BEVERAGE
Saturday, 8th March 2008
COMPANY FOCUS – INITIAL COVERAGE
HANOI BEER - ALCHOHOL AND BEVERAGE CORPORATION
(HABECO)





Strong brand name and ability to diversify range of products: HABECO utilizes
the preeminent of strategy focus on lower and middle class consumers by producing
both draught beer and canned, bottled of mainstream beer. HABECO is the leading
player in the Northern beer market, besides, it owns Vodka Hanoi brand which is
one of the most Vietnamese favorite alcohol. The diverse range of products enables
HABECO to benefit from different special consumption tax rates for each product
(currently draught beer is taxed lower due to the protective duties for local products).
Thus, increases flexibility when there is change in tax scheme and reduce seasonal
impact of beer and alcohol of the Northern market.
Robust distribution channel, however the price policy is not optimal:
Wholesale distribution via multi-level agency network reinforces the brand
awareness with consumers; however, there is no fixed maximum price causing large
volatility during holiday season.
Opportunity from the underpenetrated market; HABECO’s aggressive capacity
expansion; Carlsberg has jumped on the bandwagon: Climate, demographic
factors, Vietnamese rising income low beer consumption per capita are drivers of
beer market growth. In the trend of breweries expand their capacity to meet
significant demand, HABECO has deployed its plan to invest in new breweries to
aggressively increase its output, the typical project is Vinh Phuc Brewery (200 mil
liters). Strategic cooperation with Carlsberg (Carlsberg takes 10% of HABECO) will
enhance HABECO’s ability to manage and compete.
Difficulty in quality management, in volatility of raw material price; the change
in tax rates and pressure of competition after entering WTO: Using different
water sources making it difficult to maintain uniform quality. HABECO has not yet
found any solution to minimize the impact of the volatility of raw material price, thus,
increase the pressure to raise price and therefore face the sensitivity of consumers
towards mainstream beer price change. The change of tax rates and the
commitment to eliminate protective duties for local beer will invite large foreign
breweries into the market, which will bring about fierce competition.
Net profit shows positive sign however, ROE&ROA are under industry average
as a result of capital increase and dilution of owners’ equity during
equitization which reduces shareholders’ benefit. Yet HABECO’s EPS is higher
than forecasted figure for Saigon Beer Alcohol-Beverage Corporation (SABECO) VND997 per share and shares are offer at a lower starting price. We believe that
HABECO’s offering price is more “reasonable” than SABECO’s but still overvalued
according to our valuation.
FY ended Dec 31
2006A
2007E
2008F
2009F
2010F
Growth (%)
979,747
35%
1,257,156
28%
1,576,305
25%
2,078,349
32%
2,530,215
22%
Net profit (VNDm)
Sales (VNDm)
309,593
307,062
311,092
339,070
400,053
Dividend yield
NA
1%
1%
1%
1%
EPS (VND)
NA
1,325
1,342
1,463
VND/Share
50,000
8.30 am 10 Mar 2008
3 pm
20 Mar 2008
8.30 am 27 Mar 2008
Valuation
Discounted Cash Flow
24,600 VND/Share
(FCFF)
P/E multiples
23,200 – 51,700 VND/Share
Shareholder structure after bidding
No. of
Share holders
Ratio
shares
The government
74.44%
172,559,600
10.00%
23,180,000
15.00%
100.00%
34,770,000
231,800,000
ROE (%)
ROA (%)
Net debt/equity (%)
Net interest cover (x)
16%
14%
1%
NA
12%
11%
1%
65.12
11%
9%
0%
7.26
9%
7%
17%
5.81
11%
9%
19%
6.72
A: Actual; E: Estimate; F: Forecast
FPT Securities – Analysis Department
Quynv@fpts.com.vn
2,318
231
10,000
34,770,000
Others
Total
14.27
1.57
16%
Nguyen Van Quy
Bidding time
VND Bil
Mil
VND/Share
Shares
Strategic shareholder
16.84
1.56
16%
Tulnc@fpts.com.vn
IPO Snapshot
Chartered Capital
No. of shares
Par value
No. of shares
offered
Initial offering
price
Deposit time
1,726
18.35
1.95
20%
Le Nu Cam Tu
HANOI SECURITIES TRADING CENTER
Address
2 Phan Chu Trinh Rd,
Hoan Kiem Dist , Ha Noi
Tel
(84-4) 9360 750 – 9347 818
Fax
(84-4) 9347 818
Website
www.hastc.org.vn
1,290,400
18.59
2.17
24%
Nguyetnm@fpts.com.vn
Bidder
0.56%
NA
NA
32%
Nguyen Mai Nguyet
TAN VIET SECURITIES Joint Stock Company
Address
5th Floor, HANESC Building
152 Thuy Khe Rd, Tay Ho
Dist, Ha Noi
Tel
(84-4) 7280 921
Fax
(84-4) 7280 920
Website
www.tvsi.com.vn
Employees
P/E (x)
P/Book value (x)
Net margin (%)
Source: FPTS, SBV, HABECO,
Consulting Company
Tel: 084 (04) 7737 070 ext 4301
Key risks: risk causes by fluctuation of raw material
price and exchange rates due to its dependent on
import, by the level of competition and the economy
situation, and the risk causes by unconsolidated
financial report
Analysts covering this company do not own its stock or
those of its closest competitors.
Refer to other important disclosures at the end of this
report.
Information used in the report can be found on FPTS’ EZSEARCH: HTTPS://EZSEARCH.FPTS.COM.VN
Copyright © FPTS. Redistribution or reproduction is prohibited without written permission.
P a g e |1
8th March 2008
HANOI BEER –ALCOHOL AND BEVERAGE CORPORATION
(HABECO)
Balance sheet (VNDm)
2005A
2006A
2007E
2008F
2009F
2010F
Cash and cash equivalent
237,647
399,562
423,771
391,202
459,745
467,340
Short-term investment
329,578
204,668
150,368
150,368
150,368
150,368
Account receivables
129,843
343,334
321,607
390,663
500,088
594,032
81,330
84,375
138,156
181,413
249,983
308,713
5,034
2,445
3,739
3,739
3,739
3,739
307,699
296,899
476,943
1,880,852
2,425,810
2,367,108
-
Inventories
Other current assets
Tangible fixed assets
Intangible fixed assets
Construction in progress
General Information
Establishment:
Long-term investments
Other non-current assets
471
4,529
296
148
1
26,022
39,040
-
-
-
-
545,518
771,965
1,223,799
519,019
700,187
575,583
-
19,605
131,019
131,019
131,019
131,019
15 Aug 1958
Head office: 183 Hoang
Hoa Tham, Ba Dinh,
TOTAL ASSETS
1,663,985
2,167,266
2,870,540
3,649,267
4,621,783
4,598,745
Ha Noi
Current liabilities
105,740
181,572
223,974
206,761
242,988
247,002
Tel:
Non-current liabilities
12,140
12,377
12,614
507,851
712,388
712,625
1,539,184
1,958,774
2,627,593
2,928,295
3,660,048
3,632,758
6,922
14,543
6,360
6,360
6,360
6,360
1,663,985
2,167,266
2,870,540
3,649,267
4,621,783
4,598,745
(84-4) 8453 843
Fax: (84-4) 7223 784
Owner's equity
Website:
www.habeco.com.vn
Reserves
Email: habeco@vnn.vn
TOTAL RESOURCES
Business lines
Profit & Loss (VNDm)
2005A
2006A
2007E
2008F
2009F
2010F
 Beer, alcoholic drinks,
soft drinks, alcohol,
package ;
Net sales
723,065
979,747
1,257,156
1,576,305
2,078,349
2,530,215
Cost of sales
394,127
592,734
798,278
1,048,222
1,444,426
1,783,769
Gross profit
328,938
387,013
458,878
528,082
633,923
746,446
Financial incomes
63,395
126,729
110,000
123,200
138,000
154,500
Financial expenses
4,410
12,687
6,651
66,278
94,303
93,437
Selling expenses
89,693
95,112
122,042
153,025
201,762
245,629
G&A expenses
36,017
44,359
56,919
71,369
94,099
114,558
262,213
361,584
383,265
360,610
381,759
447,322
17,483
43,660
43,209
54,179
71,434
86,965
279,696
405,244
426,475
414,789
453,193
534,287
37,784
95,651
119,413
103,697
114,123
134,234
241,912
309,593
307,062
311,092
339,070
400,053
 Export, import beer,
alcoholic drinks, soft
drinks
 Investing, consulting
services, raising
investment fund
 Researching, training,
technology transferring
 Hotel, tourist, fair
organizing business
Net operating profit
Other incomes
Profit before tax
Current corporate tax
Strategic plan
 Maintain high and
stable growth from 20 –
25%/year, dividend
payout ratio at
minimum 11%
Profit after tax
Financial Ratios
2005A
2006A
2007E
2008F
2009F
2010F
Gross profit growth (%)
NA
18%
19%
15%
20%
18%
Net profit growth (%)
NA
28%
-1%
1%
9%
18%
 Expand and diverse
business lines, invest in
office for rent, hotel,
restaurant, financial
investment
Owner's equity growth (%)
NA
28%
33%
11%
25%
-1%
Total Assets growth (%)
NA
30%
32%
27%
27%
0%
Gross profit margin (%)
45%
45%
40%
37%
34%
31%
ROA (%)
15%
14%
11%
9%
7%
9%
 Contribute capital for
new subsidiaries and
associates
ROE (%)
16%
16%
12%
11%
9%
11%
Basic EPS (VND)
NA
NA
1,325
1,342
1,463
1,726
Price / Book (x)
NA
NA
2.2
1.9
1.6
1.6
Price / Turnover (x)
NA
NA
4.5
3.6
2.7
2.3
Dividend Payout ratio (%)
NA
NA
11%
12%
13%
14%
LT debt / equity (x)
0.01
0.01
0.00
0.17
0.19
0.20
Total asset / equity (x)
1.08
1.10
1.09
1.24
1.26
1.26
Current ratio (x)
7.41
5.70
4.63
5.40
5.61
6.17
Asset turnover (x)
0.43
0.45
0.44
0.43
0.45
0.55
CA turnover (x)
0.92
0.95
1.21
1.41
1.52
1.66
A: Actual; E: Estimate; F: Forecast
Source: FPTS, State Bank of Vietnam, Habeco
Copyright © FPTS. Redistribution or reproduction is prohibited without written permission.
P a g e |2
8th March 2008
HANOI BEER –ALCOHOL
ALCOHOL AND BEVERAGE CORPORATION
(HABECO)
BUSINESS OPERATION
Strong brand name in the Northern market, benefit from diverse range of products and segments
Long-standing brand
name
 Truc Bach Beer, Hong Ha Beer, Ha Noi Beer, Huu Nghi Beer are brand
brandnames that have
existed in the Vietnamese market since 1958, especially in the Northern market. In 2007,
the total beer consumption volume of HABECO is estimated to be 184 mil liters, accounted
for 10% of the total consumption volume of the market.
Produce beer for
both two largest
segments
 Different from its direct competitor SABECO, HABECO produces draught beer and
mainstream beer which helps creating a familiar brand name for both lower and middle
classes. This strategy will enable HABECO to utilize a better margin from draught beer
(low production cost, special consumption tax rate currently at 40% compare to canne
canned,
bottled beer at 75%) until it shares the same tax rate with other products (expected to take
effect in 2009 in accordance
accordan with the WTO commitments), consumers thus may switch to
higher class beer and HABECO may then concentrates
concentrate on other existing produc
products.
12%
Segmentation by
volume
43%
45%
Draught
Mainstream
Premium
Segmentation by
price
20% 30%
Segmentation beer
price
Draught
VND 10,000
/liter
Mainstream
VND 17000 –
19,000/liter
Premium
VND 23,000 –
36,000/liter
50%
Draught
Mainstream
Premium
Leading brewery in
the Northern market
Unique underground
water is the main
factor for special
taste of draught beer
 Production capacity of draught beer is low. In 2007 it is estimated to be nearly 40 million
liters. In peak season,, Ha Noi draught beer is consumed over half a million liter a day, and
the product is also distributed to other Northern provinces. Scarcity of supply causes
sellers mixing
