Vietnam fund exits investment in Masan

The VinaCapital Vietnam Opportunity Fund cites a need to recycle capital as it sells its investment in Masan Food for $20 million.

VinaCapital, an asset management and investment banking firm, has sold its equity investment in Vietnam's Masan Food for $20 million. Details of the buyer were not disclosed.

Masan Food is the food and beverage business of Vietnam's Masan Group. The group has businesses spanning foods, financial services, natural resources and logistics.

Masan Food was established in 2003 and currently has a market share of around 50% in some food categories such as fish, chilli and soy sauces. It has positioned itself well in the premium market with key brands such as Chinsu and Tam Thai Tu. The business is on a strong growth trajectory and grew revenues to $115 million in 2008 from $36 million in 2006 and is projecting a further increase to $260 million in 2009. European asset manager BankInvest acquired an equity stake in Masan Food in November 2008.

VinaCapital bought a 15% stake in Masan Food in August 2006, and an additional, smaller stake in December 2007. At the time of its initial investment in 2006, Masan was unlisted and neither buyer nor seller disclosed the price at which the deal was transacted. VinaCapital also got proportionate representation on the Masan board.

The investment was made through the VinaCapital Vietnam Opportunity Fund (VOF), a closed-end fund traded on the London Stock Exchange's Alternative Investment Market (AIM). VOF was launched in 2003. Its net asset value as of January 31, 2009, was $597 million, down marginally from $605 million at the end of calendar 2008. VOF has a geographic focus on the Indochina region, with around 70% of its investments in Vietnam, making it one of the largest investors in the country.

"Masan remains in a strong market position and will record positive 2008 results, but we feel the price offered fully values the investment in the current market and is an excellent opportunity for VOF to recycle capital into other investments," says Andy Ho, managing director and head of investments at VinaCapital, in a written statement.

VinaCapital did not disclose details of the profit booked but did say it sold its equity stake in Masan at a price that was 81% above the value at which it was holding the investment on its books. It also noted that the sale will generate over $20 million, for a return of over 2.5 times.

Until recently, Vietnam was hailed as one of Asia's high-potential markets and thus was attracting a great deal of interest from both strategic and financial investors. But like its much larger neighbour, China, Vietnam has been hit hard by the global slowdown and consequent adverse impact on exports. And for Vietnam, the global bad news came on top of high inflation domestically, which sent the cost of goods and services sky-rocketing.

The solution to Vietnam's woes is not very different from that across Asia -- boost domestic demand and spending. Companies like Masan Foods will be well-placed to benefit if the government is actually able to do that, but from its actions, it seems that VinaCapital has decided not to wait and see whether that happens, preferring to cash in its chips now rather than wait for future gains.

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