afc vietnam fund presentation 2013.12.02 (asia frontier capital ltd.)
DESCRIPTION
AFC Vietnam Fund invests in undervalued Vietnamese stock exchange listed securities. The fund was launched on 10th December 2013.TRANSCRIPT
CONFIDENTIAL AFC Asia Frontier Fund
September 2013
CONFIDENTIAL
AFC Vietnam Fund
December 2013
2 CONFIDENTIAL
Most new funds are launched when markets are “hot” and close to their highs
We see opportunities as the market & economy are at the bottom
Viet Capital - Hanoi Index 2006 – Oct. 2013
AFC Vietnam Fund
TABLE OF CONTENTS
Executive Summary 4
Why Vietnam 5
AFC Vietnam Fund 17
Directors & Shareholders 18
Investment Strategy 22
Contact Information 24
Disclaimer 25
Appendix 26
3 CONFIDENTIAL AFC Vietnam Fund
EXECUTIVE SUMMARY
Fund Objective
• Capture the value of growth companies in Vietnam; especially in the small to medium size company segment
Opportunity
• Vietnams GDP growth is accelerating again since H2 2013
• Declining interest rates and improvement in credit growth helps business expansion
• Banking reform is under way, such as e.g. the resolution for NPL’s
Potential
• We believe to achieve a significant capital appreciation of its newly launched fund for at least the next 5 - 7 years.
4 CONFIDENTIAL AFC Vietnam Fund
5
Vietnam’s Low Correlation to Global Markets
offers significant Diversification Benefits
AFC Asia Frontier Fund CONFIDENTIAL
WHY VIETNAM
0.350.40
0.63
0.820.88
VH Index(Hanoi)
VN Index (HoChi Minh)
MSCI FrontierMarkets
MSCI BRIC MSCIEmergingMarkets
Correlation with the MSCI World Index
Bloomberg . *Based on 10 years monthly data
6 CONFIDENTIAL
A Land of Opportunities
Valuations
• Vietnam’s overall valuation looks extremely compelling versus its regional peers, but listed “Small/Medium Caps” offer outstanding value
• Reaching the old highs in the next economic and stock market cycle would mean a potential of several hundred per cent, supported by fundamentals
Growth Prospects
• Very competitive labour costs, but rising individual wealth at CAGR 13.50% over the past 10 years
• High foreign remittances, capital account surplus, trade account neutral
• FDI reached USD 9.6bn in October, or 87% of 2013 plan of USD 11bn
AFC Vietnam Fund
WHY VIETNAM
7 CONFIDENTIAL
Strong Fundamentals will Support Growth
Sustainable GDP Growth
• GDP is accelerating again in 2013, after declining from 8.5% (2007) to 5% (2012)
Competitive Labour Costs
• Low wages with increasing productivity and improvements in human capital
Inflation under Control
• The government managed to successfully manage inflation at an expected rate of 7% in 2013 (recent high in 2008 at 19.9%)
Interest Rates Came Down
• Average lending rate came down from over 20% (2011) to around 13% (2013)
Improving Trade Balance
• Trade balance improved from USD -18bn (2008) to USD -0.2bn (f) 2013
Foreign Reserves Increasing
• Foreign reserves increased from USD 12.5bn (2010) to USD 32bn (f) 2013
Stable Currency for the past 2 Years
AFC Vietnam Fund
WHY VIETNAM
8 CONFIDENTIAL
AFC Vietnam Fund
Competitive Labour Costs and Increasingly Educated Population
Worldbank
WHY VIETNAM
4,964
3,989 3,934
1,889
817473 434 285 206 117 105
Average Monthly Salary (USD)
9 CONFIDENTIAL
Compelling Valuations
AFC Vietnam Fund
Bloomberg
WHY VIETNAM
P/E
2013
Dividend
Yield
P/B YTD
Perform.