ing Ha Noi draught beer with other nameless beer
beers but still hard to meet
demand. Thanks to its reasonable price, and the favorite of draught beer among lower
class drinker enhances strength of Hanoi Beer’s brandname and hence, brings large profit
to the firm during hot season.
HABECO penetrates
the alcoholic drinks
via its subsidiaries’
products
 Hanoi Liquor Company (HALICO) one of HABECO’s subsidiaries produces Vodka Ha Noi
currently with high quality, suitable taste and reasonable price in the market. The alcoholic
drinks output is estimated to be 11 million liters in 2007. Its
Its price is VND 19,000/ 330ml
bottle, VND 39,000/ 700 ml bottle. Vodka Hanoi is well sold in the cold season whilst beer
in the hot season. HABECO in the North unlike SABECO in the South does not has hot
season all the year, however alcoholic
alcoholic drinks have help reducing seasonal impact on the
firm.
Robust distribution channel, however the price policy is not optimal
Wide and strong
distribution network
especially
in
Northern provinces
 Dense distribution
istribution network is concentrated in Hanoi city and surrounding provinces gives
HABECO competitive advantage.
 Similar to many other firms in the consumer goods industry, HABECO’ s sells products via
multi-level
level agency
agency distribution network, through main distributors, supermarket, retail
stores, restaurants before reaching end users. This approach brings HABECO’s products
to many places around Vietnam and helps it becoming popular.
 HABECO has not yet penetrated in the
he Southern market, from Quang Binh onward. It has
2 subsidiaries in this area namely Hanoi – Quang Binh Beer Joint Stock Company and
Hanoi - Vung
ng Tau Beer Joint Stock Company who help reducing tra
transportation cost from
the North to the South.
Copyright © FPTS. Redistribution or reproduction is prohibited without written permission.
P a g e |3
8th March 2008
HANOI BEER –ALCOHOL
ALCOHOL AND BEVERAGE CORPORATION
(HABECO)
First level agents 
are only obligated to
distribute products
at
the
price
purchase
directly
from HABECO at
minimum
Under HABECO’s
HABECO’ price policy, the first level agents are obligated to sell its products not
lower than the regulated price but maximum price is not specified
specified. As the result, its agents,
distributors; retail stores automatically set selling price making itits price fluctuate during
holiday seasons and badly affects end users.
Favorable market condition; implicit market exploitable opportunities; co-op
co peration with Carlsberg
Favorable market
condition; implicit
market exploitable
opportunities
GPD per capita
GDP growth
Vietnam
5.8
demographic
%
9.0%
8.4%8.2%8.5%
7.7%
7.1%7.3%
$960
$706$723
$624
$482$528
$434
26.3
%
67.9
%
02 03 04 05 06 07 08*
02 03 04 05 06 07* 08*
Age 0 - 24
Age 25 - 64
Age above 65
 The hot and humid tropical
t
climate and largest percentage of beverage consumers
(accounting for 68% of the population)) are the very favorable factors accelerating the
increasing demand for its as well as growth of this industry.
 Vietnam income per capita increases over the years and helps gradually changing
consumers habit,
habit strengthening “Westernization” trend and forming beer drinking habit.
 Vietnam beer consumption per capita is low compared to other countr
countries in the region and
worldwide while beer accounts for 89% of total value and 97% of total volume of alcoholic
drinks and its supply is still in shortage. Currently, only 5 out of 400 breweries have
capacity of over 100 million liters annually.
Vietnam annual beer production
3500
Annual consumption per capita
(liter/head/year)
157
866
2002
Follow the main
trend, HABECO has
invested to expand
capacity
1013
2003
1400
2004
1500
2005
1700
116 110 99
82
48 39
15
2006 2010*
 For the period from 2007 to 2010, HABECO’s investment is estimated to be VND 500
billion per year,
year particularly, in 2008 VND 2,000 billion is invested for the construction of its
largest brewery in Vinh Phuc province with annual capacity of 200 million liters. Thanks to
its investment in several subsidiaries’ and associates’ breweries with capacity of 25 – 50
million
n liters annually from the North to the South,
South, HABECO can utilize merging and
accquisition of low-capicity
low
breweries to save cost and time for product launching.
Copyright © FPTS. Redistribution or reproduction is prohibited without written permission.
P a g e |4
8th March 2008
HANOI BEER –ALCOHOL AND BEVERAGE CORPORATION
(HABECO)
HABECO is
concentrating on
finding solutions to
broaden its market
 HABECO aims at taking up 70% of market share in the North and Northern Central for
Hanoi Beer, maintaining annual growth rate of mother company from 20 – 25%, having 23
subsidiaries, associates cover different business area by 2010. HABECO’s strategy is to
reinforce its position, gain market share, and penetrate into Southern market.
 HABECO’s products is exported to some countries such as the UK, America, Japan and
Korea, its exported volume is not significant although it favorable conditions for
strengthening export in the future.
Vietnam beer
market is
underpenetrated,
thus becomes an
attractive investment
channel for foreign
investors
 Because of favorable tax rate, existing market share of local breweries and the law forbids
100% foreign ownership breweries, foreign beverage manufacturers penetrates local
market under the form of joint ventures and associates with local firms. Currently, local
breweries especially HABECO and SABECO are dominant in the market owing to the fact
that their beverage is suitable with Vietnamese tast. That is the very reason Carlberg does
not miss the chance to be come HABECO’s strategic partnership. The chance is
considered a mutual benefit as Carsberg is able to utilize HABECO’s existing distribution
network while HABECO can utilize its advanced technology, quality management
experiences from the world’s leading beer producer.
Using different water sources making it difficult to maintain unified quality
Difficulty caused by
using different water
sources in different
breweries
 This makes negative effect to the uniformity in quality of products, therefore causes
significant impact to its brandname since its reputation has been built on the unique good
taste which comes from the underground water source HABECO possesses. The cooporation with Carlsberg may help HABECO find a solution to reduce the effect of different
water sources on beer taste.
Volatility of raw material price, sensitivity to price of mainstream beer consumers and the effect of
special consumption tax
Difficulty in
effectively
controlling cost of
goods sold
 Because raw materials are mainly imported and its price has been increased continuously,
HABECO faces difficulty in controlling effectively cost of goods sold. Recently, HABECO
has increased the price of Hanoi Beer but there is not yet any signs that the main
competitor SABECO would do the same. Still, the price is much lower than Heineken and
Tiger Beer but HABECO still faces the fact that their consumers are more sensitive to
price change than premium beer consumers, thus it will have impact on sales.
Pricing by brands
Hanoi Beer 24 cans package
VND 155,000
Saigon Beer 24 cans package
VND 140,000
Tiger Beer 24 cans package
VND 185,000
Heineken Beer 24 cans package
VND 285,000
Pressure from
special consumption
tax
 Draught beer will share the same special consumption tax rate with other types (expected
to take effect in 2009 in accordance with the WTO commitments). This will increase the
pressure on the firm since revenue, profit from this product will decline since consumers
will switch to other cheaper products. If restructuring measures for production range is not
carried out timely, business operation shall be affected.
WTO invites competition
Facing fierce
competition when
the government
abolishes protective
policy
 Commitment to apply one special consumption tax rate on beer products including draught beer,
canned, bottled beer and reduce import tax on beer from 65% to 35% within 3 years will bring about
market risk due to competition from global large brands who will quickly dominate premium segment
using massive marketing campaigns, worldwide reputation and make it difficult for HABECO to
penetrate into this segment and enlarge market share. However, these global large brandnames
might meet obstacles on the race to penetrate in the mainstream segment since the Vietnamese are
familiar with local beer taste and the price is more cheaper and acceptable.
Copyright © FPTS. Redistribution or reproduction is prohibited without written permission.
P a g e |5
8th March 2008
HANOI BEER –ALCOHOL AND BEVERAGE CORPORATION
(HABECO)
FINANCIAL FORECAST MODEL
Lacking details of the consolidated financial report is the main limitation
In HABECO’s information disclosure, there is no consolidated financial report, the past years figures and forecasted
figures represents only the outcome of the mother company’s business operation. We could not access to essential
information to be able to foresee corporation’s business achievements, therefore in this report we solely include our
forecasted figures for the mother company.
We do not account for incomes from financial investment, office renting, hotel and restaurant business in our forecast
since we do not know the details on such activities. Moreover, the activities are not within HABECO’ regular business
operation hence we doubt their stability and recurrence.
Revenue grows at 27.7% annually
We use the forecasted revenue from HABECO’s information disclosure from 2007 to 2010. The revenue grows at
27.7% CARG, we believe that this figure is quite reasonable since HABECO has planned to expand its capacity, its
largest project of Vinh Phuc Brewery which gives 200 liters/year (to be completed by the end 2009) and the market
demand for beer is increasing whilst breweries’s capacity are not high enough to meet actual demand, and in the past,
HABECO’s revenue was grown at the same pace.
Beer production annually grows at 15% CARG from 2002 to 2007, we believe this figure will increase in the next few
years due to the under penetration of the market. HABECO is the leading firm, dominates Northern market hence is
expected to grow at the speed higher than the industry average.
Besides, the upward trend of raw material price keeps continuing will force HABECO to consider raising the selling price
after equitization (similar to SABECO’s strategy) which will lead revenue to grow faster in the future years as in the past.
