Japanese investors keen on realty market

Japanese investors are now interested in mushrooming high-rise building in HCMC

Japanese investors have paid much attention to high-rises which have been erected recently in Vietnam. At first, just like the way Tama Home did, Japanese enterprises wanted to buy stakes of struggling Vietnamese companies. Late last year, this property firm earning nearly US$2 billion in revenue each year bought 20% stake of Cotecland.

Capital-strapped property projects are also what Japanese investors have target, including money-making services of such projects. Kmix Corp., a Japanese private firm specializing in building and road maintenance, has purchased a 45%-stake and become a strategic partner of the local Huy Bao Co. President Ariyasu Hashimoto of Kmix expressed his ambition of achieving an impressive growth by making overseas investments when the Japanese market has turned saturated with last year’s revenue of US$160 million. After trips to Asian countries to explore the markets, he saw a bright future for his firm from the rapid development of high-rises in HCMC. With the investment in Huy Bao, Kmix expects the revenue of Huy Bao to far exceed VND60 billion obtained last year from maintenance and sanitation services for buildings in HCMC and neighboring provinces.

Meanwhile, Kenzo Tsutsumi, president of Veglia Laboratories Co., has found out a growth potential from energy saving for buildings. Tsutsumi was present in Vietnam with another partner to buy 20% stake of Viet Esco Joint Stock Co. of the HCMC Energy Conservation Center only two weeks after this young firm got the business license. And after the signing ceremony, this Japanese firm has already drafted a contract to deploy an energy-saving project worth nearly VND10 billion for a five-star hotel in HCMC.

This has showed that besides the buying spree of stocks, Japanese firms have also penetrated the Vietnamese market by purchasing stakes of unlisted companies. According to statistics of orgnizations specialzing in studying mergers and acquisitions (M&A) such as ThomsonReuters, IMAA and AVM Vietnam, there were up to 16 successful deals last year with a total value amounting to nearly US$600 million, and the number of acquisitions is forecast to increase much this year.

Most recently, Nichirei Foods under Nichirei Corporation has set aside around 500 million yen, approximately US$6.25 million, to buy a 19%-stake of Cholimex Food Joint Stock Co. Cholimex is a consumer goods producer, and this sector has so far seen the largest number of M&A transactions. Unlike in the past when M&A were the exclusive playground for giants, they are now carried out by small and medium enterprises operating in all sectors.
Japanese investors do not hesitate to show that finding new markets is what they must do. Among those new markets, together with Indonesia and India, Vietnam is an attractive destination in Asia.

A Japanese firm said that Vietnam’s high growth potential and a bountiful cheap labor supply have attractted them. In addition, in recent years, Vietnamese firms have struggled hard in the midst of economic woes, and thus this is a good time to buy a firm or shares at a low price.

Backed by strong financial capabilities, extensive expertise and good managerial capabilities, Japanese firms have now been strategic partners that local firms look for. Japanese investors have also sought potential Vietnamese firms to buy stakes and become strategic partners. A representative of a local firm said the negotiations with Japanese partners are pretty tough, lengthy and uncomfortable. However, they will never change their minds once the decisions are made.

When purchasing stakes of a company, Japanese firms normally send representatives to cooperate in production and trading activities. In the first phase, they only contribute capital at a minimum level to sound out the market. And when better understanding the market, their investment ratios will increase when they buy more stakes and then become dominant shareholders. - Source: Business Times