* AFC Vietnam Fund 6.0x 9.1% 0.96x 71.0%
** Vietnam 10.8x 3.9% 1.74x 17.4%
Thailand 12.7x 3.3% 2.18x 1.4%
Indonesia 13.6x 2.4% 2.48x 1.9%
Singapore 13.9x 3.7% 1.40x 0.8%
Malaysia 16.1x 3.3% 2.35x 7.0%
Philippines 17.2x 2.4% 2.69x 7.8%
* AFC VF Model Portfolio as of 20 Nov 2013
** Ho Chi Minh 22% / Hanoi 12.7%
10 CONFIDENTIAL
AFC Vietnam Fund
Increasing Foreign Reserves will Support Currency & Balance of Payments
Worldbank
90%
50%
25% 23%
44%
54%
2008 2009 2010 2011 2012 2013 (f)
Foreign Reserves in % of External Debt
6.2 79.1
13.4
23.5 23.9
16.5
12.5 13.5
23.6
32
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013(f)
Foreign Reserves (USD bn)
WHY VIETNAM
11 CONFIDENTIAL
Improving Business Environment
Restructuring of the Banking Sector
• State Asset Management Company to take over NPL’s from Banks
• Consolidation of Banks / M&A Activities
• Potential increase of Foreign Ownership Limit
• Improving Banking Regulatory Framework
• Better Supervision and Severe Punishment of Banking Misconduct
Government to Support Economic Recovery
• Lower Lending Rates
• Tax Cuts for Individuals and Corporates
• Stimulus Packages for various Industry Sectors
• Restructuring of SOE’s
AFC Vietnam Fund
WHY VIETNAM
12 CONFIDENTIAL
Improving Business Environment
Strong Foreign Investments into Manufacturing (Samsung alone ~USD 5bn)
Key Sectors: Electronics, Textile and Energy
TPP Free Trade Agreement and ASEAN 2015 will Kick-Start Economy
Political Stability
Main Risks
• Resurgence of inflation and depreciation cycle, external economic or political shocks
• Vietnam is still at the very beginning of its various regulatory and government reforms and still a lot needs to be done.
AFC Vietnam Fund
WHY VIETNAM
13 CONFIDENTIAL
AFC Vietnam Fund
90 88
52 5247 46
3325
2117 14 13
9
World Bank 2011 Political Stability Ranking
Stable Political Environment
WHY VIETNAM
14 CONFIDENTIAL
AFC Vietnam Fund
Low Market Cap/GDP relative to Asian Markets
Worldbank 2012
23%
44% 45%55%
62%69%
85%
105% 106%
151%157%
Market Cap in % of GDP
WHY VIETNAM
15 CONFIDENTIAL
AFC Vietnam Fund
Stock Market Information
Bloomberg
27 42
195245
342
455
642696 702
737Number of listed companies
Banks24%
Food & Beverages25%
Energy19%
Real Estate7%
Material7%
Insurance5%
Others13%
Sector Breakdown Aug 2013
WHY VIETNAM
16 CONFIDENTIAL
AFC Vietnam Fund
0
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400
600
800
1000
1200
1400
1600
19
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13
MSCI Emerging Market Index, 1973 - 2013
Ho Chi Minh Index, 2002 - 2013
Vietnam is at the very beginning of a long term
capital growth trend
Bloomberg / Viet Capital
WHY VIETNAM
17 CONFIDENTIAL
AFC Vietnam Fund
AFC VIETNAM FUND
Target Fund Size: USD 50 million
Legal Structure: Open End
Style: Value / Growth
Domicile: Cayman Islands
Initial Minimum Investment: USD 10,000 / USD 1,000 subsequent purchases
Launch Date: 10 December 2013
Subscription Frequency: Monthly, 5 business days before end of month
Redemption: Monthly, 60 days prior notice
Fees: Management: 1.8% p.a. of NAV
Performance: 12.5% p.a. of NAV appreciation
High Water Mark: Yes (performance fee only applies to net profits)
Auditor: KPMG, Cayman Islands
Legal Advisor: Ogier, Hong Kong
Custodian: Viet Capital Securities, Ho Chi Minh
Fund Administrator: Amicorp Fund Services Asia Pte Ltd., Singapore
Investment Manager: Asia Frontier Capital (Vietnam) Ltd., Cayman Islands
18 CONFIDENTIAL
AFC Vietnam Fund
Andreas Karall, CIO of AFC Vietnam Fund, brings with him 25 years of experience in fund and portfolio management. He managed several public and private funds for various banks and fund managers in Europe. In the early part of his career he was the CEO of a small fund and portfolio management company in Vienna. That was around the time when he developed an affinity for Asian markets and he started to closely follow and invest in them. He is constantly looking for attractive investment opportunities, especially when they arise shortly after an economic crisis or political turmoil. He successfully invested in the Hong Kong stock market after the Tiananmen Square protests of 1989, in Finland after the 1991 collapse of the Soviet Union and in Asian markets after the 1997 Asian crisis. He sold most positions for his clients in 2007 and therefore escaped the financial crisis almost unscathed and was able to reinvest at bargain prices in 2008/2009. After Vietnamese stock market correction of over 70%, Andy is now ready and excited to get involved!
