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SCMP Reporter

Kinh Do seeks another first - an overseas listing

Created by a group of Vietnamese-Chinese investors in 1993, confectionary Kinh Do Corp has blazed a trail for the private sector in Vietnam.

Now one of the most prominent firms on Vietnam's young stock market, Kinh Do is determined to list internationally by the end of the decade - another potential first for the private sector.

With unprecedented international attention on Vietnam's bourse, Kinh Do is often singled out for special interest as the biggest purely private-sector operation in a nation still dominated by state-linked enterprises.

Vietnam's  membership in the World Trade Organisation is further intensifying the spotlight as local manufacturers and distributors like Kinh Do face foreign competition.

'Even as we grow, we know we have to keep expanding and developing ... rasing quality and keeping our ambitions high,' said vice-general-director Le Phung Hao.

'An international listing would be part of that process, helping us to compete on the international stage ... but we still have a great deal of work to do,' Mr Hao said.

Some recent reports  suggest the firm is eyeing Singapore, but Mr Hao said Hong Kong was also an option, as was London or New York.

The firm,  trading at a market capitalisation of US$455 million across two listings, is seeking US$2 billion in assets by the time it lists  abroad.

Listing in Vietnam in December 2005, Kinh Do  has  34 per cent of its shares held by foreign investors  led by Prudential Insurance, Temasek Holdings and fund house VinaCapital, headed by Hong Kong investors Horst Geicke and Sun Wah Group president Jonathan Choi.

It has already acquired rights to the Walls ice-cream brand from Unilever and bought a controlling stake in local soft-drink maker Tribeco. It  branched out recently into the property sector and became a 'strategic partner' of the Vietnam Export-Import Bank, paying US$90 million for a 6.2 per cent stake.

Kinh Do last year claimed 30 per cent growth on turnover of US$170 million and profit of US$18 million.

Seven  plants  make a full range of processed food from potato chips to mooncakes, served by 25 bakeries, 215 distributors and 65,000 retail stores  in Vietnam. It  exports to 30 foreign markets led by Japan and the US.

Officials in Vietnam's ruling Communist Party also have a stake in Kinh Do's growth, conferring state awards on the firm. State leaders have determined that the state sector must play a 'lead role' in Vietnam's rush to join the ranks of middle-class nations by 2010, yet still hope to drive private enterprise to better mobilise domestic capital, insisting they must be allowed to compete.

Foreign economists have warned that the private sector could still struggle to find a level playing field even in non-strategic sectors, particularly in obtaining capital.

While praising the ongoing Doi Moi reform process, Mr Hao speaks of frustration over government bureaucracy. 'The bureaucracy has not always kept up with the demands of international development,' he said. 'There are still shortcomings, particularly with each locality implementing things differently.'

Many foreign analysts believe such problems will be further exposed as Vietnam adapts to WTO membership.

VinaCapital's head analyst Fiachra Mac Cana  said  greater competition under WTO could only highlight Kinh Do's competitive advantages.

Even as the firm sought to expand into property and exports, its hold and reputation on the domestic market should not be underestimated.

'The great thing about Kinh Do is its distribution network that gives it a very strong advantage, turning WTO membership into an opportunity, rather than a challenge,' Mr Mac Cana said. 'They can move an awful lot of products. For anyone entering Vietnam, replicating someone else's distribution network is extremely risky, awkward and exceptionally expensive. That makes Kinh Do very attractive to sign up with, rather than try and compete.'

Kinh Do has  struck a deal to distribute Cadbury Schweppes products in Vietnam - the kind of arrangement  Mr Mac Cana expects to grow increasingly common.

Foreign bankers and lawyers in Ho Chi Minh City not directly connected to the firm echo the sentiment, saying the firm was being watched closely.

'The Kinh Do story is impressive ... they have succeeded in the private sector with a clean and open reputation,' one veteran Hong Kong investor said. 'People like their products and they have this vast network that won't be easily matched.'

Vietnam has an emerging middle class and the government is seeking to eradicate poverty across its 84 million population within four years - good news for its core market.

Mr Hao looks at the population figures in a different way, warning of a struggle to develop qualified personnel to match the company's goals. 'Developing human resources is going to be our biggest challenge and priority,' he said.



Vietnamese sweets maker looks abroad