Moreover, we believe that HABECO’s existing brand name and its cooperation with Carlsberg provides the firm with
high chance to pursue the target to get Hanoi Beer its 70% market share in the North and North Central, and widen
market to the South right after new breweries are up and running. The strategy to focus on the lower and middle class
consumers still upholds the preeminence.
However, in HABECO’s information disclosure, it mentioned that after equitization, the mother company aims to
maintain high and stable growth from 20- 25% annually, thus the 27.7% growth even though only for a period of 4 years
is higher than proposed plan.
Gross margin tends to decelerate
Total expenses from HABECO’s forecast is increasing over the years, can be explained by the continuous raising price
of main raw material such as malt and houblon 20 – 30% each year leading to difficulty in controlling cost of goods sold.
In 2007, gross profit margin is 40% at the same level with SABECO and is considerably higher than comparables in the
industry.
Total expenses over revenue increases by 3% each year, 2010 particularly it increases at a slower pace of 1%.
Assuming that the main component of total expense is cost of goods sold and sales reduction is insignificant then the
indicator of cost of goods sold over net sales is similar to total expenses over revenue thus increases 3% each year and
1% in 2010.
Effective management of selling expenses and G&A expenses
Selling expenses and/or G&A expenses over net revenue in 2005, 2006 decelerated shows that HABECO has taken
actions to reduce selling and G&A expenses. The ratio is much lower than comparables in the industry indicating that
HABECO has not been spending much on sales and marketing activities. Assuming that the actions HABECO taken to
reduce expenses will be in effect still and selling expenses over net revenue and G&A expenses over net revenue will be
maintained at 9.7% and 4.5% respectively for the next few years.
Copyright © FPTS. Redistribution or reproduction is prohibited without written permission.
P a g e |6
8th March 2008
HANOI BEER –ALCOHOL AND BEVERAGE CORPORATION
(HABECO)
Carlsberg
Modest utilization of owners’ equity
 Return on equity (ROE) is forecasted to maintain
Ratios
Sabeco
Malaysia
Tsingtao
44,889,683
6,202,614
95,426,350
P/E (x), LTM
at 11% annually on average from 2007 to 2010,
lower than 2005, 2006 due to the large increase
in equity in 2007 after equitization.
Market cap (VND mil)
n/a
20.9
62.5
P/B (x), LFI
n/a
1.5
4.3
 Similar to SABECO, after equitization HABECO’s
EV/ EBITDA, LFI/LTM
n/a
11.6
n/a
ROE (%), LFI
10%
24%
24%
ROA (%), LFI
7%
20%
13%
Net profit margin (%)
8%
11%
8%
0.01
-
0.02
Gross profit margin (%)
41%
32%
34%
SG&A as % sales
11%
18%
25%
Effective tax rate (%)
Working capital cycles
28%
28%
25%
Trade A/R days
17
206
9
Stock days
20
83
253
Trade A/P days
35
142
134
chartered capital has tripled from VND 748 billion
to VND2,318 billion, carried out by:
i. Transfer all reserves, funds balance and
retained earnings to chartered capital
ii. Record revaluation of tangible fixed assets
(VND 195 bil), long-term financial investment
(VND 37 bil) and “goodwill” (VND 127 bil).
Owners’ equity is thus 17% diluted by
recording “goodwill” in total assets which
effect negatively shareholders’ benefit.
 HABECO’s ROE is similar to that of SABECO,
but just equals half of Carlsberg Malaysia’s or
Tsingtao finance.
Long-term debt/ Equity (x), LFI
Operating ratio analysis
Source: FPTS, Reuters
(*) LTM: latest 12 month firgures LFI: latest 9 month firgures
Debt used for funding business operation and investment is assumed to be more effective than
comparables
We rely on the increase in working capital each year and assume that the company uses short-term borrowing to fund
demand for working capital. According to information released, HABECO plans to borrow 30% of the total investment in
the largest project Vinh Phuc Brewery therefore we assume that long-term borrowing is equal to 30% of the investments
in the 2 stages of the project.
By 2007, long-term borrowing over equity is nearly nil, from 2008 to 2010 it is assumed at about 0.2 times, HABECO
seem to have the most effective use of this instrument among all 3 comparables.
Investment cost reaches record high in 2008, 2009
Besides the investment plan that the company states in the information disclosure including its VND 150 billion
investment in warehouse, branch and marketing activities and VND 100 billion in some of the mother company’s
projects, annually we assume fixed assets will incur similar to that in 2006. In VND 150 billion investment mentioned
above, we assume VND 50 billion is spent on marketing and is not record in capital expenditure, the rest of the
investment goes to buildings and equipments account of the mother company and its branch, the buildings depreciate
over 25 years, equipments depreciate over 8 years and their costs are recorded in capital expenditure account.
For Vinh Phuc Brewery project, the total investment of each stage is record in costs of buildings and equipments and we
apply the same assumptions above to calculate depreciation. The project was carried out since end of 2007; the first
stage will be completed in 2008 and second stage in end of 2009, making cash flows of those years negative.
Copyright © FPTS. Redistribution or reproduction is prohibited without written permission.
P a g e |7
8th March 2008
HANOI BEER –ALCOHOL AND BEVERAGE CORPORATION
(HABECO)
VALUATION
Discounted Free Cash Flow to the Firm
 Applying discounted cash flow to the firm (FCFF)
model 3 stages, relying on the unconsolidated
financial figures we calculate the basic value of
VND 24,600/share for HABECO which implies
P/E of 18.6x. Taking into account the
consolidation factor of the report, HABECO is
estimated at VND 36,300/share which implies P/E
of 27.4x.
 We use Vietnamese risk free rate of 9.42%, and
the market risk premium to be 7%-8.63%,
 WACC is calculated to be 14.6%-16.6% and beta
in used is the average beta of comparables in the
industry, inflation and other components are
IMF’s forecast.
Result
Enterprise
value
Owners’
equity
Share price
6,322,077
3,876,929
5,896,640
6,134,894
3,689,746
5,709,457
26,466
15,918
24,631
Highest
Lowest
Most likely –
Low end
24,631
Target price
Sensitivity analysis
Permanent growth
WACC
14.6%
16.6%
6.5%
22,980
15,918
7.0%
24,631
16,948
7.5%
26,466
18,064
P/E multiples (using both P/E transaction and P/E trading)
 Applying P/E multiples method to value HABECO
share price, we have chosen P/E transaction and
P/E trading as follow:
 Price/ Earnings per share (P/E)
 Price/ Profit before tax, interest, depreciation and
amortization (P/EBITDA)
 Revenue, book value, profit after tax and profit
before tax, depreciation and interest forecasted
in 2007.
 Comparing results show that a HABECO share
price is expected to be from VND 23,200 –
51,700 per share.
P/E transaction
2007
2008
2009
2010
Price (use PE average)
Price (use PE median)
PE TRADING
44,468
35,223
2007
45,052
35,686
2008
37,941
30,053
2009
44,764
35,458
2010
Price (use PE average)
Price (use PE median)
P/EBITDA
51,743
38,034
2007
52,422
38,533
2008
44,147
32,451
2009
52,088
38,287
2010
Price (use P/EBITDA
median)
Price (use P/EBITDA
average)
18,698
31,401
29,518
29,599
23,189
38,942
36,607
36,708
 Comparables chosen in our P/E trading multiples valuation are
those whose main business is beer production or local firms who
partly involve in the beer, alcoholic and soft drinks production.
 Comparables chosen in our P/E transaction multiples valuation
are firms being traded worldwide and in the area whose main
business is beer, alcoholic drinks and soft drinks production.
Copyright © FPTS. Redistribution or reproduction is prohibited without written permission.
P a g e |8
8th March 2008
HANOI BEER –ALCOHOL AND BEVERAGE CORPORATION
(HABECO)
Trading P/E of comparables
Ratios
Target Company
Date
Currency
Market cap
Enterprise value
EBITDA
(VND ‘000)
(local currency
‘000)
(local currency
‘000)
P/EBITDA
P/E
P/BV
P/S
LAN HUANGHE
02/2008
CNY
4,451,910,876
2,298,817
142,273
14.2
245.9
5.3
2.6
Carlsberg Brewery
Malaysia Bhd
02/2008
MYR
6,202,613,828
1,055,736
125,610
10.0
14.5
2.7
1.3
Fujian Yanjing
Huiquan Brewery Co
Ltd
02/2008
CNY
5,830,879,500
2,618,320
145,720
18.1
74.2
2.5
3.1
San Miguel Corp
02/2008
PHP
1,545,362,450
4,069,683
31,673,000
0.1
15.0
1.2
0.4
Foster's Group Ltd
02/2008
AUD
152,087,129,280
12,842,300
1,364,300
7.5
14.2
2.3
2.3
Shaw Wallace & Co
Ltd
02/2008
IDR
29,725,199
15,474,610
998,500
17.0
94.6
13.6
6.9
Vinamilk
02/2008
VND
21,208,880,000
21,623,377,000
860,157,000
24.7
21.4
7.8
3.2
Tsingtao Brew
02/2008
CNY
95,426,350,020
42,837,020
1,539,377
28.0
60.2
8.2
1.8
Loulan Holdings Ltd
02/2008
HKD
137,904,000
110,900
3,640,000
0.0
NA
NA
5.0
Muhack Alcohol Co
Ltd
02/2008
KRD
695,954,560
55,508,860
5,313,500
7.8
33.1
1.2
1.1
Dromana Estate Ltd
02/2008
AUD
26,410,925
4,684
NA
NA
NA
1.0
0.8
Empee Distilleries Ltd
02/2008
IDR
5,979,918
4,039,510
376,200
9.1
24.3
4.6
0.5
Average
12.4
39.1
4.6
2.4
Median
10.0
28.7
2.7
2.1
Source: Financial ratios are collected from Reuters at 31/12/2007. Market ratios are collected at 28/2/2008 and 25/2/2008; See Appendix 3
Transaction P/E of comparables
Complet
Target Company
Bidder Company
Date
Deal
value
Enterprise
value
Revenue
( USDm)
( USDm)
( USDm)
P/S
P/EBITDA
P/E
31-Oct-07
San Miguel Corporation
(11% stake)
San Miguel Corporation
Retirement Fund
616
5,717.4
5,079.80
1.13
8.66
26.59
13-Aug-07
WantWant Holdings Ltd
(26.6% stake)
Want Want International Ltd
806
3,090.74
867.93
3.56
31.45
42.49
11-Jan-07
Fraser & Neave Limited
(F&N) (14.9% stake)
Seletar Investments Pte
Limited
585
5,806.82
2,389.40
2.43
12.66
18.11
31-Dec-05
Del Monte Pacific Limited
NutriAsia Pacific Limited
418
419,38
199.58
2.10
10.25
14.80
Del Monte Pacific Limited
First Pacific Company
Limited
416
416.00
199.58
2.08
10.17
14.63
8-Jun-05
National Foods Ltd
San Miguel Corporation
1,480
1,516.85
1,099.53
1.38
11.09
0.00
6-Jun-05
Southcorp Wines Pty
Limited
Beringer Blass Wine Estates
Pty Limited (BBWE)
2,814
2,813.89
809.81
3.47
31.27
76.21
COFCO Greatwall Winery
(Yantai) Co.. Ltd (40%
stake)
COFCO (BVI) No 31 Ltd
39
96.49
30.56
3.16
23.46
33.08
Southcorp Wines Pty
Limited
Beringer Blass Wine Estates
Pty Limited (BBWE)
2,814
2,813.89
809.81
3.47
31.27
76.21
2.53
18.92
33.57
2.43
12.66
26.59
6-Jun-05
Average
Median
Source:
mergermarket.com; See Appendix 4
Copyright © FPTS. Redistribution or reproduction is prohibited without written permission.
P a g e |9
8th March 2008
HANOI BEER –ALCOHOL AND BEVERAGE CORPORATION
(HABECO)
Risks



Economic risk: HABECO’s products are consumer goods depending heavily on consumers’ income and the
speed of change in consumers’ habit. The consumption of these products is robust when consumers’ demand for
luxury goods increases and much less than neccesity goods when the economy is in regression.
Exchange rates risk and raw material price volatile risk: since the business operation in the industry relies
mainly on import raw material thus when exchange rates vary, or price of raw material fluctuates implies significant
increase in HABECO’s cost of goods sold.
Market risk: Vietnamese WTO entry in 2007 has put pressure to local breweries from the fierce competition from
foreign producers, especially when the government abolish the protective duties making this pressure to be
stronger.
IMPORTANT NOTICES



On 19th November 2007 at Hanoi, the signing ceremony was carried out for EPC contract, second phase of the
HABECO Vinh Phuc Brewery project, between HABECO and its associates Krones – Haskoning – Lilama. This
project raises the capacity of the brewery to 200 million liters/year. The brewery is said to possess a modern and
fastest production line in Vietnam with capacity of 60,000 beer bottles/hour.
On 22nd February 2008, HABECO announced a signing ceremony of a triple memorandum with Diageo (one of the
world leading alcohol manufacturer) and Hanoi Liquour Compay (HALICO) (a susidiary of HABECO) for their
cooperation in the alcoholic drinks market in Vietnam. Diageo wishes to consolidate its worldwide experiences and
HALICO and HABECO’s local market comprehensive acknowledgement. On the other hand, the cooperation with
Diageo will enhance the locl alcohol manufacturing position to stably develop in accordance with the government’s
and the industry’s strategy.
Upon the Enterprise Establishment Announcement dated 19th February 2008, the three founded shareholders
including Habeco, Vinaglass and Lilama Hanoi shared a legal capital of VND300 billion to establish Habeco
Investment and Development Joint Stock Company. This new company’s main activities are: distilling, rectifying
and making brandy; producing beer and malt; producing non-alcohol drinks and mineral water; mechanical
fabrication, treatment and metal coating; metal product manufaturing; electronic item production; industrial
equipment and machinery installation; water exploitation, treatment and supply; Building construction and other civil
engineering works; ground clearance and preparation; electricity, water supply and drainage, heater and airconditioner installation; other installation works; drinks, equipment and facilitiy trading; overland transportation,
warehouse and reservation; short-term warehousing; roving restaurant services, office services, administration
services and entertainment services.
Copyright © FPTS. Redistribution or reproduction is prohibited without written permission.
P a g e | 10
8th March 2008
HANOI BEER –ALCOHOL AND BEVERAGE CORPORATION
(HABECO)
ANNEX I: COMPANY PROFILE
History of development
1890
Started from Hommel Brewery, a French breweries was built in 1890
1957
On 15/08/1958, Hommel Brewery was rebuilt and named as Ha Noi Brewery producing various products such as
Truc Bach, Hong Ha, Ha Noi, Huu Nghi
1993
Ha Noi Brewery became Ha Noi Beer Company with a capacity of 50 million litters per year
2003
Ha Noi Beer Company renamed as Hanoi Beer Alcohol Beverage Corporation, better known as HABECO
2004
HABECO’s corporate governance was re-arranged as a parent company with many susidiaries locates from the
north to center of Vietnam
2007
Only HABECO, one of the largest Vietnamese enterprises is awarded the prize of Asia Pacific Quality Organisation
(APQO) for achieving 7 aspects of the international standard products including corporate government, strategy
management, customer and market orientation, information analysis, human resource management and
development, business outcome management
Business lines




