NAP winds down in China, shifts focus to Vietnam F&B sector

December 04, 2014 10:03
New Asia Partners chairman Dennis Nguyen sees Vietnam's economy growing 6 percent annually in the next three years. Photo:

Private equity firm New Asia Partners Ltd. is shifting its focus to Vietnam's food and beverage sector as it winds down its investments in China, NAP chairman Dennis Nguyen said.

"A good rule of thumb for an industry to invest in is that it should be growing at three times the country's economic expansion," Nguyen told EJ Insight in an interview.

"We are investing in Vietnam's rising middle class and its US$200 billion economy," he said, adding that the firm plans to invest in one more cafe chain and a grocery store in the country.

Vietnam is boosting its consumption as its middle class gains more income and buying power.

The economy is expected to surpass the 5.8 percent growth target this year on the back of robust exports, the government said on Tuesday.

GDP grew 5.42 percent last year, accelerating from a 5.25 percent increase in 2012. The government targets a growth of 6.2 percent in 2015.

"I see Vietnam's economy growing about 6 percent annually in the next three years," Nguyen said. "Per capita gross domestic product in Hanoi and Ho Chi Minh is at about US$5,000, compared with only US$2,400 in Vietnam as a whole."

At the moment, all three investments of the Minneapolis-based firm are in the food sector. While two are in Vietnam, the third, a fast-food business, is in Guangdong.

In 2011, New Asia Partners invested in Huy Vietnam, which is now the country's largest Vietnamese cuisine restaurant chain. In late September, it announced a Series B round of equity financing worth US$15 million, which was well taken up by institutional investors as well as family enterprises, mostly from Malaysia and South Korea. Hong Kong-based AIF Capital was also one of the investors.

Another restaurant in its Vietnam portfolio offers Western cuisine.

Exiting China

The firm was able to complete 15 deals in China between 2002 and 2008. Some of them, such as Wuyi Pharmaceuticals (01889.HK), Huiyin Household Appliances (01280.HK), have since listed in Hong Kong.

"The Guangdong chain restaurant serving Southeast Asian food is probably my last investment in China," Nguyen said.

China's economy is slowing after decades of double-digit growth. It waned to a five-year low of 7.3 percent in the three months to September, raising concerns of a spillover effect on the global economy but falling roughly in line with Chinese leaders' plans for a controlled slowdown.

"China is forecast to grow at about 6 to 7 percent in the coming years, but I only see it at 5 percent, given the data," Nguyen said.

He said commodity prices are a major tip-off of economic performance. "Commodity prices such as oil and copper are consumer-related and they have fallen 30 to 40 percent, which to me means a lack of demand from China, less things will be bought," he said.

Once he decides to exit the restaurant business, he said he will do it through the Hong Kong equity market.

"Hong Kong understands the food and beverage market very well and it is not too far away from Vietnam," Nguyen said.

"It would be easy to bring Hong Kong investors to take a look at the restaurants, do due diligence and all kinds of work."

He also said he prefers Hong Kong as a listing venue because of its market transparency and rigid standards, a situation that is favorable to investors.

-- Contact the reporter at [email protected]


Ayishah Ma is a financial reporter on Greater China issues.