VIETNAM BUSINESS REVIEW | FINANCE 1

VIETNAM

BUSINESS REVIEW

Highlight

Vietnam National FinTech Day in May

Vol 11, Mar 28th

2018 What’s in it today?

FINANCE

SSIAM sells stake in PAN Group and SSC

Interfood to buy Wonderfarm brand from Malaysian firm

Vietcombank to offload over 6.6 millions shares at Orient

Commercial Bank

RETAIL

Electronics retailers to heat up pharmaceutical

distribution segment

Two RoK retail groups seek trade opportunity in

Vietnam

STARTUP

Vietnam National FinTech Day in May

Next decade to see stronger capital flows to Vietnamese

tech startups

Singapore’s Insignia Ventures invests $600k in truck

platform LOGIVAN

500 startups closes 20th deal in Vietnam, seek to up deal

pace this year

ECOMMERCE

Two thirds of E-commerce transactions in Vietnam made

via Facebook

A seminar held to promote links between E-commerce

and Logistics

INVESTMENT

Big investors jump into growing poultry market

Japan firm to build Binh Duong smart city

LOGISTICS

Savico Vietnam shuts down taxi company

All Nippon Airways-owned to exit Vietnam’s

affordable air travel

VIETNAM BUSINESS REVIEW | FINANCE 1

FINANCE

SSIAM sells stake in PAN Group and SSC

SSI Asset Management (SSIAM), a unit of Vietnam’s largest brokerage house Saigon Securities Inc (SSI),

has sold nearly nine million shares in Vietnamese agriculture firm PAN Group and Southern Seed

Corporation (SSC).

In a disclosure to the HCMC Stock Exchange, SSIAM announced that it has sold nearly 7.1 million shares

in PAN Group, representing 5.9% of total voting shares. With the transaction, SSIAM will no longer be

the major shareholder of the agriculture firm. Meanwhile, the asset management company SSIAM also

completed the sale of over 1.43 million shares in SSC. Both the transactions were carried out through

Vietnam Securities Deposit. Both PAN Group and SSC are part-owned by founder chairman Nguyen Duy

Hung, a Vietnamese businessman.

SSIAM is the wholly-owned subsidiary of SSI, Vietnam’s biggest brokerage house. The company

established two private equity funds in collaboration with Japan’s Daiwa Securities Group with its latest

investment being in retailer Concung.

Interfood to buy Wonderfarm brand from Malaysian firm

Interfood Shareholding Company (Interfood) has proposed to buy the Wonderfarm brand from

Malaysia-based Wonderfarm Biscuits & Confectionery Sdn. Bhd, for up to $200,000.

Interfood had in 2009 intended to purchase the brand for $4m and had expressed interest in acquiring

the Malaysian firm to develop its biscuits and bottled water business. The deal, however, fell through

due to lack of a consensus on both sides.

The beverage company has two 2 brands in Vietnam including Wonderfarm and KIRIN. Wonderfarm has

many traditional Vietnamese products like “Winter Melon”, “Birds Nest” and “Tamarind“. On the other

hand, KIRIN is a Japanese brand with products such as “Ice +” and “Latte”. Wonderfarm Biscuits &

Confectionery Sdn. Bhd. manages the IP rights of Interfood. The company is based in Gelugor, Malaysia.

Vietcombank to offload over 6.6 millions shares at Orient Commercial Bank

Vietnam’s largest lender by market value Vietcombank (VCB) has registered to offload over 6.6 million

shares at HCMC-based Orient Commercial Bank (OCB) on March 17, as a part of its effort to pare its

ownership at other credit institutes under Circular No. 36 of State Bank of Vietnam.

According to the latest announcement from Hanoi Stock Exchange, VCB will sell the OCB shares at

starting price of VND13,000 ($0.57) per shares. The bank is expected to earn at least VND86.74 billion

($3.81m) from the sale. VCB earlier also offered for sale 18.9 million OCB shares at starting price of

$0.57 per shares. However, only 13.16 million shares were purchased with the highest price of

VND14,500 ($0.64). After the divestment, Vietcombank’s ownership at OCB fell from 4.72% to 3.97%.