Beer, alcoholic drinks, soft drinks, alcohol, package ;
Export, import beer, alcoholic drinks, soft drinks;
Investing, consulting services, raising investment fund;
Researching, training, technology transferring;
 Hotel, tourist, fair organizing business.
Subsidiaries & Associates
HABECO
Holding
(%)
Joining
Time
No
Subsidiaries
Status
1
HN-Quang Binh Beer Joint Stock Co.
54.00
2004
Joining after being privatised
2
Thanh Hoa Beer Joint Stock Co.
55.00
2003
Privatised from State owned Co.
3
HN-Thai Binh Beer Joint Stock Co.
56.00
2005
Joining after being privatised
4
HN-Hai Phong Beer Joint Stock Co.
65.00
2005
Joining follow equity transaction
5
HN-Hai Duong Beer Joint Stock Co.
55.00
2004
Joining follow equity transaction
6
HN- Vung Tau Beer Joint Stock Co.
29.00
12/2006
7
Hanoi Liquor Company (HALICO)
58.15
12/2006
New establishment, business not
start
yet from State owned Co.
Privatised
8
55.30
12/2005
New establishment, business started
9
HN-Quang Ninh Beer Alcohol Beverage Commercial
Joint Stock Co.
Ha Noi Beer Commercial Joint Stock Co.
60.00
12/2006
New establishment, business started
10
Harec Investment Joint Stock Co.
60.00
12/2006
New establishment, business started
11
NGK packing Joint Stock Co.
68.95
2005
Privatised from State owned Co.
1
Ha Noi Investing and Developing Beer Alcohol Beverage
Joint Stock Co.
28.00
12/2006
New establishment, business not
start yet
27.20
1995
Associates
SanMiguel Yamamura HP Ltd
2
Source: HABECO Prospectus
Copyright © FPTS. Redistribution or reproduction is prohibited without written permission.
Associated
P a g e | 11
8th March 2008
HANOI BEER –ALCOHOL AND BEVERAGE CORPORATION
(HABECO)
Products, brand names, images
Brand names, Images
All of HABECO’s alcohol drinks products are registed and protected widely by international copyright in almost
countries which HABECO exports products to such as Taiwan, UK, US, Japan, Korea…
Beer
Currently, HABECO focus on 2 major segments including Canned/Bottled Beer and Draught Beer
Canned/Bottled Beer


Bottled Beer (450ml), the main product of HABECO with the red logo. Beer is bottled by modern manufacture with
capacity of 30.000 bottles/hour. Beer then is packed into crate to easily deliver
Canned Beer (330ml) was first appeared in market in 1992. Beer is poured into cans for longer fresh taste and favor, it
also is convenient for consumers
Ha Noi Beer Premium is poured in 330ml bottle

Ha Noi Lager (450ml) - with green logo this product has been first appeared in middle of 2007

Draught Beer

Ha Noi draught beer brings high quality of original taste with affordable price to major consumers. Currently, Ha Noi
draught beer is poured into kegs using German technology
Alcohol
All kinds of HABECO’ Alcohol in market are produced by it’s subsidiary – HALICO with the capacity of 9,6 mil litters/year.
Currently, HALICO controls 60% of branded spirit sales in the country and benefits from a vast distribution network, particularly in
the North with various brand name such as Vodka Lua moi, Vodka Nep moi, Vodka Ha Noi…
Distribution Network
HABECO at the moment controls 3 branches and 2 joint stock companies helping HABECO to deliver products to all areas of the
country, mostly from Quang Binh to the North. Current efficient distribution network productively contributes to the increase of
sales in major marketplaces such as Hanoi, Nghe An, Nam Dinh, Hai Phong, Quang Ninh…
HABECO’s Distribution Network:
Market
Number of agents
Market
Number of agents
Market
Number of agents
Hà Nội
170
Thái Bình
6
Bắc Kạn
3
Hải Dương
22
Thanh Hóa
13
Hà Nam
6
Hải Phòng
24
Nghệ An
28
Điện Biên
5
Quảng Ninh
1
Hòa Bình
6
Tp,Hồ Chí Minh
2
Bắc Giang
11
Hà Giang
3
Hà Tĩnh
9
Hà Tây
31
Lạng Sơn
3
Đà Nẵng
1
Phú Thọ
20
Cao Bằng
5
Quảng Bình
1
Thái Nguyên
8
Sơn La
4
Quảng Trị
2
Tuyên Quang
5
Lào Cai
5
Huế
1
Yên Bái
4
Hưng Yên
16
Quảng Nam
1
Nam Định
11
Bắc Ninh
20
Vũng Tàu
1
Vĩnh Phúc
8
Khánh Hòa
1
Ninh Bình
9
Source: HABECO prospectus
Copyright © FPTS. Redistribution or reproduction is prohibited without written permission.
P a g e | 12
8th March 2008
HANOI BEER –ALCOHOL AND BEVERAGE CORPORATION
(HABECO)
Production and Technology
Production of all products
Unit: 1,000 litters
Unit
All kinds of beer products
All kinds of Alcohol
Alcohol
Palet
Carton paper (piece)
Cork (1000 cái)
2004
2005
2006
Expected 2007
217.966
4.624
2.267
34.302
185.3
256.629
6.505
2.481
36.942
218.8
306.126
9.436
3.275
36.44
195.6
99.795
353.959
11.6
5
20
120
400
Source: HABECO’s disclosure (11/2007)
Beer production
Production
2005
112.580
2006
121.800
2006-2005
8.19%
2007 E*
130.000
2007-2006 E*
6.73%
- Bottled beer
75.760
78.274
3.32%
70.640
-9.75%
- Draught beer
28.260
32.780
15.99%
39.860
21.60%
Produce
8.560
10.746
25.54%
19.500
81.46%
120.000
147.500
22.92%
184.000
24.75%
- Bottled beer
83.180
103.721
24.69%
124.535
20.07%
- Draught beer
28.260
32.700
15.71%
39.860
21.90%
- Canned beer
8.560
11.079
29.43%
19.605
76.96%
- Canned beer
Sale
(*) E: Expect; F: Forecast
Source: HABECO propectus
Technology
HABECO uses German techlonogy for producing beer, besides, the company applies quality management systems of International
Organization for Standardization including:




ISO 22000: 2005 for safety food processing system
ISO 9001: 2000 for quality control system
ISO 14001 : 2004 for environment control system
ISO 22000-2005 for consistency of Quality – Environment- Safety food processing system
HALICO currently provides the entire Alcohol products for HABECO. Though HALICO share a low percentage in domestic market but
still is considered as one of the most successful wineries with rapid annual growth. Besides, HALICO has achieved various prizes
and records such as Vietnamese high quality products award in 2001, 2002, 2003…
Suppliers
The main raw materials of producing beer are malt, rice, sugar…However, malt is still the most important ingredient currently
imported from Germany, France, Australia, Denmark, China.
Amost HABECO’ suppliers are high-quality partners enables to guarantee a stable source of raw materials for the company.
However, about 60-70% of raw materials imported from overseas, therefore it affects on price of beer products. Other materials such
as rice, sugar…are available in the country.
Copyright © FPTS. Redistribution or reproduction is prohibited without written permission.
P a g e | 13
8th March 2008
HANOI BEER –ALCOHOL AND BEVERAGE CORPORATION
(HABECO)
ANNEX II: INDUSTRY ANALYSIS
Characters of the market
SWOT Analysis
Strengths





Weaknesses







Opportunities








Threats




The sector accounts for a sizeable proportion of industrial output and GDP, with the sector attracting significant
foreign investment in recent years from the likes of Carlsberg, San Miguel and Heineken
Vietnamese consumers, particularly the young and affluent, are interested in brands and accordingly, renowned
Western products backed by investment in marketing and promotions tend to have highly successful launches
Beer is influenced by local culture and economic conditions and therefore, consumers trend to loyal to local
taste and regional origin of the products.
The tropical climate also effects positively to the beer consuming. Beer is considered as the seasoning drinks
and with the warm seasons lasting during the year, Vietnam climate offers the advantage for the growth of beer
drinking habit
The wealthy urban centres of Hanoi and Ho Chi Minh City now provide highly receptive consumer audiences
About 60-70% of raw materials to produce beer are imported from other countries, mostly is malt This results in
a fluctuated price of beer in market and increases the competition among breweries
There are wide income disparities between urban and rural areas and local consumption patterns vary
significantly according to income
Low market penetration coupled with favorable demographic in terms of tropical climate and young population
(80% under 40 years of age)
The advertisement of alcohol drink products is restricted in Vietnam especially strong wines.
It is typical in Vietnamese culture to drink beer in social events and business gatherings.
Other new products such as low or non alcoholic beer, stout and dark beer have not been developed to enter
the country
In alcohol market, there is a substantial black market for smuggled products such as, strong wine, red wine,
champagnes, Vodka. The government estimates that a third of spirit sales come from smuggled goods. High
taxes on importing alcohol drink products have created this smuggling problem, which the government now has
to work very hard to address.
Huge and young population of approximately 83 million and 90 million by 2010 in which more than a half of
population if under the age of 25 and more than 80% under the age of 40
Accession to the WTO would benefit Vietnamese exporters, with the gradual removal of market barriers and
trade restrictions set to increase their competition. Moreover, it is the chance for Vietnamese companies to
access overseas capital, management, technology to combine with existing domestic distribution network in
order to enhance business efficiency
Rising income levels and changing lifestyles, particularly in urban areas, are increasing consumer demand for
snacks, convenience and luxury food items
Vietnam's large domestic market, growing export opportunities, and low labour costs, as well as the prospect of
acquiring newly-privatised beverage companies, offer further investment opportunities
The country's struggling agricultural sector is in need of significant investment and willing investors can expect
assisted entry
A growing tourism sector fuels interest in convenience categories, in addition to sub-sectors, such as soft and
alcoholic drinks
Due to the inherent price sensitivity of Vietnamese consumers, the majority of alcoholic drink products in the
country fall at the economy end of the market; however, this is gradually changing -- particularly within wealthy
urban centres, with the brewing industry a major driver of this slow move towards premiumisation.
The increase in recent trend of merges and acquisitions helping large firms to save investment and enhance
the infrastructure of small companies.
The IPO schedule of state owned companies are seen not attractive by foreign investments because of
unstable and vague policies.
Government is still holding the major share of key industrial firms, this may reduce the efficiency of
management and also have an impact on the transparency and competition in the market
Vietnam's WTO membership may result in smaller companies, which are unable to cope with the increased
competition, being forced out of business
Sector liberalization upon WTO accession, the push by Government to apply modern technologies, increased
quality control and capacity to meet international standards are expected to intensify competition in the sector.
Source: BMI, FPTS
Copyright © FPTS. Redistribution or reproduction is prohibited without written permission.
P a g e | 14
8th March 2008
HANOI BEER –ALCOHOL AND BEVERAGE CORPORATION
(HABECO)
Supply and Demand
Supply
Currently, Vietnam has about 400 brewery establishments but only 20 of them can produce more than 20 million liters a year in which
5 have output exceeding 100 million liters. The remaining 15 factories have the capacity of more than 15 million liters, while the
majority can produce less than one million liters a year.
All breweries are almost located in big cities and provinces. For instance, HoChiMinh city shares 23,2% of total beer production of the
country; Ha Noi holds 13,44%, Hai Phong: 7,47%; Ha Tay: 6,1%, Tien Giang province: 3,79%; Hue: 3,05%; Da Nang: 2,83%. (Source:
Euromonitor)
There are 3 segments in the beer market

