The end of an era

So, I am sorry for not writing for the past few days. I was moving, and so I didn’t have any time to write up anything.

Unfortunately, I am going to have to abruptly end my writing all together for personal reasons. I really have enjoyed writing this, but it isn’t prudent for me to continue at this point. If you are a reader and want to get in touch with me, please feel free to email me at vieteconpg at gmail dot com. I really would love to hear from you.

Also, I am looking for consulting work in the short term. You can see the type of writing and analysis that I can do by looking through the blog. I would love to help out in any projects.

Thanks for reading. I hope at some point I can continue something like this in the future.

Vietecon

Stocks part 3

I am just learning lots about these companies looking at the stock charts. Actually, let me say something that is not so superficial. Looking at these stock charts has made me dive into a few stocks that I found confusing, so I am learning a lot.

So let me continue a bit more going down the list of major stocks. In this next chart, I am taking the next biggest size of market cap plus a few stocks that are widely held (so let’s say they are consensus buys).

A few points:

Source: Vietstock.com, chart by Vietecon.com. July data through July 23.

• Not many stocks in this group did that well this period. Plus, the chart ends on July 23 (I am lazy - sorry!), and we have seen a big reversal over the past few days. There are a few that were stable or improved a bit, but nothing that hit it out of the park. Plus, all depended on a rebound in July to help (except for ROS). That rebound is now over.

Source: Vietstock.com, chart by Vietecon.com

• Bao Viet (BVH) is the first one. This is a surprising one. Back at the end of 1H2019, the stock had the 8th largest weighting in VNM ETF. But now it is 19th. This is an insurance company, and I don’t really know what is happening with it, but it has been a mess for the past year, and COVID was just more of what had happened in 2H2019.

• Masan, which I think should be doing better, but even as of July 23rd it had just clawed back for the year and is now down. Remember that part of the business is convenience/grocery stores. Plus food staples, which should have been stable in COVID-times. Surprisingly, this is not all that bad, compared to MWG, which is another player in grocery stores/convenience stores. The reason is that Masan disintegrated last last year (like BVH). Still, you would have been better off owning MSN than MWG starting December 31, despite MWG being a much better company (in my opinion).

• GEX is an interesting one. From the start of its trading back in late 2015 to the end of 1Q2018, it was up more than 18x. The stock has basically fallen since then. Profits were down last year (on higher revenues), driven by unallocated expenses (finance costs, G&A, etc). In July, the stock spiked, which caused it to go positive for the year, but it is now back below (post July 23). I wonder if their moves outside of electronic engineering equipment is hurting the business. Or they could be investing for the future! Something to look at in the futrue.

• I don’t have much to say about SSI, but it’s another stock (like GEX) where 1Q2018 was the peak, and since then it has disappointed. It really bounced from its COVID lows, but the past few days have driven it down for the year.

• PNJ is another retailer that I like, but I am just not sure that it is going to work in this environment. It is hard to get excited about jewelry. The only thing helping the company (the stock?) is that people seem to be getting scared again (of a second wave, of more chaos, etc.), so they might want to buy gold. We have talked about PNJ before, and a takeaway is that gold brings in revenue but profits aren’t great, as you would expect from a true commodity.

• Then there is ROS or Faros Construction. What a bust. It was one of the biggest companies on the Vietnam stock exchanges, and now it isn’t even held by the ETF. Looking at the stock chart, it is just a continuous downslope. Sadness.

Ugh, it's back

I write in sadness. Truly. There has been a big spike in COVID cases in Vietnam. Now, the number of cases is still quite low at 11, but the country was doing so well!

Repercussions:

Stock market crashes: VN-Index (for the HCMC exchange) is down 5.31% today after being down 3.22% on Friday (driven by…I can’t really remember, probably COVID in the rest of the world, plus US-China spats, plus it being 2020). Total decline in those 2 days is 9.1%.

Da Nang measures: Quarantine for 12,000 people. Extensive testing, centered around a hospital in the city. A good chance that there will be more lockdowns until the government gets it under control. Hong Kong just banned meetings of more than 2 people.

Source: VGP news. Chart by Vietecon.com

Domestic tourism crashing again: Da Nang is obviously a big tourism center, and domestic tourists already made a majority of visitors in 2018 and 2019. (Caveat: foreigners spend more.) But still there was some hope that part of 2020 could be saved by strong domestic tourism. The government has been promoting it.

Now the government is evacuating 80,000 tourists from the city.

Foreign affairs: I have not seen anything definite about where the virus came from. The government allows few international flights, and all of these people are being centrally quarantined. But maybe one of them tested negative but was carrying it. Seems unlikely, but maybe.

However, there have been some cases of smuggling people over the border. If it is determined that one of these people smuggled brought the virus, then it really is going to be a mess. The Vietnamese people are not going to be happy. The world is ready to blow, so let’s hope this doesn’t add to it.

Strong response: It really is a shame that this is happening but what makes me optimistic is that this is a full-court press by the Vietnamese government to get this under control. I am hearing that people that have been to Danang over the past few days (but that have left) are self-quarantining. If true, this would be good news.

Ultimately, I am optimistic that the government will get this new outbreak under control, because they are doing so much and very quickly. But the virus doesn’t care what you hope.

More on stocks' performance year-to-date

Source: Vietstock.vn, chart by Vietecon.com

Following on from my post from yesterday, I have a new set of charts to look at. I will try to go through them one by one and just point out the most interesting things.

Chart 1:

• These are the big names (by market cap), and you can see how atrociously Vingroup has performed YTD. The bad news continued in 2Q, and it rebounded very little in July (all July data through the 23rd). The stock hasn’t been cheap for a while (it’s now about 40x P/E), which means it really needed very positive sentiment, which is hard to keep up. Real estate should probably keep chugging along, but they are also exposed to exports, retail, and manufacturing. All of which may be affected by COVID.

• Vinamilk continues to be an interesting story. Such great returns. And a staple, so they should be able to skate through COVID. The only issue is that growth needs to come from exports, and returns are lower there and aren’t guaranteed.

• The real estate names here (VHM and NVL) are doing alright. It will really depend on broad economic trends. High unemployment is not great.

Source: Investing.com, chart by Vietecon.com

Then there’s HPG. Wow! What a looker! It’s all from amazing results - steel sheet product sales are up 200% in the first half, exports up 100%. Steel pipes forecast to rise 10% for the year. I am surprised the stock isn’t up more!

