BUSINESS IN BRIEF 5/5
Ocean Dune golf members up in arms over proposed tear down
The rezoning of Ocean Dunes golf course in south-central province Binh Thuan’s Phan Thiet city as an urban area has stirred controversy, as stakeholders cannot reach a consensus.
In early March 2014, to stop continuous losses it has sustained for the past 20 years, Rang Dong Group, the owner of Ocean Dunes, issued a message to its members that the golf course would close early this month.
The message included plans to resolve membership fees and benefits.
Accordingly, the group proposed Ocean Dunes members could transfer their memberships to Golf Sea Links, part of the Sea Links City, managed by Rang Dong.
All member services would be entirely inherited by the course.
In cases the members having both Ocean Dunes and Golf Sea Links they can combine card validity or transfer one card to other people without paying transfer fees.
The group is openly negotiating with Ocean Dunes members to ensure their best interests.
Some members, however, are not satisfied with Rang Dong’s solution, saying that they are being disregarded and have not been heard by the group.
Ocean Dunes’ member Dinh Ngoc Tuan argued that Rang Dong should continue the golf course business and postpone changing the property into an urban area.
In the middle of last week, a group of Ocean Dunes members held a meeting where they reached a consensus on hiring a foreign law firm to protect their interests if the urban area plan goes forward.
Another member, Le Quang Liem, wants Rang Dong to pay $25,000 compensation to club members, as he is not interested in playing golf at Sea Links.
Jeff Puchalski, another member, said a proposal is being drafted to send to authorities asking them to uphold the members’ rights.
Chairman of Rang Dong Nguyen Van Dong, said the group was looking to resolve the issue in a constructive way. He added that the group greatly regrets closing the course, but that it has become necessary due to the group’s sustained losses.
In terms of satisfying Ocean Dunes’ members, Dong said that of nearly 189, nearly half couldn’t be contacted and another 50 had agreed to shift their memberships to Sea Links or receive compensation.
Discussing the transition of Ocean Dunes into an urban area, chairman of Binh Thuan People’s Committee Le Tien Phuong said, “Ocean Dunes was approved by the government’s golf course development plan, and therefore changing its function needs government approval. Once that happens, then more detailed planning can take place to balance state, society and investor interests.”
The proposal to change the golf course to an urban area will fall on the provincial Party committee’s desk this month. If green-lighted, the provincial people’s committee will pass the proposal forward to the prime minister and higher authorities for final approval.
Can Tho resolves to push forward investment projects
Authorities in the Mekong Delta’s Can Tho city are working to improve the investment environment by scaling up efforts to accelerate the pace of delayed projects.
One of the longest and biggest delayed projects in the city is the Can Tho international university village and Hoang Quan Can Tho urban area developed by Hoang Quan Can Tho Real Estate JSC.
The project saw its investment proposal ratified by the city’s People’s Committee in early 2009.
The project initially envisaged 164 hectares for the urban area, 102 hectares for the university and a 53 hectare resettlement area.
But since receiving approval, the developer has yet to do anything related to compensating and supporting the affected citizens to relocate.
Last year the Can Tho Department of Planning and Investment worked regularly with state agencies to review the project’s progress and required the developer to commit to a pace and implementation timeline as well as pay deposits (equal to 5 per cent of the cost for compensation and resettlement), as regulated by law.
According to Bui Ngoc Vy, deputy head of the department, the project developer has now proposed to change the urban area plan to housing blocks for low-income people. The plans for the university have stayed the same.
“The city’s Department of Planning and Investment is working with the project developer, asking them to prove financial capability and again commit to a timetable that can be reviewed and potentially approved by authorities,” said Vy.
Another project, the $538 million Can Tho oil refinery, has an annual production capacity of two million tonnes of much needed refined products. But six years after being licensed, it has seen no progress and has changed joint venture partners four times.
In its most recent move, the project and JV partner proposed downsizing the scale to $350 million.
The Department of Planning and Investment has similarly asked the developer to prove its financial capability, pay the 5 per cent deposit against compensation and resettlement, and make a progress commitment.
