2 CONTENTS Section 1 Introduction Section 2 Investment Manager s Report Section 3 Reports and Financial Statements Section 4 Annual General Meeting Section 5 Additional information Financial Highlights 1 Chairman s Statement 2 Investment Environment 4 Portfolio Performance 10 Top Holdings 12 VinaCapital Management Team 23 Board of Directors 24 Report of the Directors 26 Governance Report 28 Directors Remuneration Report 36 Statement of Directors Responsibilities 37 Independent Auditors Report 38 Consolidated Financial Statements and Notes 39 Notice of Annual General Meeting 90 Investing Policy 93 Historical Financial Information 98 Overview and Advisers 99 Front Cover Investee Company: PetroVietnam Gas (GAS)
3 Financial Highlights 1 Vietnam Infrastructure Limited ( VNI or the Company ) saw another year of strong performance in FY2014, extending its stretch of continued growth. This achievement was the result of a consistent strategy of shifting the portfolio towards capital markets investments. Capitalising on favourable macroeconomic conditions, VNI stepped up its investments into listed infrastructure assets, while strengthening its private equity portfolio. The capital markets component of VNI s portfolio was the largest contributor to growth for the year, increasing by 57.0 percent. As a result, the performance of VNI s portfolio improved throughout the fiscal year and as at 30 June 2014, the Company s audited net asset value per share was USD0.61, a significant increase of 15.4 percent on the previous year s balance. The Company s share price rose significantly to USD0.41 as at 30 June 2014, an increase of 14.2 percent year-on-year. The Company s share price to Net Asset Value ( NAV ) discount widened slightly to 32.2 percent, from 32.1 percent the year before. Performance summary 30 June 2014 % Change 30 June 2013 % Change 30 June 2012 NAV per share (USD) % % 0.50 Share price (USD) % % 0.21 Discount 32.2% 32.1% 58.2% The Board and Manager recently announced that in light of the requirement to hold a continuation vote during 2017, and following consultations with a number of shareholders, it intends to bring forward proposals to restructure the Company. These proposals, which are subject to regulatory and shareholder approval, would allow long-term investors to retain an investment in Vietnam whilst providing those shareholders in the Company who wish to realise their investment an opportunity for a phased exit. Further details regarding these proposals can be found in the Proposed New Strategy section of the Manager s Report. FINANCIAL HIGHLIGHTS FOR THE FISCAL YEAR 2014 NAV at 30 June 2014 USD 213.4m NAV per share at 30 June 2014 USD 0.61 Increase 15.4%
4 Chairman s Statement 2 Dear Shareholders At the end of the financial year VNI recorded an audited NAV of USD213.4 million or USD0.61 per share, representing a 15.4 percent year-on-year increase from a NAV per share of USD0.53 as at 30 June The result is 1.6 percent less than the announced unaudited NAV per share of USD0.62 as at 30 June 2014 resulting from the net effect of consolidation and valuation adjustments determined after year end. The Company s share price increased as a reflection of the increase in NAV, closing the year at USD0.41 per share, an increase of 14.2 percent above USD0.36 as at 30 June The Board believes this improvement in the Company s share price is the result of many factors, including the performance of the Company s listed equity portfolio and the continuation of the share buyback programme. VNI s share price to NAV discount widened slightly to 32.2 percent from 32.1 percent a year earlier. The closing of this discount remains one of the top priorities for the Board and the investment manager. CHAIRMAN S STATEMENT Rupert Carington Chairman Proposed new strategy The Board has announced that in light of the requirement to hold a continuation vote during 2017 and following consultations with a number of shareholders that it intends to bring forward proposals to restructure the Company. The proposals would allow long-term investors to retain an investment in Vietnam, whilst providing those shareholders in the Company who wish to realise their investment an opportunity for a phased exit. These proposals are more fully described in Note 31 (Subsequent Events) of the financial statements. These proposals are subject to regulatory approval and the approval of shareholders at an extraordinary general meeting (EGM) of shareholders to be held later this year. Corporate governance The Board has decided to bring forward proposals to ensure that the corporate governance practices of the Company are brought into line with good practices for AIM listed investment companies. The Company will hold its first Annual General Meeting on Monday 24 November The resolutions include proposals relating to approving the financial statements, the re-election of directors and reducing the required number of votes to requisition an EGM.
