort (villas, condos, golf, hotels)
260 10% Construction and sales underway
3 Jupiter HCM City region Township 200 9% Construction and sales underway
4 Nile HCM City Mixed‐use 3.1 7% Planning underway
5 Mekong HCM City region Township 250 5% Planning underway
6 Aquarius HCM City Mixed‐use 1.4 5% Land compensation underway
7 Venus Nha Trang Township 158 4% Construction underway
8 Mars HCM City region Mixed‐use 32 4% Planning underway
9 Leo HCM City region Township 126 3% Planning underway
10 Pearl HCM City Hotel 0.5 3% Operating asset
VNL top ten assets
Niagara Integrated luxury resort, Danang
Project summary
• Ground breaking in January 2008.• The first 18‐holes designed by international renowned course designer Greg Norman is now
fully operational. • Beach Clubhouse opened in August 2010; golf clubhouse to open March 2011.• Phase 1 and part of Phase 2 of the Ocean Villas have been handed‐over to owners.• Construction on the Dune Residences (15 lots) commenced. Display villa open.• Norman estates display villa under construction, mid‐March 2011 launch.
Development update
Type Integrated Resort with golf courses, hotel, retail centre, marina, resort residences (villas and condominiums) and supporting facilities
Location Son Tra ‐ Dien Ngoc Coast, Danang (10km from international airport)
Area Site Area: 260 ha. Phases 1 – 6: estimated GFA of 109,000 sq.m
Legal Status • Cleared site, ready for development• Investment License received Dec 2008• 1:500 revised Masterplan await approval
Investment Strategy
Integrated residential development with resort facility situated on the beach with panoramic views of surrounding mountains, pristine beaches and the Greg Norman golf course.
Sales update
• Phase 1‐3 of the Ocean Villas, totaling 115 villas and beach houses, have been launched with over 85% sold to date
Vietnam’s first truly integrated, world‐class resort community.
Features Greg Norman‐designed ‘The Dunes’ golf course.
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Cambridge Township, HCM City
Project summary
• In Jan 2008, HCMC People Committee granted Century 21 the Nam Rach Chiecsite which was fully compensated and cleared, in return, Century 21 to build and transfer 4,200 resettlement apartment units in Binh Khanh site at investment cost
Project background
Type Mixed‐use – Residential and Retail/Commercial
Location Nam Rach Chiec site, on the border of Districts 2 and 9
Area Site Area: 30ha. Estimated GFA: 570,000 sq.m
Legal Status • Cleared and fully compensated sites
• Investment Licence application to be submitted in Dec 2010.
• Masterplan submitted and awaiting approval
Project update
• Binh Khanh Resettlement Site: ground breaking in Sep 2009.
• Nam Rach Chiec site: 1:500 Masterplan awaiting approval prior to securing financing for development of the first phase of residential and second phase being the retail component
• Excellent location in District 2, HCMC with major infrastructure now under construction including freeway to District 1 (approx. 10 ‐15 mins by car)
Mid‐range housing project developed in conjunction with municipal government.
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Jupiter Township, Dong Nai (HCM City region)
Project summary
• Construction and sales of Zone 5 underway• Zone 5 – total 332 villas, piling work 71% complete.• Construction of show village to open end March 2011• Zone 5 – Ground floor concrete slabs 5% complete• Sales and Marketing soft launch of Zone 5 villas commenced Apr 2010
Development update
Type Integrated island residential township
Location Dai Phuc Island, Nhon Trach District, Dong Nai Province
Area Site Area: 200 ha. Approved GFA: 1,758,975 sq.m.
Legal Status • Investment License received in May 2007 • Land Use Rights issued for all zones, except for Zone 8 and CBD• 1:500 Masterplan and construction permit for Zone 5 received
Investment Strategy
Development of 6 zones over period of 5-7 years and early partial divestment to co-investor
Sales update
• Released 141 out of 332 villas in total in initial soft launch. Taken reservations for 127 villas, with 75% already converted to Sales & Purchase Contracts
• Total sales estimate for Phase 1 is USD82m and will be delivered by Q2 2012
ZONE 5
Unique island township in fast‐growing suburban region.
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Venus Township, Nha Trang (resort city)
Project summary
• Infrastructure design completed• Typical townhouse and villa design in working progress• Site being filled and leveled• 5 unit display village to open in July 2011
Development update
Type Township with villas/townhouses, apartments, hospital, school, retail centre and entertainment facilities.
Location Vinh Thai District, Nha Trang City, Khanh Hoa Province.
Area Site Area: 158 ha. Estimated GFA: 962,982 sq.m.
Legal Status • Investment approval in 2008.• Investment Licence and construction permit obtained.
Investment Strategy
Development of infrastructure and residential to commence first. Seeking divestment to co‐investor.