A 400 hectare infrastructure project for Hung Phu 1, Hung Phu 2A and Hung Phu 2B industrial parks (IPs) has been in the pipeline for nearly a decade and has seen little progress.
Its delays are attributed to changes to compensation policies and the IPs’ close proximity to the city centre, making compensation quite costly.
Reportedly the investor would have to pay $80-$90 per square metre, which would in turn drive up leasing costs and make it difficult to lease.
Meanwhile, leasing rates in neighbouring localities – Hau Giang and Vinh Long, are very competitive due to their low input costs.
This was the reason developer Can Tho IP Infrastructure Construction Company Limited pulled out of the Hung Phu 2B IP.
Chairman of Can Tho’s People’s Committee Le Hung Dung said that city authorities have continuously supported investors to work out procedures and regulations but that “Long delayed projects have a major impact on the lives of people who live on project sites. Projects that do not move forward with be strongly sanctioned.”
ODA projects badly need reciprocal capital
At a recent meeting between the ministries of transport and finance as well as the State Bank of Vietnam and Government Office, seven urgent transport projects funded by official development assistance will see capital injections totalling VND2-2.5 trillion ($95-$119 million) in 2014’s first round of advancing reciprocal capital for projects, probably soon after April 30.
These seven projects include a road linking Noi Bai international airport to Nhat Tan port in Hanoi, the Danang-Quang Ngai expressway, the Ben Luc-Long Thanh expressway, Hanoi’s urban railway section from Cat Linh to Ha Dong, Mekong Delta transport infrastructure development (WB5), upgrading the northern sub-Mekong region transport network (national highway 217) and the Lo Te-Rach Soi highway (Delta region).
“This list is temporary as they will only see capital injections once developers show that they have finalised disbursement of 70 per cent of this year’s reciprocal capital before April 30 and have land acquisition plans approved by local governments,” said deputy head of the Ministry of Planning and Investment (MPI)’s Infrastructure Department Tran Duc Toan.
Of these above listed projects, two highways developed by the Vietnam Expressway Corporation (VEC) are reportedly in position 15 days ahead of the deadline.
“We will disburse nearly VND900 billion ($42.8 million) in reciprocal capital to the Danang-Quang Ngai and Ben Luc-Long Thanh expressway projects no later than mid-April,” said VEC general director Mai Tuan Anh.
According to sources, additional reciprocal capital demands for the two projects are somewhere in the area of VND2.3 trillion ($110 million) this year, with VND1.5 trillion ($71.4 million) needed just by the latter. Construction of the Ben Luc-Long Thanh expressway is slated to kick off in June.
According to the Government Office, the National Assembly has approved only VND8 trillion ($381 million) in reciprocal capital for the whole country for implementing ODA projects this year.
The transport sector is likely to be the biggest recipient with an expected 35 per cent of the approved figure.
In a document sent to the prime minister this March, the MoT proposed an additional allocation of VND8.2 trillion ($392 million) in reciprocal capital for ODA projects this year.
This figure did not include VND2.5 trillion ($121 million) to be sourced from government bonds, already ratified by the prime minister earlier this year.
“To achieve the full reciprocal capital demand for this year, ODA projects would have to disburse VND35 trillion ($1.66 billion) to complete 245km of highways, 12km of key urban roads, upgrade 167km of highway, complete the construction of the T2 terminal at Noi Bai airport, and more,” said the head of MoT’s Planning and Investment Department Nguyen Hoang.
Concerning ODA transport projects, the role of reciprocal capital is essential as it links with compensation and land acquisition, decisive factors in construction and general disbursement.
“Key transport projects have a huge demand for reciprocal capital this year and a slow disbursement pace could make their targets unrealisable,” said Toan from the MPI.
PG Bank mulls bank-in-bank merger with VietinBank
Industry insiders are mulling the possibility of an ailing commercial bank merging into a leading bank under the bank-in-bank model, unprecedented in Vietnam thus far.
Late last week, Petrolimex Global Joint Stock Commercial Bank (PG Bank) surprised everyone when it unveiled the documents from its 2014 general shareholder meeting on its website.
The documents showed that the Board of Directors wanted shareholders to approve PG Bank’s restructuring plan to merge with Vietnam Bank for Industry and Trade (Vietinbank) through a stock swap.
The proposed value ratio was 0.82 of a share of PG Bank stock for 1 share of Vietinbank stock, which would allow Vietinbank to hold a 99 per cent stake in the former.
After the merger, PG Bank would still remain a banking entity under the bank-in-bank model.
But only a few hours after the documents went up, they were removed and PG Bank chairman Bui Ngoc Bao told VIR that the merger plans were only a proposal as of this time.
“Following the prime minister and State Bank of Vietnam’s instructions, our bank has worked on a full range of restructuring plans, including self-restructuring and merging with state or joint stock banks. Merging with VietinBank is included in that list and we have also met with a number of other potential partners. We have yet to reach a final decision,” explained Bao.
Bao asserted that PG Bank wanted to team up with a suitable credit institution and the move would take place this year if it gets the go-ahead from the central bank (SBV).
PG Bank is reportedly facing mounting pressures from its major shareholder Vietnam National Petroleum Import Export Corporation (Petrolimex) to facilitate withdrawal of its 40 per cent stake in the bank as the prime minister has required the firm to reduce its position to at least 20 per cent by 2015.
The bank-in-bank proposal with VietinBank would dilute Petrolimex’s shares to the point where it would no longer need to divest.
Discussing the merger scenario, former SBV governor Cao Si Kiem said the bank-in-bank model was virtually non-existent in Vietnam and therefore “unfeasible and hardly manageable”.
On the same topic, a joint stock commercial bank leader said the idea to merge PG Bank with VietinBank was a viable option, but retaining PG Bank brand was unnecessary as this was not a strong brand.
Director of the Bank for Investment and Development of Vietnam (BIDV)’s training centre Can Van Luc said the bank-in-bank model has occurred in the US, as a brand solution.
“This model makes the smaller bank part of the larger and of course the larger bank will have its methods for integrating the workforce and assets of the smaller entity. If PG Bank was to merge with Vietinbank, the decision to keep the brand would be made after reviewing the pros and cons,” he added.
“The government has demanded state groups and businesses divest entirely from non-core businesses, and therefore Petrolimex is anxious to exit PG Bank, even if PG Bank is allowed to merge with VietinBank,” Luc noted.
According to PG bank figures, by end of the third quarter of 2013, the bank had over 9 per cent in bad debts while credit contracted 5.6 per cent.
By the end of 2013, through selling bad debts to state-owned Vietnam Asset Management Company (VAMC), bad debts fell to nearly 3 per cent but credit only grew 0.6 per cent.
The bank’s post-tax profit last year hit only VND38 billion ($1.8 million), down 84 per cent on-year.
Investors rush to lower luxury house prices
Many villa projects in Hanoi are being sold at surprisingly low prices amid the slump in the market when their investors want to clear out the stocks.
Numerous leaflets are being posted on the streets to advertise home selling. If a luxurious house in urban projects was offered at tens of billions of VND a few years ago, a 200 square metre luxurious house is sold at only VND1.6 billion. Even so, many people still said the price is a bit high compared to the next-door projects.
Song Da Urban and Industrial Zone Investment and Development JSC has also lowered the prices for many of its properties. Price for a square metre of land in the Nam An Khanh urban project has been lowered from VND50 million to VND17-21 million. However, home buyers have not moved in yet because the infrastructure is incomplete.
Director of Commercial Real Estate Services (CBRE) Le Minh Dung said housing prices in general are dropping. Reports from CBRE said due to the economic difficulties and redundancy of housing projects, luxurious houses' investors are pushing down the prices in order to compete with the middle class housing sector.
According to the Ministry of Construction's statistic, as of late February, the total value of unoccupied houses in Vietnam reached over VND92.6 trillion of which VND9 trillion is in Hanoi. Most of these houses are located far from city centre and have incomplete infrastructure such as Nam An Khanh or Gamuda. Many urban projects including Lideco, Van Phu and An Hung are also suffering with thousands of homes being abandoned for a long time.