Diving in a bit more, I am actually really surprised by how poorly HPG has performed over the past few years (see stock chart to the right). The stock has done well this year, but not that well (+20%) given the very strong results. It is still trading at under 9x forward P/E. Other steel companies are trading about a third higher (12x P/E) despite not as exciting results.

Source: Vietstock.vn, chart by Vietecon.com

And looking over the past few years, the stock has had a weird journey. It went way up (doubled, in fact) in late 2017/early 2018. But then it has just dropped, dropped, dropped like a Snoop Dogg beat. It is still well below where it was in late 2018.

But revenues and profits have risen fairly steadily over the past 10 years. And more recently, we have seen an enormous jump in revenues. Profits have not risen as quickly (margin deterioration), but it sure looks like the type of company you would want to invest in. Steady results, good margins, and a dominate market share (about a 1/3rd of the market, according to the company).

This is yet another company that seems to be relatively well-run but the stock performance is not all that exciting (depending, of course, on when you bought it). I will be watching this one.

Monday, the next batch of stocks.

Checking in on the stock market

Sorry for the long time, no write. I was on vacation for a week and have been preparing for the big move over the past few days. It always takes much longer than you expect. And COVID doesn’t help. I should be a bit more regular over the next few days, but next week might be tough.

Because I missed a lot of news, I wanted to quickly check in on on the stock market, just to get a sense of where we stand. If you avoided the daily ups and downs and just look at the trends over the past seven months, you see a very different picture. For example, look at these two charts that I put together. They are a bit busy, but I wanted to put a lot into them.

Source: Vietstock.vn, investing.com, Bloomberg. Chart by Vietecon.com

Source: Vietstock.vn, investing.com, Bloomberg. Chart by Vietecon.com

The first chart is a bar chart that shows how each of these major markets moved during the past seven months. The first quarter was down for everyone. And everyone showed an increase, with some growing more than others, in the second quarter. The increase wasn’t enough to overcome the deficit from the first quarter, so 1H results were pretty disappointing across the board, excluding HNX (which is a weird index) and Nasdaq (showing the strong results of tech). Then we saw a pick up in July so far, which has erased the SPX losses and helped improve every other index. None of this is that surprising.

The second chart is the same but in line form. Since I didn’t include daily prices (too time-consuming), you only see the trends. And the big trend is that everyone should have just held most of their stocks, at least in the US, despite COVID. NASDAQ is way up (18%). And the SPX has now slightly risen above its yearend 2019 price.

If you told me this is how it works out back in late March, I would have assumed that this could only have occurred if COVID was quickly defeated and/or there was a miraculous treatment/vaccine. None of those things happened. We are definitely living in a COVID world (even if it isn’t in Vietnam much).

Sadly, Vietnam’s success in fighting COVID, which really shows off the system, has not stopped the stock market from falling. [Note that VNX is a better index, in my opinion, than HNX, because it reflects so many more and more important stocks.] The VNX is down 10%, and the VNM ETF is down 11%. VNM is slightly more exposed to exporters, because about a third of the index is non-Vietnamese companies with large export operations in the country. [Currency has a bit of a negative impact on VNM as well, because the KRW has depreciated about 4% YTD.]

I want to dive a bit more into this over the next few days, but a few stocks caught my eye:

• Vincom is the most important stock in Vietnam, for market cap reasons, but also because the company has been such a leader in Vietnamese technology and trends. It is down 22% ytd, and it is now no longer the biggest stock in the market.

• That title now belongs to VCB, which is down just 9% (for about 13pp of outperformance) and is now worth VND304tr ($13bn). VCB and VIC are basically neck and neck, so I expect them to swap places a lot.

• Real estate was all over the place. Vinhomes fell 7%, but NoVa Land rose 6%. Khang Dien was down 8%, but Dat Xahn was down 30%. Performance was likely due to specific events at the companies.

• Electronics companies seem to be doing well. Synopex was up 63%, Seojin grew 40%. The local GEX was up 3%,

• Retail generally did poorly. Vincom Retail down 17%, Phu Nhuan Jewelry (-30%), MWG (-27%), Masan (-5%).

There is a lot more to this, but I need a bit more time to look through it all. More tomorrow. Enjoy!

How to evaluate start ups, the case of Wag

Reminder, I will be off and on over the next month because of a big move. Hope you can bear with me. Please email or DM me (@vieteconpg) on Twitter.

So a few months ago now, people were wagging their fingers at Softbank for their outsized investment in Wag, a company that helps provide on-demand dog sitting and walking. Softbank invested $300m at a $650m valuation to help the company supersize and corner the market.

American households with pet. Source: American Pet Products Association

Of course people thought this was crazy. How could you invest that much money in dog walking?! It was either Matt Levine or Scott Galloway that ridiculed the company and Softbank. I like both of their writing (Levine’s more than Galloway’s), and so I took it on faith.

But then when I started to look into it, I actually realized that maybe the valuation wasn’t totally crazy. Or at least not prima facie crazy.

Source: American Pet Products Association survey results

First, there are a lot of pets in the US. So it’s a big addressable market. Two-thirds of US households have a pet, or 85m homes. And there are more than 60 millions households that have a dog and more than 40m that have a cat.

And pets are expensive. People spend more than $200 a year on routine vet care, more than $250 on food, and $229 on kennels/boarding.

When you add up all of this spending, then it starts to get to really big numbers. The main trade association (and let’s take their numbers with a grain of salt, since they have an vested interest in exaggerating the importance of their businesses), says that total spending was almost $100bn in 2019! And that was up 5.7% over 2019.

Source: American Pet Products Association

Diving in, “other services” was $10bn, and that includes “boarding, grooming, insurance, training, pet sitting and walking and all services outside of veterinary care.” So let’s say that about 75% of this is boarding/sitting/walking, which seems fairly reasonable given that kennel/boarding is one of the most expensive things after vet care and food. This gets us to a total spend of $7.7bn - that’s Wag’s addressable market.

Now, a few things before we tie this up to Wag’s valuation. First, this is just the US. People all over the world have pets. I am sure they spend less than the US consumers do, but I think we could fairly say that world spending is probably at least another $4bn. The UK alone spent almost $9bn in 2019 on all pets and pet services. If the same proportions held, that means UK households spent $700m on kennel/boarding.

Second, I should make a personal note here: I have been a pet sitter/walker on a competing site, Rover. Why? Well, I just wasn’t sure that I wanted to own a dog right now, and this seemed like a good way to try out a number of different dogs and see if a) I wanted a dog at all and b) which type of dog I would want. Plus, I would get a little spending money (I am notoriously thrifty). The experience was mixed. We found one dog that we loved more than life itself. But we also didn’t like other dogs at all. Now I know.