5 Chairman s Statement 3 The Board As you are all aware in April Mr Paul Cheng stepped down as Chairman of the Company and resigned as a director. On behalf of the Board, as your new chairman, I would again like to thank Paul for his three years of service as Chairman of the Company and seven years as a director. Paul led much of the drive to rebuild the Company after its very challenging start. Early in the year the Company appointed Mr Robert Binyon as an independent non-executive director. Mr Binyon, who is based in Bangkok, brings considerable knowledge of closed ended investment companies in emerging markets in Asia as well as private equity experience. The Board has also invited Mr Paul Garnett to become a non-executive director. Mr Garnett is a partner and fund manager of Ironsides Partners UK LLP, an affiliate of Ironsides Partners LLC, which is currently our largest investor. He also has considerable experience with closed ended funds. Mr Garnett s appointment will be confirmed and formally announced in the coming days. I look forward to your continuing support. Rupert Carington Chairman Vietnam Infrastructure Limited 9 October 2014
6 Investment Environment 4 Economy Vietnam s economic recovery, on-going market reforms, and the government s commitment to deepen international integration underpin the resurgence of investor interest in the market. The VN Index continues to outperform regional peers having increased 20.4 percent in USD terms over calendar year 2013 and a further 13.4 percent year-to-date to 30 June A one-two combination of stable prices and currency underscore economic growth: INVESTMENT MANAGER S REPORT A low rate of inflation, thanks to a lack of cost-push pressures and subdued domestic consumption, has kept the average consumer price index rate for H at 4.8 percent year-on-year, well below the 7.0 percent inflation target set by the State Bank of Vietnam at the commencement of the year. A stable foreign currency exchange rate benefited from a trade surplus of USD1.3 billion for H with an overall balance of payment surplus projected for the end of this year. Furthermore, record high foreign currency reserves as stated by the Prime Minister estimated to be above USD35.0 billion or 3 months of total imports lend further support to currency stability. The 1.0 percent adjustment of the official reference rate of the Vietnam dong in June 2014 was a response by the government to help boost domestic growth. However, this macroeconomic stability has come at the expense of lower credit and GDP growth even as interest rates continue to fall. One culprit is the slow progress on the resolution of non-performing bank loans. Per the General Statistics Office of Vietnam, gross domestic product growth is expected to reach 5.5 percent for 2014 after averaging 5.2 percent for H1 2014; this is much lower than previous years. Growth engines As with many emerging economies, Vietnam relies on the following four engines of growth: 1. Government spending 2. Credit growth 3. Foreign direct and indirect investment 4. Domestic consumption Gross domestic product % % Nominal GDP, USD bn 5.3% 6.8% INVESTMENT ENVIRONMENT 6.0% Real GDP, % yoy 5.0% % % H2014 Table 1: Vietnam nominal and real GDP. 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% Source: General Statistics Office of Vietnam.