Bottled/Canned Beer
This is the most favorite product at price of VND 15,000/litter, sharing largest percentage in total market consumption and sales at
about 45% and 50% respectively. Consumers of this segment generally are middle class. However, it tends to enlarge market share
by attracting upper class who currently benefit from the economic growth. SABECO, HABECO and HUE brewery are the leaders of
this segment.

Draught Beer
Holding 43% of total market consumption and 30% of total sales, draught beer is an attractive drink for middle class at price of VND
10,000/litter. It is mainly produced by some small breweries in local areas. However, HABECO is the leader of this segment in Ha Noi
and northern provinces.

High-class home brand and overseas brand
This is the highest price product of at about VND 28,000/litter mainly serving the high class customers therefore it shares only 12% of
the total consumption and 20% of sales in the segment. Tiger, Heineken first appeared in Vietnam through the distribution network of
Vietnam Brewery Limited (VBL). Meanwhile, Carlbergs is supplied by Southeast Asian Brewery and Viet Ha Brewery JV (SEAB).
Another segment leader is SABECO with Saigon Beer and 333 beer (Source: Euromonitor năm 2006)
Alcohol market presently concentrates on several brands such as Vodka, rum, liquor, champagne and other kinds of Alcohol
including local brands and overseas brands. However, only several wineries have remarkble production such as Ha Noi Liquor
Company and Thang Long winery, Ladofood Joint Stock company provide qualified products with affordable price for major
consumers. The rest firms are typically small with low production. Moreover, imported Alcohol and wine still are most attractive
product sharing the largest part of the Alcohol market. As reported in 2004, there were 72 wineries with the capacity of 103 ml
litters/year. However, the actually production during this time were only reached 76,3 ml lít/year, equal to 74% planned capacity.
Moreover, wine made from small households (more than 300 as estimated) were out of government control. This kind of alcohol is
very popular in Vietnam. It is normally made by a great number of households in the countryside and widely consumed by the
majority of people, especially those in the countryside or with low income. Imported Alcohol is only used by a small group of
consumers who have high wages in big cities.
There is a substantial black market of smuggled products. The government estimates that a third of spirit sales in market comes from
smuggled goods. High taxes have created this smuggling problem, which the government now has to work very hard to address.
Demand
Vietnam has kept the world‘s fasted – growing rate in beer market over the last 4 years with average yearly 10% expansion rate.
Currently, the beer consumption rate in Vietnam still stands at low level in the region, reaching 18 liters per capita (according to the
Ministry of Industry) compared with an average 25.3 liters per capita for Thai Lan, 43 liters per capita for South Korea and Japan and
average 88 liters per capita for European. Outlook to 2010, the Ministry of Industry expects the volume of beer industry will achieve
from 2.5 to 3 billion liters, meaning Vietnam beer consumption per capita will increase to approximately 28 liters for that same period.
Living standard increases matching with the economic growth, thus creating higher demand and consumption of wine and beer.
However, domestic brands are less competitive, therefore only gain a considerable market share by serving a small number of
consumers particularly is middle class.
Potential Growth
The outlook for Vietnam's alcoholic drinks industry remains bright, thanks both to rising domestic consumption and the country's fastgrowing tourist industry. Volume sales of alcoholic drinks are set to increase by 60.3% to 2012, while value sales growth will also be
Copyright © FPTS. Redistribution or reproduction is prohibited without written permission.
P a g e | 15
8th March 2008
HANOI BEER –ALCOHOL
ALCOHOL AND BEVERAGE CORPORATION
(HABECO)
strong at 46.9%. Beer sales will remain
emain the primary contributor to alcoholic drinks sales and this category is also set to experience the
strongest growth over the forecast period -- 61.1% to 2012 -- due to the high levels of investment the industry is receiving from both
local players and expansion-oriented
oriented multinationals.
However, volume sales growth in the wine and Alcohol industry will also be strong to 2012, at 34.3% and 23.4% respectively. Both
are fairly immature industries, which have been held back by an absence of multinational investment and their relatively high
higher price
tags -- although both factors will decline in importance over the forecast period -- as alcoholic drinks manufacturers in Vietnam
diversify away from beer and into less mature, higher growth categories, and as rising consumer incomes begin to erode consum
consumer
price sensitivity.
Table: Drinks indicators
Alcoholic drinks
production (mn litres)
Alcoholic drinks sales
(US$mn)
Alcoholic drinks sales
(mn litres)
Wine sales (mn litres)
Beer sales (mn litres)
2004
2005
2006
2007e
2008f
2009f
2010f
2011f
2012f
1,104.4
1,177.9
1,251.3
1,338.9
1,432.6
1,532.9
1,640.2
1,755.0
1,877.9
1,220.0
1,310.0
1,400.0
1,512.0
1,633.0
1,763.6
1,904.7
2,057.1
2,221.6
1,330.5
1,430.4
1,570.6
1,724.4
1,895.1
2,082.5
2,288.6
2,515.3
2,764.4
21.1
22.8
24.5
26.2
27.9
29.6
31.3
33.2
35.2
1,296.1
1,393.7
1,531.5
1,683.0
1,851.3
2,036.4
2,240.1
2,464.1
2,710.5
13.3
13.9
14.6
15.2
15.9
16.5
17.2
18.0
18.8
e/f = BMI estimate/forecast. Source: General Statistical Office, Intracen, OECD, Trade press, BMI
Copyright © FPTS. Redistribution or reproduction is prohibited without written permission.
P a g e | 16
8th March 2008
HANOI BEER –ALCOHOL AND BEVERAGE CORPORATION
(HABECO)
Industry Developing Project
Beer, Wine, Beverage Production Forecast to 2010
Area
Beer
Unit: Million litters
Beverage
Wine
2005
2010
2005
2010
2005
2010
1
58
100
5
5
1,4
15
2
711
1.400
46
65
125
300
3
221
400
0,5
2
139
350
4
0,6
50
3,6
5
5
453
1.150
23
55
530
780
6
87
400
8
18
112
200
1,530
3,500
82,5
145
911
1,650
Total
Source: Resolution 18/2007/QĐ-BCN of Minister of Ministry of Industry (08/5/2007)
Target







Building up a strong economy;
Reduce the product prices;
Increase competiveness;
Meet the dosmestic demand;
Enhance export;
Increase national revenue;
Steadilly integrate into international economic regions.
In 2010 all industry production need to meet 3,5 bn litters of beer, 145 mn litters of wine and 1.6 bn litters of beverage.
According to Misnistry of Industry and Trade, beer industry currently states a strong growth with the high consumption of all
segments, sharing 89% of total sales and 97% of total volume in total alcohol drinks industry.
Beer Industry Developing Plan to 2010
In the new issuance of the Ministry of Industry’s expansion master plan for beer industry, the industry production targets to reach 3.5
billion liters with the injected capital of approximately 31.8 VND billion. Currently, Vietnam’s output capacity reach 1.9 – 2 billion liters
and in order to achieve the expansion plan, the annual production capacity is considered to grow up average 0.5 billion liters for the
period of 2008-2010.
In fact, loads of companies are unable to upgrade and improve their production due to lack of capital, therefore Ministry of Industry
are attempting to upgrade and improve new and productive technology, enhance corporate management and investment, encourage
foreign investment to assist the domestic industry. For instance, this is a chance for dosmestic breweries to receive and make full use
of these captilal flows. Meanwhile, foreign investors are getting benefit by being allow to support domestic breweries through
establishments of joint-venture companies. In addiiton, currently government policies are encourage foreign capital to focus on high
potential breweries which enable to produce 100 mil litters per year.
Orientation of Industry Development

Reducing state share in state owned beer companies through IPO, helping companies to improve the corporate
management and business efficiency. HALICO (Ha Noi Liquor Company) is the first sample which carried out IPO in 2006.