Back to Wag. So, the valuation, as I stated above was $650m, according to press reports. But to value the company at $650m and invest $300m, you have to believe that your $300m will actually turn into something much bigger, say at least 2x as big (if not 3-5x). But let’s say that Softbank was willing to call it a win at 2x, or a $1.3bn overall valuation.

Let’s now back into earnings and revenue - what would be needed to justify this valuation. Say the company trades at a 20x multiple, which is kind of inline with the S&P, that would mean it would need earnings of $65m. Now, let’s assume that it is not the highest margin business, because it has to spend a lot on sales and marketing to get new sitters and new pet owners. Just pulling a number sort of out of a hat, let’s say a 15% margin. Of course, the company would probably dispute this, since it is a software product at heart (they just set up the transaction between sitter and pet owner), but it turns out that these businesses (at least right now) cost more than people expect. See Uber, Instacart, Doordash, etc, all of which are losing money.

Backing into a market share for Wag. Source: Vietecon.com

Earnings of $65m would imply revenues of $433m at a 15% margin. But remember that the company only gets at most 20% cut of the actual booking. Let me explain: you pay a dog walker $25 for a visit, but Wag gets 20% of that, or $5. So the implied bookings value is actually $2.2bn.

Remember we said the market right now is $7.7bn, so this is just 28%. Plus, the company may be able to get more money from targeted advertising of dog food or other pet services. And they could move out of the US into Europe.

Of course it wasn’t crazy that Softbank would expect their company to take more than a quarter of the market. Tech companies end up having quasi-monopolies. Amazon has 50% of the print book market in the US and 75% of the ebook market. Pet services may be different, but maybe it isn’t all that different.

In fact, Softbank’s view is that if they give a company tons of money, they can “blitzscale,” mean grow extremely fast and take over the market before the competition can get there.

And once Wag has 50%+ of the dog walking/sitting business, then maybe it move into other pet services, or even take over some of the stuff that TaskRabbit or Postmates does. If you have thousands of people willing to walk dogs for money, it’s not crazy to think that they would be willing to do some other task for money.

Of course, it turned out that Wag is not doing all that well. Late last year it started laying people off. And that was before a 70% decline in their core business because of COVID. At the same time, it has moved into other pet services, like food delivery and a chat line for owners to talk with vets.

Ultimately this has been a bad investment for Softbank. And maybe blitzscaling isn’t all its meant to be. The company probably hired too many people (hence layoffs), and it probably spent too much on promotions to get customers, but now that all that money has been spent, it could be an alright business.

If Wag makes it through, and does end up grabbing something like 10% of the total pet spending, it would have bookings of something like $10bn. Even with a small cut of 5%, that would be revenues of $500m and a net income of $75m. That wouldn’t be too bad.

And remember that this is all hindsight. At the time, I might have thought that taking a bit more than quarter of the market was extremely do-able. People may have had problems with the business model, but it wasn’t crazy to think: Pet services is a really big market, and this is an interesting way to get into it.

Ultimately, it’s just really hard to make investments. I can’t find the source now, but a recent academic study looked at venture investing, and it turns out the best thing to do is to invest in tons of deals, because no one knows what’s going to work. Maybe Wag was just one of those that didn’t work out. Plus, Softbank got some of its money back, much better than I expect they will get with WeWork.

Trade and seafood

I got seafood on the mind, because I made crab cakes last night (so good - here’s the recipe. You gotta make the remoulade).

Source: Vietstock.vn

I have seafood on the mind also because of some news from Minh Phu, which has been such a disappointing stock. The trouble really started last year in September (we have talked about this before - it was due to US antidumping charges), and it just progressively got worse. We have seen a bit of an uptick starting in early April, but it is still down 24% yoy.

[There was a way to make money, although it would be hard - if you bought at the bottom and held it until now, you would be up 47%.]

So more bad news: The company announced in late June that it was lowering its guidance for the year (no real surprise there) from exports of 63,000 metric tons of shrimp to 57,000. Exports fall from $709m to $683m, also a 10% decline. Exports make up about 50% of all sales. The impact on the bottom line is more significant - net profit goes from VND1.37tr to just under VND1tr, or -27%.

The company also is delaying some expansion plans. Ultimately, the new guidance (if it is met) would mean about a 1% yoy decline in export values but still more than double net income (although last year was particularly bad). The stock is trading at about a 5.2x forward P/E based on this guidance, which might be attractively low compared to comps.

Source: Company data, chart by Vietecon.com

But it is hard to make the argument on valuation at this point: it has been cheap for a while! Looking at this year, I think it is safe to say that if it ever gets to below 4x forward P/E, think about buying it. But for it really to move up to above 10x where comps trade, the company needs to fix its problems with US Customs and get back to its much higher margins that it was previously able to post (2019 net margin was 2.6%, while 2017 was 7.2% - see chart).

Looking at the broader seafood market, Minh Phu is actually doing alright. Seafood exports from Vietnam have been weak so far, much worse than for the company . The main trade body said that June exports were down 10% to $626m. That is basically in line with the 9% decline in fishery products we have seen through May, according to Vietnamese customs. .

But fishery products are a sector suffering more than most. Overall, total exports were still up 1% through the end of May for the country as a whole. Imports were down 5% year-to-date. I just wonder how this will keep up. I keep expecting imports to start to rise, because Vietnam has opened and people are spending more (or I would assume they are). While exports should fall, in my view, because the rest of the world (especially the world’s largest consumer: the US) is suffering.

Anyway, I will be watching Minh Phu and overall exports, because both keep defying me like unruly teenagers.

Source: Vietnamese customs, chart by Vietecon.com

Source: Vietnamese customs, chart by Vietecon.com

Source: Vietnamese customs, chart by Vietecon.com

Tourism - how to make it work?

Quick note on posting. I am moving in the next few weeks, so I will be posting irregularly until then (and not at all next week). Please let me know if there is anything that you want me to write about, but in the meantime, enjoy a little time off in July.

COVID has devastated the tourism industry in Vietnam. We have talked about this before (here and here). Ultimately, until the country opens up to international travel, there will be essentially no foreign tourists, especially with a 14-day quarantine. Luckily if you have a lot of time, that could be a nice break. And if they put you in a government facility, you might not have to pay for quar!

Source: Nhan Dan online

There are some numbers out for HCMC tourism in 1H2020, and it is not pretty. The number of tourists visiting fell more than 50% (fewer foreign tourists than domestic ones) and revenues were down 50%. I am a bit surprised it’s not worse, to be honest. The whole country has been locked down since Tet, yet they still had 1.3m tourists.