Despite the harsh situation, investors still show optimism and hope that transactions will increase along with economic recovery.
Hanoi’s exports enjoy surge in first four months
Hanoi earned some 3.44 billion USD from its exports in the first four months of this year, up 11.6 percent from the same period last year.
In April alone, the figure stood at 883 million USD, up 9.9 percent compared to a year ago.
Garments topped the city’s key exports with a surge of 34.6 percent, followed by glass and glass products (34.2 percent), and others (23.9 percent).
Meanwhile, the export of agricultural products and computer components and peripheral equipment saw drops of 25.3 percent and 23.1 percent respectively.
Quang Nam seeks to lure big investments
Central Quang Nam province will request ministries and sectors to offer special preferences for projects with over 500 million USD investment capital and key socio-economic projects in Chu Lai Open Economic Zone.
This step is in accordance with a new decision taken on offering preferential policies and support for new projects in the economic zone.
The province will also offer tax exemption on land use for special projects, including university dormitories, housing for workers and public works in the fields of education, health care, culture, and sport.
Businesses that have invested in high-tech will enjoy a preferential tax of 10 percent in the initial 15 years of the project.
Comprising 24 communes and five industrial parks spreading across 3,500 hectares, Chu Lai has been chosen as one of the five key economic zones to be prioritised in the 2013-15 period. Developments in the zone have created jobs for about 50,000 workers in the locality.
According to statistics, the Chu Lai Open Economic Zone has so far attracted more than 90 projects with a total registered investment of nearly 1.7 billion USD, two-thirds of which have become operational.
Singapore-based US businesses eye VN as potential destination
American Chamber of Commerce in Singapore (AmCham Singapore) Executive Director Judith Fergin said many of AmCham members see Vietnam as an increasingly viable alternative to China in the manufacturing sector, offering a lower cost basis with similar access to the Chinese market.
She made the remark on the occasion of a roundtable dialogue held in Singapore on April 27 between Vietnamese Minister of Investment and Planning Bui Quang Vinh and a number of directors for Asia-Pacific region of AmCham Singapore member companies.
“Since the Doi Moi reforms started in 1986, Vietnam has made remarkable economic progress that continues to this day. Vietnam has favourable demographics, a large consumer base, and robust potential in the manufacturing sector. Potential partners are watching with interest as the Vietnamese government moves forward on critical reforms, streamlines procedures, and entrenches legal and regulatory predictability to create a more competitive environment for business,” she said.
The AmCham Singapore Executive Director recommended the Vietnamese Government to finalize, sign, and ratify the Trans-Pacific Partnership (TPP), noting that the TPP stands to benefit Vietnam enormously and, in fully implementing it, Vietnam will pave the way for further free trade agreements with additional partners.
The roundtable dialogue was organized during the April 27-29 working visit to Singapore by Minister Vinh, who is accompanied by senior officials of other ministries and government agencies and the provinces of Thanh Hoa, Nghe An and Kien Giang.
At the event, the American executives inquired into Vietnam’s investment climate and industry priorities as well as investment opportunities and challenges in Vietnam.
Minister Vinh informed the AmCham members of Vietnam’s macro-economic situation in the first quarter of this year, the country’s orientations to lure more foreign investments in the time to come as well as its solutions to improve macro-economy and foreign direct investment climate. He suggested that AmCham Singapore, together with relevant Vietnamese agencies, connect American companies in the region to invest in Vietnam in such companies as health, education, high technology, information technology and infrastructure.
The American Chamber of Commerce in Singapore is the leading international business association in Singapore, with over 5,000 members representing more than 750 companies.
Local IP rights need protection abroad
Although Vietnam’s intellectual property right registration abroad has recently seen positive changes, the number of registration applications handed to the National Office of Intellectual Property of Vietnam (NOIP) each year remains too small, reported the Ministry of Industry and Trade's Vietnam Economic News.
Before 2013, each year only some enterprises were allowed to have intellectual property registration abroad. However, in 2013 there were 115 international registration applications, including 12 patent registrations abroad and 103 trademark registrations.
