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FLC Faros offering attractive returns for foreign funds

Released at: 11:24, 12/04/2017

FLC Faros offering attractive returns for foreign funds

Photo: FLC Group

Bloomberg data shows increasing interest in FLC Faros Construction Company among ETFs and offshore funds.

by Ngoc Lan

Bloomberg data shows that FTSE Vietnam ETF holds some 3.12 million shares in the FLC Faros Construction Company (ROS) valued at over VND530 billion ($23.31 million), making it the fifth-largest investee company in the fund’s portfolio.

Almost all of the shares were purchased during the fund’s first quarter review in 2017, which ended on March 17, at a price of VND160,100 ($7.03) apiece, totaling VND499 billion ($21.9 million).

As a result, the investment in ROS has yielded more than $2 million in returns for FTSE Vietnam ETF, the second-largest exchange-traded fund (ETF) by net asset value (NAV) on Vietnam’s stock market.

Strong Buying from Foreign Players

It’s worth noting that FTSE Vietnam ETF saw poor performance during 2016, when its NAV per fund certificate ended the year at $22.28, down 2.4 per cent from a year earlier. The fund, however, has turned things around, with its NAV increasing 10.07 per cent since the start of this year, reaching $24.62 on April 10.

With the inclusion of ROS since the second quarter, the fund’s NAV is expected to perform well and this will be one of its best investments.

Before FTSE Vietnam ETF, MSCI Frontier Markets Index ETF - a wider-reaching fund that covers global frontier markets with total assets worth $589 million - announced the addition of ROS to its portfolio from February 10.

Based on the last trading day on February 28, the fund is calculated to have purchased a large amount of ROS shares at a price of VND148,000 ($6.7) each, translating into a return rate of 14.8 per cent for the fund to date.

Besides these two ETFs, a number of offshore funds were also early birds in investing in ROS. Foreign players bought ROS shares as soon as it debuted on the Ho Chi Minh Stock Exchange with low market prices, according to exchange data.

Together with Vietjet Air (VJC), Novaland (NVL), Mobile World (MWG), and Airports Corporation of Vietnam (ACV), ROS has become one of the cash cows for foreign funds since 2016.

Notably, foreign-run funds acquired shares in VJC, MWG, and NVL before their listings at prices that were two-thirds or one-fifth of the present market price. Meanwhile, the appetite for ROS became strong after its share debut and purchasing demand emerged in early 2017, with prices having already risen sharply.

Outlook for ROS

Market perspectives remain unclear as the shareholders’ meeting season comes to an end and short-term supportive news is thin on the ground. On such a backdrop, ROS is among the highlights, as its remains appealing to foreign traders, evidenced by stable trading volumes and uptrend.

Positive factors lie behind this bright outlook.

FLC Faros has announced that it has established subsidiaries in a bid to expand its involvement in real estate items in the golf-resort-villa complex at the Nhon Hoi Economic Zone in south-central Binh Dinh province. It has also purchased a stake and become the investor of an expansion to an eco-tourism compound in northern Vinh Phuc province.

The company is also proceeding with a whopping golf-resort-villa-entertainment project on an area of 1,900 ha in central Quang Binh province with total investment of VND13.8 trillion ($606 million). It has also acquired a golf operator to improve capital usage.

FLC Faros and FLC Group last month received in principle approval to invest in a high-end entertainment complex at the Van Don Special Economic Zone in northern Quang Ninh province, with an estimated investment of $2 billion. According to the preliminary plan, the project includes a wide range of properties, such as a resort complex, a five-star hotel, an international convention center, a casino, a golf course, a safari park, a museum, a farm community, and a library.

Meanwhile, Market Vectors Vietnam ETF (VNM ETF), run by Van Eck Global, will reshuffle its holdings in May as part of its second quarter review. It has $294 million worth of assets under management, making it the largest ETF on Vietnam’s stock market.

Based on previous reviews, it is highly likely that a ticker that has been included into FTSE ETF will be added to VNM ETF’s portfolio. The most notable difference is that the candidate ticker needs to have at least six months of being listed before the review. This may have been the reason ROS was not included in the fund’s portfolio in its latest review.

Already meeting requirements for listing time, liquidity, and float ratio, ROS is likely to be added to VNM ETF’s portfolio when the ETF is poised to collect data as at May 26 and announce the new portfolio on June 2. According to calculations, ROS could account for 5-8 per cent of the ETF’s holdings, equivalent to $15-$24 million.

The requirement on listing time has been the greatest obstacle in ROS becoming eligible for inclusion into the VN30-Index, which represents the 30 largest tickers on the Ho Chi Minh Stock Exchange. Consequently, it has not been included into funds that track the index, including South Korea’s KINDEX Vietnam VN30 ETF, whose NAV stands over VND300 billion ($13.2 million).

With its listing time exceeding six months, ROS is now entitled to join the VN30-Index given its liquidity and market capitalization. Under relevant legislation, the VN30-Index is reviewed every six months and the next review will take place in July.

With major shareholders holding nearly 80 per cent and the probability of being bought by foreign funds, ROS will likely experience an uptrend in the time to come.

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