The hope is that domestic tourists will make up for the missing foreigners (that sounds like a Bobsey Twins mystery: The case of the missing foreigners). The HCMC government started a campaign in June to help promote the city domestically. I am sure it will help some, but in Vietnam we have moved from the direct impact of the pandemic effects to the indirect impact of the economic collapse of the rest of the world effects. This second part is going to hurt tourism.

My view, as I have stated previously, is that the government should stimulate. More money! In this case it will alleviate problems. But there are problems - currency issues, inflation, etc. Given declining demand, inflation may not be that big of a problem and should allow more governmental flexibility.

In other news, the government is looking to use Phu Quoc as a test case for allowing foreign tourists back in. Last year, Phu Quoc had 5m tourists, a bit more than 10% of whom were foreign.

No Americans will be allowed in, though! It will be reserved for countries that have been successful in combating COVID. That likely means New Zealand, Korea, Japan, Thailand, maybe Australia (although there are some new cases there). It will be unlikely to include Europe, since the Europeans aren’t allowing Vietnamese in. Seems short-sighted of Europe since Vietnam has been so successful in countering the ‘rona.

It looks like China might not make that list, either. There are a few Chinese being caught crossing the border to gamble. They then have to stay in quarantine for 2 weeks. It costs $700 to sneak across the border, if you pay a smuggler. Seems expensive, just to gamble.

Source: Reuters/Kham

Finally, in a stupid story, a new five-star hotel in Hanoi opened. It has a gold-plated toilet and bathtub, along with lots of gold elsewhere, including the swimming pool. I lived in Dubai, so I am not shocked by these things as much as I find them tacky.

Supposedly an actual ton of gold was used in building the hotel. At current prices for gold, that would equate to $57m (I am assuming a metric ton). But since they bought it a while ago, it probably only cost them a bit over $40m. They could sell it now for a nice profit!

How did we do in 1H?

The first half of the worst year ever recorded is finally finished. Unfortunately, the bad parts of 1H2020 are bleeding into the second half. Quick summary:

Source: Yahoo.com, chart by Vietecon.com

• massive economic dislocation with hundreds of millions of people joining the unemployed or furloughed ranks

• at least 500,000 deaths from COVID worldwide, and this likely undercounts the actual numbers considerable

• trade has drastically fallen because of COVID but also because of underlying trade tensions (see: US vs China trade war)

• massive protests against racial injustice in Western countries

Source: Yahoo.com, chart by Vietecon.com

But looking at the stock market, you would be forgiven not to think that the world is collapsing. In fact, things don’t look that bad at all. For example, the S&P 500 is down just 3.5% since the beginning of the year and up 5% year-over-year.

The VNM ETF isn’t doing as well, down 15% since the beginning of the year and just a bit more year over year. The surprising thing about this is that the Vietnamese economy should be able to rebound much faster than the US economy, since there is no community spread and even to this day no deaths from COVID.

Source: Yahoo.com, Investing.com, chart by Vietecon.com

Another weird thing is that the actual stock market in Vietnam is not doing as badly as the ETF. The main index (VN Index, which is for the Ho Chi Minh Stock Exchange) is down 12%, compared to the 15% decrease for the ETF.

Remember there are a few things that determine the value of the ETF:

• The exchange rate between the USD and the VND. Remember that the ETF is priced in dollars, but the majority of the stocks are priced in VND.

Source: Van Eck

• The ETF NAV may not reflect the underlying assets. this usually gets arbitraged away. Say the NAV cost $100, but all the assets cost $90 (this would rarely happen), you buy the assets and sell the ETF and get $10 risk-free. When the market was closed in Vietnam but not in the US during Tet, we saw a severe dislocation in the ETF value, because people started to be (rightly) concerned that COVID would damage Vietnam’s economy. At that time, there was a significant discount (more than 10%) to the NAV value. That was because the NAV value reflected the last traded price on the Vietnamese exchanges, which were stale. It’s all very interesting, but now the premium/discount isn’t so big (-0.35% as of end June).

Source: Van Eck, chart by Vietecon.com

• The ETF includes a number of assets that aren’t in Vietnam. See the pie chart on the right. Korea is extremely important at 23% of the index. Japan and Taiwan make up a bit more than 9%. There is a new holding, Jaks Resources Bhd from Malaysia, but it is still a very small amount of the index.

This points to the somewhat arbitrary nature of the index. It makes intellectual sense that company with lots of operations in Vietnam could be in the index, but if you told me that almost a third of the main Vietnamese ETF includes stocks outside of Vietnam, I would be very surprised.

Anyway, I want to explore more of first half performance, but I am running out of time. More tomorrow.

Gambling and tourism

I saw this interesting article a few days ago from the Asia Sentinel about China cracking down on gambling. Of course, China itself doesn’t allow gaming in the mainland, but there is gaming in Macau, which is the largest gambling center in the world, surpassing even Las Vegas.

Over the past few years, a number of countries bordering or near China have competed to attract Chinese and other gamblers. This includes Vietnam, which has slowly opened casinos. Foreigners are allowed to play but there are still major income-based restrictions on Vietnamese. This has basically meant that there are few Vietnamese players.

Source: Vietnam Tourism

According to this article in the Vietnam Investment Review, as restrictions have been lifted on gambling by Vietnamese, casinos have done well. However, where restrictions are still in place and only foreigners can game, revenues have suffered, even declining in the first half of 2019. Of course the situation is much worse this year.

The article in Asia Sentinel talks about a crackdown on online gambling, but it also indicated that the crackdown also was on marketing to Chinese by overseas casinos :

Apparently tiring of the massive amounts of illegal funds flowing into gambling outside the country, China’s Ministry of Public Security has completed a harsh crackdown, arresting more than 11,500 suspects, destroying 368 gambling platforms and 148 technical programs and seizing more than US$32 billion, according to a government press release.

The key point of pain for the Chinese government is in foreign exchange. To gamble outside of China, you need to gamble in another currency, putting pressure on the RMB. And it can be substantial.

If the crackdown is sincere, casinos across Southeast Asia are going to be hurting. Vietnam is the least of the worries, although they depend heavily on Chinese tourists (32% of all tourists in 2019). For example, in late 2019 Cambodia banned online gambling, which made up a quarter of the $80m in tax revenue that the government received and was mostly targeted to Chinese. Vietnam, luckily, gets minimal revenue from gaming now, although it was supposed to be another attraction for tourists in the future.

