Inversting in Vietnam

 
Vietnam has been one of the world’s fastest growing economies over the past decade.
Vietnam is forecast to be one of the fastest-growing economies in Southeast Asia, despite the impact of COVID-19.
 
The government launched a US$10.8 billion credit support package in March to combat the crisis.
After COVID-19, the economy is expected to rebound at a growth rate of 6.8 percent in 2021 with continued strong growth.
 
Regardless of the impact of the COVID-19 pandemic, Vietnam is forecast to be one of the fastest-growing economies in Southeast Asia. According to the ADB’s Asian Development Outlook 2020 report published on April 3, 2020, Vietnam’s economic growth will decline sharply to 4.8 percent in 2020 but bounce back up to 6.8 percent in 2021, provided the pandemic is contained.
 
Vietnam, together with China, Indonesia, Uganda, and India, are set to be among the fastest growing economies in the world by 2030, according to researchers at the Growth Lab of Harvard University
 
Vietnam’s accession to ASEAN and the WTO allowed the country to strengthen its integration into the world economy and accelerate the pace of improving investment legislation, and a long-term policy aimed at improving conditions and guarantees for investors created a stable investment structure that made Vietnam one of the most attractive countries for foreign capital Source: https://vietnam.mfa.gov.by/en/exportby/business/viobzec/

Vietnam Residential Real Estate Industry Overview

The Vietnamese residential real estate market is fragmented due to many local and global players’ presence. Vietnam residential real estate includes:
Pure Vietnamese capital-based local companies.
Foreign investment funds from foreign companies.
Joint venture firms.
Various proptech startups and traditional real estate firms aim to leverage technology to improve their operations and competitive edge by providing practical solutions. It enhances home buying, selling, renting, and living experiences in Vietnam.

Vietnam Residential Real Estate Market Analysis

The Vietnam Residential Real Estate Market size is expected to grow from USD 22.44 billion in 2023 to USD 40.53 billion by 2028, at a CAGR of 12.55% during the forecast period (2023-2028).
The residential market’s focus has shifted from the high-end to the mid-value segments as urbanization has created an ongoing demand for housing in large urban centers. Furthermore, the country is now widely seen as the luxury real estate market hotspot, with a growing economy coupled with laws that have made it easier for foreigners to purchase the property.

Vietnam Residential Real Estate Market Trends

Rising Government Initiatives and Social Housing Development Policies
According to the MoC, most social housing projects would be implemented in areas with large industrial parks, including Long An (310,000 units), Bac Giang (285,000), Bac Ninh (96,2 7), and Binh Duong (8,000). Social housing projects are also considered a priority in large urban cities such as Hanoi (136,000 apartments), Ho Chi Minh City (130,000), Haiphong ( 5,355), and Danang (19,360). KM assumed the implementation of the plan in stages, when approximately 700,000 apartments should be completed in the period 2021-2025, i.e. 5 % of the total demand, and 1.1 million apartments in 2025-2030, i.e. 85%
 
Rapid Urbanization is Supplementing Housing Demand
in the country by 2025 and around 1.9-2.3 percent by 2030. The nationwide number of built-in areas will reach 950-1000 by 2025 and approximately 1000-1200 by 2030. The share of the urban economy in the gross domestic product will be about 75 percent by 2025. 85 percent by 2030. In addition, the level of urbanization in ASEAN and Asia is estimated to be medium to high by 2045
 
Investment into the Property Markets ( Foreign & Local )
The wave of foreign investment continues to pour into Vietnam’s real estate market, even with potential global slow downs, the market is attractive enough to maintain its current development albeit it may occur at a slower pace.
We are currently working with global investors from East Asia and the Middle East who seek diversification into the growing property markets of Vietnam. Interest can be found in all sectors, international hotel groups like Accor and InterContinential, large-scale investors like IFA and Kingdom Hotel Investment, construction and investment groups from Japan and Korea, and even internationally backed investment funds located in Vietnam with strong financial backings like Indochina Capital and VinaCapital. All have their own property investment plans which span years into the future.
Economic theories would suggest that in times of economic downturn, retail would be a sector that suffers from a reduction in spending. However, the robustness of Vietnam’s domestic economy and the opportunities that arise as the sector is being liberalised, makes retail an attractive investment option. There is also the continued shift towards modern trade within Vietnam, which fosters new investment opportunities, and the existing shortage of quality retail space in city centres making the sector desirable to be part of property market.
We are expecting to see the strong growth of New FDI from America, Japan, Korea, Taiwan, China, Malaysia into Vietnam Country in the coming time and the birth of new developers allowing for future partnerships which will further uplift and strengthen the property market in Vietnam.

M & A growth remains strong

The Merger and Acquisition (M&A) transactions in Vietnam are expected to continue strong growth in this year.
Vietnam’s economic growth is forecast to reach 8% this year before falling to 6.5% in 2023. The strong growth has created a positive “platform” for investment and business activities, especially mergers and acquisitions (M&A).
The scale of the M&A market is slowing down in terms of the number and value of deals. In 2021, there were more than 700 deals, but in the first 10 months of 2022, the number was only about 350. The average value of a deal also decreased from 31 million USD to about 15 million USD.
Vietnam’s strategy for foreign investment cooperation for 2021-2030 has just been deployed, with new institutions and policies, including incentives for large-scale projects and others in the high-tech sector of great influence.
The Vietnamese government has established a working group in charge of removing difficulties to projects so they can push ahead with implementation, while calling for further investment in the country.
DSI Capital forecasted the M&A activity in Vietnam would pick up in sectors such as consumer products production and retail. M&A deals in the banking sector this year will continue the growth trend of last year, with several M&A transactions expected to be forthcoming these years 2024-2025.