Compared to recent years, this was a big change in the number of intellectual property registrations and reflected the growing awareness of Vietnamese people and enterprises on intellectual property in face of the increasing violation cases of intellectual property rights.
However, this number of applications remained too modest if compared to 76,000 applications of different kinds to establish their rights at the NOIP in 2013 including more than 400 patent registrations and 24,656 trademark registrations.
Nguyen Van Bay, Director of the NOIP's Centre for Research and Training, said in many cases, the data may not reflect core issues of the situation as the above data may not be complete. There are two ways for the businesses to have their intellectual property rights registered abroad. They can hand in applications to each country or to the National Office of Intellectual Property, which then examines the applications and submit to the World Intellectual Property Organisation (WIPO).
According to NOIP Director Ta Quang Minh, the businesses have not paid attention to intellectual property right registration abroad because they have not or have not been able to work out export strategies to these markets. Meanwhile, if they want to build and develop trademarks, the intellectual property right registration must come along with other activities such as advertising, introducing products and setting up distribution channels.
The intellectual property right registration abroad in fact is not an easy job, very costly and waste of time for the Vietnamese businesses, mostly small- and medium-sized ones and the scientists’ salaries remain low. For example, to apply for grant of patents in the US, it will cost thousands of US dollars and take about one year to be examined. If granted, then businesses will have to pay an additional amount of money annually for protection (about 1,000 USD a year) within 20 years.
It is necessary to have intellectual property rights registered but it is more important to exploit those protected intellectual property rights. For example, Vietnam registered trademarks for the coffee tree but still exports mainly in the form of raw materials. Therefore, after importing Vietnamese coffee, foreign producers then process the products and use their names and trademarks. If this continues, Vietnam will never have coffee products of their own trademarks in the world market.
Director Bay said to save costs and avoid risks when submitting registration applications abroad, the businesses should submit them to the Madrid system managed by WIPO, which will bring trademark protection to users in 79 countries by an only registration application.
It is said that the costs for trademark protection if handing applications to the NOIP are only about 300 USD, including costs handed to state agencies and hiring lawyers. It will be much cheaper if compared to handing a single application to each country. By this way, the registration application will be reviewed by the NOIP before submitting to WIPO, helping reduce many possible risks.
Vietnamese goods make up 80 pct at Hanoi supermarkets
Up to 80 percent of commodities displayed at Hanoi ’s supermarkets and trade centres are made in Vietnam, according to local authorities.
In response to a campaign called “Vietnamese prioritise using Vietnamese goods”, businesses in the city have invested in purchasing modern machine, renovating technology and management in order to reduce costs and improve product quality.
However, many enterprises have not paid attention to advertising their products to consumers and protecting commodity brands.
This year, the city will intensify advertising campaigns to make its products more familiar to consumers.
Launched in 2009, the campaign has received warm response from businesses across the nation.
A report released by the campaign’s steering committee showed that businesses’ participation has positively influenced the entire society and contributed to national socio-economic growth.-
Agro-forestry–fishery exports increase in four months
Vietnam grossed 9.69 billion USD from selling agro-forestry and seafood products abroad in the first four months of 2014, a year-on-year increase of 14 percent, according to the Ministry of Agriculture and Rural Development.
Seafood was the top export industry, bringing home 2.2 billion USD, up 31 percent on an annual basis. The US topped the list, accounting for 25 percent of the total exports.
Coffee, pepper, and timber products also experienced the same trend. Vietnam exported 826,000 tonnes of coffee worth 1.65 billion USD, a rise of nearly 40 percent and 30 percent, respectively, with Germany and the US remaining the biggest importers.
However, key farm produce such as rice, rubber and tea suffered a considerable drop in both volume and value against 2013.
Rubber exports declined 18 percent by volume to 189,000 tonnes and 38 percent by value to 378 million USD. China and Malaysia still topped the list, but the consumption was on the downward trend compared to the year just gone.
Meanwhile, rice exporters earned 931 million USD from selling over 2 million tonnes, a respective reduction of 6.9 percent and 4.7 percent year-on-year. China was the largest importer, accounting for over 38 percent of the market share, followed by the Philippines with 27 percent.