7 Investment Environment 5 1. Government spending Following the global financial crisis of 2008, the government has put forth a more concerted effort to invest in infrastructure to attract more foreign direct investments. Further, the government has also lowered the corporate income tax rate from 25.0 to 22.0 percent, effective 1 January 2014, with a further reduction to 20.0 percent scheduled for While this encourages international businesses to enter and develop in Vietnam, it potentially reduces revenues from tax collections while increasing government spending. The fiscal deficit for H of 4.3 percent of GDP is set to increase as the government accelerates the program of spending on infrastructure projects. Government spending has partly been funded by the issuance of domestic bonds to the Vietnamese banking system, which is flush with liquidity. Government bond auctions have been met with enthusiastic buying and yields have been declining steadily thanks to excess liquidity and low inflation. Given banks, individuals, and corporations have been content with purchasing government bonds, Vietnam has not had to look offshore to borrow at this point in time. 2. Credit growth The first decade of the 21 st century saw Vietnam achieve admirable growth in the percent range. This particular brand of rapid growth was spurred on by excessive credit growth, at times averaging 30.0 percent per annum, while productivity growth has been at a minimum. The damaging side-effects of this rapid credit growth included high inflation and the creation of asset bubbles. The government now takes a more conservative approach to credit growth looking to keep it at nominal levels, combining real GDP growth ( percent) with the rate of inflation ( percent) to yield a credit growth of percent per annum. According to the State Bank of Vietnam, credit growth for H reached 3.5 percent. At the moment, lower credit growth is dampening GDP growth which will remain below trend at percent. However, as Vietnam s productivity grows over the coming years, and as industries move higher up the manufacturing value chain in such sectors as technology, textiles and garments, education, and capital equipment, there is room for further uplift to GDP growth. Vietnam s budget deficit Source: General Statistics Office of Vietnam. Credit Growth 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% Budget Deficit, USD bn (lhs) % H % Table 2: Vietnam government deficit as a percentage of GPD. 28.2% 22.2% -5.5% 41.5% 19.2% -4.9% Source: General Statistics Office of Vietnam Credit Growth, % pa 21.4% 51.4% Deficit/GDP (rhs) % -5.3% 30.0% 37.5% % H2014 Table 3: Vietnam credit growth. 27.7% 10.9% 0.0% -1.0% -2.0% -3.0% -4.0% -5.0% -6.0% -7.0% -8.0% 8.9% 12.5% 3.5%
8 Investment Environment 6 In July 2014 Moody s re-rated Vietnam s sovereign credit rating, moving it to B1 from B2, four notches below investment grade. The firm cited Vietnam s track record of macroeconomic stability, the strengthening of its balance of payments and external payments position, and the easing of contingent risks in its banking sector as reasons for the upgrade. In September 2014, Fitch hinted at an even higher rating of BB-, three notches below investment grade, in its next review months out, thanks to a strengthening of the banking industry and diminished risks to the government in the public sector. The third ratings agency, Standard & Poor, already has a rating of BB- for Vietnam. On the back of this improvement in sovereign credit rating, over the next 2 years the Vietnamese government intends to roll over USD1.75 billion of maturing USD denominated sovereign bonds. Government bond yields Rate on 5-Year VGB 3. Foreign Direct Investments FDI disbursements, an important capital inflow and major source of support for the VND, reached USD8.9 billion as of September 2014, up 3.2 percent over the same period last year, while new FDI commitments over the same period fell 17.8 percent behind last year s record, albeit the comparison is skewed as several large commitments were signed late in 2013 for major projects like Samsung s mobile phone and electronics factories. Year-to-date to September 2014, South Korea remains the highest contributor to FDI with USD3.6 billion registered, followed by Hong Kong, Japan and Singapore. Samsung had the largest investment project registered in 2014 at USD1.0 billion, followed by Dai An Vietnam-Canadian International Hospital worth USD225.0 million and Texhong Hai Ha Industrial Park from China worth USD215.0 million. To date, Samsung has a total registered investment capital of USD8.0 billion for the manufacturing of mobile phones and electronic devices and produces 120 million smart phones, or 30 percent of their worldwide sales, from factories located in Vietnam. With further expansion of existing plants and the opening of new factories in Vietnam, this share will rise to 50 percent of their worldwide output. For the first 8 months of 2014, FDI enterprises export and import revenues were USD65.2 billion (an increase of 15.6 percent year-on-year) and USD53.6 billion (an increase of 12.0 percent year-on-year), respectively Aug 10 Aug 11 Aug 12 Aug 13 Aug 14 Table 4: Vietnam government 5 year VND bond yields Sources: General Statistics Office of Vietnam and Bloomberg. Foreign exchange rate VND VND per USD Table 5: Vietnam government 5 year VND exchange rate. Official Rate VCB Sell Free market Sell 1% upper band 1% lower band 20.4 May 13 Aug 14 Nov 14 Feb 14 Aug 14 May 14 Sources: General Statistics Office of Vietnam and Bloomberg.
