hanoi client

Corporate Development

May 2015

Client Highlights

The group is a family run business with 15 years combined experience within brewing and EPC contract business lines. The Group operates a flat hierarchy with key operating decisions made by Mr Son (Managing Director and Majority Equity Owner) within a group that currently has a combined staff of 35.

Key managerial staff hold in excess of 25 years professional experience between them and hold cross functional responsibilities.

The Group are recognised internationally for their high quality design and manufacturing of distillery equipment, produced under the sister company Eresson Electro Mechanical Refrigeration JSC, and for their production of Beer and Spirits under the Eresson Beer & Alcohol One Member Co. Ltd.

Business relationships are strong with Government bodies and are extensive within the Banking community. The group hold the only privately held license for production of Spirits in the Country.

They own a 50 year lease to their production land with ample room to develop and rollout enhancements to production. Current production : 10 million litres of beer, 5 million litres of Cognac and Whisky and 3 million litres of Vodka are produced each year.

We seek to facilitate an increase in beer production to 50 million litres, a doubling of the spirits production and to develop the ASEAN footprint for the client. These increases in production are already matched by market demands domestically and regionally (China and ASEAN).

Additional funding is desired to establish a canning production facility, currently all cans are imported to the country as there are no production facilities in Vietnam, therefore opportunities to supply other breweries as a stand alone business line is considered in addition to the proprietary volume requirements.

www.one-asia.bizBusiness Excellence Partner

Proposition Brewery and Production

Options exists for a strategic Operating partner, sale of an equity stake in the business or sourcing for an expansion loan.

An equity stake is available for the group.

Investment amount : USD 50 million USD 65 million to acquire new operating equipment and technology to expand existing facilities within Vietnam

Strategic partner to provide access to maximise production, grow footprint within Vietnam and also within ASEAN

Exit strategy for investors - Convertible option subject to IPO

Investment Structure; 60 72 months with:

Indemnity Bond

1st Charge over Hanoi land (6,000 sq. meter valued at US$3,000 per sq. /meter)

Monthly Revenue sweep


Strategic Benefits

The proposition is not a zero sum investment structure, instead it seeks to jointly collaborate by penetrating and developing the fast growing beverage sector within ASEAN, MENA and China.

Specific benefits include :

Economies of scale through increased brewing capacity Inputs for brewing will be drastically increased, opportunity for securing the supply chain under the combined venture Management skills would be exchanged and jointly developed IT applications can be rolled out to be a uniform product throughout the strategically developed Group The biggest single barrier to growth is ability to maximise operating facilities. This is solved by utilising the land that is

already owned.

Current operational production is; Beer 10 million litres per annum

Whisky 2 million litres per annum

Cognac 3 million litres per annum

Vodka 3 million litres per annum


Group Financials Hanoi Revenues

Actual

Net Revenues: 2012 2013 2014 in USD

Projected

Net Revenues: 2015 2016 2017 2018 Receipts US$ 20.8m 22.3m 24.2m 24.3m Sales 3.4m 1.0m Ad Revenue 0.3m 0.3m 0.3m 0.3mGarage Rental 0.3m 0.3m 0.3m 0.3m Total US$ 21.4m 22.9m 28.2m 25.9m


Vietnam Alcohol

Beer is big business in Vietnam, which consumes around three billion litres annually.

Vietnam is the third-largest beer consumer in Asia, behind Japan and China, and the leading consumer in Southeast Asia, out-drinking even wealthier Thailand, according to industry figures.

Eresson is positioned regionally as a premium beer brand with bottled and draft beers available.


Beer has been brewed in Asia for 7,000 years but it's only in the past few years that it has overtaken Europe and the Americas to become the biggest beer-drinking continent. It's also the fastest growing beer market - a sign of a young, upwardly mobile, and increasingly hedonistic population.

The rate of beer drinking in Vietnam has increased by more than 200 percent over the past 10 years, according to state media, due in part to rising disposable incomes and to demographics.

Competitive landscape

The domestic beer market is dominated by three companies and every major town has its own brew :

Beer Saigon in southern Ho Chi Minh City

Beer La Rue in the central areas

Hanoi beer in the northern capital

With perceived low consumption major International drinks giants are hoping to persuade Vietnam's beer drinkers to move onto harder liquors, despite heavy taxes and a ban on advertising spirits.

Our Client is in the exclusive position of holding the only privately held distillery license in Vietnam, this enables them to produce Cognac, Whisky, Vodka and the core of current production - Beer


Vietnam Alcoholic Sales

Despite the rate of beer drinking in Vietnam increasing by more than 200 percent over the past 10 years, the per capita volumes are still moderate according to the World Health Organisation (WHO).

For now Vietnam barely makes it into the world's top 100 per capita alcohol consumers, according to WHO statistics, far behind big-drinking Russia, Britain and France.

