Photographer: Maika Elan/Bloomberg

Southeast Asia's Top Market Is Set for Another Boost

  • Stock advances by the limit, gaining 20% in trading debut
  • Local beer market luring both overseas investors, brewers

Vietnam’s benchmark stock index, already the best performer in Southeast Asia in the past year, is getting another boost from Tuesday’s listing of Saigon Beer Alcohol Beverage Corp. on the Ho Chi Minh City Stock Exchange. The shares rose 20 percent in the trading debut.

The stock rose by the limit to 132,000 dong ($5.81) apiece at the close. That values Saigon Beer at $3.7 billion, making it the second-largest consumer company after Vietnam Dairy Products JSC on the exchange and fifth-largest constituent overall. The listing will increase the size and liquidity of the $59 billion VN-Index, which tracks all the companies on the bourse and is set for a fifth year of gains.

Sabeco, as the state-owned maker of Saigon Beer and 333 Beer is known, controls about 40 percent of the local market, twice as much as the next largest competitors, according to an industry group. That’s helping it double internal expectations for 2016 profit.

For the government, the listing is a way to tap a beer market where sales rose 40 percent in the five years through 2015. An auction of the government’s stake is set to follow, capping a 2008 initial public offering. IPOs and listings on the Ho Chi Minh exchange are separate events in Vietnam.

“Sabeco’s listing is a positive and important step for a country that is embracing and liberalizing its own corporations,” said Federico Parenti, a Milan-based fund manager at Sempione Sim Spa. “The listing will be successful because the market is hungry for these type of businesses.”

Seven companies including Heineken NV, Anheuser-Busch InBev NV and Asahi Group Holdings Ltd. have already registered to bid for Sabeco, which listed about 641.3 million shares at an initial price of 110,000 dong. The shares can rise or fall as much as 20 percent on their debut.

Vietnam’s stock market is offering the best returns in Southeast Asia in the past 12 months.

Heineken and Hanoi Beer Alcohol Beverage Corp. trail Sabeco in terms of market share, Nguyen Van Viet, chairman of the Vietnam Beer Alcohol Beverage association, said earlier this year. The government also plans to sell its holdings in Habeco.

While Vietnam announced the latest plans to reform its state-owned enterprises in 2011, progress has been slow with the stakes being sold often being too small and many companies selling shares to the public but then not listing on exchanges.

“The listing will help boost Sabeco’s value and make everything more transparent,” Sabeco Chief Executive Officer Le Hong Xanh said in an interview at the exchange. The company is preparing to chose an adviser to assist with the stake sale, he said, without giving details.

Sabeco’s net income in 2016 is expected to rise 10 percent to about 3.76 trillion dong in 2016, Xanh said in an interview in August. That’s twice as much as an earlier target.

Bar Culture

“There is still room for growth in the beer market, and this will be the main driver for Sabeco,” Tran Trung, Ho Chi Minh City-based analyst at ACB Securities, wrote in a November 29 note to clients.

Vietnam’s thriving street-side cafe and bar culture, young population and rising middle class make it an attractive market for overseas brewers. Beer consumption in 2016 is forecast to rise 4.1 percent to about 4 billion liters from a year ago, the most in the Association of Southeast Asian Nations, according to Euromonitor International.

The number of Vietnamese citizens of legal drinking age, 18 and above, will increase to 72.4 million by 2021 from 68.7 million this year, Euromonitor projected.

Economists predict Vietnam will be among the world’s fastest-growing economies in 2016, expanding about 6 percent, as it benefits from a manufacturing industry that’s grown in importance over the years. That and increased foreign-direct investment helped push the VN-Index to an eight-year high of 688.89 on Oct. 19. FLC Faros Construction JSC, up more than 780 percent since its Sept. 1 debut, is leading gains on the gauge.

The index, up 13 percent this year, has topped a 2.7 percent decline in the MSCI Frontier Markets Index and 4.2 percent advance in MSCI South East Asia Index. That’s made Vietnamese shares expensive relative to peers, with a 12-month price-to-earnings ratio of 13.2, more than 10.6 for the frontier measure.

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