Frontier Markets Equity Issue
The record D31trn (US$1.3bn) initial equity offering of property developer Vinhomes tested the limits of the Vietnamese stock market, proving that the fast-growing country has the ability to host sizable offerings.
The country’s largest ever share sale offered global investors a rare chance to gain significant exposure to Vietnam’s growing economy and real estate market.
Interest in Vietnam has ballooned since Vincom Retail, another Vingroup company, pioneered the IEO structure in 2017 with a D16.1trn offering that slashed the months-long delay between pricing and trading to a matter of weeks.
Although Vinhomes took advantage of the same structure, its biggest challenge was to convince investors that the local market could support such a large float. It was looking to raise almost twice as much as Vincom, and would become Vietnam’s second-biggest listed company, behind its parent Vingroup.
Vinhomes and its bankers reduced some of the pressure on the public market with a US$853m pre-IEO placement to Singapore’s sovereign wealth fund GIC in April, a month before the public offering.
To further increase the odds of success, Vinhomes brought in mainly foreign cornerstone investors for shares totalling D23.4trn or 75% of the offer. Seven buyers took up about 77% of the cornerstone tranche, namely Avanda Investment, Capital Research and Management, Dragon Capital, Ivy Investment, JF Asset Management, Korea Investment Management and Mirae Asset Global Investment.
Despite the benchmark Vietnam Index trading down almost 10% in the three weeks before pricing, Vinhomes managed to price around 267.8m secondary shares from undisclosed shareholders – equal to a 10% stake – at the top of the D110,500–D114,700 range.
The final price implied a 2018 P/E of 18, a premium to the about 14x for regional real estate players in Thailand, Indonesia and the Philippines.
Demand was strong. The deal was covered after three hours of bookbuilding and the final book was multiple times covered. Around 80 investors participated. Geographically, Asia took up 83% of the float, the US 15% and Europe 2%.
After the IEO, Vingroup, together with subsidiary Vincommerce, owns 73.8% of Vinhomes, GIC owns 7.1%, cornerstone investors 7.4% and public investors – including some existing individual holders – 11.7%.
Citigroup, Credit Suisse, Deutsche Bank and Morgan Stanley were the joint global coordinators for the float, and joint bookrunners with HSBC and Maybank Kim Eng. Saigon Securities was the domestic joint bookrunner.
Vinhomes has developed 48% of all high-end property in the last three years in Hanoi and Ho Chi Minh City. Its land bank is nearly 20 times more than the next largest player and is sufficient for approximately 15 years of development.