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Vinamilk, Kinh Do well-placed amid Vietnam slowdown, says fund
Vietnam Dairy Products Joint-Stock Co. and Kinh Do Joint-Stock Co. are among the companies best-placed to maintain strong earnings amid a slowdown in economic growth, a fund manager told investors.
Vietnam Dairy Products, known as Vinamilk, is the biggest food-industry company on the Ho Chi Minh Stock Exchange, and the second biggest overall on the bourse. Kinh Do is the second-biggest food company on the exchange.
Rising inflation, a wider trade deficit, and an increased risk of currency devaluation hurt Vietnamese share prices in the first half, DWS Vietnam Fund Ltd. Chairman Stephen Duerden said in a report released this week to the Irish Stock Exchange.
Tightened credit has led to slower growth in Vietnam, Deutsche Asset Management (Asia) Ltd. said in the report.
“Our strategy is to stay with domestic companies with pricing power,” Deutsche Asset Management said. “This includes Vinamilk, which is Vietnam's top dairy producer, a company that has been able to gain market share via superior branding and marketing.”
Pricing power generally refers to a company's ability to raise prices without hurting demand for its products.
Pricing power “is critical in an inflationary environment where higher raw material costs remain a threat,” Deutsche Asset Management (Asia) Managing Director Desmond Sheehy said in an e-mailed reply to questions sent by Bloomberg News.
Profit rises
Vinamilk, which posted a 30 percent rise in net profit in the first seven months of the year to VND812 billion (US$49 million), also “has improved its sales mix by launching premium products to protect margins against rising raw material costs,” Deutsche Asset Management, a unit of Deutsche Bank AG, said.
Kinh Do, whose main business is confectionery, has “strong distribution channels,” Deutsche Asset Management said.
Commodity-linked companies in Vietnam are also strongly placed, Deutsche Asset Management said.
PetroVietnam Fertilizer and Chemical Joint-Stock Co. has “benefited from rising fertilizer prices globally,” Deutsche Asset Management said. “The importance of the usage of fertilizers has increased as a result of limited agricultural land.”
Coffee growers in Vietnam, the world's second-biggest producer, have been encouraged by high prices to invest in inputs such as fertilizer, the agricultural attaché’s office at the U.S. Embassy in Hanoi said in a May report.
PetroVietnam Drilling & Well Services Joint-Stock Co. “is well-positioned to tap into the growth prospects in the oil and gas sector,” Deutsche Asset Management said.
“As Vietnam embarks on exploration of its oil fields, we anticipate growth in the company's core business.” Sheehy said, “Most oilfield projects are highly profitable.”
Vietnamese Prime Minister Nguyen Tan Dung told Vietnam Oil & Gas Group to increase the crude output target for the year to as much as 16.3 million metric tons from an earlier goal of 16 million tons, Dau Tu newspaper reported Friday.
Vietnam is Southeast Asia's third biggest oil producer after Indonesia and Malaysia.
Thanhnien
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