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AFC Vietnam Fund presentation 2013.12.02 (Asia Frontier Capital Ltd.)

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AFC Vietnam Fund presentation 2013.12.02 (Asia Frontier Capital Ltd.)

  1. 1. AFC Vietnam Fund AFC Asia Frontier Fund December 2013 September 2013 CONFIDENTIAL CONFIDENTIAL
  2. 2. 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 2 CONFIDENTIAL
  3. 3. 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 AFC Vietnam Fund 3 CONFIDENTIAL
  4. 4. 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. AFC Vietnam Fund 4 CONFIDENTIAL
  5. 5. WHY VIETNAM Vietnam’s Low Correlation to Global Markets offers significant Diversification Benefits Correlation with the MSCI World Index 0.82 0.88 0.63 0.35 VH Index (Hanoi) 0.40 VN Index (Ho MSCI Frontier Chi Minh) Markets MSCI BRIC MSCI Emerging Markets Bloomberg . *Based on 10 years monthly data AFC Asia Frontier Fund 5 CONFIDENTIAL
  6. 6. WHY VIETNAM 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 6 CONFIDENTIAL
  7. 7. WHY VIETNAM 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 7 CONFIDENTIAL
  8. 8. WHY VIETNAM Competitive Labour Costs and Increasingly Educated Population Average Monthly Salary (USD) 4,964 3,989 3,934 1,889 817 473 434 285 206 117 105 Worldbank AFC Vietnam Fund 8 CONFIDENTIAL
  9. 9. WHY VIETNAM Compelling Valuations * AFC Vietnam Fund ** Vietnam Thailand Indonesia Singapore Malaysia Philippines P/E Dividend 2013 Yield 6.0x 9.1% 10.8x 3.9% 12.7x 3.3% 13.6x 2.4% 13.9x 3.7% 16.1x 3.3% 17.2x 2.4% P/B 0.96x 1.74x 2.18x 2.48x 1.40x 2.35x 2.69x YTD Perform. 71.0% 17.4% 1.4% 1.9% 0.8% 7.0% 7.8% * AFC VF Model Portfolio as of 20 Nov 2013 ** Ho Chi Minh 22% / Hanoi 12.7% Bloomberg AFC Vietnam Fund 9 CONFIDENTIAL
  10. 10. WHY VIETNAM Increasing Foreign Reserves will Support Currency & Balance of Payments 90% Foreign Reserves in % of External Debt Foreign Reserves (USD bn) 23.5 2008 2009 13.4 44% 25% 23% 2010 2011 6.2 2012 2013 (f) 23.6 16.5 54% 50% 23.9 7 12.5 13.5 9.1 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 (f) Worldbank AFC Vietnam Fund 32 10 CONFIDENTIAL
  11. 11. WHY VIETNAM 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 11 CONFIDENTIAL
  12. 12. WHY VIETNAM 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 12 CONFIDENTIAL
  13. 13. WHY VIETNAM Stable Political Environment 90 88 World Bank 2011 Political Stability Ranking 52 52 47 46 33 25 AFC Vietnam Fund 13 21 17 14 13 9 CONFIDENTIAL
  14. 14. WHY VIETNAM Low Market Cap/GDP relative to Asian Markets Market Cap in % of GDP 151% 105% 157% 106% 85% 44% 45% 55% 62% 69% 23% Worldbank 2012 AFC Vietnam Fund 14 CONFIDENTIAL
  15. 15. WHY VIETNAM Stock Market Information Number of listed companies 642 Sector Breakdown Aug 2013 696 702 737 Insurance 5% 455 27 Banks 24% Material 7% 342 195 Others 13% 245 Real Estate 7% 42 Energy 19% Food & Beverages 25% Bloomberg AFC Vietnam Fund 15 CONFIDENTIAL
  16. 16. WHY VIETNAM MSCI Emerging Market Index, 1973 - 2013 1600 1400 1200 Ho Chi Minh Index, 2002 - 2013 Vietnam is at the very beginning of a long term capital growth trend 1000 800 600 400 200 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 0 Bloomberg / Viet Capital AFC Vietnam Fund 16 CONFIDENTIAL
  17. 17. AFC VIETNAM FUND Target Fund Size: Legal Structure: Style: Domicile: Initial Minimum Investment: Launch Date: Subscription Frequency: Redemption: Fees: High Water Mark: Auditor: Legal Advisor: Custodian: Fund Administrator: Investment Manager: AFC Vietnam Fund USD 50 million Open End Value / Growth Cayman Islands USD 10,000 / USD 1,000 subsequent purchases 10 December 2013 Monthly, 5 business days before end of month Monthly, 60 days prior notice Management: 1.8% p.a. of NAV Performance: 12.5% p.a. of NAV appreciation Yes (performance fee only applies to net profits) KPMG, Cayman Islands Ogier, Hong Kong Viet Capital Securities, Ho Chi Minh Amicorp Fund Services Asia Pte Ltd., Singapore Asia Frontier Capital (Vietnam) Ltd., Cayman Islands 17 CONFIDENTIAL
  18. 18. DIRECTOR & SHAREHOLDER OF ASIA FRONTIER CAPITAL (VIETNAM) LTD. 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! AFC Vietnam Fund 18 CONFIDENTIAL
  19. 19. DIRECTOR & SHAREHOLDER OF ASIA FRONTIER CAPITAL (VIETNAM) LTD. 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. AFC Vietnam Fund 19 CONFIDENTIAL
  20. 20. DIRECTOR OF ASIA FRONTIER CAPITAL (VIETNAM) LTD. 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. AFC Vietnam Fund 20 CONFIDENTIAL
  21. 21. SHAREHOLDER OF ASIA FRONTIER CAPITAL LTD. 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. AFC Vietnam Fund 21 CONFIDENTIAL
  22. 22. 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) AFC Vietnam Fund 22 CONFIDENTIAL
  23. 23. INVESTMENT STRATEGY Example of Typical Equity Investments Hanoi Beer Hanoi Education Develop. & Invest. Son La Sugar Bao Viet Securities PetroVietnam Technical Services Market Cap USD (m) 5 9 10 38 383 P/E P/B 6.9x 5.3x 3.6x 8.1x 6.2x Div Yield 1.2 0.8 1.0 0.7 1.0 8.1% 10.9% 12.4% 0.0% 8.3% Pay Out Sector Ratio 50% Consumer Goods 66% Consumer Services 34% Consumer Goods 0% Financials 40% Oil & Gas Model Portfolio Sector Weightings Infrastructure Consumer Goods Technology Real Estate Construction & Materials Oil & Gas / Energy AFC Vietnam Fund 8% Health Care 28% Financials 6% Agriculture 2% Education 12% Transportation & Logistics 5% Textiles 23 5% 5% 9% 8% 9% 3% CONFIDENTIAL
  24. 24. CONTACT INFORMATION 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: vietnam@asiafrontiercapital.com Investment Enquiries: Andreas Vogelsanger Mobile: +66 84435 7472 Email: av@asiafrontiercapital.com Skype: andreasvogelsanger AFC Vietnam Fund 24 CONFIDENTIAL
  25. 25. 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 25 CONFIDENTIAL
  26. 26. Appendix AFC Vietnam Fund 26 CONFIDENTIAL
  27. 27. AFC VIETNAM FUND AFC Umbrella Fund (non US), Cayman Islands * AFC Vietnam Fund KPMG Amicorp Auditor Fund Administrator Ogier Hong Kong Asia Frontier Capital (Vietnam)Ltd. ** Legal Advisor Investment Manager Asia Frontier Investments Ltd. (licensed by SFC Hong Kong)*** Investment Advisor AFC VF Ltd. **** Investment Firm Viet Capital Securities Custodian * ** *** **** 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 27 CONFIDENTIAL
  28. 28. WHY VIETNAM Ho Chi Minh Index – 4 Years of Consolidation Viet Capital AFC Vietnam Fund 28 CONFIDENTIAL
  29. 29. WHY VIETNAM Healthcare Demand 2012 Regional healthcare expenditure per capital (USD) Healthcare expenditure per capita (current USD) 2,447 95 70 79 83 2009 2010 100 58 25 516 95 100 112 Indonesia Vietnam Philippines 31 37 47 226 Thailand Malaysia Singapore 2003 2004 2005 2006 2007 2008 2011 Worldbank AFC Vietnam Fund 29 CONFIDENTIAL 2012
  30. 30. WHY VIETNAM Mobile/Internet Consumer Trends Internet users (per 100 people) Regional internet users (per 100 people) 2012 39 35 31 24 27 17 13 27 8 4 2003 2004 74 66 21 36 39 Philippines Vietnam 15 2005 2006 2007 2008 2009 2010 2011 2012 Indonesia Mobile subscriptions (per 100 people) 143 Thailand Malaysia Singapore Regional mobile subscriptions (per 100 people) 2012 149 127 113 87 107 115 120 Philippines Indonesia Thailand 53 3 6 12 2004 2005 2006 149 153 Malaysia Vietnam Singapore 22 2003 141 2007 2008 2009 2010 2011 2012 Worldbank AFC Vietnam Fund 30 CONFIDENTIAL
  31. 31. WHY VIETNAM GDP per Capita Accelerating GDP per capita (current USD) 1,596 1,408 1,224 1,130 1,070 230 492 402 416 441 361 361 374 288 337 558 642 731 843 Worldbank AFC Vietnam Fund 31 CONFIDENTIAL
  32. 32. WHY VIETNAM Regional GDP per Capita Singapore Malaysia Thailand China Indonesia Vietnam Cambodia Burma GDP per Capita (USD) 61,104 16,536 9,432 9,060 4,812 3,444 2,364 1,400 Population (m) 5 30 67 1,357 249 90 15 62 World Bank 2012 - based on Purchasing Power Parity AFC Vietnam Fund 32 CONFIDENTIAL