Vingroup plans offshore listing

Hanoi-based real estate firm is keen to launch an offshore listing after being the first Vietnamese corporate to issue a global bond and syndicated loan in 2013.

Vingroup plans to diversify its funding sources, with an offshore listing first on the list, but the volatile nature of global equity markets is putting it off from doing so.

“We would like to try all the possible financing channels, both domestic and international,” said Le Thi Thu Thuy, CEO of Vingroup to FinanceAsia. “The most near term opportunity for us to look into is an offshore listing.”

“[With equity financing], we will be able to access a broader capital base and being listed on an exchange would strengthen the requirement for stricter corporate governance,” she added. “This in turn improves the company’s discipline and is something we have been trying to do in the last few years.”

However, Thuy highlights that market conditions were not conducive last year for an offshore listing, and hopes 2014 will be different.

Vingroup’s increased interest in accessing foreign markets for funding could pave the way for more local companies to do so in the years to come, especially given the fact that analysts believe Vietnam could benefit from improved foreign demand

In 2013, Asian markets were volatile and lagged developed markets peers. Concerns over slowing economies across the region hit sentiment, especially in China where its ongoing economic transformation to a consumer-driven economy has slowed gross domestic product (GDP) growth.

Meanwhile, some Asian countries such as India and Indonesia have faced cyclical problems such as current and fiscal deficits. Investor sentiment has also been weighed down by an expectation that the US will continue to taper its money-printing programme this year.

These factors have, as a result, hindered sizable Asian companies such as Vingroup – Vietnam’s largest real estate company by market capitalisation – from launching an initial public offering (IPO) last year. The developer could have been the first to do so from the Southeast Asian nation offshore.

“We would like to be a first time issuer [from Vietnam] if we can, but selling equity is more difficult than selling credit,” said Thuy. “We would need to wait for the equity market to recover and confidence to return before the big names will be able to issue equity.”

“Also when the valuations make sense as well, then we might do it,” she added.

In spite of these hurdles, equity analysts remain positive on the prospects for Asia ex-Japan in 2014.

Signs of a synchronised improvement in the key economies of the US, Europe and Japan bodes well for Asian exports. At the same time, the careful execution of Fed tapering – potentially supplemented by counter-measures such as cuts in interest rates on excess reserves with the US central bank – will preserve liquidity in Asia.

These factors, combined with Vietnam’s improving macroeconomic fundamentals, make it easier for Vingroup to embark on its offshore listing plans this year.

Vietnam’s GDP rose 6.04% in the fourth quarter of 2013, up from 5.42% in the third quarter. The Southeast Asian country’s strong growth figures bring the country’s total economic growth in 2013 to 5.42% – up from 5.25% in 2012.

According to the International Monetary Fund (IMF), Vietnam’s growing economy is being supported by both exports and increased foreign investment in the country. The country’s economy is expected to grow at about 5.5% in 2014.

Last year (2013) was a busy one for Vingroup, having launched several landmark deals that boosted its profile in global capital markets.

Vingroup priced Vietnam’s first ever dollar bond from the corporate space at the end of October, defying investor concerns circling the lack of transparency plaguing Vietnamese real estate corporate profiles. Being a first time issuer, the developer had to pay up, achieving a yield of 11.875% for the fixed-income instrument.

The property company also tapped the syndicated loan market by raising an inaugural international bank loan of $150 million, also in October.

“These transactions were fundamentally important for our country because it opens up a new financing channel; not only for Vingroup but also for other corporates in Vietnam,” said Thuy. “The economy is recovering, and the demographics are strong, so the potential for Vietnam is there.”

Thuy said that Vingroup could return with another dollar-denominated bond this year, but will wait for its existing notes to trade a little further in secondaries. The notes are fairing very well, having traded up to touch over 105 on December 3 from 101 shortly after it was priced.

“If everything goes according to as planned, we will need a lot of capital to expand in the next few years and we will come back to the market,” she said. “Hopefully we can achieve a single digit yield level in the coming months, especially when it is proven right that the economy will improve.”

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