SOURCE: WORLD TRAVEL & TOURISM COUNCIL, CHART BY VIETECON.COM

The way I see it is that the Vietnamese government may face pressures from two sides now. The first is pressure to open more gambling spots to a) attract foreigner tourists and b) generate revenues. To really generate revenues, the government probably needs to allow Vietnamese to game. The second pressure is from the Chinese government to stop offshore gambling. At least in Macau, the government gets to keep the revenue. With Chinese gambling outside of China, there is a double hit of foreign exchange and lost revenues in Macau.

I wonder if China will start to make it difficult to convert money for gambling in Vietnam. That would be a real blow to casinos there.

It will be interesting to see what happens if tourism doesn’t return to previous levels in Vietnam. tourism, as shown in the chart above, is an extremely important job sector. And it brings in a lot of money…

MWG May Update

I am back! Hope you didn’t miss me too much. I am going to have to ease myself into this, because I am pretty busy in trying to get a big move done during COVID. What a mess the world is, except in Vietnam.

But I wanted to check in on my beloved MWG, which posted a May update. There are a lot of things we can gain from this report. Things that apply to MWG but also that apply to Vietnam as a whole.

Source: MWG, Vietecon.com

• Revenues were up 19% yoy in May to VND10.3tr. That’s great. And most of the sales (62%) came from the more profitable Dien May Xahn (DMX), rather than the grocery.

• BHX, the grocery, continues to outperform tremendously. Revenues there were more than VND2tr, up 155% yoy. For the year, they are up 167%. The number of stores also grew by 334 net new stores, while both other brands (DMX and TGDD) closed stores.

• Net profit was up slightly (+4% yoy). As long as BHX is driving a lot of the growth, it will be hard for net profit to rise as much, just because margins are so much lower at BHX. We have talked about this a bunch, but generally grocery margins are only 2-5% at very mature stores. BHX is still growing.

• The company said that gross margin at BHX improved due to a better negotiating postiion over suppliers and better inventory control (making sure that waste is minimal, always hard to do with a grocery). These should both improve over time. MWG said EBITDA at BHX in May.

• One more small thing: online revenue was down 1%. yoy in May If you remember this post, my view was/is that online ordering/delivery would probably revert back once the lockdowns were completed but that data mining is the key. Well, it turns out I was right, at least for MWG - online ordering reverted back, but the company likely has a lot more data to mine. Hopefully it can make use of ti.

Now what does this all mean for Vietnam. Well, it is some evidence for a V-shaped recovery.

We will have to see what happens in June, but we could very likely see a return to more normal growth, with certain segments doing much better than others. Phones didn’t do that well, but white goods did. And groceries continue to be very strong.

Of course, while Vietnam has escaped mostly unscathed by COVID directly, we are going to start seeing the indirect effects over the next few months as exports fall and external demand remains minimal. That could result in the V turning into a W. Let’s hope not. But looking at the US (the consumer of the world), I am pessimistic.

Wages

Publication note: I will be off to the beach starting tomorrow and for a week, so I will not be able to post. I am sure you will make do fine without me. See you on Monday, June 29.

I don’t see much in the news today. There are a few things that I want to work on when I get back, but in the meantime, this story popped out at me. I think I posted news that Apple will have some of its products “assembled” in Vietnam, specifically the airpods.

Well, we finally got a little information on the factory, run by Luxshare-ICT. The wages range from VND9-14m monthly ($390-610) for assembly-line workers. This breaks down into a base salary of VND4.8m and potentially more than double that for housing, travel, meals, overtime and attendance bonuses. It looks like workers are shooting for VND10m a month ($435).

The minimum wage in 2020 in Bac Giang (where the factory is located) is VND3.43m, so it is above that. The Asian floor wage (see this report for more details) was about VND9m last year, which is at the high range of what people are expecting.

But it looks like garment workers make VND3.7m or so as a basic wage in Vietnam (not counting some of the bonuses). The base is better at Luxshare-ICT, and hopefully these bonuses/benefits will come through and be valuable.

Ultimately, though it isn’t a great wage. And surprisingly, wages aren’t much lower than in China, where Foxconn workers earnings between $300-450 per month, according to this article.

We have talked about the fact that labor costs are high in Vietnam before (long time ago - Jan 2, 2019 - so far back, I can’t even link to it for some reason).

The median Vietnamese firm reported that wages and salaries cost about $2,739 per worker—about twice as high as in Lao PDR, Myanmar and Malaysia, and about 30 to 45 percent higher than in Cambodia, Thailand, and the Philippines. Wage costs are, however, considerably lower than in the BRIC economies other than India.

These higher salaries are offset by higher productivity, but if wages rise faster than productivity, the country is going to find it difficult to attract investment at the amounts the government wants/needs. This might be good in the long run, but I am sure the government won’t be happy.

Lots of investments in Vietnam

Not sure why right now, but over the past week there have been a lot of investments in Vietnamese companies and startups by foreign investors. KKR’s investment in VHM is the biggest at $600m, but there are a number of multimillion dollar investments in small start ups.

These startups are in big markets: property, entertainment and consumer finance (with some in multiple areas). Ultimately, the funds that have money that they must put to use, and it really seems like Vietnam is an attractive market, despite COVID and the weak performance of the public stock market over the past few years.

Quick summary of the deals that caught my eye:

VHM: The big announcement is a 6% stake in Vinhomes by KKR. This is especially timely given my recent post on value at VHM. Total cost was $650m, so not shabby for the Vietnamese market. VIC will continue to be the majority shareholder. Remember that it owned 56.86%, so it is now just above 50%, I assume.

I don’t really understand why KKR is buying into publicly-listed companies, although it did a similar transaction with MSN, which turned about $100m in 2017 into more than $200m last year (according to this article - I didn’t check the numbers).

I would think, though, that KKR would get even better returns by buying up a bunch of companies with good land banks, rolling them up and then selling/listing the combined company. That’s a more traditional private equity route. Although it is much more time-consuming and risky.

Propzy: The proptech company closed a $25m Series A led by Gaw Capital and SoftBank Ventures Asia. Propzy helps guide people through the real estate process. The money will be used for expansion and to provide a balance sheet for direct mortgage financing.

The company says it has handled more than $1bn in transactions since it was founded. No wonder they were able to raise so much.

Source: Company data

F88: Also in the fintech space, F88 rasied $6m on a valuation of $91m in a follow-on investment from Mekong Capital and Granite Oak. F88 is a consumer lending firm with 180 storefronts now. It had only 11 branches at the time of the first investment in 2016. It’s last round was in 2018 when it was valued at less than half ($43m).

