Vietnam Agribusiness_From farm to chopsticks 290208

Vietnam Agribusiness: From farm to chopsticks February 29th, 2008
Horizon Securities
EXECUTIVE SUMMARY
VIETNAM has progressed from a nation of chronic food shortages to one
of the world’s leading exporters of soft commodities. Vietnam is the
biggest export of pepper in world, second biggest for rice, coffee, and
cashew nuts, and fourth biggest for natural rubber. Vietnam has only
begun to show its potential in the agribusiness sector.
We believe the global agricultural sector is undergoing a major structural
change that will affect the entire food value-chain. Increases in global
demographics, wealth, and food demand, despite limited natural
resources, erratic weather patterns, and declining arable land and water
supplies, are resulting in supply-demand pressures across an
increasingly wide range of commodities. What’s more, we see these
macro trends, which are shaping the world’s agribusiness, revealing
themselves in Vietnam.
Of the 271 listed companies in Vietnam, there are currently 36
companies involved in the agribusiness value-chain. Together, they add-
up to more than 18% of the total market capitalization. Given that the
agribusiness sector accounts for more than 20% of Vietnam’s GDP and
employs more than 55% the country’s workforce, we built a listed shares
weighted agribusiness index, HRS Agri-index1, to track the performance
of the companies involved along the food value-chain.
We believe Vietnam’s agribusiness companies will face a host of
challenges and opportunities from the current dynamics in the global
agribusiness sector.
Rising local consumption and export demand against supply-side
constraints will necessitate farmers to increase yields. We believe this
will drive the demand for farm inputs namely fertilizers, seeds, and
machinery.
We believe that as input costs increase, the ones to benefit will be those
that can minimize price pressures from suppliers and/or customers.
These are companies that have already started to integrate upstream
and capable of securing stable input prices, and companies that have a
strong brand name that can pass the cost onto consumers.
We believe the rise of supermarkets in Vietnam will affect the whole
agribusiness value-chain. As modern procurement systems invariably
exert more demanding requirements from processors we see greater
demand for cold storage, logistics, warehousing, and processing
facilities.
As supermarkets tend to source products from medium to large
processors and wholesalers, we believe there will be opportunities for a
greater level of integration along the supply-chain. Moreover, we believe
there is an opportunity for corporations to set up large scale industrial
farms and factory farms, as more flexible land reforms have opened the
door to land consolidation and accumulation.
Finally, we believe there is an opportunity for branded FMCG food
products. Added-value food products have had a tremendous growth in
2007; five of the ten fastest growing health and convenience products
were food goods. What’s more, brand-aware Vietnamese consumers are
buying Vietnamese products; five of the ten fastest growing brands were
Vietnamese in 2007.
1 Horizon Securities clients can contact their account manager to get more information
on how they can invest in the same proportions set out in any of the HRS Indices.
Horizon Securities
Research team
Marc Djandji, CFA
Head of Research
marcdiandji@horizonsecurities.com
+84.90.318.9687
Khoi Pham
Analyst
khoipham@horizonsecurities.com
Phuong Le
Analyst
phuongle@horizonsecurities.com
HRS Agri-index, VN-index, HaSTC index
0
20
40
60
80
100
120
140
160
180
200
1/07 2/07 3/07 4/07 5/07 6/07 7/07 8/07 9/07 10/07
11/07
12/07 1/08 2/08
VN-Index_adj HASTCI_adj AGRI-Index_adj
Please refer to the important disclosures at
the end of this document.

2 Horizon Securities
Table of contents
I. THE END OF CHEAP FOOD............................................................................................... 4
1.1 THE FOOD SUPPLY-DEMAND EQUATION; DEMAND FACTORS................................................. 4
1.2 THE FOOD SUPPLY-DEMAND EQUATION; SUPPLY FACTORS .................................................. 7
1.3 THE FOOD SUPPLY-DEMAND EQUATION; SOFT COMMODITIES ARE TAKING CENTRE STAGE ....... 7
II. CHALLENGES AND OPPORTUNITIES FOR VIETNAM AGRIBUSINESS ........................10
III. LISTED AGRIBUSINESS ................................................................................................14
IV. FARM INPUT..................................................................................................................16
4.1 FERTILIZER SECTOR IN VIETNAM: RELYING HEAVILY ON IMPORTS.......................................16
4.2 CROP PROTECTION ......................................................................................................18
4.3 OPPORTUNITIES FOR THE SEED SECTOR .........................................................................19
4.4 FARMING MACHINERY ..................................................................................................20
4.5 ANIMAL FEED..............................................................................................................21
V. RESOURCE PRODUCERS ..............................................................................................21
5.1 CROP PRODUCTION: OPPORTUNITIES FOR LARGE-SCALE FARMING ENTERPRISES.................21
5.2 CONTRACT FARMING....................................................................................................22
VI. PROCESSING ................................................................................................................22
6.1 DAIRY PRODUCTS: UPTREND DEMAND AND LOW LEVEL OF SUBSTITUTE .............................22
6.2 SUGAR INDUSTRY: UNDER GOVERNMENT’S “PRICE MANAGEMENT”...................................23
6.3 CONFECTIONERY: SEVERE COMPETITION AMONG RIVALS..................................................25
6.4 AQUACULTURE PROCESSING: VIETNAM’S FOURTH LARGEST INCOME..................................26
6.5 SOFT DRINK: STILL ENOUGH ROOM FOR LOCAL PLAYERS TO GROWTH ................................27
VII. DISTRIBUTION: THE RISE OF SUPERMARKETS ........................................................28
VIII. COMPANIES IN FOCUS...............................................................................................30

Table of figures
FIGURE 1. WORLD’S MEAT CONSUMPTION VS. GDP ...................................................................................... 5
FIGURE 2. VIETNAM’S MEAT CONSUMPTION PER CAPITA.................................................................................. 5
FIGURE 3. FISHERIES AND LIVESTOCK OUTPUT VALUE (BLN’VND).................................................................... 5
FIGURE 4. AGRICULTURE, FISHERIES AND LIVESTOCK COMPOSITION ................................................................. 5
FIGURE 5. US GRAINS FOR ETHANOL PRODUCTION......................................................................................... 6
FIGURE 6. US BIOFUELS CONSUMPTION....................................................................................................... 6
FIGURE 7. WORLD’S GRAIN PRODUCTION AND CONSUMPTION.......................................................................... 7
FIGURE 8. WORLD UREA FERTILIZER PRICE ................................................................................................... 9
FIGURE 9. WORLD COFFEE PRICE................................................................................................................ 9
FIGURE 10. WORLD WHEAT PRICE .............................................................................................................. 9
FIGURE 11. VIETNAM FOOD CPI VS. TOTAL CPI ............................................................................................ 9
FIGURE 12. VIETNAM RICE PRICE................................................................................................................ 9
FIGURE 13. VIETNAM PIG AND PIGLET PRICE ................................................................................................ 9
FIGURE 14. VIETNAM INDUSTRY AND DOMESTIC CHICKEN PRICE...................................................................... 9
FIGURE 15. VIETNAM GASOLINE PRICE......................................................................................................... 9
FIGURE 16. TOP 10 GROWTH CATEGORIES ................................................................................................11
FIGURE 17. TOP 10 FASTEST GROWING BRANDS ........................................................................................11
FIGURE 18. VIETNAM AGRICULTURE GDP TO TOTAL GDP ............................................................................13
FIGURE 19. VIETNAM AGRICULTURE OUTPUT...............................................................................................13
FIGURE 20. VIETNAM AGRICULTURE EXPORT MIX .........................................................................................13
FIGURE 21. VIETNAM AGRICULTURE EXPORT VS. TOTAL EXPORT .....................................................................13
FIGURE 22. WORLD ARABLE LAND PER CAPITA............................................................................................13
FIGURE 23. VIETNAM ARABLE LAND FOR PADDY ..........................................................................................13
FIGURE 24. VIETNAM ARABLE LAND FOR PERENNIAL INDUSTRIAL CROPS .........................................................13
FIGURE 25. VIETNAM ARABLE LAND FOR ANNUAL INDUSTRIAL CROPS .............................................................13
FIGURE 26. HRS AGRI-INDEX..................................................................................................................14
FIGURE 27. HRS AGRI-INDEX COVERED STOCKS: VALUATION COMPARABLES ..................................................14
FIGURE 28. VIETNAM: AGRIBUSINESS VALUE CHAIN.....................................................................................15
FIGURE 29. LISTED COMPANIES IN FARM INPUT SECTOR...............................................................................16
FIGURE 30. LOCAL FERTILIZER PRODUCTION...............................................................................................16
FIGURE 31. VIETNAM’S FERTILIZER IMPORT................................................................................................16
FIGURE 32. FERTILIZER PRICES ................................................................................................................17
FIGURE 33. LOCAL SUPPLY VS. DEMAND ....................................................................................................17
FIGURE 34. MARKET SHARE 2007..........................................................................................................17
FIGURE 35. MARKET SHARE 2010..........................................................................................................17
FIGURE 36. VIETNAM GAS RESERVE AND PRODUCTION.................................................................................18
FIGURE 37. GROWTH OF THE BIOTECH CROP MARKET IN THE WORLD..............................................................19
FIGURE 38. LIST OF REGISTERED SEEDS IN VIETNAM ...................................................................................20
FIGURE 39. WORLD PADDY YIELD .............................................................................................................21
FIGURE 40. LISTED COMPANIES IN MILK SECTOR.........................................................................................22
FIGURE 41. VIETNAM: PRODUCTION OF MILK BY PROVINCE ...........................................................................23
FIGURE 42. LISTED COMPANIES IN SUGAR SECTOR ......................................................................................23
FIGURE 43. SUGAR MARKET IS HIGHLY FRAGMENTED ..................................................................................24
FIGURE 44. DOMESTIC SUGAR PRICE IN THE PAST 2 YEARS...........................................................................24
FIGURE 45. VIETNAM: TARIFF REDUCTION ROADMAP IN COMPLIANCE WITH WTO .............................................24
FIGURE 46. KEY PLAYER MARKET SHARES .................................................................................................25
FIGURE 47. LISTED COMPANIES IN CONFECTIONERY SECTOR.........................................................................25
FIGURE 48. VIETNAM AQUACULTURE EXPORT ..............................................................................................26
FIGURE 49. PRODUCTION OF AQUATIC PRODUCT..........................................................................................26
FIGURE 50. LISTED COMPANIES IN FISHERY SECTOR ....................................................................................26
FIGURE 51. EXPORTS REPRESENT A SIGNIFICANT PORTION OF AQUACULTURE PROCESSORS’ TOTAL REVENUE........27
FIGURE 52. LISTED COMPANIES IN SOFT-DRINK SECTOR...............................................................................27
FIGURE 53. TRADITIONAL SHOPPING STILL DOMINATES VIETNAM ...................................................................28
FIGURE 54. …BUT MODERN SHOPPING TREND IS ON THE RISE ......................................................................28
FIGURE 55. MODERN TRADING FORM IS CHANGING AGRIBUSINESS VALUE CHAIN .............................................28
FIGURE 56. LIST OF MAJOR SUPERMARKETS, HYPERMARKETS AND DEPARTMENT STORES IN VIETNAM ................29
FIGURE 57. RETURN ON AGRIBUSINESS STOCKS.........................................................................................31
FIGURE 58. AGRIBUSINESS SHARES ABSOLUTE PERFORMANCE (TOP 10 COMPANIES)......................................32

I. The end of cheap food
We believe the global agricultural sector is undergoing a major structural change that
will affect the entire food value-chain. The global macro trends that are shaping the
world’s agribusiness are also revealing themselves in Vietnam.
Continuous increases in global demographics, wealth, and food demand, despite
limited natural resources, erratic weather patterns, and declining arable land and
water supplies, are resulting in pressures across an increasingly, wide range of soft
commodities. Soaring oil prices have contributed to the increased inflationary
pressure of most agricultural crops: 1) by raising input and transportation costs, and
2) by boosting demand for agricultural crops used as feedstock in the production of
alternative energies. Hence, we are entering a period of short supply, yet robust
global demand for agricultural products and food, resulting in worldwide agflation2.
There can be no discussion concerning the current environment affecting
agribusiness without mentioning biofuels and China. The recent surge in demand for
biofuels and the greater hectarage allocated to biofuels feedstock which followed,
coupled with China’s insatiable hunger for animal protein have compounded the
current global agflation pressures. We believe these factors, have and will continue
to put pressure on the supply-demand equation for years to come.
Since the introduction of its economic reforms, Vietnam progressed from a nation of
chronic food shortages to one of the world’s leading exporters of agricultural
products, namely rice, coffee, rubber, and tea. Vietnam has only begun to show its
potential in the agriculture sector and at this stage most of its agribusiness is
involved in low margin commodity exports, rather than value-added processed foods.
Vietnamese agribusiness industry must confront issues of low production yields, high
costs, food safety, and deficiencies in the processing and distribution segments. In
view of Vietnam’s dependency on agriculture and exports of commodities, and given
that agribusiness accounts for more than 18% of total listed market capitalization,
Horizon Securities has sought out the listed agribusiness companies and has
highlighted some of the major opportunities and challenges these companies will
face.
1.1 The food supply-demand equation; demand factors
We observe three key catalysts driving the long-term demand for agricultural
production and agribusiness.
Demographics: Current world population is believed to have reached over 6.6 billion
and is expected to surpass 7.5 billion by 2025, growing by over 70 million per year.
That 70 million additional people a year worldwide need to bed fed, while the supply
of arable land has been on the decline. Current population growth compounded by
improvement in health and life expectancy in developing countries intensifies the
demand for food.
We see China and India as being key factors in the global food supply-demand
equation as they account for more than one-third of the world’s population. With a
population of about 1.3 billion, China feeds the largest number of consumers in the
world. China becoming a net importer of food would have major repercussions on
world demand and soft commodity prices. China has already shifted from being self-
sufficient to an importer for certain food staples, such as soybean of which it is now
the world's largest importer. In addition, we are facing the fact that China will soon
have to begin importing much more corn than the 100,000 tones it is currently
importing. According to Zhu Changguo, Chairman of the Chinese Cereals and Oils
Association, China could be forced to import 10 million tons of corn a year by 2010 to
feed its growing livestock industry and ethanol production.
2 Merrill Lynch, April 2007
We believe major structural
change in global agricultural
that will affect the entire food
value-chain
Agribusiness accounts for more
than 18% of Vietnam’s total
listed market capitalization
China has shifted from being
self-sufficient to an importer for
certain food staples

Vietnam’s population exceeded 85 million in 2007 with over 50% under 30 years old
and a median age of 26.4 years. Successful family planning efforts resulted in the
population growth rate dropping to 1% in 2007 from 2.1 percent in 1989. According
to the US Census Bureau the Vietnam’s population will be just short of 100 million by
2025, growing at an average 0.8 million per year.
Eating habits: Demand for animal protein, such as beef, pork, poultry, and dairy
generally increases with affluence. Increasing real income and urbanization in
emerging markets are encouraging higher levels of nutrition and diets that
incorporate more animal protein.
Figure 1. World’s meat consumption vs. GDP Figure 2. Vietnam’s meat consumption per capita
y = 24.201Ln(x) - 159.24
R2
= 0.6254
-20
0
20
40
60
80
100
120
140
160
0 10,000 20,000 30,000 40,000 50,000 60,000
GDP
Meatconsumption(kgpercapita)
-
5.00
10.00
15.00
20.00
25.00
30.00
35.00
40.00
45.00
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
kg/person
Source: Horizon Securities, FAO Source: Horizon Securities, FAO, USDA
Rising income, particularly in Vietnam’s urban areas induced a rapid increase in
demand for meat. Per capita meat consumption went from 16kg/year in 1987 to
38.17kg/year in 2007, 70% of which is pork meat. In response to this rising demand,
the private sector invested heavily in feed, breeding, and slaughtering/processing.
Between 2000 and 2006 the total value of livestock output increased at over 7%
GAGR while the total agricultural sector increased by 4%.
Figure 3. Fisheries and livestock output value
(bln’VND)
Figure 4. Agriculture, fisheries and livestock
composition
0
5,000
10,000
15,000
20,000
25,000
30,000
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Outputvalueoffishing&livestockat1994
constantprices
Oceanic fisheries Aquaculture Domestic animal Poultry Non - meat product
-
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
180,000
200,000
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
BillionVND
Domestic animals Poultry Non-meat products Grains Vegetables
Industrial crops Fruit crops Oceanic fisheries Aquaculture
Source: GSO Source: GSO
In 2000, the state selected pork and dairy as strategic livestock commodities. While
pork was chosen to develop an export market, dairy was developed in order to
reduce Vietnam’s reliance on milk imports. The number of live pigs increased from
18.9 million in 1999 to 26.9 million by 2006. Live cattle increased from just above 4
million in 1999 to over 6.5 million in 2006.
Thanks to better breeding methods, higher quality feeds, and new large-scale animal
farming facilities, the country was able to increase production capacity and yields.
Between 2000 and 2006, the average weight of a pig increased by over 30%, while
the amount of milk domestically produced went from 51,000 tons to over 200,000
tons per year.
more animal protein in
Vietnamese diet…
… means more livestock
production

Economic growth has also benefited the production of other types of animal proteins.
The Vietnamese poultry sector had been scaling up at a rapid pace in the last
decade. However, the outbreaks of Avian Influenza in 2004, 2005, and country-wide
culling of chicken, caused production to be scaled back significantly, as farmers
worry about loosing their flocks from further outbreaks in the future.
In 2001, the state formulated a plan to bolster fish farming in the Mekong Delta by
developing 700,000 hectares of land. Backed by strong government support, fish
and shrimp farming grew at over 19% CAGR from 2000 to 2007. There are now close
to one million fish farming hectares and the sector produces more than two million
tons of farmed aquatic products per year.
Most of the world's livestock is grain fed; grain account for 70% of the cost of the
animals’ diet. To raise poultry and pork, it takes an estimated 2 to 4 kg of grain to
produce 1 kg of meat, and for grain-fed cattle, the figure is an estimated 7 kg of grain
per 1 kg of meat. Therefore, as demand for grain-fed animal protein increases, so
does demand for animal feed. The increasing demand for animal feed has prompted
Hanoi to boost maize production (at the expense of arable land used to growing rice)
in an effort to reduce Vietnam’s dependency on maize imports for feed
manufacturing.
Biofuels: In response to higher energy prices, and fueled by government incentives,
the fledgling biofuels industry has started to grow at an explosive pace. This growth
was fuelled by a series of government policies aiming to reduce petroleum
dependency. In his State of the Union address, in January 2007, President Bush
declared that the US would need to expand the use of biofuels and invest in new
technologies to produce ethanol. Concretely, in December 2007, the adoption of the
United States Energy Bill doubled the Renewable Fuel Standard (RFS) for first
generation biofuels to 15 billion gallons per year by 2015.
Figure 5. US grains for ethanol production Figure 6. US biofuels consumption
0
20
40
60
80
100
120
1980 1985 1990 1995 2000 2005
MillionTons
0
50,000,000
100,000,000
150,000,000
200,000,000
250,000,000
300,000,000
350,000,000
400,000,000
450,000,000
500,000,000
2000 2001 2002 2003 2004 2005 2006 2007E
Demand(tons)
Source: Earth Policy Institute Source: US National Biodiesel Board
By far the largest producer of biodiesel in the world, the European Union has about
180 operational biodiesel plants which have a production capacity estimated at 10.2
million tons. Supportive government policies in the European Union have encouraged
biodiesel production.
The US National Biodiesel Board indicates there are 171 operational biodiesel plants
in the United States, with a total production capacity exceeding 8.48 billion liters.
Production capacity has rocketed in response to growing demand, which has risen
from 98 million liters in 2004 to 852 million liters in 2006.
Although we believe this will significantly disrupts the supply-demand structure of
major crops, government biofuels policy is the key variable that will determine the
extent of ethanol’s effect on soft commodity prices. In fact, in response to higher food
prices and research suggesting limited environmental benefits of starch-based
grain account for 70% of the
cost of the animals’ diet
… more grain for animal feed
results in less grain for food

biofuels technology, there is growing concern, particularly in Europe, about the
viability of diverting arable land for biofuels feedstock.
1.2 The food supply-demand equation; supply factors
Over the past 50 years, the green revolution had enabled world food production to
outpace rising demand (and sustain a low-priced food environment). New
technologies and agricultural techniques such as crop rotation, mass production and
use of agrochemicals, expanded irrigation, and the introduction of genetically
superior, disease-resistant plants brought about considerable benefits. However, the
demand has caught up while supply has slowed. In Vietnam, major investments in
irrigation had contributed to past sector growth, for rice in particular, but this
production has begun to plateau.
Among the most serious constraints to increasing yields in the face of population
growth are: 1) shortages of arable land, 2) degradation of land resources, 3) loss of
agricultural land due to urbanization, 4) diversification to non-food of arable land, 5)
water shortages and pollution, 6) irrigation problems, 7) collapsing oceanic fisheries,
and 8) climate change. As a result capacity to increase food production may well be
shrinking.
At the time of writing this report, we are reminded of Vietnam’s agri-sector’s
vulnerability to adverse weather and risks of disease/pests outbreaks. A record-long
cold weather in the North of Vietnam has caused over 60,000 cattle to die, and has
destroyed over 150,000 hectares of rice paddies. Water shortages caused by low
rainfall in the North of Vietnam, are hurting agriculture in the Red River Delta.
There are also growing concerns about elevated risks of another bird flue outbreak
and potential blue-ear outbreak. Since the beginning of the year there have been
H5N1 outbreaks in seven provinces in the country. Although Vietnam has been
vaccinating poultry for years, there is a clear and present risk that farmers may have
to cull millions of birds as they did in 2004 and 2005.
1.3 The food supply-demand equation; soft commodities are taking centre stage
Soft commodities prices have soared to decade-highs affecting producers,
consumers, and governments everywhere. The triggering factor was the sudden
increase in demand for grain used to manufacture ethanol in the US. From 2006 to
2007, grain used for ethanol production jumped from 54 million tons to 81 millions,
effectively doubling the
annual growth in world grain
demand.
The most significant year-
over-year price increase has
been for wheat, which rose by
an average 74.5%. World
maize prices increased by
nearly 20% in 2007, but this
follows an increase of almost
45% in the previous year. For
rice, world prices registered a
17% rise year-over-year.
Declining global stockpiles of
soft commodities are
exacerbating current price pressures. Global inventories of grains are currently at a
25-year low.
What sets apart the current agri-sector conditions to previous ones is the fact that
prices are soaring, not just for a selected few, but for nearly all, major food and feed
commodities.
Figure 7. World’s grain production and consumption
0
500
1,000
1,500
2,000
2,500
1960 1970 1980 1990 2000
MillionMetricTons
Production Consumption
Source: USDA
From 2006 to 2007, grain
used for ethanol production
jumped from 54 million tons to
81 millions

As these events permeate into the food value-chain in Vietnam, processors and
consumers are feeling the crunch. Furthermore, a politic of food scarcity is emerging
as Hanoi has limited rice exports in an attempt to limit the rise in domestic food
prices. In 2007, Vietnam’s Consumer Price Index rose by 12.6%, while food and
foodstuff jumped 19%, the highest increase among the CPI’s components. Food and
foodstuff alone, account for more than 42% of the CPI basket.
Fighting inflation in Vietnam
We are concerned about Vietnam’s rampant inflation and the ramifications it will have on the
economy and consumer spending. However, the current inflation environment is not only
inherent to Vietnam, as we point out throughout this report; there are global pressures at work
that are affecting inflation everywhere.
It’s always difficult to know why central bankers do what they do, and we are uncertain about
how the State Bank’s recent moves will pan out in the economy. First, the State Bank
announced it would reduce the money supply by approximately VND34,000 billion (US$2.13
billion) by requiring commercial banks 1) to increase their reserves by 1% to 11% of their
deposits, and 2) by forcing commercial banks to buy treasury bonds to be issued on 17 March
2008. Then, last week the State Bank, through open market instruments, injected VND39,000
billion (US$2.44 billion) into the monetary market with a maturity date on 8 March 2008. In
short, the State Bank withdrew money and injected it right back, but did this through different
channels. Almost instantly after these measures were announced, a cold chill ran across the
red hot real estate market. Commercial banks may have interpreted these measures as a
message that they needed to restructure their mortgage portfolio. It is still unclear, however,
how these measures will affect the economy in the short to medium term and whether they will
be successful at curbing inflation.

Figure 8. World urea fertilizer price Figure 9. World coffee price
0
50
100
150
200
250
300
350
400
450
9/27/2002
12/26/2002
3/26/2003
6/24/2003
9/22/2003
12/19/2003
3/18/2004
6/16/2004
9/14/2004
12/13/2004
3/11/2005
10/5/2005
1/3/2006
4/3/2006
6/30/2006
9/28/2006
12/27/2006
3/27/2007
6/25/2007
9/21/2007
US$/ton
-
500
1,000
1,500
2,000
2,500
11/14/2002
2/10/2003
5/16/2003
8/26/2003
11/18/2003
2/17/2004
5/7/2004
7/28/2004
10/18/2004
1/6/2005
3/29/2005
6/17/2005
9/7/2005
11/28/2005
2/16/2006
5/9/2006
7/28/2006
10/18/2006
1/8/2007
3/29/2007
6/19/2007
9/7/2007
11/28/2007
US$/ton
Source: Reuters Source: Reuters
Figure 10. World wheat price Figure 11. Vietnam food CPI vs. total CPI
90.0
95.0
100.0
105.0
110.0
115.0
120.0
125.0
Aug-02
D
ec-02
Apr-03
Aug-03
D
ec-03
Apr-04
Aug-04
D
ec-04
Apr-05
Aug-05
D
ec-05
Apr-06
Aug-06
D
ec-06
Apr-07
Aug-07
D
ec-07
Vietnam CPI Food CPI
Source: futures.tradingcharts.com Source: GSO
Figure 12. Vietnam rice price Figure 13. Vietnam pig and piglet price
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
Jan-01
M
ay-01
Sep-01
Jan-02
M
ay-02
Sep-02
Jan-03
M
ay-03
Sep-03
Jan-04
M
ay-04
Sep-04
Jan-05
M
ay-05
Sep-05
Jan-06
M
ay-06
Sep-06
Jan-07
M
ay-07
Sep-07
Jan-08
VND/kg
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
Jan-01Apr-01Jul-01Oct-01Jan-02Apr-02Jul-02Oct-02Jan-03Apr-03Jul-03Oct-03Jan-04Apr-04Jul-04Oct-04Jan-05Apr-05Jul-05Oct-05Jan-06Apr-06Jul-06Oct-06Jan-07Apr-07Jul-07Oct-07Jan-08
VND/kg
Piglet Live pig
Source: Agriculture Information Center of Vietnam Source: Agriculture Information Center of Vietnam
Figure 14. Vietnam industry and domestic chicken
price
Figure 15. Vietnam gasoline price
0
20,000
40,000
60,000
80,000
100,000
120,000
Jan-06
Feb-06
Mar-06
Apr-06
May-06
Jun-06
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Aug-06
Sep-06
Oct-06
Nov-06
Dec-06
Jan-07
Feb-07
Mar-07
Apr-07
May-07
Jun-07
Jul-07
Aug-07
Sep-07
Oct-07
Nov-07
Dec-07
Jan-08
Feb-08
VND/kg
Industry Chicken Domestic Chicken
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
Jan-01
May-01
Sep-01
Jan-02
May-02
Sep-02
Jan-03
May-03
Sep-03
Jan-04
May-04
Sep-04
Jan-05
May-05
Sep-05
Jan-06
May-06
Sep-06
Jan-07
May-07
Sep-07
Jan-08
VND/liter
Source: Agriculture Information Center of Vietnam Source: Agriculture Information Center of Vietnam

II. Challenges and opportunities for Vietnam agribusiness
Government reforms were successful in stimulating agricultural production to the
extent that Vietnam moved from being a rice importer to the world’s second largest
rice exporter. Despite positive strides in the sector, Vietnamese farmers still face
many challenges and continue to operate with very limited capital. Outdated
machinery is common and the majority of Vietnam's fields are still tended by non-
mechanical means, mainly manual labor or water buffalo.
Poor transportation systems and the lack of post-harvest handling, storage, and
processing facilities are causing high spoilage rates. The MARD estimates that 20%
of all production is lost due to inadequate storage and processing equipment.
To sum up, since the late 1990’s Vietnam’s agribusiness increased owing to strong
domestic demand for food and rising agri-exports. However, considering the need for
investments in the sector and poor fixed asset base, we are concerned about the
ability of Vietnam’s agribusiness companies to maintain margins amid surging soft
commodities costs.
We believe, however, that there will be significant growth opportunities for well
positioned players all along the agribusiness value-chain, from farm inputs to
retailers, as Vietnam’s agribusiness sector must increase production, yields, quality
of products, processing capabilities, handling, packaging and logistics.
Rising local consumption and export demand against supply-side constraints (limited
land, water supply, low reserves, and weather) will necessitate farmers to increase
yields. We believe this will drive the demand for farm inputs such as agrochemicals,
seeds, and machinery. While there is no new capacity expected before 2010, the
growing demand for fertilizer is leading to rising imports. We believe domestic
fertilizer producers could benefit from a potential government “release” of domestic
prices as these have yet to be aligned with world prices.
We believe that as input costs increase, the ones to benefit will be those that can
minimize price pressures from suppliers and/or customers. These are companies
that have already started to integrate upstream and capable of securing stable input
prices, and companies that have a strong brand name that can pass the cost onto
consumers.
Moreover, we believe there is an opportunity for corporations to set up large scale
industrial farms and factory farms, as more flexible land reforms have opened the
door to land consolidation and accumulation.
Additionally, exports of food products can become a valuable growth driver for the
agribusiness sector if Vietnam is able to improve price competitiveness, quality of
products, and move towards higher-value products. Domestic producers must meet
all the processes and hygiene requirements set by importing countries, regarding
farming, harvesting, processing and packing.
Over the past several years, Vietnam's urban economy has begun a steady transition
from traditional open-air markets to modern supermarkets and shopping centers.
Although early stage, this trend alone has increased the extent of the food value-
chain. The success of large-scale retailing and food exports is depends on an
efficient supply chain. As modern procurement systems invariably exert more
demanding requirements from processors we see greater demand for cold storage,
logistics, warehousing, and processing facilities.
Finally, the urban middle-class accounted for 55% of the urban population in 2006,
up from 33% in 2003. With a fast-growing urban middle-class and demand for higher
value products in Vietnam’s cities, we believe there is an opportunity for branded
FMCG food products. Added-value food products have had a tremendous growth in
2007; five of the ten fastest growing health and convenience products were food
Vietnam moved from being a
rice importer to the world’s
second largest rice exporter
Rising local consumption and
export demand drive the
demand for farm inputs
…fast-growing urban middle-
class and demand for high-
value products in Vietnam’s
cities create opportunity for
branded FMCG food products

goods. What’s more, brand-aware Vietnamese consumers are buying Vietnamese
products; five of the ten fastest growing brands were Vietnamese in 2007.
Figure 16. Top 10 growth categories
(value growth % 2007 vs. 2006)
Figure 17. Top 10 fastest growing brands
82%
68%
59%
57%
53%
51%
46% 45%
36%
32%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
Ready-to-drink
teaM
ilk
Pasterizeed
Tonic
drink
Razor
InsecttrapToner/A
stringent
Adultdia
per
Sun
protection
Ice
cream
M
ilk
pow
derforinfant
17.0%
11.4%
10.3%
7.9% 7.7% 7.4%
6.4%
5.6%
5.1%
4.7%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
18.0%
Khong do
RTD Tea
(THP)
Vinamilk
Ice
cream
Trang
Tien Ice
Cream
Sting
(Pepsi)
Maggi
(Soya
sauce)
C2 (RTD) Tw ister
(Pepsi)
Vinh Hue
(Soya
Milk)
Chinsu
(Soya
sauce)
Aji-Ngon
(MSG)
Source: TNS Worldpanel Source: TNS Worldpanel

Vietnam Agribusiness fast facts
Vietnam ranks first in export of
pepper, second in rice, coffee,
cashew nuts, and top-five of
natural rubber and seafood.
Rice productivity in Vietnam is at
4.89 tons per hectares one of the
highest level in the world.
Average farm size in Vietnam is at
0.5ha; three hundred times lower
than that in the US.
Paddy area has lost 6.5%, from
7.7mln ha in 2000 to 7.2mln ha
in 2007. 51.5% of paddy land is
in the Mekong Delta.
Since the “Economic Reform” in
the 90s, share of agriculture in
overall GDP has come down to
more than 20% in 2006 from
40% in 1990.
Total investment in agriculture
stands at 4.17% of GDP with
public investment accounting for
2.19% of GDP.
The Government is now targeting
3.0-3.5% growth in agriculture
over the next 5 years. The
agriculture sector achieved a
4.1% CAGR over the past 10
years.
Total agro-forestry export value to
grow at 12% pa to 2010. Export
value in 2007 has already
surpassed government’s targets
for 2010.
60mln or 72.88% of the total
population reside in Vietnam’s
rural area. Agribusiness employs
more than 55% of the country’s
workforce.
10mln rural households, at the
current household income level of
US$1,000 pa, make up a sizable
buying power.
In the past 5 years, the
Government has stipulated Law
on Land, Law on Cooperative, Law
of Forest Protection &
Development and many others
regulations on framing and
agriculture activities.
Vietnamese companies are now
allowed to trade in commodities
exchanges through local banks.
The list of 10 sensitive products,
governed by the state, includes
fertilizer, rice, foodstuffs, cement,
steel, gasoline, sugar, salt, paper
and medicines.
State finance system for
agriculture includes Agriculture
Bank, Bank for Public Policies and
926 public funds.
Only 50% of farmers have access
to state credit system with
preferential interest rates 7.2-
8.4% pa.
In 2006, the State’s spending on
agriculture reached US$776mln,
up 7% yoy.
The Government is spending
VND157tln (US$9.8bln) to
improve rural infrastructure –
irrigation, roads, electrification,
R&D and training.
Fisheries, industrial crops and
food processing are the major
focus areas for Vietnam’s agri-
industry.
Fish farming production has
increased nine-fold since 1990.
Since the beginning of 2007,
exported rice and coffee prices
have risen 40% and 32%
respectively.
Price of rice increases 2x-3x along
the supply chain due to poor
infrastructure, inadequate storage
and excessive intermediation.
Vietnam’s beer sales totaled
US$2.2bln in 2007. The alcoholic
drink industry has grown at 10%
CAGR in the past 5 years.
Only 10% of agri-product in
Vietnam is processed. The
Government plan to increase the
figure to 20% by 2010.
Food processing makes up 8.1%
of industrial output and has been
growing at 13% CAGR in the past
5 years.
Vietnam’s food retailing sector is
a US$10bln, growing at 11%
CAGR in the past 5 years.
Around 76mln (90%) Vietnamese
people still shop at traditional wet
market and groceries.
Co-op Mart is the leader in the
retailing business with 27
supermarkets and plans to
expand to 100 locations by 2010.
Metro Cash&Carry, BigC, Parkson,
Lotte Department, Dairy Farm are
already in Vietnam. While Wal-
Mart, Carrefour have Vietnam in
their expansion plans.
There are 36 listed companies in
the agribusiness sector, on Ho Chi
Minh Stock Exchange and Ha Noi
Trading Center.

Figure 18. Vietnam agriculture GDP to total GDP Figure 19. Vietnam agriculture output
-
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
TotalGDP(BlnVND)
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
%Agriculture,forestryandfisherytoGDP
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
Food Vegetable
and bean
Industrial
crop
Fruit crop
Figure 20. Vietnam agriculture export mix Figure 21. Vietnam agriculture export vs. total
export
Wood and wooden
products
Fishery products
Other
Rice
Rubber
Coffee
Vegetables & fruit
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
MillionUSD
Total Agri Export Total Export
Figure 22. World arable land per capita Figure 23. Vietnam arable land for paddy
0
100
200
300
400
500
600
700
800
Oceania North America Europe South
America
Sub-Saharan
Africa
Middle East &
North Africa
Central
America &
Caribbean
Vietnam
Population(Million)
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
Hectaresofarablelandpercapita
Population Arable Land per capita
-
1,000.0
2,000.0
3,000.0
4,000.0
5,000.0
6,000.0
7,000.0
8,000.0
9,000.0
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
thousandha
Source: Earthtrends Source: GSO
Figure 24. Vietnam arable land for perennial
industrial crops
Figure 25. Vietnam arable land for annual
industrial crops
0
100
200
300
400
500
600
700
800
900
1990 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007E
Thousandha
Sugar-cane Cotton Jute Sedge Peanut Soya-bean Tobacco
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Thousandha
Tea Coffee Rubber Pepper Cashew nut Coconut

III. Listed agribusiness
Of the 271 listed companies in
Vietnam, there are currently 36
companies involved in the
agribusiness value-chain.
Agribusiness in Vietnam’s
capital markets accounts for
more than 18% of the total
market capitalization. In
addition, of the thirty largest
market caps, agribusiness is
the third most predominant
industry after real estate and
construction, and financial
services. Given the sector’s
significant contribution to
Vietnam’s GDP, we built a listed shares market cap weighted agribusiness index to
track the performance of the companies involved along the food value-chain.
There are four parts to the agribusiness value-chain; farm inputs, production,
processing, and distribution/marketing. Most of the listed companies are mainly
processors with some level of upstream and possibly downstream integration.
Horizon Securities believes that as a leading commodities exporter Vietnam will face
a host of challenges and opportunities from the current dynamics in the global
agribusiness sector. Horizon Securities has sought out the listed agribusiness
companies and has highlighted some of them in this report.
Figure 27. HRS Agri-index covered stocks: Valuation comparables
Net sales EBIT % yoy EBIT % yoy EBIT % yoy OPM
FY05 FY06 FY07 FY05 FY06 FY07 FY07
DPM.HM PVFCCo Fertilizer (urea) 2,537,555 3,050,829 3,779,038 22% 790,106 N/A 919,765 16% 1,269,695 38% 34%
HSI.HM MF JSC Fertilizer (NPK) 137,778 389,476 656,894 118% 5,832 N/A 26,911 361% 56,200 109% 9%
TSC.HM TSC Fertilizer (trading) 879,702 1,138,957 1,375,090 25% 4,620 179% 12,511 171% 86,267 590% 6%
HAI.HN HAI Crop protection 358,864 415,502 496,545 18% 44,600 N/A 29,648 -34% 46,080 55% 9%
NSC.HM NSC Seed 102,579 96,552 140,388 17% 8,957 N/A 6,062 -32% 12,708 110% 9%
SSC.HM SOUTHERN SEED Seed 127,919 129,861 155,857 10% 29,280 10% 24,654 -16% 24,957 1% 16%
TRI.HM TRIBECO SAIGON Berverage 306,451 293,779 384,639 12% 7,095 -24% 16,095 127% 17,421 8% 5%
SCD.HM CHUONG DUONG BEV. Berverage 148,021 194,485 238,894 27% 17,932 N/A 18,625 4% 20,238 9% 8%
VTL.HN THANG LONG JSC Berverage 72,116 63,390 75,164 2% 11,696 13% 11,099 -5% 10,782 -3% 14%
VDL.HN LAM DONG FOOD Berverage 136,174 130,238 151,845 6% N/A N/A N/A N/A 10,398 N/A 7%
IFS.HM INTERFOOD Berverage 507,213 641,686 723,272 19% 67,913 N/A 71,363 5% 86,808 22% 12%
VNM.HM VINAMILK Dairy 5,638,784 6,619,102 6,821,864 10% 524,448 2% 594,186 13% 671,963 13% 10%
HNM.HN HANOIMILK Dairy 288,076 327,972 323,829 6% 26,411 N/A 18,149 -31% 20,231 11% 6%
KDC.HM KINH DO CORP Confectionery 798,617 998,149 1,233,119 24% 111,219 10% 131,881 19% 156,464 19% 13%
NKD.HM NORTH KINH DO Confectionery 354,789 419,429 561,580 26% 43,824 49% 55,506 27% 69,406 25% 12%
BBC.HM BIEN HOA CONF. Confectionery 285,362 341,331 453,975 26% 18,854 24% 19,022 1% 22,998 21% 5%
HHC.HN HAI HA CONF. Confectionery 330,058 325,830 341,248 2% 16,800 N/A 18,957 13% 22,975 21% 7%
ABT.HM BENTRE AQUATEX Aquaculture 282,433 331,215 429,706 23% 9,996 79% 26,627 166% 32,397 22% 8%
ICF.HM INVESTMENT COM. Aquaculture 281,202 283,154 326,025 8% 12,441 N/A 23,070 85% 25,122 9% 8%
ANV.HM NAM VIET CORP Aquaculture 1,212,316 2,707,076 3,193,437 62% N/A N/A 299,334 N/A 390,237 30% 12%
MPC.HM MINH PHU SEAFOOD Aquaculture 2,027,425 1,352,531 N/A N/A N/A N/A 98,861 N/A N/A N/A N/A
VHC.HM VINH HOANG Aquaculture 507,014 1,516,245 1,789,557 88% 6,903 N/A 98,579 1328% 142,636 45% 8%
AGF.HM AN GIANG FISH. Aquaculture 786,182 1,190,906 1,233,734 25% 30,484 8% 52,339 72% 46,277 -12% 4%
ACL.HM CUU LONG FISH. Aquaculture 88,475 311,275 537,449 146% N/A N/A 41,022 N/A 65,271 59% 12%
TS4.HM SEAFOOD NO.4 Aquaculture 83,880 151,827 172,904 44% 3,623 -13% 6,546 81% 7,850 20% 5%
SJ1.HM SEAFOOD NO.1 Aquaculture 130,781 147,895 145,553 5% 5,650 N/A 4,980 -12% 6,240 25% 4%
FMC.HM SAO TA FOOD Aquaculture 970,807 925,197 999,764 1% 37,581 N/A 33,782 -10% 36,511 8% 4%
FBT.HM FAQUIMEX Aquaculture 373,460 457,661 N/A N/A 21,331 N/A 35,912 68% N/A N/A N/A
LAF.HM LAFOOCO LONG AN Aquaculture 784,550 699,904 626,503 -11% 17,390 -55% (14,139) -181% 35,453 351% 6%
SGC.HM SA GIANG IM. Food processor 98,100 88,489 118,917 10% 15,013 N/A 16,840 12% 17,671 5% 15%
SAF.HM SAFOCO Food processor 203,970 272,065 333,205 28% N/A N/A 8,411 N/A 10,429 24% 3%
CAN.HM HALONG FOOD Food processor 191,255 204,206 309,086 27% 10,647 84% 11,289 6% 13,074 16% 4%
TAC.HM TUONG AN OIL Cooking oil 1,181,594 1,515,469 2,554,229 47% 22,333 N/A 28,868 29% 102,790 256% 4%
LSS.HM LAM SON SUGAR Sugar 651,976 626,661 813,958 12% N/A N/A 115,718 N/A 118,805 3% 15%
BHS.HM BIEN HOA SUGAR Sugar 540,656 766,123 643,945 9% 53,292 22% 69,429 30% 44,783 -35% 7%
SBT.HM BOURBON TAYNINH Sugar 629,791 679,860 674,272 3% 119,365 173% 173,847 46% 149,109 -14% 22%
Sales growth
2Y-CAGR
Company nameTicker Subsector
Source: Horizon Securities, Reuters, company’s report
3 Horizon Securities clients can contact their account manager to get more information on how they can
invest in the same proportions set out in any of the HRS Indices.
Figure 26. HRS Agri-Index3
0
20
40
60
80
100
120
140
160
180
200
1/07 2/07 3/07 4/07 5/07 6/07 7/07 8/07 9/07
10/07
11/07
12/07 1/08 2/08
VN-Index_adj HASTCI_adj AGRI-Index_adj
Source: HOSE, HASTC, Horizon Securities