9 Investment Environment 7 Foreign direct investors, whose interests, among other factors, have been primarily focused on lower labor costs and access to a market that is growing towards 100 million people, have been growing steadily over the past few years and continues to do so in On the other hand, foreign indirect investors (FII), those that primarily focus on Vietnam s stock and bond markets, are driven to Vietnam mainly to access lower valuations (as compared to other regional emerging markets) coupled with steady dividend yields. Foreign direct investment FDI Disbursement FDI Registered Domestic consumption Retail sales, an indicator of aggregate demand, showed gradual improvement over the calendar year, with H real retail sales growing at 5.7 percent year-on-year compared to 5.3 percent over the same period last year. Record-low inflation stabilized consumer purchasing power, contributing to retail sales growth. The ANZ Roy Morgan Consumer Confidence Index advanced to in August 2014, the highest level recorded since March 2014 and higher than the average level of this index over the first 8 months of This reflects a gradual improvement in consumer psychology over the past year. Further progress required: non-performing loans and privatizations Non-performing loans (NPLs) One area of concern is related the government s ongoing efforts to resolve nonperforming loans in the banking system. Failure to alleviate the pressure generated by NPLs threatens access to capital for local businesses, while international businesses find ways of accessing cheaper and readily available offshore funding to help expand their Vietnamese operations, or start new ones. This access to low cost funding paves the way for them to dominate their respective sectors. Left unchecked, this may lead to the demise of domestic industries and State-owned enterprises and, with them, foreign indirect investment. It is paramount Vietnam prepares for the eventuality of losing some of its advantages, such as the competitive cost of labor given foreign businesses will seek new labor pools in other emerging and cost-competitive countries, and leaving behind an economy with few mature domestic industries to sustain future growth H2014 Table 6: Vietnam s foreign direct investments registered and disbursements. Source: General Statistics Office of Vietnam. The Vietnamese government recognizes that NPLs are a challenge for the banking system. In order to resolve the NPL issue there will most likely be a need to provide for an additional USD billion. This estimate is based on current outstanding loans, the current provision, and the additional provision required as expressed by figures provided by the State Bank of Vietnam and major ratings agencies (Moody s, Standard & Poor s, and Fitch Ratings).
10 Investment Environment 8 The banks currently report NPLs at just over 4.0 percent. The State Bank of Vietnam puts that figure at 10.9 percent. If we presume the higher estimate is correct, and we apply a recovery rate of 40.0 percent, meaning 60.0 percent of the loan value is lost, that will require an additional provision of USD3.7 billion. Although this figure appears large, it s manageable relative to the USD22.0 billion of total equity value in the banking system today. Even if the entire USD billion were written off, its impact would be insulated by the equity value of the banking system. Furthermore, given Vietnam s 2013 GDP of USD170.0 billion, the scale of this NPL problem relative to GDP appears manageable. However, we do not dismiss its significance and the challenges in resolving this difficult problem which continues to act as a drag on credit and economic growth. In order to help address this challenge, the government has established the Vietnam Asset Management Company to acquire the NPLs from the books of the commercial banks. Essentially, the banks are receiving a bond from the State Bank of Vietnam ( SBV ) which will allow them to amortize these loans at 20 percent per annum over the next five years. During these five years, the VAMC will try to sell the debt and return proceeds to the banks as well as keeping some of the cash for itself. The process of selling the NPLs, or the collaterals from the NPLs, has not yet been initiated as of the time of writing this report. The key question is whether or not the government will allow foreign investors to purchase the NPLs and with it, the underlying collateral which in most cases is real estate. This remains a challenging debate within the government as no consensus as to whether the legal framework is sufficient to allow this to proceed. Meanwhile, the VAMC chairman has declared that a legal framework to facilitate foreign investor participation in future bad debt auctions is being clarified. Global economic impact We expect the US Dollar to gain against the Euro, Yen, and other currencies as the US Federal Reserve ends its quantitative easing (QE3) later this year, while the Euro looks to weaken amidst Europe s mitigated economic recovery. We think any negative impact on Vietnamese exports will be small because the country produces inexpensive manufactured goods (i.e. garments, footwear, etc.) and tend to have lower demand-elasticity. It remains a possibility that other Asian countries will raise interest rates to defend against capital flight as a result of a reduction in QE3. However, with Vietnam s interest rates hinging more on internal factors, the country possesses stronger fortification to withstand such external global pressures than neighbours such as Indonesia and Thailand.
11 Investment Environment 9 Vietnam s robust external position (e.g. trade surpluses, high reserves) and lack of hot money inflows, which can reverse direction and cause instability, shield the country from the adverse effects caused by changes in US monetary policy. The SBV manages the VND to keep it incontrovertible and less subject to speculative trading in global financial markets. In general, local factors and SBV policy determine the strength of the VND. Despite the government decreasing the benchmark value of the VND by 1.0 percent in June 2014, the value of the local currency is still very stable and strong. Economic stability leads to investment confidence In the coming months leading to the end of 2014 and into 2015, we believe the economy will remain stable and resilient, enough to overcome tensions such as those experienced with China in May and June of After a short period of heightened tensions, China related anxieties have subsided especially after the oil-rig removal one month ahead of schedule. The visit to China by a high-ranking Vietnamese official also contributed to a normalization of relations. The economic effects have been muted as major indicators such as bilateral trading, investment flows, and state to state contacts, have remained uninterrupted. Latest figures showed that trade flows between the two countries have remained on track and stayed on a par with Chinese investments in Trans-Pacific Partnership related industries such as fabrics and textiles have shown no signs of being scaled back. We believe the bilateral economic and financial relationships between Vietnam and China are of mutual benefit and sustainable going forward.
12 Portfolio Performance 10 Portfolio performance The Company s audited NAV was USD213.4 million or USD0.61 per share as at 30 June 2014, an increase of 15.4 percent from USD0.53 as at 30 June VNI s share price increased by 14.2 percent to USD0.41 as at 30 June 2014 from USD0.36 a year earlier. As a result, the Company s share price to NAV per share discount slightly widened to 32.2 percent as at 30 June 2014 from 32.1 percent as at 30 June Portfolio by sector Number of holdings 30 June 2014 (% of NAV) 30 June 2013 (% of NAV) Telecommunications % 32.4% Oil and gas % 13.3% IP and township development % 19.1% General infrastructure % 5.8% Transport and logistics 2 7.5% 7.5% Power 2 4.1% 3.2% Agribusiness 3 2.2% 3.5% Industrials 1 1.1% 0.0% Bonds 3 1.4% 9.5% Cash and cash equivalents 2.3% 5.7% INVESTMENT MANAGER S REPORT PORTFOLIO PERFORMANCE Portfolio by asset class Number of holdings 30 June 2014 (% of NAV) 30 June 2013 (% of NAV) Listed % 27.5% OTC 0.0% 3.0% Private equity % 54.3% Bonds 3 1.4% 9.5% Cash and cash equivalents 2.3% 5.7% Asset class and sector exposure VNI s asset class exposure changed materially in FY2014 as a result of the shift to listed equities. The Company utilised most of its free cash for investment into select listed shares and the share buyback programme. As a result, the Company s listed and private equity assets as a percentage of NAV changed to 48.0 percent and 48.2 percent from 27.5 percent and 54.3 percent a year ago, respectively. Meanwhile, cash and cash equivalents, including bonds, fell from 15.2 percent of NAV as at 30 June 2013 to 2.3 percent as at 30 June 2014.