Beta Media: In a slightly larger deal, Daiwi PI Partners invested $8m in Beta at a valuation of VND1tr ($43m). This is the third investment round in the firm. The first was VIC, the second was a $2.5m investment by Blue HK Financial Group. The last round had a valuation of VND600bn ($26m), so this is a nice step up.

Beta Media is a budget cinema operator, and it shows how far Vietnam has come conquering COVID, because nowhere else in the world would someone investment in movie theaters. AMC Theatres, the largest movie theater chain in the US, warned that it could go bankrupt.

Ultimately, though, Beta is a bet that Vietnamese consumers will start to move up the chain from essentials to more and more entertainment. Of course, I was also interested in the launch of VieON, a new streaming service. It will be interesting to see if Vietnam moves straight to streaming and skips the cinema route at all. I hope not, because there is nothing like watching a movie with a raucous crowd while eating popcorn and drinking a coke. I love it! I miss it!

Repsol and the future of S. China Sea energy

Source: @zacharytheodore

So the long and difficult case of Repsol energy is over in Vietnam. A bit of history here: Repsol signed an agreement with the Vietnamese government to develop 2 blocks in the South China Sea back in the day. Then in 2017 one of them was cancelled after push back from China. And in March 2018, the second project was halted as well. Repsol at the time said that it would ask for compensation.

Now Repsol, in a statement published on the Madrid stock exchange on Monday, said that it:

“has signed an agreement with PetroVietnam to transfer to the latter its 51.75% stake in Block 07/03 PSC and its 40% stake in Blocks 135-136/03 PSC in Vietnam.”

Notably there is no significant impact on Repsol’s financial statements, so either a) there was no compensation, or b) the compensation is so minimal that it wouldn’t make a material impact. I feel bad for Repsol, because I am sure it took forever to negotiate these.

The second block (Block 07/03 PSC) was to produce:

The field’s estimated potential recovery is around 45 million barrels of crude oil, 172 billion cubic feet of natural gas and 2.3 million barrels of condensate, a super light form of crude oil that is mostly a byproduct of gas production.

This would equate to more than $2bn in revenues for the oil company (less in income, because Respol only owned 51.75% and the Vietnamese state would take out taxes/fees). But this would have been significant. The company had $2.0bn in upstream operating income in 2019. And it seems unclear, based on what I have read, to determine how much oil and gas is in the South China sea.

Right now, it looks like there is still a Rosneft oil project off the coast of Vietnam, which the Vietnamese government has zealously guarded (literally - it sent out ships to protect the drilling).

Vietnam is not along. Other ASEAN countries are facing similar pressure from China, and they have taken different paths. Duerte in the Philippines signed an agreement with China to jointly explore for oil and gas in the South China Sea. This was hotly contested in the country and internationally.

And Malaysia has arguably lost a dispute with China over a block very close to where Repsol was supposed to develop. Basically, Petronas, the Malaysian NOC, sent out a contractor (Seadrill) ship to do exploratory drilling in the block. The survey was supposedly successful, but it was involved in a standoff with a Chinese state-owned survey ship. And ultimately, Petronas may have to tie up with a Chinese NOC to develop any field.

Sorry to keep harping on the same thing over and over, but this is YET ANOTHER reason to focus on renewables. Sure, offshore wind mind face some difficulties, but most offshore wind isn’t far offshore. And there is plenty of solar and on-shore wind potential within Vietnamese borders. If there is little need for oil and gas, and if oil and gas are less lucrative because everyone is shifting to renewables, then maybe we can de-escalate disputes over the South China Sea. Wishful thinking, I know.

More on real estate

Source: Vietstock.vn, chart by Vietecon.com

Before I get further into real estate, I just wanted to mention a milestone. Vietnam is going to start allowing international flights again! Yay! A charter flight with 250 Japanese businessmen will be making the trip shortly, according to the South China Morning Post. Interesting stat there: more than 800,000 Japanese visited Vietnam in 2018, or about 5% of all visitors (kind of surprised its not more).

Source: Vietstock.vn, chart by Vietecon.com

Now, back to real estate. I wanted to look at VinHomes (VHM) a little bit more, because of how crazy the statistics are on the company. Look at the chart above. Revenue was just VND11tr in 2016 but jumped to VND52tr by 2019. Same for net profit: VND1.6tr going to VND22tr.

This flows into the balance sheet, with assets rising 5.3x in the three years and equity growing even faster at 6.8x. Of course, the big increase in equity is because of the IPO in May 2018. And as part of that, there was some demergering and acquisition of subsidiaries. That meant some sales, for which VNM only recognized the income, were fully consolidated in the income.

Source: Company data, chart by Vietecon.com

This makes looking at their numbers quite confusing, but I did find figures that show just the property sales and gross profits. And it is crazy how high VHM’s gross profits are for their property sales. It probably helps that they have low land costs, but even still. Gross margin of +60% is crazy. Even at the 2018 low of 33%, this is quite a good margin.

Of course, gross profit doesn’t take into the time value of money. What I mean is that the company buys the land, then a year or two later (if they are lucky) starts building, then after some initial infrastructure investment is done, it starts selling units. Even so, it might have its initial cash locked up for many years, and construction costs for a year or two (again, if they are lucky). Deposits are partially offset against this, but not entirely, and so if you present-value all of the cashflows in and out, the value is going to be less than the gross profit.

Having said all of that, it is still an extremely high gross margin even compared to other emerging market developers. Good for them. Speaks to their brand and their ability to buy cheap land.

Now, though the company is probably going to face lower sales due to COVID. However, because it has pre-sold a lot of units, it still has lots of revenue to recognize, to the total of VND79.6tr as of 1Q2020. That’s almost five quarters of revenue at a 2019 run rate.

Plus, it still has lots of land, to the tune of 153m sqm as of 1Q2020. VHM says that all of this could be sold for $44bn (VND1,012tr) through 2025. That is massive, and actually almost doesn’t seem possible. The company had bookings of almost VND100tr in 2019, so it would have to more than double that in 2020 and keep at that level until 2025 to exhaust the land bank. I doubt the market could absorb all of that. Remember that total GDP is just $250bn, so VHM would make up something like 3% of GDP a year.

How does the GDV (gross development value) compare to market cap? Well, the stock is trading at about 0.25x GDV. But of course, GDV is a revenue figure, not a net income figure. Net margin has been as high as 33%, but let’s assume a more reasonable 25% (between 2019’s high and the 2018 low of 19%). That would mean that the stock is trading at around 1.0x future net income. But that doesn’t include VND6.3tr in investment properties plus some revenues/profits from its contracting business.