VIETNAM BUSINESS REVIEW | E-COMMERCE 2

E-COMMERCE

Two thirds of E-commerce transactions in Vietnam made via Facebook

The world’s largest social media network proves important to Vietnam’s e-commerce.

Up to 66% of shoppers in Vietnam purchased items online via Facebook as of 2016, rising rapidly from

44% in 2015, although the country is home to numerous providers and platforms, a government official

has stated.

Both foreign and domestic providers such as Alibaba-invested Lazada, Shopee, Sendo, Adayroi.com,

Mobile World and competing for presence in Vietnam. Amazon has recently announced a plan to

support Vietnamese small- and medium-sized enterprises to ship their products abroad.

E-commerce has become increasingly popular in Vietnam thanks to lower item prices and faster

delivery, said Nguyen Nhu Quynh, deputy head of Inspection Department at the Ministry of Science and

Technology, at a recent workshop hosted by AmCham.

The most demanded goods online are fashion, cosmetics, food and drinks while smartphone is the most

used device for e-commerce. E-commerce transactions in Vietnam totaled $5b in 2016 and are

expected to double in the upcoming 5 years. Quynh noted that the growth of e-commerce in Vietnam was yet to be sustainable due to the underdeveloped payment system, low consumer confidence and questionable quality of services.

A seminar held to promote links between E-commerce and Logistics

Though logistics and e-commerce in Vietnam is booming, the two sectors have been hamstrung by a

lack of linkages between them, according to Tran Thanh Hai, deputy director of the Import-Export

Department under the Ministry of Industry and Trade. The development of e-commerce must be

accompanied with quality logistics services as logistics are crucial for online sales.

According to the ministry, since 2015, though logistics and delivery services have grown rapidly, they

have not met the needs of e-commerce. High logistics and delivery costs in online sales has led to

online purchase prices not being much lower than for traditional purchases, Hai said, adding that the

quality of delivery services is low.

In Vietnam, logistics enterprises and e-commerce firms are mainly small and medium sized, their scale

of operation is not large, they lack professionalism, and they lack close links to serve customers.

This is one of the reasons that online purchasing is unattractive to consumers and why logistics for e-

commerce has not developed. Therefore, improving the efficiency of logistics services to support e-

commerce is urgent.

To tackle the problem, the Department of Import-Export and the Department of E-Commerce and Digital Economy will hold a workshop themed ‘Logistics and E-Commerce: Companion for Development’ on April 10.

VIETNAM BUSINESS REVIEW | START-UP 3

START-UP

Vietnam National FinTech Day in May

The State Bank of Vietnam (SBV) will organise the National FinTech Day in May. This is the first major

event of FinTech in the country, with the participation of FinTech management agencies, the start-up

community, commercial banks, experts from Vietnam, as well as foreign countries.

Speaking at the Vietnam-Korea Financial Co-operation Forum on March 22, SBV’s governor Le Minh

Hung stressed that the industrial revolution 4.0 is causing a boom in technology, bringing many

opportunities, creating added value and is a great driving force for economic development.

Banking and finance is a pioneer sector in rapidly adopting and applying the superior features of

technology solutions to enhance innovation, improve products and services, and reduce costs, thereby

bringing benefits to customers, he said.

Next decade to see stronger capital flows to Vietnamese tech startups

Vietnamese startups in new technology will be a key driver in luring in foreign capital within the next

decade, said Maybank Kim Eng Group in March 27's conference in Singapore.

As new and disruptive technology drives change and enables the ASEAN marketplace, Maybank Kim Eng

Group believes that Vietnam’s tech startups will attract big-name investors from the region, mostly from

within the ASEAN and China. According to the group, investors are excited about this growth potential

and they are now shifting to the ASEAN from China and India.

Chong told VIR that overseas investors pay strong attention to the region, particularly Vietnam, despite

rising protectionist policies from developed markets such as the US. Investors are driven by the fast

growth rates of ASEAN countries, which average 5- 6% per year, the young population, & high

penetration of Internet connection. The capital for these deals mostly came from China and the ASEAN.

Statistics from Maybank Kim Eng show that funding to ASEAN tech startups has surged in the last two

years. In the first 8 months of 2017, disclosed equity funding for the startups was around $6.5b, double

the $3.1b of 2016 despite the lower number of deals.