Sales update
• Soft sales launch in Hanoi in Q4 2010.• Official launch planned for Q2 2011.
The first modern township in Nha Trang – a fast‐growing coastal resort city.
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Nile Mixed‐used, HCM City
Project summary
• Relocation of the factory in progress
• Site clearance underway
• Expected key milestones: Construction – Q2 2011; Sales launch –Q4 2011; Completion – 2015
Development update
Type Residential Apartments, Retail podium, Office and Hotel
Location 152 Tran Phu Street, District 10 (Chinatown), HCMC
Area Site Area: 3.1 ha. Estimated GFA: 278,748 sq.m
Total units Over 1,100 apartments
Legal Status • Site occupied by local partner’s factory• Investment License received Oct 2008
• 1:500 Masterplan approved Oct 2010
Investment Strategy
Commencing residential apartments first and seeking co‐investor and major tenants for commercial/retail space
A landmark development in central HCM City.
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Tiber Mixed‐use, Hanoi
Project summary
• Design consultants are engaged and working through various architectural and engineering approvals
• Pre‐construction site works to be commenced in Q1 2011
• Pre‐qualification of international based building contractor commenced, tender to start in Dec 2010
• Construction permit expected in Q1 2011.
Development update
Type Residential Apartments, Office, Retail podium and Hotel
Location 222 Tran Duy Hung, My Dinh, Hanoi
Area Site Area: 4 ha. Approved GFA: 351,400 sq.m
Legal Status • Cleared site, ready for development• Investment License received May 2008• 1:500 Masterplan received Mar 2010• Construction permit application in progress
Investment Strategy
Negotiating pre-lease for office tower with view to commence construction by Q2 2011
Sales update
• Pre‐commitment of 40% office building is under negotiation
• Pre‐commitment of 60% retail centre is under negotiation
• Marketing for hotel/serviced apartment investor/operator under way
A landmark development in Hanoi’s fastest‐growing suburban region.
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Comprehensive valuation process• Valuations are required for each real estate project.
• Two independent valuers at least once per year.
• VNL Valuation Committee meets quarterly to review and recommend to the VNL Board adjustments to the market values.
• Re‐valuations are usually initiated upon:Obtaining an investment licenceConstruction permitReaching another significant milestoneReceiving an unsolicited offer to purchaseImpairment test
• External valuation consultants engaged include: JLL, CBRE, Colliers, Savills, Cushman & Wakefield, HVS (Singapore), JLL (Hotels) Singapore.
• Properties assessed for valuation impairment each quarter.
VNL valuation policy
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Key milestones in last 12 months:• USD196 million in financing secured for 10
projects in 2009‐10.
• Construction began on The Garland, Dai Phuc Lotus, Azura Tower, and Ocean Villas and Cham Condominiums at Danang Beach Resort.
• Sales reservations booked for all villas at The Ocean Villas in Danang and The Garland in HCM City.
• Divestment from Oasis and Quoc Te in HCM City, and Mandarin Gardens in Hanoi.
• Acquired minority stake in Legend Hotel in HCM City.
• Opened brand new Mercure La Gare Hanoi and Movenpick Hanoi following major refurbishment.
VNL 2010 performance highlights
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VNL strategy for 2011
Overall objective is to increase NAV and reduce the share price discount.
Strategies:
1) Selective exits of mature, non‐core holdings (ie. those where sale at current price would result in higher IRR than completing development).
2) Fast‐track residential sales and marketing on properties across Vietnam to take advantage of market demand.
3) Promote ‘VinaLiving’ lifestyle brand to enhance residential sales at premium prices.
VNL has USD600 million residential sales pipeline!
4) Project management joint venture to bring delivery of projects ‘in‐house’ to ensure quality.
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Conclusion
Questions for investors
• What are your views on the distribution policies? Is it what you want? If not, what other solutions do you prefer?
• Are you receiving enough information about your investment in our funds? What other information do you want?
• What are your thoughts on the potential change in listing to an Asian stock exchange?
Our current thoughts on a change in listing:
Pros Cons
• Attract new investors• Liquidity higher if enough analysts cover us.• Closer to our market, can reach investors more easily.
• More analysts in Singapore cover Vietnam.• Our largest investors in Europe can still execute on Asian exchanges.
• May help close discount.
• Disenfranchise some investors.• Liquidity may be low if not enough analysts cover us.
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VinaCapital Group17th Floor, Sun Wah Tower115 Nguyen Hue, District 1, Ho Chi Minh City, Vietnam
P: (84 8) 3821 9930 F: (84 8) 3821 9931
Email: [email protected]
Website: www.vinacapital.com
Ho Chi Minh City Hanoi Danang Nha Trang Phnom Penh Singapore