Last year, Vietnam’s agro-forestry-fishery exports climbed a marginal 0.7 percent year-on-year to 27.5 billion USD.
Enterprises make plea for better work environment
The Vietnam Chamber of Commerce and Industry (VCCI) collected more than 300 recommendations from the business community and reported them to Prime Minister Nguyen Tan Dung during his conference with representatives of enterprises nationwide in Hanoi on April 28.
Speaking at the event, VCCI Chairman Vu Tien Loc said that the recommendations mainly relate to the legal obligations faced by businesses, which must be reformed in order to ensure business freedom and equal competitiveness.
Enterprises suggest the Government continue creating favourable conditions for them to operate, carry out investment activities and gain access to credit loans and advanced technologies.
The Government has also been asked to reschedule the planned raising of the minimum wage during at least two years of 2014-2015 to give them time to prepare their budgets accordingly.
The business community also wants administrative procedures to be simplified, especially in business registration, customs and construction work.
According to the VCCI leader, there are now more than 500,000 enterprises operating in Vietnam and contributing to the country’s economic growth, the State budget and employment rates. Despite their success, Loc said growth model renovation and restructuring are vital for the business community to develop further.
HCMC High Tech Park designs successfully pressure sensor chips
Pressure sensor chips based on MEMS technology was designed successfully by Hi-tech Park R&D Center and the Centre for Research and Training in Integrated Circuit design (the National University of Ho Chi Minh City) on April 28.
This technology contributes to the further advancement in pressure measurements.
Team leader of research pressure sensor chips of R&D Center Truong Huu Ly said that pressure sensor chips are suitable for highly precise measurements in life, industry and health.
In the medicine industry, pressure sensor chips will be applied to sphygmomanometer. Beside that, these chips will also be used for water level measurements such as washing machines, dishwashing machines, sinks.
This chip works as a machine controls pressure of gas.
In addition, pressure sensor chips can also be used in irrigational work to prevent flooding, said Ly.
Vinamilk grasps market share rather than profits
Vinamilk expects to post 2014 revenues of almost VND36.3 trillion ($1.7 billion), up 14.9 per cent from a year earlier, but will accept lower profits to maintain its market share.
Vietnam’s largest dairy and second biggest listed firm in terms of market capitalisation obtained shareholder approval at its annual general meeting held on April 25 to raise its 2013 dividend rate to 48 per cent, up from a previous 34 per cent and issue bonus shares at a rate of 20 per cent.
Contrary to expected revenue growth, the dairy product maker announced it expected a 2014 post-tax profit of almost VND6 trillion ($285 million), down 8.28 per cent on 2013.
Answering a shareholder at the meeting, Vinamilk chairwoman and CEO Mai Kieu Lien explained the lower profit target aimed to maintain reasonable prices based on declining consumer purchasing power.
“When purchasing power falls, competition becomes fiercer. In such an instance, maintaining market share instead of eyeing higher profits is the correct thing to do,” she said. Lien added that if the results were better than expected, Vinamilk would revise the company’s profit target in the second half of the year.
She claimed the company’s liquid milk products currently held a 48-49 per cent market share. Kantar World Panel’s research issued in May 2013 revealed that 94 per cent of Vietnamese families surveyed used at least one Vinamilk product.
Lien highlighted 2013’s profit performance had surpassed its target by 5 per cent and the profits accumulated by last year already accounted for 95 per cent of the target identified for 2016.
Vinamilk estimates a net profit of VND6.18 trillion for 2015, a little higher than this year but still lower than its 2013 result of VND6.53 trillion ($311 million).
The company has earmarked VND2.508 trillion ($119 million) for this year’s investment which would go to the parent company itself, and its members and associate firms, including the Miraka company in New Zealand, where Vinamilk holds a 19 per cent stake, and Driftwood in the US.
Vinamilk is working on the establishment of a $3 million subsidiary in Poland as part of its overseas expansion drive to more than double annual revenues to $3 billion by 2017. CEO Lien is the company’s legal representative in Poland. The new project will serve as a trader of farm produce and cattle to support Vinamilk’s core production of dairy products, beverages and food.