Major deals in the region are Alibaba’s $4-billion investment into Lazada; Tencent, Temasek, and Google

pouring $1.2b into Indonesian ride-hailing app Go-jek or JD.com putting $500m into Thai fintech startup

Tokopedia. “This is a very exciting time for the ASEAN as the young population is energetic and is

becoming increasingly tech-savvy. We are studying at least twelve Vietnamese startups in fintech,

consumer finance, and e-commerce to decide which one to invest in,” said Justin Hall, partner at Golden

Gates Ventures. Golden Gates currently has 3 investments in Vietnam: Appota, Lozi.vn & Wifi Chua.

Google and Temasek estimate that the Internet economy in the ASEAN will reach $200b in 2025, a six-

fold growth every year. In particular, the e-commerce sector will take up at least $5b, presenting fresh

opportunities for investors and startups.

VIETNAM BUSINESS REVIEW | START-UP 4

Singapore’s Insignia Ventures invests $600k in truck platform LOGIVAN

Singapore-based Insignia Ventures Partners, founded by former Sequoia Capital venture partner Yinglan

Tan, has invested $600,000 in Vietnamese freight-with-trucker connecting platform LOGIVAN. Linh

Pham, Founder of LOGIVAN, confirmed that the newly-raised capital will enable it to expand to HCMC &

other major economic hubs in Vietnam, serving companies that have high transportation needs.

After noticing that 70% trucks in Vietnam returned empty due to a fragmented logistics market, Pham

founded LOGIVAN as a connecting platform for trucks, becoming the first company in Vietnam working

to ‘Uberize’ the trucking industry with technology.

LOGIVAN offers a central platform that tracks the

location of freight and truck. In doing so, it is able to

optimize truck routes and reduce their empty load

return rates.

In order to book a truck, clients access LOGIVAN’s

marketplace on the web and indicate how many trucks

they require and what kind of cargo they need to be

delivered.

Pham, a former Goldman Sachs technology analyst and

Cambridge University graduate, earlier founded

Snappetite, a platform for deals before launching LOGIVAN.

According to the World Bank’s ranking, Vietnam is 64th out of 160 countries in the world and 4th in

ASEAN after Singapore, Malaysia and Thailand in logistics development. Vietnam’s logistics costs remain

high, equivalent to over 20% of GDP while these costs account for between 9% and 14% of GDP in

developed countries, according to Vietnam Logistics Association.

Insignia Ventures Partners is a venture capital firm specializing in startup investments. In February, it

closed its maiden fund at $120m. The milestone came less than a year after Tan left Sequoia’s office in

Singapore, and also marks the largest ever maiden vehicle by a venture capital firm in this region.

500 startups closes 20th deal in Vietnam, seek to up deal pace this year

Silicon Valley-based venture capital fund 500 Startups recently closed its 20th deal from its $10m VN

fund by backing a fintech blockchain startup.

Eddie Thai, one of the US firm’s two local partners, said that the fund aims to boost its investments to

two or more deals per month this year. “At the same time, we will continue supporting our portfolio

companies. We’re proud of the progress they’ve made so far and we want to continue helping them

attract talent, enter new markets, and raise capital,” he revealed.

According to a report from Hanoi-based accelerator Topica Founder Institute, 500 Startups was the most

active Vietnam-focused venture capital firm (excluding accelerators) in 2017.

LOGIVAN's Founder Linh Pham joined Uber Exchange startup competition and was the only team to win a

trip to Silicon Valley

VIETNAM BUSINESS REVIEW | RETAIL 5

RETAIL

Electronics retailers to heat up pharmaceutical distribution segment

FPT and a number of electronics retailers are looking to expand their business by entering the

pharmaceutical segment.

Nguyen Bach Diep, chairman of FPT Retail, announced the plan to increase the Long Chau

pharmaceutical chain to 400 units by 2022 with an annual average of 100 drugstore openings.

Long Chau drugstores have higher average monthly sales than other stores in the market. Specifically,

the stores generate $136,000 in sales revenue per month, while Pharmacity makes $11,000, Pharno

$18,000, and An Khang $32,000.

Currently, FPT Group holds 47% of the shares in FPT Retail, Dragon Capital and VinaCapital hold

34.32%, and the rest belongs to other shareholders.