DIRECTOR & SHAREHOLDER OF ASIA FRONTIER CAPITAL (VIETNAM) LTD.
19 CONFIDENTIAL
AFC Vietnam Fund
Andreas Vogelsanger, CEO / Head Marketing of AFC Vietnam
Fund, has over 25 years of wide-ranging experience with leading institutions in the finance industry. Prior to joining AFC Vietnam Fund Andreas was a Founding Partner and Chairman of a small corporate finance boutique in Bangkok and he worked for top-level investment banks, hedge funds and private banks in Zurich, Geneva, London, Hong Kong and Singapore. He is passionate in finding the best value solutions for clients in tailoring an optimal investment proposition. Andreas was awarded an AMP diploma from Wharton Business School, University of Pennsylvania and he also holds CEFA (Certified European Financial Analyst and Portfolio Manager) and FRM (Financial Risk Manager) diplomas.
DIRECTOR & SHAREHOLDER OF ASIA FRONTIER CAPITAL (VIETNAM) LTD.
20 CONFIDENTIAL
AFC Vietnam Fund
Thomas Hugger, COO of AFC Vietnam Fund and Founder of
Asia Frontier Capital, has spent 27 years in private banking where he specialized in managing portfolios of listed and unlisted equities. He has been investing in Asian and African Frontier Markets since 1993. He is the former Managing Partner, CFO & COO of Leopard Capital; and was previously a Managing Director and Head of Portfolio Management at LGT Bank in Hong Kong. He also held senior investment positions at Bank Julius Baer in Zurich and Hong Kong. Mr. Hugger was the founding shareholder of one of the largest brokerage companies in Bangladesh. He is also a Certified Financial Investment Analyst (CFIA) and Investment Adviser (Switzerland) and a Certified European Federation of Financial Analysts Societies (EFFAS) Financial Analyst.
DIRECTOR OF ASIA FRONTIER CAPITAL (VIETNAM) LTD.
21 CONFIDENTIAL
AFC Vietnam Fund
Dr Marc Faber, is CEO, investment advisor and fund manager of Marc Faber Limited. He is the publisher of a widely read monthly investment newsletter The Gloom, Boom and Doom report which highlights global investment opportunities. Dr. Faber is respected around the world for his market forecasts over the past three decades.
Hon. Andrew Fraser, Director, is a graduate of St John's College, Oxford after which he held numerous posts in the financial sector both in the City of London and elsewhere. He has previously held positions as; CEO of Baring Securities in the UK, Chairman of Equity Partners Ltd., a Bangladesh investment bank, as well as Chairman of Bridge Securities, a quoted Korean company, amongst other posts. At present he is a global investor based in London.
SHAREHOLDER OF ASIA FRONTIER CAPITAL LTD.
INVESTMENT STRATEGY
Value Based Bottom Up Stock Selection
• In-house and third party research to identify undervalued companies
• Self-developed Valuation & Earnings model
• Company visits
Risk Mitigation
• In-depth due diligence of investment opportunities
• The fund is well diversified and typically invests in 40 to 60 stocks across various sectors
• Investment limit per position max 9% with top-slicing at 19%
Cash
• Not fully invested in uncertain times and/or excessive valuations
• Holding cash will allow the fund to take advantage of opportunistic investments when they arise (momentum / news driven)
22 CONFIDENTIAL AFC Vietnam Fund
INVESTMENT STRATEGY
Example of Typical Equity Investments
Model Portfolio Sector Weightings
23 CONFIDENTIAL AFC Vietnam Fund
Infrastructure 8% Health Care 5%
Consumer Goods 28% Financials 5%
Technology 6% Agriculture 9%
Real Estate 2% Education 8%
Construction & Materials 12% Transportation & Logistics 9%
Oil & Gas / Energy 5% Textiles 3%
Market Cap
USD (m)
P/E P/B Div Yield Pay Out
Ratio
Sector
Hanoi Beer 5 6.9x 1.2 8.1% 50% Consumer Goods
Hanoi Education Develop. & Invest. 9 5.3x 0.8 10.9% 66% Consumer Services
Son La Sugar 10 3.6x 1.0 12.4% 34% Consumer Goods
Bao Viet Securities 38 8.1x 0.7 0.0% 0% Financials
PetroVietnam Technical Services 383 6.2x 1.0 8.3% 40% Oil & Gas
24 CONFIDENTIAL
ASIA FRONTIER CAPITAL (Vietnam) LTD. c/o Ogier Fiduciary Services (Cayman) Ltd. 89 Nexus Way Camana Bay Grand Cayman KY1-9007 Cayman Islands Tel: +852 3904 1015 Fax: +852 3904 1017 Email: [email protected] Investment Enquiries:
Andreas Vogelsanger Mobile: +66 84435 7472 Email: [email protected] Skype: andreasvogelsanger
AFC Vietnam Fund
CONTACT INFORMATION
25 CONFIDENTIAL
DISCLAIMER
