NAV and February 2012 update (0450Z)
09 März 2012 - 10:21AM
UK Regulatory
TIDMVPF
RNS Number : 0450Z
Vietnam Property Fund
09 March 2012
Vietnam Property Fund Limited
"VPF" or "the Company"
NAV and February 2012 Update
Fund NAV Performance
The NAV per share closed at US$0.753 on 29 February 2012.
Investment Climate
The consumer price index ("CPI") month-on-month ("m/m")
increased from +1.0% in Jan to +1.37% in Feb, mainly due to the
Vietnamese New Year (Tet) effect. This was much lower compared to
last year when CPI m/m reached 1.75% in January and 2.5% in
February. CPI year-on-year ("y/y") continued to drop and recorded
16.4% in February, down from 17.3% last month. Prices were more
stable during this Tet holiday with both food and non-food February
m/m inflation decelerating: food +1.45% this year vs. 3.6% last
year and non-food +0.7% this year vs. 1.0% last year.
Given the rapid rise in global energy prices the pressure to
increase petroleum prices has been building. The Government
therefore recently reduced the import tax to support petroleum
distributors. Despite this support petroleum distributors continued
making losses, said to be some VND1,400 loss/liter, prompting the
Government to increase petrol prices by 7.5% on average on 7 March.
We estimate that this increase will add about 0.9% to the CPI (0.3%
directly, 0.6% indirectly). If we conservatively assume that the
electricity price may be increased by about 15% soon we would have
to add another estimated 1.1% to the CPI. Hence, even with an
electricity price hike, we expect inflation in 2012 to still come
in below 10% given weak aggregate demand and prudent monetary and
fiscal policies .
The Government reported that FX reserves increased by 20% since
the beginning of 2012 thanks to a falling trade deficit. This
brings the estimated FX reserves from around US$15bn as at end of
2011 to some US$18bn. This is largely in line with our forecast of
a US$5-6bn balance of payment surplus this year, much higher than
the Government's conservative forecast of US$2bn. The better than
expected performance was not only due to the falling trade deficit,
but also due to the increasing confidence in the Vietnamese Dong
which motivated Vietnamese people to shift from US$ and gold assets
to the Dong.
Owing to the rapidly decelerating inflation, the Government just
announced that interest rates would be reduced by 100bps in the
very near future: deposit interest rate cap will go down from 14%
to 13%, refinancing rate from 15% to 14% and Open Markets
Operations rate from 14% to 13%. This move was anticipated by the
market and hence will not fuel inflation expectations as the market
realises that:
-- The current economic situation is weak and inflation y/y has
been falling sharply since Q3 last year, from 23.2% in August 2011
to 16.4% in February 2012.
-- The currency has stabilised. Both interbank and black market
rate are now more or less the same as the official mid rate, a
phenomena not seen for a long time.
Investment Update
It has been an encouraging start to the year with a good
sustained increase in the VN Index sending signals of a potential
recovery in the stock market. Real estate provided perhaps the
biggest surprise with a couple of our equity holdings rising over
50% year to date. Admittedly we do have quite a long way to go to
break even on some of our stock holdings but the first two months
of the year have been extremely encouraging from both a price
growth point of view and daily trading volume increase.
We have also been actively trading in February with a deal
agreed to sell our holding in SJS to a local investor. Towards the
end of last year we heard about a dispute between the management of
SJS, the largest shareholder and parent company and the decision
was taken to exit this holding. We were offered a premium to the
share price on the date of trading of just under 15%. This deal did
realise a loss of c. 45% from the original purchase price but the
exit was necessary to avoid being caught up in a potentially
damaging local dispute that VPF would have had no control over. It
is worth noting that this is not the first time we have exited a
position with SJS and that, over the life of VPF to date, our net
US$ return on SJS is a more acceptable 18%.
We have also deployed more funds into the SDI project. In order
to meet its short term cash flow requirements and to comply with
one of the Vietnamese company regulations (charter capital has to
be at least 20% of investment capital), SDI decided to increase
charter capital by the maximum of VND 300bn, equally divided into 3
capital calls with the first capital call occurring at the end of
February at VND 100bn (c. US$ 4.79m). VPF fully contributed its
portion of VND 10bn (c. US$ 479,386) to maintain its 10% equity
interest in the company. We supported this company action as it
allowed the company avoiding costly bridging finance in the current
weak borrowing conditions and as it allowed VPF preventing a
negative impact of US$ 1.89m on VPF's NAV that a dilution would
have had. Currently, SDI is undertaking negotiations to acquire
further financing options in order to avoid the shareholders
injecting further funds into the project.
For further information including the full February Monthly
Report please visit - www.vietnampropertyfund.com or contact:
Enquiries:
Rachel Hill
Dragon Capital Markets (Europe) Limited | Tel: +44 79 71 214 852
Freddy Crossley
Seymour Pierce Limited (Nominated Adviser and Broker) | Tel: +44
20 7107 8000
This information is provided by RNS
The company news service from the London Stock Exchange
END
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