13 Portfolio Performance 11 On a sector basis, the Company increased its exposure in oil and gas to 19.9 percent of NAV from 13.3 percent a year ago, and general infrastructure from 5.8 percent to 12.0 percent. Investment activity The listed equity segment of the portfolio, which makes up 48.0 percent of NAV, delivered a 57.0 percent return (equivalent to USD39.0 million in total gains) over the fiscal year, outperforming the VN Index, which returned 19.2 percent in USD terms over the same period. This outstanding return was mainly attributable to holdings in Hoa Phat Group (HPG), PetroVietnam Drilling and Well Services (PVD), and PetroVietnam Technical Services (PVS) which increased by 133, 95 and 92 percent, respectively. During the fiscal year, VNI strengthened its positions in select high growth equities at reasonable valuations, including PetroVietnam Gas (GAS), Danang Rubber Company (DRC), and FPT Corporation (FPT). Meanwhile, VNI divested mature stocks that no longer had attractive growth prospects, including Phu My Fertiliser (DPM) and PetroVietnam Southern Gas (PGS). The Company s BTS companies under SEATH continued their steady performance. As the equitisation plan for MobiFone, one of Vietnam s top three mobile network operators, gradually takes shape, these BTS companies are well-positioned to cater to the need for telecommunications infrastructure among competing operators. The Company is also well on track with its expansion strategy into related businesses, the first of which being In-Building Systems (IBS). The performance of Ba Thien II Industrial Park near Hanoi s Noi Bai International Airport is also improving. The company has had some success in attracting tenants from Japan and Korea and has recently contracted with four new tenants, with the potential to add two additional tenants by the end of the calendar year. With an improved outlook and increasing demand for industrial space in the region, Ba Thien II has now entered Phase 2 of its infrastructure development. Pursuant to the share buyback authority granted to the Company s Board of Directors, VNI has now spent USD17.6 million repurchasing 50.4 million shares which are held as treasury shares. The total number of shares acquired represents 12.5 percent of the Company s million ordinary shares in issue and as a result, total voting rights in the Company were reduced to million.
14 Top Holdings 12 Investment Southeast Asia Telecommunications Holdings Pte. Ltd. (SEATH) Asset class Sector Description Private equity Telecommunications Vietnam s largest private BTS holding company Ba Thien II Industrial Park Private Equity IP and township 308ha IP project in Vinh Phuc province, near Hanoi Book value () % NAV 61, , INVESTMENT MANAGER S REPORT: PetroVietnam Drilling JSC (PVD) Listed Oil and gas PetroVietnam subsidiary; oil and gas drilling services 17, Hoa Phat Group (HPG) Listed General infrastructure A leading steel conglomerate 15, PetroVietnam Gas (GAS) Listed Oil and gas Vietnam s largest oil and gas producer PetroVietnam Technical Services Corporation (PVS) Listed Oil and gas A leading oil and gas technical services company 13, , TOP TEN HOLDINGS BY ASSET CLASS Vietnam Aircraft Leasing JSC (VALC) Private Equity Transport & logistics The first aircraft leasing company in Vietnam 10, Ho Chi Minh City Infrastructure Investment JSC (CII) Listed General infrastructure Vietnam s top infrastructure investment company 10, FPT Corporation (FPT) Listed Telecommunications A leading telecommunication company in Vietnam Long An Industrial Park (Long An IP) Private Equity IP and township Major IP and port project in Long An province 5, ,