This year’s investment will also be earmarked for the firm’s new Cambodian project. Vinamilk received a license to build a $23 million dairy plant joint venture in Phnom Penh earlier this year. The facility is scheduled to start production in the third quarter of 2015, with annual revenue predicted to reach $35 million. It will be Vinamilk’s second plant outside Vietnam after Miraka, where Vinamilk produces Twin Cows fresh milk, which is already sold in Vietnam and China.
Last December, Vinamilk invested $7 million in the California-based Driftwood Dairy Holding Corp. to hold a 70 per cent stake. The American firm supplies a range of dairy lines, as well as other products including bread and salads to schools, hospitals and restaurants.
If the firm succeeds in topping $3 billion in revenue by 2017 it would propel Vinamilk into becoming one of the world’s top 50 milk producers.
Capital management is sweet for Masan
Major Vietnamese food producer Masan Group has attributed its rocketing growth to its allocation of capital raised from international long-term corporate investors.
In 2013 Masan saw long-term investments of about $1.5 billion from high-profile names such as the International Finance Corporation (IFC), KKR & Co. (KKR), J.P. Morgan and TPG Growth. Masan then designated $964 million to general business activities, $174 million to M&A deals and $350 million to balance its books, said a Masan report announced at the group’s annual general meeting in Ho Chi Minh City on April 25.
The meeting approved the multi-business private group’s plans to issue an additional 4.5 million ordinary shares to clear its liabilities as per existing agreements with the IFC, pursuant to a convertible loan extended to Masan by the IFC in 2010, and with MRG, an investment vehicle controlled by the UK’s Mount Kellett Capital, pursuant to a convertible loan extended to Masan by MRG in 2011. The issue is set to begin this year and will run through the first four months of next year.
Masan chairman Nguyen Dang Quang said M&A had played a very important role in the group’s growth momentum. The company acquired leading Vietnamese coffee product maker Vinacafe Bien Hoa, animal feed manufacturer ProConco, and iconic mineral water producer Vinh Hao.
Masan completed an overall business shake-up in 2013 to focus more on the consumption and resources sectors with the hope of higher profits. It expects 2014 revenue to hit at least $1 billion, double that of 2012.
The diversified giant with interests ranging from instant noodles to tungsten mining set up Masan Consumer Holdings to directly control two operating platforms – Masan Consumer and Masan Consumer Ventures. The former continues to serve as the group’s food and non-alcoholic beverage business, while the latter is an incubation platform for high-growth opportunities.
Korean expat Seokhee Won, a former top executive with global giant Unilever, was recently named the new CEO of Masan Consumer and deputy CEO of Masan Group. He is expected to leverage his 22 years experience in the consumer goods industry to help the group achieve its $1 billion plus 2014 revenue target.
At the general meeting, Dominic Price, former CEO of Indochina and India for J.P. Morgan, was elected as a new member of the board as Madhur Maini decided to step down. Chairman Quang said in another statement, “The arrival of Dominic Price will greatly strengthen Masan’s efforts to implement a corporate governance platform, while the appointment of Seokhee Won is an important part of Masan’s commitment to deliver transformational growth in the consumer sector.”
Last year, J.P. Morgan and its affiliates provided Masan Consumer’s Masan Industrial with a three-year line of credit of up to $175 million. Of this, $150 million is guaranteed by the Multilateral Investment Guarantee Agency (MIGA), a World Bank member. At the time Masan was the first private company in Southeast Asia to secure MIGA support for a corporate finance loan.
Recently, on April 25, MIGA executive vice president Keiko Honda arrived in Vietnam to seek and identify areas where MIGA can help the country mobilise capital for important infrastructure projects and other job-creating enterprises.
Sudico scales up restructuring efforts
After two years in the process of restructuring, the Song Da Urban and Industrial Zones Investment Development JSC (Sudico), a major local property developer, saw a return to profitability last year with more than VND75 billion ($3.5 million) compared to losses of VND302 billion ($14.3 million) in 2012 and VND70 billion ($3.3 million) in 2011.