Figure 28. Vietnam: Agribusiness value chain
• Fertilizers • Plantation • Meat processing • Logistics
• Crop protection • Crop production • Aquaculture • Strorage
• Seed • Fishery • Confectionary • Suppermarkets
• Machinery • Livestock • Sugar • Hypermarkets
DPM Petrovietnam
HSI General Fertilizer
TSC Techno–Agricultural
HAI H.A.I JSC
NSC National Seed
SSC Southern Seed
ABT Ben Tre Aquaproduct
ICF Investment Commerce
ANV Nam Viet Fisheries
MPC Minh Phu Seafood
VHC Vinh Hoan
AGF An Giang Fisheries
ACL Cuu Long Fisheries
TS4 Seapriexco 4
LSS Lam Son Sugar
BHS Bien Hoa Sugar
TRI Tribeco Sai Gon
SCD Chuong Duong Beverage
VTL Thang Long Wine
VDL Lam Dong Foodstuffs
KDC Kinh Do Corp.
NKD North Kinh Do
BBC Bien Hoa Confectionary
SBT Sucrerie De Bourbon TN
HHC Hai Hai Confectionary
SJ1 Seafood No. 1
FMC Sao Ta Food
FBT Ben Tre Forestry
LAF Lafooco Long An
IFS Interfood
SGC Sa Giang Import Export
SAF SAFOCO
CAN Canfoco Ha Long
TAC Tuong An Oil
VNM Vietnam Diary Products
HNM Ha Noi Milk
DistributionProcessingProductionFarm Input
Source: Horizon Securities

IV. Farm input
The farm input segment includes companies engaged in fertilizers, crop protection
(such as pesticides, fungicides, and insecticides), farming machinery, seed, and feed.
These products help to enhance the productivity of land, crops, and animal
husbandry. The key drivers for this sector involve the increasing concerns for higher
productivity yields resulting from rising food demand against depleting arable land.
We believe the rising income in Vietnam’s rural areas will help farmers deal with the
current rise in prices of farm inputs.
Figure 29. Listed companies in farm input sector
Ticker Name Sector
Market Cap.
(VND’mln)
Net sales
(VND’mln)
EBITDA
Margin
Net Profit
Margin ROA ROE
DPM.HM PVFC Urea fertilizer 21,470,000 3,779,038 NA 35.0% 21.3% 29.3%
HSI.HM General Fertilizer NPK fertilizer 275,000 656,894 NA 3.8% 5.2% 31.8%
TSC.HM TSC Fertilizer trading 694,128 1,375,090 NA 5.0% 17.8% 57.3%
HAI.HN HAI Crop protection 558,600 496,545 9.5% 10.3% 14.3% 30.2%
NSC.HM National Seed Seed 123,840 140,388 9.9% 9.6% 12.6% 20.2%
SSC.HM Southern Seed Seed 421,000 155,857 NA 14.1% 14.8% 18.1%
Source: Horizon Securities, company’s data
4.1 Fertilizer sector in Vietnam: relying heavily on imports
Increasing at a 4.5% CAGR over the past 5 years, by 2007 Vietnam’s aggregate
fertilizer demand had reached 6.2 million tons. Due to insufficient domestic
production capacity, the country has to import more than 61% of the yearly demand,
making it one of the biggest fertilizer importers in the world. In order to encourage
local production, the government has accorded a number of favorable policies to
fertilizer producers, such as low VAT (5%), subsidies on transportation and raw
material costs, and privileged access to natural resources.
Since fertilizer is on the list of the ten key products4 under the government’s “price
management”, the government “recommends” a selling price range to local
producers. The end result is that fertilizer prices in Vietnam have not moved in step
with the world prices. In 2007, as the international urea prices had surged by 104%
year-over-year, local prices increased by just about 20%.
Although revenues have been capped, local producers are able maintain their profit
margins thanks government subsidies and low raw material costs. As Vietnam fulfills
its WTO’s agreements and more state-own enterprises are privatized, we expect less
price controls and subsidies from the state.
Figure 30. Local fertilizer production Figure 31. Vietnam’s fertilizer import
-
500
1,000
1,500
2,000
2,500
3,000
2000 2001 2002 2003 2004 2005 2006 2007
10% CAGR
-
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
2001 2002 2003 2004 2005 2006 2007
'000tons
Urea (N) Phosphate (P) Potash (K) NPK Others
Phu My Fertilizer
commenced operation
Source: Vietnam Fertilizer Association Source: GSO
4
10 products include: fertilizer, food, food stuffs, cement, steel, gasoline, sugar, salt, paper and medicines
Vietnam has to import more
than 61% total fertilizer
consumption… making it
biggest fertilizer importers in
the world.
The key drivers for this sector
involve the increasing concerns
for higher productivity yields
resulting from rising food
demand against depleting
arable land

Urea market (N)
The state monopolizes Vietnam’s urea market. Although there are hundreds of
fertilizer trading companies, there are only two urea producers; Petrovietnam
Fertilizer & Chemicals Plc. (PVFC), listed on HOSE, and Habac Nitrogenous Fertilizers
& Chemical Ltd. (HANICHEMCO), which is a subsidiary of the state-owned
conglomerate, Vietnam National Chemical Corporation (VINACHEM)5.
In 2007, Vietnam consumed more than 1.7mln tons urea, 45% of which was
imported, mainly from China. The Ministry of Agriculture and Development estimates
urea demand to increase by 8% per year to 2.1mln tons by 2010. Because demand
still outstrips the domestic supply, we believe that in the short-run, local prices will
continue to increase despite the government’s effort to minimize the increase.
Moreover, China, the largest fertilizer exporter to Vietnam, in a bid to ensure supply
to its farmers, decided last month to raise export tariffs on urea fertilizer.
By 2010, the Hanoi plans to establish two more state-owned fertilizer companies
with a total built up production capacity of 1.3 million tons of urea per year, hence
providing enough supply to the market.
Figure 32. Fertilizer prices Figure 33. Local supply vs. demand
-
100
200
300
400
500
600
Sep-02D
ec-02M
ar-03Jun-03Sep-03D
ec-03M
ar-04Jun-04Sep-04D
ec-04M
ar-05Jun-05Sep-05D
ec-05M
ar-06Jun-06Sep-06D
ec-06M
ar-07Jun-07Sep-07D
ec-07
VN UREA WORLD UREA
(1,500)
(1,000)
(500)
-
500
1,000
1,500
2,000
2,500
3,000
2008 2009 2010
Total Demand Total Local Supply Shortage/Surplus
Source: Reuters, Price Department Source: Vietnam Fertilizer Association
Figure 34. Market share 2007 Figure 35. Market share 2010
Phu My Fertilizer
45%
Ha Bac Fertilizer
10%
Import
45%
Phu My Fertilizer
37%
Ha Bac Fertilizer
7%Ninh Binh Fertilizer
23%
Ca Mau Fertilizer
33%
Source: Horizon Securities, Vietnam Fertilizer Association Source: Horizon Securities, Vietnam Fertilizer Association
PVFC Fertilizer (ticker: DPM.HM) opened its urea production plant in 2004, and has
been listed on HOSE since November 2007. With its current capacity of 740,000
tons per year, PVFC accounts for more than 45% of total urea consumption in
Vietnam. To secure its position in the market, PVFC has recently invested US$50
million in a new production facility, which will add 125,000 tons to PVFC’s total
production in 2010.
5 www.vinachem.com.vn. VINACHEM is the largest corporation in the chemical industry in Vietnam, owning
more than 40 companies in fertilizer, crop-protection, rubber, oil refinery, and various chemical sectors.
…urea demand is estimated to
increase by 8% CAGR to
2.1mln tons by 2010