Supporting beer companies to change to joint venture company model (100% foreign owned company still now allowed) to
swop modern technology in order to produce international qualified products.
Apply domestic equipments (which standard is equal to imported technology) is prior in all investment projects.
Copyright © FPTS. Redistribution or reproduction is prohibited without written permission.
P a g e | 17
8th March 2008
HANOI BEER –ALCOHOL AND BEVERAGE CORPORATION
(HABECO)
WTO Integration
Tax of imported beer has been already reduced from 80% to 65%, then will be at 35% in the next 5 years. The current tax (65%)
seems to be considerablely high ,as a result foreign producers choose to assist with domestic companies to avoid this tax.
Beer Market
Company
Brand
Capacity 2007
(Mil
litters/year)
Production
2006
(Mil litters)
Market Share
Brewery
Location
SABECO
Beer 333, Daigon red,
Saigon Green, Saigon
Export
680
550
34%
HCMC, Can
Tho, Soc
Trang, Yen Bai
Vietnam Brewery
Limited (VBL)
Heiniken, Tiger, Ankor,
Bivina, Amber Stout,
Coors Light, Foster, BGI,
Larue Export
230
230
21%
HCMC, Ha Tay
HABECO
Hanoi Beer
300
150
17%
Hanoi, Thanh
Hoa, Hai
Duong
San Miguel
San Miguel
50
N/A
6.5%
Nha Trang
Southeast Asian
Brewery and Viet Ha
Brewery JV (SEAB)
Halida, Carlsberg
N/A
N/A
5.5%
Hanoi
Hue Brewery Limited
(HBL)
Huda, Festival
100
30
3%
Others
Source: Vietnam Alcohol, Beer, Beverage Association, FPTS
Hue
Legal Structure
Equitization in
Progress
Joint Venture
Equitization in
Progress
Foreign Owned
Joint Venture
Joint Venture
13%
SABECO has a dominant position in the south with competition coming from Vietnam Brewery Limited whereas in northern and
central Vietnam, its major rivals are Hanoi Beer – Alcohol – Beverage Corporation (“Habeco”) and Southeast Asia Brewery Ltd
(“SEAB”). Volume sales of beer in Vietnam is expected to increase by an enormous 61% to 2012, and Habeco and Sabeco, who
control 17% and 34% respectively of the 1.5bn litre annual beer market, are both well poised to exploit this growth. The remaining
market share is taken by non-state businesses and small scale manufacturers.
Further highlighting their credentials is the fact that top global brewers have proved keen to partner the two companies in Vietnam.
Danish major Carlsberg holds a strategic stake in Habeco - one which it is expected to look to increase - while Sabeco has reportedly
attracted the attention of US giant Anheuser-Busch and Belgian behemoth InBev.
A number of foreign players have invested in the Vietnamese market, including the Danish major Carlsberg, the Philippines' San
Miguel, which recently announced plans to boost beer production in Vietnam to 1mn hectolitres, Anglo-South African brewing giant
SABMiller and UK-based Scottish & Newcastle. Heineken's Vietnamese operation is controlled through Vietnam Brewery Ltd, which
is majority-owned by the Dutch brewing major and its regional affiliate APB. The group's Vietnamese partner is Saigon Trading
Corporation (Satra). Government privatisations of state-owned brewing companies have given foreign players a chance to increase
their market share in Vietnam and this process in likely to be ongoing in 2008.
Alcohol Market
According to Ministry of Industry, Alcohol industry is gradually improving but seems not ready for WTO integration agenda. Merely
wineries enables to own modern technology but fail to utilse the entire production due to the lack of competitive products to struggle
with foreign rivals., Alcohol
As reported in 2004, there were 72 wineries with the capacity of 103 ml litters/year. However, the actually production during this time
were only reached 76,3 ml lít/year, equal to 74% planned capacity. Moreover, wine made from small households (more than 300 as
estimated) were out of government control. This kind of alcohol is very popular in Vietnam. Imported Alcohol is only used by a small
minority of higher income-people in bigger cities. Government reported that two third of these imported Alcohol and wine are from
unidentified source, mainly from smuggling suppliers, therefore seriously affect domestic wineries and market.
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P a g e | 18
8th March 2008
HANOI BEER –ALCOHOL AND BEVERAGE CORPORATION
(HABECO)
Besides, companies which are using FDI only utilise 17% of original capacity due to lack of strategy products. The preparation for
WTO integration is on going. Vietnam Alcohol, Beer, Beverage Association and other administrations are setting up the development
of traditional wines and Alcohol.
Access to WTO, Vietnam has committed to remove specialty consumption tax of alcohol drinks including beer, wine and Alcohol.
Therefore, in order to enable to compete with foreign rivals, domestic players need to positively and actively improve competitive
ability.
No
1
2
3
4
5
6
7
8
9
10
11
12
13
Company
Quang Ngai Sugar company
Address
Products
Tỉnh Bình Định
Semi Alcohol
Tỉnh Thanh Hoá
Semi Alcohol
Quận Tân phú, TPHCM
Alcohol
Ha Noi Liquor Company
94 Lò Đúc, Hà Nội
Vodka,...
Internation wine company
151 Ký Con, Nguyễn Thái Bình,Q1
Bien Hoa Sugar company
34-35 Bến Vân Đồn, P12,Q4
Vodka Kermanoff, Gin Harpoon,
Napoleon XO, Rhum Chauvet,...
Rum, Bien Hoa Wine, King Whisky,
Whisky Martini,...
Whisky XO...
Lam Son Sugar company
Huy Việt Ltd.Co
Dong Xuan wine company
T17 Bàu Cát 2, P13, Q.TB
Gò Đen Wine, Brandy XO...
Bach Ma company
40/4A Trần Văn Mười, Xã Xuân Thới
Thượng, Huyện Hóc môn
Alied Domeq Associates
621 Phạm Văn Chí, P7, Q6
Whisky Wall Street...
Phi Long Wine company
417 Phan Văn Trị, P1, Gò Vấp
Snake wines
Sai Gon Wine company
80 Nguyễn Huệ, Quận 1
Napoléon X.O, ROYAL WHISKY
Vietnam Wine JS company
Tỉnh Long An
White wines
Lam Dong JS Company
4B Bùi Thị Xuân – Tp Đà Lạt – Lâm
Đồng
Da Lat wines
Source: FPTS
Copyright © FPTS. Redistribution or reproduction is prohibited without written permission.
P a g e | 19
8th March 2008
HANOI BEER –ALCOHOL AND BEVERAGE CORPORATION
(HABECO)
ANNEX III: COMPARABLE COMPANIES IN OUR TRADING P/E MUTIPLES
Company Name
Country
Description
LAN HUANGHE
China
Beverage Manufacturing, Animal Feeds Manufacturing, Trade, Storage, Trade of Building
Materials, General Machines, Foods, Consultation Services, Agricultural & Animal Husbandry
Services, Aquaculture, etc.
Carlsberg Brewery
Malaysia Bhd
Malaysia
Fujian Yanjing Huiquan
Brewery Co Ltd
China
Carlsberg Brewery Malaysia Berhad (Carlsberg Malaysia) is principally engaged in the
production of beer, stout, shandy and non-alcoholic beverages for distribution in the home
market and for export. The brands offered by the Company include Carlsberg Green Label,
SKOL, Danish Royal Stout, Royal Stout Ginseng, Carlsberg Special Brew, Jacobsen Saaz
Blonde, Jacobsen Bramley Wit, Tetley?s English Ale, Jolly Shandy and Nutrimalt. The
Company's wholly owned subsidiaries include Carlsberg Marketing Sdn. Bhd. and Euro
Distributors Sdn. Bhd. Carlsberg Malaysia has a 24.6% investment in The Lion Brewery
Ceylon Ltd (TLBCL). TLBCL is principally engaged in the manufacture, marketing and
distribution of beer, stout, shandy and non-alcoholic beverages. On October 30, 2006, the
Company entered into a shareholders? agreement with Wiseline Limited to acquire 50%
equity interest in Carlsberg Distributors Taiwan Limited (CDTL). As a result, CDTL is a 50%
jointly controlled entity of the Company.
Beer and Beverage Manufacture
San Miguel Corp
Philippines
San Miguel Corp. is the largest food, beverage and packaging co. in the Phil. and Southeast
Asia. The Company and its subsidiaries are primarily engaged in the prod., processing and
marketing of beverage, food and packaging products. It is also engaged in the management
and dev. of real estate properties. In 2001, the co. acquired substantial ownership interest in
Coca-Cola Bottlers Phil., Inc. through a foreign subsidiary as well as Pure Foods Corporation
Foster's Group Ltd
Australia
Foster’s Group Limited (Foster’s) is a global drinks company engaged in the production and
marketing of alcoholic beverages. Foster?s owns, markets and distributes an international
portfolio of beer, wine, Alcohol, cider and non-alcohol brands and its products are sold in more
than 155 countries. Internationally, Foster?s produces, markets and exports a portfolio of wine
brands, including Beringer, Lindemans, Wolf Blass, Penfolds, Rosemount, Matua Valley,
Wynns Coonawarrra Estate and Castello di Gabbiano. Major beer brands in its portfolio
includes Victoria Bitter, Crown Lager and Corona and Asahi. Foster's range of Alcohol
primarily include Cougar Bourbon, The Black Douglas, Aperol, Cinzano and SKYY. Its nonalcohol range includes products, such as flavoured water, natural beverages and drinks with
