Investment funds seek to "play it safe and play it safe"

Unwilling to accept risks, investment funds now only prioritize looking for businesses with sustainable cash flow, profits and good business models.

Investment funds benefit from the growth in consumer spending in Vietnam. Photo: Duc Thanh

Focus on consumer industries

Investment funds operating in the Vietnamese market benefit from the growth in consumer spending in Vietnam. Hospitals, medical equipment, logistics and food retail are always the areas that receive great attention from foreign investors. Accordingly, Mekong Capital's Mekong Enterprise Fund IV is still focusing on areas in the consumer goods industry.

In June, SSI Asset Management Company Limited (SSIAM) and Union Securities Investment Trust Co., Ltd. (USITC) - a member company of Union Bank of Taiwan (UBOT) - signed a cooperation agreement to establish a new investment fund. Mr. Nguyen Phan Dung, Deputy General Director of SSIAM, said that the new fund is not limited by product type or investment field.

According to the specific needs of each product, SSIAM always aims to help investors access businesses with great growth potential, attractive valuations, from industries and groups that benefit the most from Vietnam's economic growth in the long term, including consumer goods, retail, education, health care, commercial banking, residential real estate, industrial real estate, information technology, transportation...

According to Dr. Le Minh Phieu, founder of LMP Lawyers, these are also good businesses in difficult times. Among them, strategic stock investment or mergers and acquisitions (M&A) are still attractive to investors. This year, this deal consultant has made 10 deals, of which 4 have been completed, a few have been closed, and the others are in the negotiation stage of transaction contracts.

Target profitable companies

In the current context, the criteria for investments have become more stringent. Mekong Capital prioritizes businesses with sustainable cash flows, profits and good business models. “Given the current limitations in access to equity capital and the high cost of debt, investing in any business that requires further rounds of funding to survive is a risk we are not willing to take,” said Chad Ovel, CEO of Mekong Capital.

One strategy that Mekong Capital has not changed is to find ways to invest in management capacity and leadership teams. According to Mr. Chad Ovel, the biggest lesson that the fund has learned from more than 20 years of experience investing in 45 companies in Vietnam is that companies that continuously strive to build management teams and improve leadership quality will be able to outperform their competitors.

“This needs to remain a key focus at all times. If it is not done successfully in the years leading up to the economic downturn, it will be more difficult to weather the storm,” said Chad Ovel.

Mekong Capital has not seen any slowdown in interest from potential strategic investors in its fund companies at this point, and in some cases, some strategic investors appear to be more active than in what are considered difficult economic times.

The Vietnamese IPO market is quite quiet, Mekong Capital plans to push for Vua Nem and F88 to list early. The optimistic signal is that the State Securities Commission has recently made significant improvements in speeding up the processing of applications for the steps required for listing. This improvement is important for any company, as well as investment fund companies, to restore confidence in the ability to list promptly when the business meets all the necessary standards.

Currently, Mekong Capital still has budget in Mekong Enterprise Fund IV, equivalent to 3-4 new investments. And these investments will be implemented after 1 year. In addition, the Company also has some new investments related to land and forests.

Meanwhile, SSIAM representative said that for the listed investment segment, SSI Fund is still maintaining the status of new disbursements and restructuring the portfolio. However, the fund must still ensure the principles of safe portfolio management with the method of selecting companies with the best governance foundation, transparency, bright prospects and reasonable valuation to create value in the medium and long term for customers.

For PE investment, SSI Fund is also actively researching new investments as well as divestments. The disbursement depends on the progress of finding businesses that meet the criteria of the funds, and the negotiation with the invested businesses to reach common terms between the participating parties. Each invested company is a partner and is willing to spend time working closely with the Company's Board of Directors to increase the value of the Company.

According to Mr. Dung, finding deals with outstanding profit potential is a goal to aim for, but equally important is helping the companies receiving capital build a sustainable 3-5 year business plan, improve operational management, restructure finances and build a network of strategic partners. Divestment also depends a lot on timing and market context. At the same time, finding the right partner to take over the capital is an important factor besides price.

The 16th Vietnam M&A Forum 2024

The 16th Vietnam M&A Forum 2024 - a prestigious annual event on mergers and acquisitions and investment connections organized by Dau Tu Newspaper under the direction and sponsorship of the Ministry of Planning and Investment , will be held at JW Marriott Saigon Hotel (HCMC) on Wednesday, November 27, 2024.

With the theme “A Blossoming Market”, the Vietnam M&A Forum 2024 will discuss in-depth emerging M&A opportunities in potential sectors such as real estate, retail, technology, renewable energy, financial services and logistics.

The M&A Forum 2024 will have the following main activities:

Main workshop with leading Vietnamese and international speakers.

Honoring outstanding M&A deals and consultants in the period 2023 - 2024.

Release of M&A Market Panorama 2024 Special Edition (Vietnamese - English bilingual).

Source: https://baodautu.vn/quy-dau-tu-tim-cach-an-chac-mac-ben-d229454.html