Raw material for nitrogen fertilizer is abundant
The main raw materials for urea production are coal or natural gas, which contribute
more than 90% of total production costs. For economic and environmental reasons,
natural gas is the feedstock of choice.
According to Cedigaz, Vietnam has around 400 billion cubic meters of proven natural
gas reserves. Current production level is about 7 billion cubic meters per annum. The
country has discovered four gas fields, including the Bach Ho Oil Field, Nam Con Son
Gas Basin, May Lay Tho Chu Basin and Song Hong (Red River) Basin. Beside these
projects, many companies are carrying exploration activities to prove more gas
reserves offshore Vietnam.
PVFC is using natural gas in
the production while
HANICHEMCO, since 1960,
has been using coal-based
production. PVFC’s natural
gas consumption is currently
around 53,000-54,000 metric
tons per hour, which it gets
from the Bach Ho (White
Tiger) Oil Field and Nam Con
Son Gas Project. The company
has secured a long-term
agreement with the state to
purchase natural gas at
US$2.2 per million BTU until
2012, and US$3.6 per million
BTU thereafter.
Other types of fertilizers – Phosphate (P2O2), Potash (K2O), NPK
Vietnam is self-sufficient for the production of super-phosphate (OSP); but due to the
scarcity of phosphate and salt deposits, the country is unable to produce DAP and
potash fertilizers. Annual consumption of these fertilizers has reached more than 2
million tons; mainly imported from China. The Ministry of Planning and Investments
forecasts that demand will continue growing at 3% to 5% annually until 2010.
The state-owned Vinachem operates thirteen fertilizer companies, which dominate
60% of the NPK processing market. Other major producers in this sector include the
General Biochemistry Fertilizer (ticker: HSI.HM), the Vietnam-Japan Fertilizer (Japan),
the Tan Hung Fertilizer Ltd., and the Proconco JV (France).
The General Biochemistry Fertilizer Co. (ticker: HSI.HM) recently expanded its total
production to 480,000 tons per year, enough to cover 15% of the domestic NPK
demand. Revenue in 2007 reached US$41mln, up 86% yoy. Management
announced its intention to move into other agrochemical markets and has invested
US$0.72 million in a new insecticide factory. The company also plans to invest over
US$40 million into two infrastructure projects; an industrial park and a port.
The Techno-Agricultural Supplying Co. (ticker: TSC.HM) is a fertilizer trading company.
As such it imports more than 10% of Vietnam’s total fertilizer imports. Sales for
2007, reached US$86 million up 21% over the previous year. Management decided
to establish a new securities brokerage house in the Mekong Delta region, the Can
Tho Securities JSC, which will start operations in the first quarter of 2008.
4.2 Crop protection
The crop protection industry includes pesticides, fungicides, and insecticides. Rising
health and environmental concerns, and tougher regulations over the use of these
chemicals have caused world crop protection sales to drop by 2.5% to US$30.4
billion. The most significant reduction in crop protection sales was in the NAFTA
region loosing 5.3%, followed by Asia, which fell by 4.1%. Global growth expectations
remain low at 1-2% over the next five years.
Figure 36. Vietnam gas reserve and production
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
billioncubicmeter
0
50
100
150
200
250
300
350
400
450
Gas reserve Gas production
36% CAGR
Vietnam has around 400 billion
cubic meters of proven natural
gas reserves
…annual consumption is
around 2mln ton, mainly
imported from China… demand
continues to grow at 3-5%
annually to 2010.
In Vietnam, PVFC is using
natural gas in the production
while HANICHEMCO, since
1960, has been using coal-
based production

Every year Vietnam consumes more than 9 million tons of crop protection chemicals,
mainly pesticides. Vietnam’s Plant Protection Department estimates that more than
95% of farmers excessively use pesticides. In the context of the tainted food
scandals in China, the misuse of chemical pesticides may have a serious detrimental
effect on Vietnam’s agri-exports. Industry analysts estimate that consumption of
chemical crop protection products in Vietnam will gradually decrease in the future.
The key local players in the industry include; H.A.I JSC (ticker: HAI.HM), An Giang
Pesticide (AGPPS), Sai Gon Pesticide (SPC), the Microbiological & Chemical Industry
JSC (BICICO) and Vietnam Pesticide JSC (VIPESCO).
HAI has a very small production capacity; it mainly buys pesticides in bulk then re-
packages in bottles and distributes them to the market. The company estimates it
holds about 10% market share. In 2007, HAI sales reached VND496.5 billion (US$31
million), representing a 19.5% increase over the previous year.
4.3 Opportunities for the seed sector
According to Phillip McDougall, in 2006 the value of the market for agriculture
biotechnology based products, which currently comprises sales of seed of herbicide
tolerant (HT) and insect resistant (IR) crops, continued to advance by 14.2% to
US$6,050 million. The market for biotech crops is expected to continue to expand,
both through the adoption of advanced traits and uptake in further country markets,
particularly in Asia. The Vietnamese government allows local and foreign companies
to sell genetically modified seeds as long as they comply with the state regulations.
In Vietnam, there are
more than 65 domestic
and foreign companies
operating in the seed
sector; most of them
are either state-owned
companies or
governmental research
centers. Global industry
leaders have made
headway into the
country; namely Bayer
Cropscience, Monsanto,
and Syngenta.
Of the domestic companies, only three have the capabilities to produce seeds
themselves. Two of these companies are listed; they are the National Seed JSC
(ticker: NSC.HM) and the Southern Seed JSC (ticker: SSC.HM).
Established in 1968, the National Seed JSC currently operates three production
plants, and an experimental farm. The company’s main products include rice, maize,
vegetable, and sweet potato seeds. Its main markets are in the North of Vietnam and
Laos. Total revenue in 2007 was VND140.4bln (US$8.7mln), a 45.4% increase over
2006. The company recently raised capital to acquire other domestic seed
companies, and to invest in an industrial park in the North of Vietnam.
The Southern Seed Co. produces rice, maize, beans, bitter melons, cucumbers and
watermelons seeds mainly for the South of Vietnam. Total revenue in 2007 was
VND155.9bln (US$9.7mln), up 20.0% year-over-year. The company also has
announced significant investments to acquire a research center and two
experimental farms. Management recently announced the acquisition of Ha Tay Seed
Co., and the development of a seed production facility in Ha Noi. The Company also
acquired a 49% stake in an office building in HCMC.
Figure 37. Growth of the biotech crop market in the world
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
$million
Source: World Fertilizer Association
In Vietnam, there are more
than 65 companies operating
in the seed industry; most of
them are either state-owned
companies or governmental
research center.

Figure 38. List of registered seeds in Vietnam
Type Code Companies
Paddies LC93-1 Syngenta Vietnam
Maize WAX44 Monsanto Thailand
Maize DEKALB 979 Monsanto Thailand
Maize DEKALB 959 GM Paddies Research Center
GM Paddies HYT 83 GM Paddies Research Center
Paddies HYT 100 Thai Agriculture Department
Paddies PRACHIBURI Quoc Hao Co. (China)
GM Paddies Kim Uu 75 Thai Binh Seed
Paddies TBR-1 Luong Nong Co. (China)
Maize LNS 222 Agriculture University of Vietnam
Paddies Huong Com Southern Seed (SSC)
Maize MX10 Southern Seed (SSC)
Paddies N46 Agriculture Development Center
GM Paddies CNR36 High-tech Agriculture Co. (China)
GM Paddies D ưu 725 Quoc Hao Co. (China)
Paddies Nghi Huong Uu 725 Quoc Hao Co. (China)
Peanut TB25 Thai Binh Seed
Paddies TBR 18 Thai Binh Seed
Paddies BC15 Thai Binh Seed
Paddies Thuc Hung 6 Thuc Hung Co. (China)
Paddies B-TE 1 BAYER Cropscience AG
Paddies Ha Uu 108 Vietnam-China Co.
Paddies KOSHIHIKARI H3 HONDA Motor Co.
Maize NK 4300 Syngenta Vietnam
Maize DKC 9301 Monsanto Thailand
GM Paddies Khang Dan National Seed (NSC)
Source: Horizon Securities, VSTA
4.4 Farming machinery
There are no listed companies in this segment. The domestic production is still
dominated by the state-owned Vietnam Engine and Agriculture Machinery
Corporation (VEAM), and 15 of its subsidiaries. Some of VEAM’s companies have
already been privatized.
The Agriculture Production Department of Vietnam estimates that the current
machinery utilization rate in agriculture is less than 30%. Prices for agriculture
equipments are still out of reach for many farmers in Vietnam; a tractor costs up
VND100 million (US$6,250) while a harvester sells for VND20 million (US$1,250).
Moreover, the country-wide average farm size of 0.5 hectares, coupled with the fact
that many farms hold two to five plots of land scattered in different locations, deter
household farms from buying expensive machinery.
Greater land consolidation, increasing urbanization, and the rural exodus to big cities
will drive the need for greater mechanized farming. We believe the rise of industrial
farming and co-operatives holding larger plots of land will trigger growth in machinery
usage, while better access to bank financing and economies of scales will make
farming machinery more affordable to farmers.
The Ministry of Industry estimates that total farming machinery production will grow
at an average 12% per year to reach VND3,280bln (US$205mln) by 2015. Country-
wide as of 2007, there are 145,805 tractors, 793,400 water pumps, 288,400 rice
threshers and 257,500 boats. The Ministry of Industry expects that by 2015 Vietnam
will need 830,565 tractors, 12,450 harvesting machines, 4,350,570 water pumps
and 525,844 boats.
Current machinery utilization
rate in agriculture is less than
30%.
…we believe there will be
increasing demand for tractors,
pumps, planting and harvesting
machine