Ultimately, I find that property stocks trade on a mix of forward-looking sentiment around sales plus a land bank. If the land bank is rapidly depleted, investors pay attention. That’s not the case here, so I expect they will look more closely at trends in sales, partially because the land bank is basically inexhaustible in the near term. Looking at the stock price through that lens, it was trading at around VND85k pre-COVID, then we saw it fall to a low of VND53k before partially rebounding to VND77k. And Monday it fell again, as sentiment starts to turn negative on the rest of the world recovering and the knock-on effect in Vietnam.

I assume we will continue to see lots of volatility in VHM and the rest of the Vietnamese market until the rest of the world starts to get COVID under control.

Source: Company data

Source: Company data

Property stocks

Source: World Bank, Vietnamese GSO, chart by Vietecon.com

Following up on my Wednesday post, there is a lot of interesting things to look at within the property space in Vietnam. Remember, it makes up as much as a quarter of the stock market (although much of that is Vingroup). But even besides that, it is a good indication of what is happening in the real economy.

Although, if we examine that last statement a bit more using data, it turns out that construction is actually pretty small as a percentage of GDP, less than 7%. So in fact the real estate weighting in the stock market is disproportionately high compared to its weighting in the economy. I wonder if that is because exports are such a bit part of the economy in Vietnam. Not sure. Looking at the US, construction makes up just 4-5%. So maybe exports don’t explain it.

No matter, property is important to stock performance. Today, I am just going to throw a bunch of charts at you (scroll down to see all 6), to get a sense of how things have been trending. The biggest thing that I realized through this is that there is just a lot of variance and that you can’t really look at the companies as a group. Quick summary points:

• VHM is really the outlier, because in 2018, the company had a massive increase in sales from VND15tr to VND39tr. That also resulted in a massive growth in net profit and equity. I haven’t looked into this sufficiently, but I would surmise that VHM delivered a big project then. Even outside of 2018, the company has shown solid growth in sales and mixed growth in net income.

• Looking at the rest of the crew, sales growth is all over the place, but that’s no surprise. This is endemic in property developers, because sales depends on deliveries, and deliveries are lumpy. You usually deliver all at once when a development is finished, or at least within most of a year or spanning no more than 2 years. Unless it is an exceedingly large development. So you see some companies with tons of growth followed by a decline, or vice versa.

• Net profit growth doesn’t always follow sales growth, which is important to know. Think of property companies as having massive operating leverage. In a down year, sales barely or don’t cover operating expenses. But then when deliveries are big, they swamp operating expenses.

• Equity has been growing steadily, even in periods when net income isn’t growing. That’s very interesting. It could be because of lower liabilities, particularly as cash is received for projects.

• Asset growth doesn’t match equity growth either, surprisingly. That speaks to the need to look at each individual company to really see what is happening.

• Looking at the Dupont equation components of RoE, there are some broad similarities. Sales/assets is about 26% on average (2019), and net margin is around 26%, with a standard deviation of 11-12% in each case. The companies are generally highly levered at 2.7x assets/equity, but that can really vary (standard deviation of almost 1.0x).

• RoE also is all over the place, but that is mainly due to the Vingroup companies. Outside of them RoE averaged 12% in 2016-17 and 16% in 2018-19. And the standard deviation is almost cut in half. I don’t really buy that the Vingroup companies are different, but at least for RoE, it looks like they might be statistically different enough to matter.

I want to go into the implications of this a bit more and into a discussion of specific companies, but that will have to wait until next week.

Source: Company data, calcuations and charts by Vietecon.com

Quick look at value in Vingroup

Today, I wanted to highlight a few things following on our discussion of Vingroup yesterday.

Source: Vingroup, Vietstock.vn, chart by Vietecon.com

Specifically, I wanted to talk about how to look at the valuation of Vingroup. What I mean by that is that Vingroup is ultimately a conglomerate with a number of pieces, some of which fit together better than others. It also owns majority stakes in two publicly-traded real estate companies, Vincom Retail and VinHomes. These two actually have the most synergies - both are developers, one of commercial and one of residential.

It is very easy to see how much these two make up to Vingroup’s overall value, because they are publicly traded.

• VIC owns 56.86% of VHM, for a value of $6.6bn.

• It owns 73.66% of VRE worth $2.0bn.

Source: Vingroup, chart by Vietecon.com

In total that means out of a market cap of $14bn, 59% is from these two publicly-traded stocks. In that regard, VIC is a real estate company.

Back in my equity research days, I had to do so many sum-of-the-parts valuations. These are helpful in really providing clarity on where value is coming from. For instance, it is now easier to look at the rest of the business and see if the value implied by the market cap makes sense. Are the car and phone businesses, along with everything else, worth more than $5.8bn? Plus, they have options worth $370m as of the end of 1Q from the sale of Vincommerce to Masan? That’s 6% of the value too?

It can be hard to value each of these parts, so the publicly-traded parts give a way to back into valuations of things that are less transparent.

Source: Vingroup, chart by Vietecon.com

Looking at the segments, property and leasing make up 56% of total sales, plus all of the profits. (!) In fact, all of the other segments are money losing, including hospitality, which is particularly weird to me (free cash flow here is still negative even after adding back depreciation).

Of course looking at profit for segments that are very nascent (like cars and phones, which just started production last year) is not totally fair. We also need to look at the assets and the equity of these segments.

Source: Vingroup, chart by Vietecon.com

At the end of 2019, total equity of these other segments totaled VND136tr ($5.9bn), or almost exactly what the value implied by the sum-of-the-parts. So P/B is something like 1.0x for the non-publicly traded assets. Not sure what to think about it. It doesn’t look like it is heavily overvalued, but at the same time, it isn’t super cheap. Plus, most people include a discount to the valuation to account for the conglomerate nature.

This is the problem with conglomerates, sometimes the sum of the parts is worth more than the whole, at least in the market’s view. Plus there are so many ways to look at them. It would take more than just this one blog post to get to the bottom of it.

But at first glance, I think we can see that its not super easy to figure out the true value of Vingroup. If you are comfortable with the market prices for VRE and VHM, then you still have to do a lot of work on the rest of the business to see real upside.

This is not always the case. Back in my old days, the sum-of-the-parts for Emaar showed that the publicly-traded parts were worth something like 70% (making up the numbers a bit here), and the company still had assets and revenues many, many multiples of that value. It was a clear buying opportunity.

Unfortunately, for Vingroup, we can’t say anything with that kind of certainty.

Ok. Enough for today. More on real estate tomorrow.