This Presentation is presented solely for purposes of discussion to assist prospective investors in determining whether they have a preliminary interest in the investment opportunity described herein. Under no circumstances is it to be used or considered as an offer to sell, or a solicitation of an offer to buy, any security or other interest in AFC Vietnam Fund, AFC Asia Frontier Fund, AFC Umbrella Fund or any other fund related thereto (the “Fund”). Offers and sales of interests in the Fund will not be registered under the laws of any jurisdiction and will be made solely to qualified investors under all applicable laws. Potential investors must read the entire Offering Memorandum delivered by the Fund and the disclosure in this Subscription Agreement. Nothing contained herein shall be deemed to be binding against, or to create any obligations or commitment on the part of, any potential investor or the Asia Frontier Capital (the “Fund Sponsors”). The Fund Sponsors reserve the right, in their sole and absolute discretion with or without notice, to alter the terms or conditions of this Presentation and the Fund and/or to alter or terminate the potential investment opportunity described herein. Potential investors are not to construe this Presentation as investment, legal or tax advice. Prior to making any potential investment, potential investors should consult with their own legal, investment, accounting, regulatory, tax and other advisors to determine the consequences of the potential investment opportunity described herein and to arrive at an independent evaluation of such potential investment opportunity.
By accepting this Presentation, the recipient agrees not to copy, distribute, discuss or otherwise disclose this Presentation or the contents hereof (including the potential investment opportunity described) or any other related information provided by the Fund Sponsors or by its agents to any person other than employees of recipient evaluating this potential investment opportunity on recipient’s behalf without the prior written consent of the Fund Sponsors.
While the information contained herein has been obtained from various sources which the Fund Sponsors believe, but does not guarantee, to be reliable, the Fund Sponsors do not represent that it is accurate or complete and it should not be relied upon as such. No person has been authorized to give any information or make any representation or warranty regarding the subject matter hereof, either express or implied, and, if given or made in this Presentation, in other materials or verbally, such information, representation or warranty cannot and should not be relied upon nor is any representation or warranty made as to the accuracy, content, suitability or completeness of the information, analysis or conclusions or any information furnished in connection herewith contained in this Presentation and it is not to be relied upon as a substitute for independent review of the underlying documents, available due diligence information and such other information as prospective investors may deem appropriate or prudent to review. The Fund Sponsors, their agents, their respective affiliates, and each of their respective shareholders, members, officers, directors, managers, employees, counsel, advisors, consultants and agents (“Representatives”), expressly disclaim any and all liability for express or implied representations or warranties that may be contained in, or for omissions from or inaccuracies in, this Presentation or any other oral or written communication transmitted or made available to a prospective investor or its Representatives. Without limiting the generality of the foregoing, nothing contained herein is or shall be relied upon as a promise or representation as to any matter, including, without limitation, the future performance of the potential investment opportunity described herein. None of the Fund Sponsors, their agents, or their respective Representatives is under any obligation to correct any inaccuracies or omissions in this Presentation. Each prospective investor will have the sole responsibility for verifying the accuracy of all information furnished in this Presentation and in any other due diligence information furnished to a prospective investor, and each prospective investor shall have the sole responsibility for determining the value of the potential investment based on assumptions said prospective investor believes to be reasonable. Representatives will from time to time have long or short positions in, act as principal in, and buy or sell, the securities, referred to in this document. There shall be no recourse against the Fund Sponsors or any of their Representatives in the event of any errors or omissions in the information furnished, the methodology used, the calculations of values or conclusions. Without limiting the generality of the foregoing, any historical information or information based on past performance included herein is for informational purposes only, has inherent limitations and is not intended to be a representation, warranty or guarantee of future performance. All of the information presented herein is subject to change without notice. Actual returns to potential investors may be lower than the figures shown herein. Projected performance data shown constitutes “forward-looking information” which is based on numerous assumptions and is speculative in nature. Actual results may vary significantly from the values and rates of return projected herein. There can no assurance that the Fund will realize its rate of return objectives or return of investors’ capital. Potential investors should have the financial ability and willingness to accept the risks (including without limitation the risk of loss and lack of liquidity) characteristic of investments in entities such as the Fund.