In early 2018, electronics retailer Digiworld mapped out its road to conquer Vietnam’s consumer goods

market. Digiworld JSC plans to boost its presence in the healthcare & consumer goods industries this

year. The goal for 2018 is to earn at least VND200 bln ($8.78m) in gross revenue from these 2

sectors.

The distributor plans to achieve this target by constantly rolling out new offers throughout 2018.

Specifically, in Q2, Digiworld will introduce a series of children’s healthcare products that are imported

from the US. In the next quarter, Digiworld will launch other products for liver protection and circulatory

system improvement.

In August 2017, the firm made its debut with Kingsmen, which promises to improve the physiological

energy of men above 40 years old. Revenue from Kingsmen will be included in Digiworld’s financial

reports this year.

Two RoK retail groups seek trade opportunity in Vietnam

Two retail and distribution groups from the Republic of Korea (ROK), K-holdings and Coupang, will meet

Vietnamese partners to discuss investment opportunities on March 22.

This is part of activities within the framework of the Vietnam-ROK business exchange program organized

by the Export Support Centre under the Vietnam Trade Promotion Agency and the Vietnamese Trade

Office in the ROK with the aim of boosting exports to the market.

The two groups are in need of importing spices/sauce, noodle/vermicelli/rice noodle and products, canned food/frozen seafood, frozen and dried fruit, coffee, chocolate, cashew nut, pepper, cinnamon, anise, dried food such as dried beef, chicken and cuttlefish, fresh fruits like coconut, pineapple, banana, mango and dragon fruit and some other processed food, which offer opportunities for Vietnamese

agricultural businesses to ship their products to the market.

VIETNAM BUSINESS REVIEW | LOGISTICS 6

LOGISTICS

Savico Vietnam shuts down taxi company

Saigon General Service Corporation (Savico) announced to the State Security Commission of Vietnam

and HCM City Stock Exchange that its taxi brand – ComfortDelgro Savico Taxi – has been closed to

preserve funds and reengineer its taxi-related business plans.

ComfortDelgro Savico Taxi was opened in 2005 as a joint venture between Savico and ComfortDelGro

Corporation Limited, a Singaporean multinational land transport company.

Even though ComfortDelgro Savico Taxi has operated in HCM City for a long time, its market share has

always been relatively modest, with a fleet of only around 400 cars, compared to Vinasun Taxi’s fleet of

more than 6,000 cars.

For the past few years the taxi company has incurred high costs due to constant improvement of its cars

and service quality. However, tough competition from Grab and Uber has caused the company to

struggle to make much profit from the investment.

According to Savico’s 2017 report, ComfortDelgro Savico Taxi only made around VND235 million

($10,300) of profit, down from around VND3.3 billion ($145,000) in 2016 and nearly VND7 billion

($307,000) in 2015.

On March 16, ComfortDelGro said that ComfortDelgro Savico Taxi has merged with Vinataxi (70% of

whose shares are owned by ComfortDelGro). According to statistics from the city’s Department of

Transport, as of 2017, there were around 35,000 taxis in HCM City, including around 24,000 Grab and

Uber taxis. Many of Vietnam’s traditional taxi companies are struggling to compete with Grab and Uber.

All Nippon Airways-owned to exit Vietnam’s affordable air travel

Japanese low-cost airline Vanilla Air, which is wholly owned by All Nippon Airways, announced its official

exit from Vietnam's affordable aviation market despite optimistic business performance over the past

18 months due to its failure over local competitors.

On March 25, the All Nippon Airways-owned airline officially cancelled 100% of its services in Vietnam,

three days after its merger with Peach Aviation, a subsidiary of ANA Holdings.

To date, both Vanilla Air and Peach Aviation are specialised in catering affordable aviation services,

sharing the parent company of ANA Holdings, Japan's leading air travel services provider.

In September 2016, Vanilla Air initiated the two flight routes of HCMC-Taipei (China) and HCMC-Tokyo

(Japan). Along both routes, the Japan-based airline saw constant, intense competition with other

foreign-invested airlines such as EVA Air, Uni Airways, and China Airlines, as well as Vietnam-based

affordable airlines such as Vietnam Airlines and Vietjet. Additionally, Vanilla Air has been planning its

merger with Peach Aviation in October 2018, expecting to be wholly acquired by late March 2019.

