Category Archives: KPF News

VN industrial, logistics real estate a resilient asset class: analysts

High demand for e-commerce and pharmaceuticals makes the industrial and logistic real estate segments further develop. — Photo Courtesy JLL Vietnam HCM CITY — Demand for e-commerce and pharmaceuticals ensure that the industrial and logistics real estate segments remain the most resilient asset class in 2021, experts have said. In its latest report on the segments, property consultant Jones Lang Lasalle (JLL) said early and mid-2021 will always be remembered in history as the time when COVID-19 changed lives and businesses in Việt Nam. Most provinces and cities’ authorities imposed strict social distancing measures, fuelling the dramatic acceleration of e-commerce as consumers stuck at home flocked to online shopping portals. “Amid slowing economic activity, COVID-19 led to a surge in e-commerce and accelerated digital transformation,” Trang Bùi, head of client development, transactions Vietnam, JLL, said. “Logistics and industrial buildings, comprising warehousing and supply chain and manufacturing facilities, received increasing investments due to the rise of e-commerce and third-party logistics (3PLs) services in recent years.” According to the Việt Nam e-Commerce and Digital Economy Agency, Việt Nam is one of the fastest growing e-commerce markets in Southeast Asia due to its young and tech-savvy population and strong growth in smartphone ownership and 4G. Retail e-commerce grew at 18 per cent last year to US$11.8 billion, it said. JLL forecast logistics and industrial investment in the Asia-Pacific to almost double from 2019-2021 to $50-60 billion in 2023-25, and said Việt Nam has developed a tri-economic regional model to stimulate vertical growth. In the second quarter of this year the total area of industrial land and ready-built factories were 9,700ha and 1.9 million square metres in the north, 6,600ha and 30,500 square metres in the central region and 25,200ha and 3.2 million square metre in the south. The quarter also saw a lot mergers and acquisitions and welcomed new investors such as GNP Industrial and KCN Vietnam, signs of great market potential even during the pandemic. “The attractiveness of the logistics and industrial asset class will only intensify for investors, as many of them are starting to increase their exposure to logistics assets while they look to allocate capital to stable income-producing assets,” Trang said. However, COVID-19 has affected the supply chain and manufacturing as factories faced labour shortages due to restrictions on people’s movements. JLL said logistics connections suffered from disruption in product delivery since goods were classified into essential and non-essential. FMCG, e-commerce, pharmaceuticals, and cold storage are among the sectors that would have demand for additional warehouse space near urban areas while the auto, heavy machinery, and chemical industries are likely to look for short-term leases in suburban areas, it said. Trang said though prices of construction materials have increased by 25 per cent this year, “Demand for e-commerce and pharmaceutical services has ensured that Việt Nam’s industrial and logistics real estate sector remains the most resilient asset class in 2021.” JLL said however the logistics industry has to overcome many challenges to achieve growth goals, and it is imperative for the country to continue investing in infrastructure, like highways, utility networks and renewable energy, to enter the next phase of the industrial and logistics cycle and become more competitive among regional peers. Việt Nam also needs to significantly improve the time and costs required for cross-border trade, it added. — VNS Source:

Rising Japanese interest in major M&A activities promising big ticket deals

Japanese companies are starting to accelerate their overseas expansion, with surging value of outbound mergers and acquisitions in the second quarter. Masataka “Sam” Yoshida, head of the Cross-border Division of RECOF Corporation and CEO of RECOF Vietnam Co., Ltd., talked with VIR’s Oanh Van about the trend. How likely is it that Japanese companies will target Vietnamese businesses in the coming time? Japan’s outbound merger and acquisition (M&A) transactions bottomed out in the second and third quarters of 2020, and picked up speed in this year’s second quarter. North America contributed most transactions and saw a rise of 60 per cent on-year, but Asia also advanced with 53 transactions, up 43 per cent. Vietnam kept its second position among ASEAN countries, only after Singapore, and recorded nine transactions in the second quarter, up 80 per cent. This includes the $1.4-billion investment by SMBC Consumer Finance in FE Credit (VP Bank subsidiary) which took almost half of the total invested volume of all transactions in the region in Q2. So, we cannot deny that this deal was unique and exceptional within and that the other eight transactions were minimal by size. Japanese companies will continue to look outwards and see Vietnam as a good investment location because it has a rapidly evolving domestic consumer market and many willing sellers who are looking for capital and expertise from Japanese investors. Both Japanese and Vietnamese governments have shown ongoing commitments to creating a more investor-friendly environment in both countries. Despite the warming market sentiment in Japan, overseas travel restrictions remain the big hurdle for M&A transactions, and most of the deals have taken unexpectedly long before closing, with many of them starting before the pandemic became serious early last year. The statistics indicate that Japanese investors started to catch up with global competition in investing in high-growth markets, especially Vietnam. Because of the pandemic, it is possible that Japanese companies are not able to come back to the market in full scale, at least during this Q3. Why are Japanese investors spending more on acquiring Vietnamese assets compared with investors from other Asian territories? We have seen a noticeable string of large transactions conducted by Japanese parties in Vietnam’s banking, finance, and real estate markets. This can be explained by the continued expansion of Japanese-Vietnamese relations, along with the recent recovery in Japanese outbound M&A activities. Many factors are driving this acceleration, including Japan’s stagnating domestic economy, the low cost of capital, and the encouragement from the government for Japanese companies to divest non-core businesses and pursue returns and growth. To achieve that goal, cross-border M&A activities in emerging countries are on the rise, especially among large Japanese corporations. Generally speaking, large Japanese corporations are less interested in buying small or early-stage Vietnamese businesses. The fact that Japanese investors tend to acquire well-established and financially sound local companies has differentiated them from others who often buy out distressed or unprofitable businesses for restructuring. Seeking investment opportunities in established companies inevitably means going after bigger deals. In addition, the price is important for Japanese buyers, but it is not the sole consideration. They are more concerned about the strategic rationale of the transaction such as deal synergies, customer base, and relations with the existing trading partners. Japanese companies are also risk averse and would always want to be fully compliant with tax and other regulatory requirements in Vietnam. Therefore, they are generally willing to offer higher valuation compared to investors from other countries. What is the outlook for M&A in Vietnam in the second half of 2021? More deals that were postponed by the onset of the pandemic will make their way back to the market, creating more targets. Companies are adjusting to the “new normal”, which means more people are getting accustomed to online meetings and advanced virtual data room technology. We really wish to see the process of completing due diligence and concluding transactions comprehensively online become a real possibility. However, in light of the ongoing pandemic, we believe Vietnam’s economic outlook is not immune to risks. Several economic and financial indicators have not yet bounced back to their pre-crisis levels, including the GDP growth rate. A great deal of uncertainties remain. Along with the rising infections in Ho Chi Minh City in the absence of effective vaccines, unpredictable economic and social changes may also occur during the crisis. With all this, it could be unreasonable to expect a significant uptick in M&A activities for the rest of 2021 if the pandemic remains as troublesome as now. The market is likely to see more selection and concentration activities by investors in this time of uncertainty. However, after this phase, the need for companies to divest and restructure their balance sheet will spark opportunities. On the other hand, companies that made deals during uncertain times may outperform their industry peers. Source: