Stock of FLC Faros – Magnet for Foreign Investment

Tuan Minh

21:03 18/04/2017

BizLIVE - Bloomberg data shows that FTSE Vietnam ETF is holding some 3.12 million shares of FLC Faros Construction Company (ROS), valued at over 530 billion dong ($23.31 million), making it the fifth-largest investee company in the fund’s portfolio.

Stock of FLC Faros – Magnet for Foreign Investment

FLC Faros has offered high returns for foreign funds. Photo: Internet

Shares of FLC Faros Construction (ROS) rallied after being included in the portfolio of FTSE Vietnam ETF, offering attractive returns to traders. 

Strong Buying Force from Foreign Players

Bloomberg data shows that FTSE Vietnam ETF was holding some 3.12 million shares of FLC Faros Construction Company (ROS) as of April 11, valued at over 530 billion dong ($23.31 million), making it the fifth-largest item in the fund’s portfolio.

The stock of ROS headed north after being included in the basket of FTSE Vietnam ETF, closing at 170,000 dong ($7.5) per share on April 11, representing an increase of approximately 12% from March 3 when the new portfolio was announced.

In contrast to 2016 when FTSE Vietnam ETF performed poorly as its NAV per fund certificate ended the year at $22.28, down 2.4% from a year earlier. The fund, however, made a U-turn when its NAV have increased 10.07% since the start of this year, reaching $24.62/share as of April 10.

Prior to FTSE Vietnam ETF, MSCI Frontier Markets Index ETF – a wider-reaching fund that covers global frontier markets with total assets worth $589 million – had announced to add ROS to its portfolio from February 10, 2017.

Based on the last trading day on February 28, the fund is calculated to have purchased a large amount of ROS shares with a price of 148,000 dong ($6.52) each.

Besides the two ETFs that disclose their operations, a number of offshore funds were early birds when investing in ROS. Foreign players started to buy in ROS shares as soon as the company debuted its listing on the Ho Chi Minh Stock Exchange with low market prices, according to exchange data.

Foreign players had purchased 387,000 ROS shares as of February 28, 2017 when MSCI Frontier Markets Index ETF began its trading in ROS.

Unlike other large companies which commonly sell their shares to foreign-run funds before listing with big discounts, ROS is appealing to investors after its share debut. Foreign investors have strongly bought ROS shares when market prices have already rising sharply.

Which is the chance for ROS?

Market perspectives remain unclear in April when the shareholders’ meeting season is nearing an end and short-term supportive news is running out. On that backdrop, ROS is among few outstanding tickers as its remains attractive to foreign traders, evidenced by stable trading volume and uptrend.

Positive factors are behind this phenomenon.

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

The company is also proceeding with the whopping golf-resort-villa-entertainment project on an area of 1,900 hectares in Quang Binh province with a total investment of 13.8 trillion dong ($606 million). Further, it has reshuffled its finances and acquired a golf operator to improve the capital usage.

FLC Faros and FLC Group last month received in-principle approval to invest in the high-end entertainment complex in the Van Don Special Economic Zone, Quang Ninh, 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, a museum, a farm community, and a library.

Further, Market Vectors Vietnam ETF (VNM ETF), run by Van Eck Global, will reshuffle its holdings late in May, part of its second-quarter review. VNM ETF has $294 million worth of assets under management, making it the largest ETF in the Vietnamese 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 month of being listed before the review. This might have been the reason ROS was not included in the fund’s portfolio in its latest review.

According to financial expert Le Tien Dong, already meeting requirements for listing time, liquidity, float ratio, ROS is likely to be added to VNM ETF’s portfolio when the ETF is poised to collect data as of May 26 and announce the new portfolio on June 2. Calculations show that ROS can account for 5-8% of the ETF’s holdings, equivalent to $15 million-$24 million.

The requirement on listing time has also been the largest obstacle for ROS to be eligible for the inclusion into the VN30 Index, which represents the 30 largest tickers listed on the Ho Chi Minh Stock Exchange. Consequently, it has not been included into funds that track this index, including South Korea’s KINDEX Vietnam VN30 ETF, whose NAV stands over 300 billion dong ($13.2 million).

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

In a nutshell, with major shareholders holding nearly an 80% stake and the probability of being bought by foreign funds, ROS will likely to enjoy an uptrend in the time to come.