4.5 Animal feed
The Livestock Department of Vietnam estimates there are 241 feed trading and
manufacturing companies in Vietnam (82.2% local, 13.7% foreign invested and 4.1%
joint venture companies), none of which are listed. The leading industry players are
the large global agribusiness companies, namely Cargill (US), CP Group (Thailand),
Proconcon (France) and Uni-President (Taiwan).
To produce commercial animal feed, Vietnam has to rely on imported corn since local
corn production is insufficient and local ingredients are usually more expensive than
imported ones. The animal feed industry is the driver of corn consumption in
Vietnam; feed accounts for about 80% of total corn consumption in the country.
Vietnam produces around 10 million tons of feed annually, with only 33%
commercially manufactured.
To feed the livestock that will supply Vietnam’s growing demand for meat, feed grain
production will have to be increased. The Livestock Department of Vietnam believes
that by 2010, total demand for animal feed will reach 16-17 million tons per year.
V. Resource producers
5.1 Crop production: Opportunities for large-scale farming enterprises
There are no listed companies in this sector; most players are cooperative or state-
owned companies. Key players in this industry include the Vietnam Northern Food
Corporation (Vinafood 1), Vietnam Southern Food Corporation (Vinafood 2), Song Hau
Food Processing JSC (Sohafood), Codo State Farm Export-Import (Codofarm),
VinhLong Cereal and Food Import-Export JSC (Vinhlong Food), An Giang Import-Export
Co., Gentraco Feed JSC (Gentraco), Tien Giang Food Co. (Tigifood), Long An Food Co.
(Longanfood), An Giang Agriculture and Foods Import-Export Co. (An Giang Afiex) and
Dong Thap Foods - Agriculture Co. (Dargrimex).
Fragmented agriculture
One of the most important undertakings of the state, in regards to agriculture and
food safety, has been to increase rice quality and yields. Through successful seed
management and selection, Vietnam has been able to develop new, pest-resistant,
rice varieties which have significantly increased the country’s yields per hectare.
Today, Vietnam’s paddy yields are above world standards. Though the land allocated
to rice culture has diminished, the rice yield and production has increased. Today’s
rice production is of better
quality and higher efficiency
than ever and production has
been increasingly tied to the
market requirements. In
addition, the country has been
able to increase its rice
exports to approximately 20%
of its total rice production.
At 0.1 ha per capita, Vietnam
has one of the lowest arable
land per capita ratio in the
world. In addition, total arable
land in Vietnam has been
under pressure from greater
industrialization and urbanization. Between 2000 and 2006, the total area allocated
to rice cultivation decreased by almost 6.5%, as farmers allocate land to more
valuable crops.
Over 70% of Vietnam’s population lives in rural areas, and there are more 10 million
household farms throughout the country. The country-wide average arable land size
per farm is 0.5 ha. Farms in the Mekong Delta are bigger than in the North, with an
average size of 1.2 ha. In addition, the degree of fragmentation in the South is less of
a problem, with many farmers having only one plot. Household farms are considered
Figure 39. World paddy yield
-
2,000
4,000
6,000
8,000
10,000
Egypt US China Vietnam World India
Paddy(kg/ha)
Source: FAO

the basic economic farm unit. Small farm size and fragmentation of land are some of
the main obstacles to increasing productivity and economies of scale in Vietnam.
Emerging trends from land reforms
Thanks to more flexible land reforms, which have facilitated leasing of land, allowed
larger holding size and provided longer use rights, a trend towards greater land
consolidation and accumulation has emerged. There is evidence that a “land market”
has emerged in every region of Vietnam with activities including renting and leasing
land, lending and borrowing land, “‘buying”’ and “selling” Land Use Rights, land
exchange and bidding for land.
Additionally, recent government policies support the notion of larger farms that will
permit the concentration of land and capital. There are currently about 113,000
commercial farms with an average land area of 5 hectares throughout the country,
this represent an 86% increase over 2001 figures. We believe this is an important
development which will facilitate the development of larger industrial farms.
5.2 Contract farming6
Although first attempts of contract farming were unsuccessful, the state has
indicated that it supports the concept as a means to link farmers to market
demands. Consequently, the government passed Decision 80/2002/ TTg in 2002, to
promote the consumption of agricultural products through signed contracts between
enterprises and farmers.
Private involvement in contract farming is not a novelty. While success stories vary
greatly between types of commodities and geographic localities, there have been
some encouraging developments. According to the Ministry of Agriculture and Rural
Development (MARD) the majority of rice, maize, sugar cane, and most other
industrial crops output is produced under contract farming. Also, we have seen some
companies such as Charoen Pokphand (C.P.) Group, Lam Son Sugar and Sugarcane
Company (LSS:HM), Angimex-Kitoku JVC, Antesco already integrating upstream and
securing with farmers timely access to raw materials.
VI. Processing
There are 30 listed companies involved in the processing segment of the agri-food
value-chain.
6.1 Dairy Products: Uptrend demand and low level of substitute
Key players in the industry include two listed companies: Vinamilk (ticker: VNM.HM),
and Hanoimilk (ticker: HNM.HN). Other players include Dutch Lady Vietnam, and
some joint-ventures F&N Vietnam Foods Co., and Nestle Vietnam.
Vietnam’s dairy consumption is one of the fastest growing food segments in the
country. Current dairy consumption is around 9kg per annum and dairy product
consumption has been growing at 16.3% CAGR from 2004 to 2006. Local supply
only meets about 22% of the demand for dairy products. Vinamilk purchase about
60% of fresh milk produced in Vietnam. Dutch Lady collects another 20% while the
rest is bought by a number of smaller companies. Vietnam currently imports dairy
6 Contract farming can be defined as an agreement between farmers and processing and/or marketing
firms for the production and supply of agricultural products under forward agreements, frequently at
predetermined prices. The arrangement also invariably involves the purchaser in providing a degree of
production support through, for example, the supply of inputs and the provision of technical advice. The
basis of such arrangements is a commitment on the part of the farmer to provide a specific commodity in
quantities and at quality standards determined by the purchaser and a commitment on the part of the
company to support the farmer’s production and to purchase the commodity. (FAO, 2001)
Figure 40. Listed companies in milk sector
Ticker Name
Market Cap.
(VNDmln)
Net sales
(VNDmln)
EBITDA
Margin
Net Profit Margin ROA ROE
HNM.HN HANOIMILK 173,418 323,829 NA 3.7% 5.0% 8.2%
VNM.HM VINAMILK 19,981,426 6,821,864 NA 14.2% 21.6% 27.4%
Local supply only meets about
22% of the demand for dairy

from various countries including, notably the United States, Australia, Korea, and the
Netherlands.
Figure 41. Vietnam: production of milk by province
Unit: tons
Year
Provinces
2001 2002 2003 2004 2005
Vietnam 64,703 78,453 126,697 151,314 197,679
Red River Delta 4,958 7,032 9,865 12,218 14,098
North East - 33 482 2,739 6,803
North West 4,026 4,550 5,934 7,677 7,820
South Central Coast 365 414 670 971 739
Central Highlands 998 1,673 2,566 3,827 4,853
South Central Coast
ex. HCMC
9,814 13,058 16,110 19,711 26,802
Ho Chi Minh City 44,540 51,691 90,264 104,160 130,054
Mekong River Delta 1,871 4,353 5,766 7,859 11,723
Source: MARD
Vinamilk (ticker: VNM.HM) is the leading company in the industry with 183
distribution centers and more than 94,000 outlets throughout Vietnam. The
company’s current capacity is 491 million litres per year. Net income in 2007
increased 32% yoy. The company has captured 40% of the powder milk market, it
dominates 90% of the yogurt market, and 73% of the condensed milk market. In
October 2007, Vinamilk acquired a 55% stake in the Lam Son Dairy JSC a small dairy
company in northern Vietnam with a capacity of 20,000 litres per year.
Hanoimilk (ticker: HNM.HN) is the third largest dairy producer and the largest in
northern Vietnam. The company’s total production capacity is 80 million liters per
year. Hanoimilk focuses on producing sterilized fresh milk for children between 7–12
years old; a market of which it holds 25-28%. Net profit in 2007 increased by 66.5%
compared to the previous year. In August 2007, the company signed a strategic
partnership agreement with Maeil, one of Korea’s leading dairy companies, in which
Maeil would acquire a 10% stake in Hanoimilk. Hanoimilk’s products have recently
been picked-up by Hapro, a state-owned retail and supermarket distribution
business, which will distribute them in its stores.
6.2 Sugar industry: Under government’s “price management”
Figure 42. Listed companies in sugar sector
Ticker Name
Market Cap.
(VNDmln)
Net sales
(VNDmln)
EBITDA Margin Net Profit Margin ROA ROE
BHS.HM BIEN HOA SUGAR 614,942 643,945 NA 8.3% 8.5% 14.6%
LSS.HM LAM SON SUGAR 900,000 813,958 21.9% 10.0% 9.7% 14.5%
SBT.HM SUCRERIE DE BOURBON TAY NINH 1,021,991 674,272 32.5% 28.4% 11.8% 12.6%
Vietnam has 37 sugar processors with a total capacity of 1.05 million tons per year.
In 2007, local producers manufactured 0.97 million tons, about 75% of the domestic
demand. As a result, domestic sugar production fails to meet the continuously
increasing demand in the beverage and confectionery sectors. The country has to
import around 0.3-0.4 million tons each year.
Hanoimilk signed a strategic
partnership agreement with
Maeil, one of Korea’s leading
dairy companies
Vinamilk acquired a 55% stake
in the Lam Son Dairy JSC a
small dairy company in
northern Vietnam