VIETNAM BUSINESS REVIEW | INVESTMENT 7

INVESTMENT

Big investors jump into growing poultry market

Hundreds of poultry farming companies provide meat and eggs, and tens of thousands of household-run

farms are operating throughout the country. However, no powerful company has yet to lead the market.

In 2017, Bel Ga, a startup in poultry breeding, got a $4 billion loan from International Finance

Corporation (IFC) to expand poultry farming. With the loan, Bel Ga can receive support from global

groups with many years of experience and professional management systems in the field, including

Belgabroed and De Heus.

Before receiving the loan, Bel Ga was known as the first chicken company that received a Global GAP

certificate in poultry farming.

CP Vietnam, Ba Huan, Vinh Thanh Dat, Dabaco, 3F Viet. Thanh Duc and DKT are the best known poultry

and egg suppliers in the domestic market.

An analyst said that poultry meat and eggs have a short life cycle, therefore, risks always exist. Only

companies with good logistics which lowers costs can be competitive.

He said that the market is being restructured as consumers now prefer higher requirements for food

safety.

Big investors who have joined the market recently are developing large-scale projects with modern and

professional farming technology.

One of the investment deals expected to change the face of the industry is VinaCapital’s investment of

$32.5 million in Ba Huan JSC, announced last week.

With the deal, VinaCapital became the strategic investor in Ba Huan and will pour more capital in the

next 12 months if the business targets can be met.

Established as a household-run company 17 years ago, Ba Huan is one of the leading fresh poultry meat

and egg suppliers.

Ba Huan runs a closed production and business chain with traceable products and has a large

distribution network of 2,000 agents and retail points throughout the country.

According to IFC, food consumption in Vietnam amounts to 15% of GDP and has annual growth rate of

18%.

However, the low food safety standards have hindered the industry’s growth and blocked opportunities

to join modern food supply chains.

According to DBS Bank, the amount of chicken consumed in Vietnam each year has a CAGR of 8.6%.

VIETNAM BUSINESS REVIEW | INVESTMENT 8

It is expected that the consumption level will reach 17 kilograms of meat per head per annum by 2021,

or double the eight kilogram level in 2015.

The figure was predicted based on the pace of urbanization and the expansion of the middle class.

The optimistic forecast has prompted corporations to make investments in poultry meat and egg

production.

Hoa Phat, a steel manufacturer, unexpectedly announced it will produce 300 million eggs a year from

2020.

Japan firm to build Binh Duong smart city

Construction and development giant Becamex IDC and Japan’s Nippon Telegraph and Telephone East

Corporation (NTT East) yesterday signed a memorandum of understanding for building a smart city in

the southern province of Binh Duong.

Under the MoU, NTT Vietnam will collaborate with Vietnam

Technology & Telecommunication JSC, a subsidiary of Becamex IDC,

to provide information technology and telecommunications

services to customers in industrial parks and urban areas developed

by the Vietnam Singapore Industrial Park (VSIP).

The tie-up will also include human resource training and

technology transfer and implementation of measures to enhance

the quality of services.

The two sides will also do research on a feasibility study to instal

public wi-fi in Binh Duong New City and other areas and another to develop a second data centre in the

province.

Tran Thanh Liem, chairman of the province People’s Committee, said Becamex IDC and NTT East would

be reliable partners in developing the smart city.

The MoU will be the legal framework for the tie-up between Becamex IDC, NTT East and the

management of the Binh Duong Smart City to develop information and communication technology

network infrastructure, he said.

He called on the two companies to quickly draft concrete plans to effectively implement the agreement.

The plan to develop Binh Duong smart city in 2016-21 focuses on four areas: humans; technology;

business community and infrastructure; and living and working environments.

The province has so far attracted more than US$29 billion in foreign direct investment projects, ranking

second only to HCM City.

Becamex IDC & Japan’s Nippon Telegraph & Telephone East Corporation sign a MoU for

building a smart city in the southern province of Binh Duong yesterday.

VIETNAM BUSINESS REVIEW | INVESTMENT 9

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