Real estate companies

I used to cover real estate companies. For 10 years. It was a long time. I enjoyed it, although I got a bit tired of talking about the same companies over and over. I love the process of initiating on a company, and when things are really happening (mergers, acquisitions, spin offs), it is really fun, because you have something to talk about.

The rest of the time, you are just kind of sitting there updating your charts on prices, and it can be hard to find something to write about.

Source: Vietstock.vn, WSJ.com, chart by Vietecon.com.

Now that I am looking at Vietnam, there are so many things to look at! It is exciting again. And Vietnamese real estate companies make up a good portion of the stock market as well - a quarter by some counts.

But when you really look into the market, there are only four companies that matter. What I mean by that is that these four are big enough so that foreigners can easily invest in them (and even then you run into foreign ownership limits). The rest would be considered small cap and difficult to make a big bet on.

And then looking at those top four, it turns out that three have significant ties to each other. Vingroup (VIC) owns majority stakes in Vinhomes (VHM) and Vincom Retail (VRE). That leaves just No Va Land (NVL) as an independent. The market caps of numbers 5-10 don’t add up to the market cap of No Va Land, the fourth largest.

Ultimately, while real estate is not a concentrated industry (there are tons of developers of all sizes), but within the stock market, only a few matter.

Source: Vietstock.vn, WSJ.com, chart by Vietecon.com. Change in share price is from Jan 2 to June 10.

The weird thing is that generally, P/E falls along with market cap. This could be because they probably don’t trade as much, and investors would demand a better risk-reward ratio (as reflected by the P/E) to invest in them.

Also, looking at performance year-to-date, the stocks have been all over the place. Vincom is up 79%, despite having lots of shops and malls closed. While, Vingroup is down 17%. Vinhomes is down 9%. But No Va Land is down just 5%. Looking further down the list, there is no general trend.

Earnings in 1Q weren’t predictive of performance either. Naively, you might think that a really good performance in 1Q would drive the stock up. Unfortunately, you would be gone. VRE had the best share price performance, but five companies had better profit changes than it did.

One of the main reasons for that is because the balance sheet matters so much more than the income statement for real estate companies than for other companies. If a home is “sold,” but it hasn’t been bought, then the company won’t recognize it on the income statement until it is delivered. It’s a real pain to figure out changes in each of these accounts, and that’s why the balance sheet changes is a much better reflection of what is really happening. Also, that means that the income statement, even more so than in other industries, is reflective of the past, sometimes the “distant” past, say 2-3 years when a home was sold “off plan” or off the master plan.

I will delve further into this over the next few days, but I thought it was interesting to take a quick look at what is happening with real estate.

Looking at rooftop solar trends in Vietnam

A few articles have come out over the past few days looking at the solar/renewables market in Vietnam.

Source: PV Magazine

There was some interesting data in this article, in particular. I didn’t realize that there have been “27,845 systems with 573MW installed capacity” added to the market in the past nine months.

Note that rooftop solar is defined as:

“[A] solar power system with photovoltaic panels installed on the roofs of civil works or industrial works and has a capacity of less than or equal to 1MWp and directly or indirectly connected to the electricity purchaser with the line of 35kV or less. 

So that could limit some larger industrial installations.

In spite of that (probably 1MWp is plenty big), most of it is installations are industrial. They see have the most to gain in absolute terms, plus they are used to making a decision based on cash flows over a long-term horizon. Residential is also quite high at 28%. Commercial (retail, shops, restaurants) may be a harder sell, because who pays for it? Is it the landlord or the tenant? And who gets the rewards?

According to this data, almost all the installations have been in the south, which is not really a surprise. We have talked about the new FiTs earlier (here). For every province but Ninh Thuan, they expire this year (next for Ninh Thuan), and then it looks like it goes to auctions (unless something has changed). That’s might be a good alternative, because it could allow more capacity to be installed in the north. Right now, it is better and more lucrative to install capacity in the south, because there is more sun. Without different prices for different areas, it makes sense to always go where the sun is brighter.

Separately, China, which has tried to be a leader on policy to address climate change (although is also a large and rising contributor to it), may be backsliding. But “as the economic pressure from Covid-19 increased, China began to loosen restrictions on industrial pollution and is inching back toward coal as a cheap source of power.” COVID actually helped reduce pollution globally, but let’s see what happens when the economy comes back.

Source: PV Magazine

Source: PV Magazine

Quick bites

Friday. Long week seeing what is happening in the US, plus COVID-19, plus Hong Kong, plus…who knows. When is 2020 going to be over! I am by nature an optimist, so I hope that we will come out of all this tumult with a renewed sense of wonder and respect for humanity. It’s too easy to be cynical, so let’s take the harder route and be optimistic. I’m not talking about being a pollyanna, but rather hoping and working toward the better. It’s a struggle every day.

Anyway, to some news:

Money supply: We have been talking about currencies and FX and inflation. Well, we got some figures from the SBV, and they aren’t such a surprise. M2 is up 3.4% ytd as of the end of May. We aren’t seeing inflation, but this is likely to pressure the currency. Also, bank credit is up 1.96% in the same period, which is probably not enough to drive a 5% growth target (I can’t remember if this is still the new target or now).

Uniqlo: In good news for Vietnamese growth, Uniqlo is opening a new store in HCMC this week. It’s the 3rd store for Uniqlo in the country. It’s big at 2,000 sqm (or 21,500 sqft for my American readers).

Riverway tourism: HCMC is adding three new waterway routes for tourists in the city. There are now 7 (including these 3, if I am reading the article correctly).

In less good news:

Drought in Long An: The Mekong delta province is facing yet another drought, with supply equal to only 50% of demand. And it looks like it isn’t going to change for the foreseeable future.

Nearly 736,000cu.m of water will be needed by 2030, according to the province’s planning on water supply. Currently, its plants can only supply 206,000cu.m of fresh water. It lacks more than 215,000cu.m of fresh water to serve industrial and urban development and people’s daily activities.

We have talked about saltwater intrusion for quite a while (it was one of the first things I looked at over a year ago). It is no surprise that fresh water is lacking and that efforts to deal with saltwater intrusion have hurt mangrove forests (that need brackish water).

This is going to be a running occurrance, especially as water gets help up by dams further upstream on the Mekong. The Vietnamese government needs to start figuring out a way to deal with this. It’s going to be tough and require significant changes.

There is a new environmental law coming down the track, and hopefully it will help address some of these concerns. It seems to be based on the good principle of “polluter pays.” This will only partially help drought-affected regions, but maybe it will help clean up water elsewhere.