With the increase in consumption beer remains the alcohol of choice, 97% again as provided by the WHO.


Global Alcohol Consumption per Capita

Source : WHO

Vietnam Alcohol Consumption by Beverage

Source : WHO

Vietnam Growth

With more than 88 million people, Vietnam has the third highest population after Indonesia and the Philippines in ASEAN, which has a combined population of more than 600 million. Vietnam has embarked on economic reforms for more than two decades, and attempts to liberalise and open up the domestic market for foreign companies have accelerated since the country joined the World Trade Organisation (WTO) in 2007.

Robust economic growth, helped to a good extent by continued inflows of foreign direct investment (FDI), has led Vietnams per capita disposable income to rise by 21% each year from 2006-2011, with per capita consumer spending rising at a similar rate.

Apart from being an alternative production base in Asia, Vietnam is increasingly emerging as a lucrative market for international brands, targeting the countrys expanding middle class which has a growing appetite for higher-end consumer goods and services.

Vietnam is a development success story.

Political and economic reforms (Doi Moi) launched in 1986 have transformed Vietnam from one of the poorest countries in the world, with per capita income below $100, to a lower middle income country within a quarter of a century with per capita income of over $2,000 by the end of 2014.

The external sector continues to be an important engine of growth. Export value in US dollar terms is estimated to have grown by 11.6% in 2014, outperforming other countries in the region.

Vietnams traditional labor-intensive manufacturing exports such as garments, footwear and furniture, continue to grow at a rapid clip.

Recent additions to the export basket such as hi-tech and high-value products (cell phones, computers, electronics, and automobile parts) have also maintained rapid growth, and have now become the largest share of export.

The Government has recently paid more attention to improving the business environment, with two Resolutions issued in March 2014 and March 2015, setting out concrete actions to remove obstacles to doing business in Vietnam, with a goal of achieving a business environment comparable to the average of the ASEAN-6 group.


Risks

In certain markets in Asia, governments have been steadily clamping down on alcohol marketing.

The latest one to implement such rules is Vietnam.

Late last year, Vietnam established strict procedures on alcohol. Under the new rules, before distributing alcoholic beverages, a producer must now submit to authorities, along with the application for a production license, documents concerning trademarks and conformity with technical and food safety standards.

Organisations and individuals engaged in small-scale liquor production in a liquor trading village will be exempt from the license requirement. Our client holds all the necessary permits and licenses.

Could Government clamp down on alcohol production?

Various measures have been rolled out to control consumption, however rapidly rising income levels and influx of foreign brands are only further fuelling demand. It is unlikely further measures will be rolled out whilst Vietnam pursues its open door policies

Could the Group fail to repay?

Vietnam is extremely sensitive to negative foreign press and any hint of possible default on foreign borrowings would be quickly dealt with. The Group Holding Company may offer additional guarantees if needed.

Can consumption tastes change?

Yes, we believe tastes will only develop and that the Client is in the position to adapt to changing tastes. The client has learnt his trade from European distilling practice and is fully aware how to adapt outputs.

In our opinion, Political risk remains the key risk and is one that is readily available from the insurance providers.


Summary

The alcohol industry within Vietnam and South East Asia is booming, increasing disposable incomes and developing tastes for brands are only fuelling the demand surge.

Our client is in an enviable position of holding one of the only privately held licenses in Vietnam, has a strong brand and distribution network and has an internationally recognised production capacity for producing and installing distillery hardware.

Operating margins are very strong with all earlier sunk costs for existing operations already written off.

The Group are seeking either a strategic partner OR sale of an equity stake within the business.

Upon confirmation of interest and non disclosure agreements a data room is available with full due diligence materials, a financial model and 3 years of audited financials. We look forward to meeting you again and introducing the principals.

Thank you


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The Group operates across the heart of South East Asia, we are ideally placed to help you grow your Asian business. With local talent, local knowledge and feet on the street we offer highly personalised solutions.

Contact Us

Contact Details

Hong Kong

6th Floor Wyndham Place

40 44 Wyndham Street

Central

Hong Kong

Indonesia

18th Floor, World Trade Centre II

Jl Jend Sudirman Kav. 29-31

Jakarta 12920

Indonesia

Singapore

47 Hill Street

#06-06 SCCI BUILDING

Singapore 179365

United Kingdom

36, Pantiles Close

St Johns, Woking

Surrey GU21 7PT

United Kingdom

Telephone : +62 21 2939 2006

Facsimile : +62 21 2939 2001

Website : www.one-asia.biz

Email : [email protected]

Additional Representation

Australia

Vietnam



Asia Representatives

hanoi client

Documents

production of beer

beer production

production of spirits

spirits production

production land

production facilities

current production

canning production facility