This came on the back of the firm’s comprehensive shake-up measures last year, including reducing management from nine deputy general directors to only four and total headcount from more than 950 to around 600.
The firm’s finances were strengthened after it basically resolved matured bank loans and rescheduled other debts.
To bolster operational efficiency the firm dissolved or merged ineffective member units and focused on core projects.
At its recent general shareholder meeting, the firm’s management expressed its commitment to concentrating resources on major property projects with high salability such as Nam An Khanh and reviewing other projects on that basis to produce suitable decisions that ensure investment efficiency.
In respect to its core projects, Nam An Khanh new urban area in Hanoi’s suburban Hoai Duc district is the company’s top priority this year to which Sudico will apply both wholesale and retail sales methods.
In respect to the Van La-Van Khe residential area, which was once suspended as it conflicted with Hanoi general planning, Sudico chairman Ho Sy Hung said, “The project was approved but selling in the near-term will surely face difficulties due to still low liquidity. Therefore the board of directors has assigned the general director to work with Hanoi authorities to revise the project’s planning to correlate with the market at this time – shifting from high-end property to medium to boost sales.”
On the project’s goals for this year Hung said, “In 2014 the project will strive for approval of its 1/500 scale plan, further build technical infrastructure, develop key project items and complete the investment procedures for living block projects.”
In respect to its Hoa Hai new urban project in Danang, the company’s deputy general director Do Van Binh said Sudico planned to sell the project last year to recoup capital but had not yet found an appropriate buyer due to low offers.
“It is difficult to find similar projects to invest in at this time, so the management has decided not to sell it but rather source potential partners for joint implementation,” Binh said.
Regarding the Tien Xuan urban project, Sudico’s largest in scope and located in Hanoi’s Quoc Oai district, this year the company will work with authorities to establish zone planning, revise the detailed plan to match general planning and select the best investment options for the parts of the property that have already successfully seen site clearance.
In respect to the Sudico-SPM housing development project in Ho Chi Minh City’s district 9, Sudico is actively sourcing partners and will consider divesting if the project does not soon improve.
Real estate market posts nationwide upswing
The Ministry of Construction has claimed there are signs of recovery throughout the real estate market.
The Ministry of Construction has issued figures claiming evidence of a country-wide upturn in the real estate market
According to figures from Ministry of Construction (MoC), the real estate market has seen improvements, with an increase in transactions and a slow-down in falling prices.
More than 1,500 successful transactions were reported in the first quarter in Hanoi, double the number recorded during the same period last year. In the first 15 days of April, more than 800 transactions were reported.
According to Nguyen Tran Nam, Deputy Minister of MoC, a range of projects had seen remarkable increases in sales, including Vingroup’s Royal City and Times City, Hoa Phat Group’s Mandarin Garden, Thang Long Number One, 175 Nguyen Trai and Victoria Van Phu.
Land and villa sales have also seen modest increases this quarter compared to zero sales during the same period last year.
“These figures reveal that Hanoi’s real estate market has seen positive movement with increasing transactions. In many projects, inventories has been reduced and prices have been stable,” Nam said at a meeting of the National Steering Committee for Housing Policy and Real Estate Market held recently in Hanoi.
Nam added that the most sought after projects were located within Ring Road 3, and were mostly bought by end-users, not speculators.
“This shows the fact that the market is now healthier, for both developers and buyers,” he claimed.
The same positive signs have been seen in Ho Chi Minh City. The MoC said that more than 1,000 successful transactions were also seen in the first two months of this year. In Ho Chi Minh City, affordable houses in suburban districts 8, 9, Thu Duc and Binh Chanh were proving the most popular purchases.
In Ho Chi Minh City’s neighbouring provinces, where land is 30 to 50 per cent lower than the city, buyers are expressing interest in the Long Hau residential area, which despite being located in Long An province, abuts the Phu My Hung urban development area.
Nam also claimed the figures proved that prices were no longer falling. Apart from projects in areas lacking completed infrastructure, completed projects located in central areas were maintaining prices, with some firms even increasing prices.
Nam said there was evidence of an increasing shortage of VND20 million per square metre and less than 100 square metre apartments.