Vietnam's HSC to boost advisory works as M&A deals accelerate

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Ho Chi Minh City Securities Corp., Vietnam's second-biggest brokerage by market share, expects its advisory business to grow as much as two-thirds as overseas and local companies tap into the nation's rising consumer spending.

The securities firm, also known as HSC, typically has 30 to 35 advisory deals ongoing per year, Chief Executive Officer Johan Nyvene said in an interview in Ho Chi Minh City, and aims to expand that to 40 to 50 by the end of 2012.

Mergers and acquisitions in industries ranging from coffee to medical services have increased in Vietnam this year as investors sought to profit from the country's growing middle class, even as inflation and borrowing costs spiraled. Six Vietnamese commercial banks, including the country's two biggest listed lenders, cut borrowing costs for businesses earlier this month as the government strived to make credit cheaper to protect economic growth.

"Vietnam's capital market as a whole is still thirsty for capital," Nyvene said. "The consumer-related sectors and businesses in particular are also fast-growing, given the demographics of the country, and these businesses typically need a significant amount of capital for growth."

The government is aiming for gross domestic product growth of 6.5 percent in 2012, compared with 6 percent forecast for this year.

Private investment

"Most of the consumer-related businesses are privately owned, not government owned, and so tapping into equity capital is the easiest way for these businesses to access capital," Nyvene said. "Given the low valuation of stocks on the listed market, foreign buyers are keen to buy into a sector where there is already an established network, or distribution channel, or customer base, or a well-recognized brand."

Masan Consumer Corp., a unit of Masan Group, agreed in April to sell a 10 percent stake to KKR & Co., the investment firm managed by Henry Kravis and George Roberts, for $159 million, Vietnam's largest private-equity investment.

Vinacafe Bien Hoa Joint-Stock Co., a unit of Vietnam's second-biggest coffee exporter, said Sept. 6 it received a 1.07 trillion dong takeover bid from Masan Consumer.

HSC was the adviser this year to MegaStar Media Co. for a transaction with South Korea's CJ-CGV Co., according to Nyvene. CJ-CGV paid $73.6 million for a 92 percent stake in Envoy Media Partners Ltd., which owns 80 percent of MegaStar Media Co., Vietnam's biggest cinema operator, Saigon Times reported on July 13.

"A good amount of fee income from HSC's advisory work this year came from the work we did for the MegaStar deal, which will be booked in our third-quarter profit," he said. "This year so far we have advised a few transactions in consumer and retail sectors. This is the trend for the near future."

HSC was the second-biggest brokerage in the first half of the year after Saigon Securities Inc., according to the Ho Chi Minh City Stock Exchange, up from third place in 2010.

HSC shares gained 3.1 percent to 20,000 dong yesterday, the highest level since March 23. The VN Index, the benchmark measure on the Ho Chi Minh City Stock Exchange, rose 1.4 percent to 469.40, gaining for a 13th day, the longest winning streak since 2004.

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