There are excellent opportunities in Vietnam’s listed and OTC markets. And these opportunities are seem limited for Foreign-Investor, it hindered by the 49% foreign ownership (30% for banks)

The Equitisation of state-owned enterprises: The equitisation of state-owned enterprises is an important aspect of Vietnam’s emerging capital markets.
The government is entering the final phase of equitisations, involving the sale of the largest and most attractive SOEs (For Instant, Telecoms, Banks,…etc).
While the Covid-19 pandemic has severely impacted global trade and investment activities, the combined M&A transaction value in Vietnam is estimated to decline by 51.4% year-on-year to US$3.5 billion.
– Ho Chi Minh City Stock Exchange (HoSE) has 290 listed companies with a Total Market Capitalisation is under US $15 Bil.
– Forward P/E of 10x with earnings growth rate estimated at 15-20%, it is over the medium term for some leaded-company. PEG is less than 1.
– Foreign-Investor are interesting in Vietnam’s Equity remains strong, with foreigners typically involved in 30-45% of daily trades (HoSE).
– In the years of 2020-2025, we will see the equitisation of more major SOEs including Commercial Banks and Vietnamese State Companies.

Private equity is a rich terrain for investment in Vietnam as a strong entrepreneurial spirit is found throughout society.

About 300,000 small and medium-sized enterprises in Vietnam.
– Increasing number of SMEs can now handle meaningful investments of USD5-10m or more.
– SMEs are increasingly aware of and understand private equity structures. Minority protections can now be negotiated.
– SMEs tend to be family-run-investors need to take on a management support role and promote professionalisation of these companies.
New consumer trends

Private firms are at the forefront of new consumer trends in Vietnam.

DSI Capital has been taking stakes in top Rubber Companies, Food products company, Coffee Company and IT Industry.
Growth is often best achieved with the alignment of interests of a good management team. As the Private Equity industry is developing, Vietnam’s Private Equity firms are focussing on developing quality management within their investee companies

Fast rising demand and supply limitations create an excellent opportunity for investment in Vietnam’s property market

1) Office sector highlights:
Grade A office buildings in HCM City and Hanoi have
almost 100% occupancy.
2) Retail sector highlights:
Vietnam tops A.T.Kearney’s 2008 list of world’s most
attractive emerging market retail locations.
3) Hotel sector highlights:
Tourism expected to grow at 15% yearly over the
next 5 years.
4) Residential sector highlights:
Population growth and density drives demand for
additional 10 million sq.m GFA yearly.

Infrastructure is emerging as an alternative asset class with stable, consistent returns with low correlation to the equities markets

– Shortages in every infrastructure sector in Vietnam.
– Port congestion is particularly acute, traffic congestion is just as bad.
– About USD4.5 billion to be invested in ports in the next five years.
– Some 13 expressways planned for construction by 2023, with total cost of around USD26.5 billion.
– The government has encouraged private investors to finance power projects, which are expected to cost about USD64 billion in the 2019-2023 period.
– Infrastructure, especially seaports and electric power, is the most important factor now for firms considering investment in Vietnam.
– Government encourages PPP method in infrastructure investment.
– Private investors involved in PPP projects will be offered some benefits, such as preferential corporate income tax, exemption of land use fee for the area allocated for the projects or exemption of land rent over the life time of the projects. Goods imported to implement the projects will enjoy tax preferences in accordance with import-export tax regulations. The investors can also have some rights such as mortgaging assets, buying foreign currency and others.
– Vietnam’s transportation infrastructure investment value is forecasted to increase to over US$15.3 billion (*S$16.55 billion) by 2020. Railways and ports are expected to grow the most and have the highest value. The investment value of ports alone is expected to rise from 7 per cent of total infrastructure spending in 2018 to 16.4 per cent by 2023. This creates many lucrative opportunities for investors.

Factors to measure success of Private Equity investments

– The Private Equity Deals are coming from a diverse range of alternative investors in the world with different backgrounds.
– The Successful Integration, Dividend-Yield received, Good Revenues & Profits and Saved-Cost is indicating the diversity of measuring Investor’s success in Vietnam.
– Almost Investors considered IRR on exit to be the most important factor when measuring success of Private Equity investments.
– However, identify that not all Private Equity industry participants in Vietnam regarded IRR as the most important factor, and in some cases regarded it as less important than other factors.
– With the Private Equity investment opportunities, where investors are looking to improve their businesses in Vietnam, increasing returns to investors. Certain industries are valued based upon revenue multiples, and other industries derive greater returns by acquiring and integrating small and less efficient operations together. For the time being, Private Equity investors apply different measures in general to transactions other than a general reliance on IRR depending on the specific business.
– Some of Real Investor looked at the good industries and Vietnam’s economy is currently heading, where the country is in investment preference compared to other destinations is seem very safety and where Investors intended to invest in the coming years.

How DSI can help you…

A Good & Unique reliable bridge for solely Investor in Vietnam
Exellent & Profitable Projects Developer
Asset Management
Advisory & Finance
M & A Consultancy
Long-Term Co-investment opportunities
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