functional additives. On August 4, 2006, the Company sold its business in Vietnam to Asia
Pacific Breweries
Shaw Wallace & Co Ltd
India
Shaw Wallace & Co. Ltd. was established in Calcutta in 1886 and incorporated in 1946. The
company, a part of the Jumbo group since 1987, has a host of liquor and beer brands.
Tsingtao Brew
China
Vinamilk
Viet Nam
Loulan Holdings Ltd
Hong Kong
(China)
Muhack Alcohol Co Ltd
Korea
Dromana Estate Ltd
Australia
Tsingtao Brewery Company Limited is engaged in brewing and sales of beer, and other
related businesses. It owns breweries and malting mills in cities all over China. The
Company's geographic segments include Qingdao region, other Shandong region, Huabei
region, Huanan region and overseas.
Vietnam Dairy Products Joint Stock Company (Vinamilk) is a Vietnam-based company
engaged in the milk and beverages sector. The Company mainly produces and markets milk,
beverages and nutrition products, as well as provides supporting services, such as logistics,
package and warehousing rental. Vinamilk also manages a polyclinic, and is involved in the
properties management business. As of December 31, 2006, the Company has three
branches, eight factories, one logistic subsidiary and a polyclinic. In December 2006, the
Company established two wholly owned subsidiaries to operate in the real estate and cattle
husbandry businesses.
Loulan Holdings Limited and its subsidiaries are principally engaged in the production, sales
and distribution of alcoholic drinks, principally wines under the Company's own brand name,
Loulan. The Company operates in two main segments: selling of self-manufactured wines and
distribution of wine products. Loulan Holdings Limited's subsidiaries include Powerful
Kingdom Inc. (wholly owned), Xinjiang Loulan Wine Co., Ltd (90% owned), Crownhead
Limited (wholly owned), Vision Spirit Investment Limited (wholly owned) and Shanghai Shen
Hong (wholly owned). The Company operates in Hong Kong and Mainland China.
Muhak Alcohol Co., Ltd. is a Korea-based company engaged in the manufacturing and sale of
liquor. The Company provides two main products: ethanol used in the production of distilled
liquor, food additives, medicines and other related products, and carbonic acid gas used in
welding.
Dromana Estate Limited is an Australia-based company. The Company is principally engaged
in the production, distribution, merchandising and promotion of wine. Dromana Estate Limited
has a 30% interest in the Tuerong Park Unit Trust. The Trust’s principal activities are vineyard
owner. Its wholly owned subsidiaries include National Vintages Pty Ltd, D.E.
Copyright © FPTS. Redistribution or reproduction is prohibited without written permission.
P a g e | 20
8th March 2008
HANOI BEER –ALCOHOL AND BEVERAGE CORPORATION
(HABECO)
Empee Distilleries Ltd
Ấn Độ
Empee Distilleries Limited (EDL) is an alcoholic beverages manufacturer in India. EDL is
engaged in the manufacturing of Indian-made foreign liquor (IMFL) products under its own
brand portfolio, as well as under tie-up arrangements with other companies. The brands under
its portfolio are Old Secret XXX Rum, Power XXX Rum, Power Brandy, Mc Lene Ordinary
Brandy, Mclene XXX Ordinary Rum, Power Whisky, Empee Napoleon Premium Brandy,
Empee Fine Brandy, Commando XXX Rum, Club Polo Dry Gin, Club Royal Whisky, Elcanso
Dark XXX Rum and Old Secret Brandy. The brands under tie-up arrangement are Brihans
Napoleon Premium Brandy and Brihans Premium Whisky. The Company has facilities to
manufacture various IMFL products in its distillery units set up at Mevaloorkuppam,
Kanchipuram District, Tamil Nadu, and at Kanjikode, Palakkad District, Kerala. It also has a
wind mill energy plant at Coimbatore District, Tamil Nadu.
Source: Reuters
Copyright © FPTS. Redistribution or reproduction is prohibited without written permission.
P a g e | 21
8th March 2008
HANOI BEER –ALCOHOL AND BEVERAGE CORPORATION
(HABECO)
ANNEX IV: COMPARABLE COMPANIES IN OUR TRANSACTION P/E MULTIPLES
Date
Complete
Date
Target
Company
Bidder
Seller
Deal Description
10/31/2007
10/31/2007
San Miguel
Corporation
(11% stake)
San Miguel
Corporation
Retirement
Fund
SM
Investments
Corporation
5/29/2007
8/13/2007
WantWant
Holdings Ltd
(26,6%
stake)
Want Want
International
Ltd
San Miguel Corporation Retirement Fund, the Philippines
based retirement fund owned by the employees of San
Miguel Corporation (SMC), the listed Philippine based
food, beverage and packaging company, has agreed to
acquire an 11% stake in the company, from SM
Investments Corporation, the Philippines based company
engaged in financial, leisure and retail sector, for a
consideration of PHP 27.6bn (USD 6.27bn
The Singaporean Tsai family, via wholly owned
subsidiary Want Want International Limited (WWIL), has
made a public offer to acquire the 26.6% it does not own
of Want Want Holdings Ltd, the Singapore listed food &
beverages firm. The required cash consideration is
estimated at USD 805.6m, should 100% of the freefloated shareholders accept. The offer is part of the
group's plans to proceed with significant restructuring and
additional investment of its operations.
12/8/2006
1/11/2007
Fraser &
Neave
Limited
(F&N)
(14,9%
stake)
Seletar
Investments
Pte Limited
12/2/2005
12/31/2005
Del Monte
Pacific
Limited
NutriAsia
Pacific
Limited
Del Monte
Pacific
Limited
First Pacific
Company
Limited
11/9/2005
2/2/2005
6/8/2005
National
Foods Ltd
San Miguel
Corporation
1/13/2005
6/6/2005
Southcorp
Wines Pty
Limited
Beringer
Blass Wine
Estates Pty
Limited
(BBWE)
Temasek Holdings (Pte) Limited, the Singapore state
owned investment company through its wholly owned
subsidiary, Seletar Investments Pte Limited, has agreed
to acquire a 14.9% stake in Fraser and Neave Limited
(F&N), the listed Singapore based holding company
engaged in business of food & beverages, real-estate
management and the publishing, in a private placement
transaction valued at SGD 900m (USD 584.74m). F&N
will use the proceeds from the private placement to fund
its working capital needs, fund new investments and to
grow its food and beverage business to enhance
shareholders value.
NutriAsia Pacific Ltd, a British Virgin Islands-incorporated
holding entity controlled by San Miguel Corp, the
Philippines food, beverage and packaging group, has
agreed to acquire a 49.76% stake in Del Monte Pacific,
the British Virgin Islands-registered Singapore-listed food
and beverage company, from MCI Inc, for a cash
consideration of USD 206.5m (SGD 349m).
Del Monte
Holdings Ltd
Reline
Investments
Pty Ltd
First Pacific Co Ltd, the Hong Kong-based diversified
investment group, has agreed to acquire a 39.72% stake
in Del Monte Pacific Ltd (DMP), the British Virgin Islandsregistered Singapore-listed food and beverage company,
from Cirio Finanziaria SpA, the insolvent Italian foods
group, for SGD 0.6513 (USD 0.3818) per share or a total
cash consideration of USD 163.6m.
San Miguel Corporation, the listed Philippines food and
beverage group has made an offer to acquire National
Foods Limited, the listed Australian dairy for a total
consideration of AUD 1.82bn (EUR 1.06bn) including the
assumption of debt.
Beringer Blass Wine Estates (BBWE), a subsidiary of
Foster’s Group Limited, the listed Australian brewing
group, has agreed to acquire the entire issued share
capital of Southcorp Wines Pty Limited, the listed
Australian wine producer, for a total consideration of AUD
3.57bn (USD 2.72bn) including the assumption of debt of
AUD 451.7m (USD 353m).
Copyright © FPTS. Redistribution or reproduction is prohibited without written permission.
P a g e | 22
8th March 2008
HANOI BEER –ALCOHOL AND BEVERAGE CORPORATION
(HABECO)
3/28/2006
COFCO
Greatwall
Winery
(Yantai) Co,,
Ltd (40%
stake)
COFCO
(BVI) No 31
Ltd
First
Channel
International
Limited
COFCO (BVI) No 31 Ltd, a unit owned by COFCO
International Ltd, the listed Hong Kong based producer of
vegetable oil, soybean meal and related products, has
agreed to acquire the remaining 40% stake not already
held in COFCO Greatwall Winery (Yantai) Co., Ltd, the
Chinese wine maker, from First Channel International
Limited, a British Virgin Islands based holding company,
for CNY 309m (USD 38.6m).
Source: mergermarket.com
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Level 3, Citilight building
45 Vo Thi Sau street,
District I
Ho Chi Minh city
Vietnam
Tel:
(84-8) 290 8686
Fax:
(84-8) 290 6070
Copyright © FPTS. Redistribution or reproduction is prohibited without written permission.
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