AN INVESTMENT IN THE FUND WILL NOT BE APPROPRIATE FOR ALL INVESTORS. INTERESTS IN THE FUND WILL INVOLVE A HIGH DEGREE OF RISK AND ARE INTENDED FOR SALE ONLY TO SOPHISTICATED INVESTORS WHO ARE CAPABLE OF UNDERSTANDING AND ASSUMING THE RISKS INVOLVED. INVESTORS MAY LOSE ALL OR SUBSTANTIALLY ALL OF THEIR INVESTMENT.
THE INTERESTS IN THE FUND HAVE NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR THE APPLICABLE SECURITIES LAWS OF ANY US. STATE OR ANY NON-U.S. JURISDICTION, AND ARE BEING OFFERED AND SOLD IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND ANY SUCH APPLICABLE LAWS. INTERESTS IN THE FUND HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE US. SECURITIES AND EXCHANGE COMMISSION OR BY THE SECURITIES REGULATORY AUTHORITY OF ANY STATE OR ANY OTHER RELEVANT JURISDICTION, NOR HAS ANY OTHER AUTHORITY OR COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS MEMORANDUM. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
AFC Vietnam Fund
26 CONFIDENTIAL
Appendix
AFC Vietnam Fund
27 CONFIDENTIAL
AFC Vietnam Fund
AFC Umbrella Fund (non US), Cayman Islands *
AFC Vietnam Fund
AFC VF Ltd. ****
Investment Firm
Viet Capital Securities
Custodian
KPMG
Auditor
Amicorp
Fund Administrator
Ogier Hong Kong
Legal Advisor
Asia Frontier Capital (Vietnam)Ltd. **
Investment Manager
Asia Frontier Investments Ltd. (licensed by SFC Hong Kong)***
Investment Advisor
* Directors: Thomas Hugger, Andrew Fraser, Asadul Islam
** Directors: Thomas Hugger, Andreas Vogelsanger, Andy Karall
*** Directors: Thomas Hugger, Andreas Vogelsanger, Peter de Vries, Asadul Islam
**** Directors: Thomas Hugger, Andreas Vogelsanger, Andy Karall
AFC VIETNAM FUND
28 CONFIDENTIAL
AFC Vietnam Fund
Viet Capital
Ho Chi Minh Index – 4 Years of Consolidation
WHY VIETNAM
29 CONFIDENTIAL
AFC Vietnam Fund
Worldbank
Healthcare Demand
WHY VIETNAM
2531
3747
58
7079 83
95100
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Healthcare expenditure per capita (current USD)
95 100 112226
516
2,447
Indonesia Vietnam Philippines Thailand Malaysia Singapore
2012 Regional healthcare expenditure per capital (USD)
30 CONFIDENTIAL
AFC Vietnam Fund
4 8
13
1721
2427
31
35
39
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Internet users (per 100 people)
3 6 12 22
53
87
113
127
143149
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Mobile subscriptions (per 100 people)
1527
36 39
6674
Indonesia Thailand Philippines Vietnam Malaysia Singapore
Regional internet users (per 100 people) 2012
107 115 120141 149 153
Philippines Indonesia Thailand Malaysia Vietnam Singapore
Regional mobile subscriptions (per 100 people) 2012
Worldbank
Mobile/Internet Consumer Trends
WHY VIETNAM
31 CONFIDENTIAL
AFC Vietnam Fund
Worldbank
230288 337 361 361 374 402 416 441 492
558642
731843
1,0701,130
1,224
1,408
1,596GDP per capita (current USD)
GDP per Capita Accelerating
WHY VIETNAM
32 CONFIDENTIAL
AFC Vietnam Fund
Regional GDP per Capita
World Bank 2012 - based on Purchasing Power Parity
GDP per
Capita (USD)
Population
(m)
Singapore 61,104 5
Malaysia 16,536 30
Thailand 9,432 67
China 9,060 1,357
Indonesia 4,812 249
Vietnam 3,444 90
Cambodia 2,364 15
Burma 1,400 62
WHY VIETNAM