15 Top Holdings 13 Southeast Asia Telecommunications Holdings Pte. Ltd. (SEATH) Southeast Asia Telecommunications Holdings Pte. Ltd. (SEATH) is VNI s base transceiver station (BTS) holding company. Established in Singapore, it is the largest private investor in the tower business in Vietnam, owning absolute stakes in three local BTS companies, including GII, MIS and VNC-55 based in Ho Chi Minh City, Ha Noi and Da Nang, respectively. As at 30 June 2014, the company has 1,927 BTS towers across Vietnam. These towers are leased under long-term contracts with key mobile operators at a tenancy ratio of 1.2, providing stable cash flow and favorable margins. The company is on track with its expansion strategy into In-building Systems (IBS) to further enhance its profitability and provide stable income to the fund. For the first half of 2014, SEATH achieved an EBITDA margin of 59.0 percent and net margin of 21.0 percent. Company highlights Current NAV (USD mil) 62.1 % of VNI's NAV 29.1 Number of towers 1,927 Tenancy Ratio 1.19 EBITDA margin (FY 2013) 58.6% Net margin (FY 2013) 18.0%
16 Top Holdings 14 Ba Thien II Industrial Park (Ba Thien) Ba Thien 2 Industrial Park is a 308ha project located in Vinh Phuc province, just 20km from Noi Bai International Airport and 45km from Hanoi city. In addition to its strategic location, Ba Thien 2 Industrial Park enjoys advantageous economic features and preferential local investment policies. It offers a combination of industrial land and ready-built factories with high-quality infrastructure and utilities for tenants. The first phase of the project comprising of 40ha is completed with full infrastructure and utilities and ready to accommodate tenants. The second phase of the project (40ha) started in Q A waste water treatment plant and Vina CPK s office has commenced construction and both are expected to completed by the end of the year. The site has seen a considerable increase in interest and activity. Currently, three tenants are building factories on the site (Nippon Paint, Deahuynst and Suzukaku on total land area of 9.1ha). Korean client, Union decided to lease 2ha and have begun drilling tests on the site. Additionally, the Hong Kong Garment Factory (TAL) signed the environment study report with the Vinh Phuc Department of Environment and Natural Resources to lease 8ha and a deposit agreement to lease 3.5ha with Sekonix has been signed. Ba Thien continues to market the project to potential investors with a focus on Japanese and Korean investors. Company highlights Current NAV (USD mil) 25.0 % of VNI's NAV 11.7 Total area (ha) 308 Industrial area (ha) 221 Leased ratio (on total area) 4.7% Number of tenants 5
17 Top Holdings 15 PetroVietnam Drilling JSC (PVD) PetroVietnam Drilling JSC (PVD) is a leading Vietnamese drilling-related services company, with parent, PetroVietnam, owning a 51 percent stake. The company owns and operates five drilling rigs, including three jack-up rigs, one tender assist drilling rig (TAD) and 1 land rig, in addition to its leased jack-up fleet. During PVD s latest quarter, the company reported revenue of VND5,613 billion, an increase of 67.6 percent year-on-year and net profit of VND730 billion, an increase of 64.7 percent year-on-year. The key growth drivers were a 15.0 percent increase in the average day rate for PVD s own jack-up rigs during the period; the increased number of leased rigs from three in Q to eight in Q2 2014; and a higher utilization rate for both owned and leased rigs. Additionally, the well services segment achieved an increase in capacity due to higher demand for all supporting services. For H1 2014, PVD achieved VND9,937 billion in revenue and VND1,327 billion in net profit, an increase of 52.2 and 52.2 percent year-on-year, respectively. As at 30 June 2014, PVD closed at VND82,500 per share, implying a trailing P/E ratio of 9.8x and P/B ratio of 2.0x. Financial highlights Profit and loss (VND bn) FY12A FY13A H1 14 Revenue 11,929 14,863 9,937 Net income 1,322 1,878 1,327 Net margin 11.1% 12.6% 13.3% EPS (adjusted) 4,802 6,822 4,824 Balance sheet (VND bn) Total assets 19,084 21,490 23,074 Shareholders equity 6,992 9,875 11,096 ROE (%) 18.9% 19.0% 22.0% Valuation (VND bn) PER (x) P/B (x) Dividend yield (%) 2.4% 1.6% 2.4%
18 Top Holdings 16 Hoa Phat Group (HPG) Hoa Phat Group (HPG) is a leading steel manufacturer, specializing in construction steel and steel pipe. The company currently holds 18% market share in construction steel, up from 17% of the previous quarter, thanks to new capacity from Phase II of its steel integrated complex which came into operation in October During HPG s latest quarter, the company earned revenue of VND6,681 billion and net profit of VND943 billion, an increase of 53.8 and 84.5 percent year-on-year, respectively, mainly from a 50.0 percent increase in sales volume for construction steel and lower costs on raw materials. For H1 2014, HPG s revenue reached VND13,196 billion, while net profit was VND1,813 billion achieving 82.4 percent of the company s full year guidance. For 2014, the company proposed a cash dividend of VND3,000 per share, implying a dividend yield of 5.6 percent. As at 30 June 2014, HPG closed at VND54,000 per share, equivalent to a trailing P/E ratio of 9.3x and P/B ratio of 2.5x. Financial highlights Profit and loss (VND bn) FY12A FY13A H1 14 Revenue 16,827 18,934 13,196 Net income 994 1,954 1,813 Net margin 5.9% 10.3% 13.7% EPS (adjusted) 2,372 4,663 3,764 Balance sheet (VND bn) Total assets 18,957 22,961 20,350 Shareholders equity 8,085 9,498 10,618 ROE (%) 12.3% 20.6% 34.1% Valuation (VND bn) PER (x) P/B (x) Dividend yield (%) 5.5% 4.9% 5.6%
19 Top Holdings 17 PetroVietnam Gas (GAS) PetroVietnam Gas (GAS) is the country s sole pipeline supplier of dry gas for 45 percent power output and 80 percent fertilizer output in Vietnam. GAS is also the leading LPG supplier with a 70 percent market share in Vietnam. Listed on Ho Chi Minh stock exchange as the largest company in terms of market capitalization, GAS is currently 96.7 percent owned by PetroVietnam. GAS reported revenue of VND18,703 billion and net profit of VND3,230 billion for its most recent quarter, an increase of 18.7 and 11 percent year-on-year, respectively. Revenue growth was driven by an upward price adjustment for dry gas sold to fertilizer and power companies and rising dry gas sales volume. For H1 2014, GAS reported revenue of VND34,767 billion and a net profit of VND6,387 billion. For 2014, the company proposed a cash dividend of VND3,300 per share, implying a dividend yield of 2.9 percent. As at 30 June 2014, GAS closed at VND112,000 per share, equivalent to a trailing P/E ratio of 18.3x and P/B ratio of 6.0x. Financial highlights Profit and loss (VND bn) FY12A FY13A H1 14 Revenue 68,301 65,445 34,767 Net income 9,807 12,385 6,387 Net margin 14.4% 18.9% 18.4% EPS (adjusted) 5,175 6,536 3,370 Balance sheet (VND bn) Total assets 45,146 50,503 49,376 Shareholders equity 27,191 33,461 35,329 ROE (%) 36.1% 37.0% 36.2% Valuation (VND bn) PER (x) P/B (x) Dividend yield (%) 5.6% 6.0% 2.9%
20 Top Holdings 18 PetroVietnam Technical Services Corporation (PVS) PetroVietnam Technical Services (PVS) is an oil and gas service provider in Vietnam, with multiple business lines that include oil platform mechanical & construction (M&C) and transportation, petro port operations, and maintenance services (O&M) for offshore vessels. PVS holds a significant market share in the industry, with approximately 80 percent market share of platform service ships and three floating production storage and offloading (FPSO) facilities operating in Vietnam. For its most recent quarter, PVS announced net revenue totaled VND7,490 billion and net income of VND521 billion, an increase of 9.7 and 86.0 percent year-on-year, respectively. For H1 2014, net revenue and net profit reached VND13,203 billion and VND787 billion, respectively. Most of the company s segments experienced strong profit growth year-on-year, especially charter shipping (+17%), O&M segment (+142%) and port services (+45%). The commencement of the company s FPSO facility in Lam Son also contributed to bottom line growth. PVS s gross margins improved from 7.2 percent in Q to 10.8 percent in Q underpinned by improvements in the M&C and O&M business segments. For 2014, the company proposed a cash dividend of VND1,200 per share, implying a dividend yield of 4.1 percent. As at 30 June 2014, PVS closed at VND29,200 per share, representing a trailing P/E ratio of 7.4x and P/B ratio of 1.6x. Financial highlights Profit and loss (VND bn) FY12A FY13A H1 14 Revenue 24,591 25,397 13,203 Net income 1,118 1, Net margin 4.5% 6.0% 6.0% EPS (adjusted) 2,504 3,394 1,762 Balance sheet (VND bn) Total assets 21,223 23,821 26,147 Shareholders equity 6,246 8,217 8,340 ROE (%) 17.9% 18.5% 18.9% Valuation (VND bn) PER (x) P/B (x) Dividend yield (%) 7.3% 5.9% 4.1%