Net Asset Value(s) (2878F)
June 13 2012 - 7:45AM
UK Regulatory
TIDMVPF
RNS Number : 2878F
Vietnam Property Fund
13 June 2012
Vietnam Property Fund Limited
"VPF" or "the Company"
NAV and May 2012 Update
Fund NAV Performance
The NAV per share closed at US$ 0.782 on 31 May 2012.
Investment Climate
According to Government estimates, the trade deficit came in at
US$700m in May, resulting in a trade deficit of US$622m after five
months of the financial year. However, this figure will likely be
revised down as the Government is traditionally conservative with
its estimates. May export was reported at US$9.1bn, bringing export
year to date to US$42.9bn, or +24.1% year on year ("y/y"). While
foreign direct investment enterprises remained key contributors
with a growth of 36.9%, local enterprises started catching up,
accelerating their growth from 4.3% last month to 8.4%. Vietnam's
export fared very well compared to its main competitors China and
India which grew export by only 3-5% while Indonesia and Thailand
suffered negative growth. May import was estimated at US$9.8bn,
resulting in import year to date of US$40.8bn, or +6.6% y/y. As a
result, 12-month rolling core deficit continued to decline from
US$4.5bn in April to US$3.8bn in May. As import growth is much
lower than expected, we revised our 2012 trade deficit forecast
from US$7.2bn to only US$4.2bn.
Inflation in May came in at only +0.18%, implying that the
Consumer Price Index ("CPI") y/y continued to slow further from
10.4% in April to 8.3% in May. The Government's primary goal,
namely single digit inflation, was reached much quicker and easier
than many observers anticipated and the speed of CPI improvements
has even started to rise concerns about deflation. Though it's true
that inflation has collapsed very fast, we think it's too soon to
worry about deflation. Our non-food CPI has not been negative since
2009 and increased 0.44% in May or 8.3% y/y. Further, the
Government increased the petroleum import tax from 0% to 7%. On the
other hand, petrol prices were cut three times by a total of about
8% which will help lowering inflation in coming months. Given
falling commodity prices and sluggish domestic consumption, we have
revised our 2012 CPI forecast from 9.2% to 6.8%.
According to State Bank of Vietnam ("SBV"), M2 (being money and
close substitutes for money) growth reached 4.5%, deposit growth
3.4% while credit growth came in negative with -0.1% after 5
months. Although credit growth has turned positive since March, the
current growth is too weak to achieve the full year target of 15%.
Meanwhile SBV recently revealed that Non Performing Loans have
increased from 6% at the end of 2011 to 10% recently. In view
hereof and given the current sluggish GDP growth SBV made decisive
moves, cutting the deposit rate cap to 9% from June 2011, which is
300bps lower from the first rate cut in April. Whilst this stokes
fears that inflation may return, we think that these moves are the
right one as we believe that inflation is more a function of money
supply. Furthermore, despite these cuts the deposit rate cap at 9%
is still 70bps higher than the current inflation, which is expected
to reduce further to below 6.5% y/y in July.
Investment Update
As we move towards the end of another financial year at VPF
there is definitely a light at the end of a very dark tunnel for
the Vietnamese real estate market and for our investment pipeline
in particular. The listed equity portion of the portfolio has seen
some good performance year to date although the volatility in the
world markets due to the continued problems in Europe and possible
signs of a major slow down in China have provided their fair share
of volatility for the Vietnam Index as well. Our projects are
moving forward albeit slowly as the residential market continues to
be tough in terms of sales.
On the positive side, we have some very good deals on the table
and deployment of further funds should not be far away. We are
negotiating another mezzanine loan deal with a local developer who
requires funding to get their project complete. The rates are
fairly high and there may be the opportunity to invest in the
project as we have negotiated a right of first refusal should the
local partner wish to sell their shares in the project. We have
also agreed terms on a small investment into a mid cap development
company in Vietnam who are looking to expand and develop their
strong pipeline. This will give us access to further good projects
in the future. We are also in the process of analyzing a very
interesting deal in logistics and distribution which should be a
strong growth sector given the geography of this long thin country.
The continued development of infrastructure is clearly key to the
success of logistics although supply chain and good secure storage
are very important to international operators. We are also
seriously considering several hospital development opportunities
which is a hugely undersupplied sector.
Given the current investment climate we are seeing a lot of
projects. Distress seems to be the buzz word in Vietnam at the
moment but the majority of distressed projects we see are
distressed for a good reason and would be unlikely to make much in
the way of returns even if we were given the land for free. Whilst
we are monitoring the distressed opportunities that come across our
desks, the best deals with the most attractive risk profiles are
tending not to be distressed and are good candidates for investment
due to strong partners, well designed schemes that suit the current
investment climate and, most importantly of all, have a strong
cashflow that will take the project to completion even in the worst
of market conditions. After all the pain of 2011, the first half of
2012 has been encouraging.
For further information including the full May Monthly Report
please visit - www.vietnampropertyfund.com or contact:
Enquiries:
Rachel Hill
Dragon Capital Markets (Europe) Limited | Tel: +44 79 71 214 852
Freddy Crossley
Seymour Pierce Limited (Nominated Adviser and Broker) | Tel: +44
20 7107 8000
This information is provided by RNS
The company news service from the London Stock Exchange
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