The sugar industry is one the ten key industries of the state; therefore, Hanoi has
historically imposed high import tariffs. Vietnam’s WTO engagements require the
country to reduce sugar import tariffs.
Figure 45. Vietnam: tariff reduction roadmap in compliance with WTO
items 2005 2006 2007 2008 2009 2010
Raw sugar 30% 30% 30% 20% 10% 5%
Refined sugar 40% 40% 30% 20% 10% 5%
Source: Horizon Securities, Vietnam Tax Authorities
Lam Son Sugar (ticker: LSS.HM) is Vietnam’s biggest sugar producer, with two
processing plants and a total capacity of 110,000 tons. The company controls
approximately 9% of the market. The company secures supply of sugar cane through
contract farming on more than 18,000 hectares. Management recently announced it
would diversify the company’s business into banking and insurance and in setting up
a private higher education institution. Management also intends to set up a dairy
farm.
Bien Hoa Sugar (ticker: BHS.HM), the second largest sugar company in Vietnam, has
a capacity of 90,000 tons. In 2007, the company produced approximately 75,000
tons of sugar to capture 7.6% market share. It is currently the main sugar supplier to
the leading domestic food & beverage companies, notably, Vinamilk, Nestle, Coca-
Cola, and Pepsi. To ensure supply of raw material, the company contracted out, a
total area of 6,900 ha for growing sugar cane. In addition, the company owns 1,000
ha on which it grows sugar cane for its own production. In November 2007, BHS
successfully acquired Tri An Sugar Co. The factory has been upgraded and will be put
into operation in early 2008. Management announced a US$62.5 million investment
to build an integrated sugar/ethanol processing plant. The “The West Vam Co Dong
Industrial Processing Park” will cover an area 38 hectares and include:
• a sugar processing plant with a 6,000TMN capacity (expected to be
completed by the end of 2009);
• an ethanol plant with capacity of 220,000 liters per day (expected to be
completed in 2008);
• a furfural alcohol factory;
• a fertilizer factory;
• an animal feed factory; and
• shipping docks and port facilities.
The project began in October 2007, and Bien Hoa is currently involved in site
clearance.
Sucrerie De Bourbon Tay Ninh (ticker: SBT.HM) holds 6.4% of the total domestic
sugar market. Similarly to Lam Son Sugar and Bien Hoa Sugar, the company has
Figure 43. Sugar market is highly fragmented Figure 44. Domestic sugar price in the past 2 years
Others, 58.6%
Bien Hoa Sugar,
7.6%
Nagarjuna Intl
5.5%
Lam Son Sugar
9.0%
Nghe An Tate &
Lyle Sugar JV,
7.6%
Sucrerie De
Bourbon Tay Ninh,
6.4%
Vietnam Taiwan
5.3%
-
2,000
4,000
6,000
8,000
10,000
12,000
14,000
Jan-06
Apr-06
Jul-06
O
ct-06
Jan-07
Apr-07
Jul-07
O
ct-07
Jan-08
VND
Sources: Horizon Securities, VASP Sources: MARD
Lam Son Sugar controls
approximately 9% of the
market

contracted farmers over an area of 14,500 hectares; to grow sugar cane.
Contributing 90% to total sales, the Mimosa Sugar brand is the company’s major
source of revenue. Total revenue in 2007 rose 13% compared to 2006. Management
plans to invest over US$65 million to build a 504 million kWh per year thermal power
plant, and a 30 million liters per year ethanol factory.
6.3 Confectionery: Severe competition among rivals
Vietnam’s confectionery
industry is extremely
fragmented, with hundreds of
small regional producers.
Major players count about 30
companies.
Competition is intensifying as
larger players have been
spending heavily on
advertising and marketing
campaigns. Over the past five
years, Vietnam’s confectionery
industry has grown at an
average rate of 7%. Driven by
greater disposable income,
consumption per capita
reached 2kg per year in 2007
up from 1.25kg per year in 2003. Industry sales are seasonal as consumption
increases significantly from the Mid-Autumn Festival (September) to Vietnam’s New
Year (late January to mid-February).
Figure 47. Listed companies in confectionery sector
Ticker Name
Market Cap.
(VNDmln)
Net sales
(VNDmln)
EBITDA
Margin
Net Profit
Margin
ROA ROE
IFS.HM INTERFOOD 195,948 723,272 15.0% 10.0% 9.7% 18.1%
BBC.HM BIEN HOA CONFECTIONERY 894,898 453,975 7.5% 5.5% 8.0% 12.8%
HHC.HN HAI HA CONFECTIONERY 218,453 341,248 NA 5.8% 10.9% 23.0%
KDC.HM KINH DO CORP 6,720,952 1,233,119 15.9% 19.5% 12.0% 15.8%
NKD.HM NORTH KINH DO 1,259,973 561,580 17.0% 14.1% 16.6% 34.4%
Kinh Do Corp (ticker: KDC.HM), by far the largest producer of snacks and
confectionery products in Vietnam has 200 distributors and 65,000 retailers. The
company manufactures a wide range of products such as cookies, cakes and snacks.
From 2006 to 2007, KDC’s sales and net profit increased by 23.5% and 41%
respectively. The company exports to countries in Asia, Europe and North America. In
August 2007, Kinh Do signed a joint-venture with Cadbury to become its exclusive
distributor in Vietnam. The company has also expanded into real estate, investing in
and building office, apartment, and retail space.
North Kinh Do (ticker: NKD.HM), a subsidiary of Kinh Do Corp. is the second biggest
player in the market. With 46 distributors, 5 bakeries and more than 12,000 retail
outlets, the company controls about 30% of the northern market. In 2007 revenue
reached VND566 billion (US$34.75 million), increasing by 31.2% yoy. In April 2007,
management announced that together with Tribeco, the company would establish
North Tribeco, a beverage company focusing on the northern market. North Kinh Do
would own 15% of the newly established North Tribeco.
Bien Hoa Confection (ticker: BBC.HM) is the third largest confectionery company
capable of producing 45 tons of sweets, cakes and nutritional foods and 18 tons
malt per day. Revenue in 2007 increased 33% yoy and BBC has gained 7% of the
domestic market and has been exporting its products to over twenty countries.
Figure 46. Key player market shares
NKD
11.0%
BBC
7.0%
HHC
6.5%
Others
53.0%
KDC
20.0%
IFS
2.5%
Source: Horizon Securities estimate
Kinh Do signed a joint venture
with Cadbury to become its
exclusive distributor in Vietnam
North Kinh Do controls about
30% of the northern market

Hai Ha Confectionery (ticker: HHC.HN) is a large confectionery in North of Vietnam
with total capacity of 70 tons per day. In order to increase its output and expand its
market share, the company has invested close to US$1.75 million in new machinery
and new production lines. HHC’s net income in 2007 jumped 31% to VND19.7 billion
(US$1.23 million).
6.4 Aquaculture processing: Vietnam’s fourth largest income
Aquaculture is the country’s fourth largest revenue earner putting Vietnam in the
world’s top 10 seafood exporter. Vietnam has more than 450 aquaculture processing
and exporting companies but there are very few vertically integrated players. In 2006,
because total processing capacity had jumped 20% while fish farmers had only
increased output by 7.6%, many aquaproducts processors were operating at 30% to
50% under capacity. There is some level of upstream integration between processors
and farmers to the extent that processors often assist farmers by providing training,
veterinary counseling, and access to feed and inputs at bargain prices. Farmers, on
the other hand, will sell their fish at market price, typically selling to their partner-
processor. Processors win by ensuring stable raw materials supply. Some processors
are currently planning to integrate upstream by farming fish themselves.
Figure 50. Listed companies in fishery sector
Ticker Name
Market Cap.
(VNDmln)
Net sales
(VNDmln)
EBITDA
Margin
Net
Profit
Margin
ROA ROE
ABT.HM BENTRE AQUAPRODUCT IMPORT EXPORT 441,000 429,706 7.5% 9.5% 15.3% 22.8%
ACL.HM CUU LONG FISH CORP. 612,000 537,449 13.0% 10.4% 31.4% 60.9%
AGF.HM ANGIANG FISHERIES IMPORT & EXPORT 681,542 1,233,734 5.8% 3.2% 6.0% 8.6%
ANV.HM NAM VIET CORPORATION 4,719,000 3,193,437 12.2% 12.1% 22.9% 30.8%
FBT.HM FAQUIMEX 390,000 NA NA NA NA NA
FMC.HM SAO TA FOODS 255,990 999,764 NA 2.8% 9.2% 19.9%
ICF.HM INVESTMENT COMMERCE FISHERIES CORP 265,500 326,025 NA 6.0% 7.0% 15.0%
MPC.HM MINH PHU SEAFOOD 2,527,000 NA NA NA NA NA
SJ1.HM SEAFOOD NO.1 111,650 145,553 4.3% 4.0% 9.1% 11.2%
TS4.HM SEAFOOD NO.4 128,581 172,904 5.8% 4.6% 6.8% 9.6%
VHC.HM VINH HOANG 1,230,000 NA NA NA NA NA
LAF.HM LAFOOCO LONG AN FOOD PROCESSING EXPORT 202,962 626,503 NA 3.0% 14.0% 26.0%
With a current processing capacity of 700 tons per day, Nam Viet Corporation is
Vietnam’s largest basa fish processing and exporting company. NAV’s 2007 sales
figures increased by 18% compared to 2006. The company is heavily dependant on
exports, which represent on average 60% of total revenue. Exports markets are
mostly in Asia and Europe. For 2008, management intends to build a commercial
feed factory with a capacity of 750,000 tons per year. Management wants to solidify
ties with farmers they depend on, by offering them feed input. NAV will be able to
manufacture feed by utilizing its discarded waste from its fish processing activity.
Figure 48. Vietnam aquaculture export Figure 49. Production of aquatic product
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
2000 2001 2002 2003 2004 2005 2006 2007E
USDmln
14.74% CAGR
0
500
1,000
1,500
2,000
2,500
3,000
3,500
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
'000tons
Oceanic fisheries Fish farming Shrimp farming
Source: Ministry of Aquaculture Source: GSO

Figure 51. Exports represent a significant portion of aquaculture processors’ total
revenue
Code Companies
Export revenue as
% of total revenue
Main
products
ANV NAM VIET CORPORATION 65.00% basa fish
VHC VINH HOAN CORP. 92.23% basa fish
ICF INVESTMENT COMMERCE FISHERIES CORP. 96.00% shrimp, fish
ABT BENTRE AQUAPRODUCT IMPORT & EXPORT JSC. 98.04% ark shell
MPC MINH PHU SEAFOOD CORP 94.20% shrimp
AGF AN GIANG FISHERIES IMPORT & EXPORT JSC 80.00% basa fish
ACL CUULONG FISH JSC 95.00% basa fish
FMC SAO TA FOODS JSC 98.00% shrimp
FBT BEN TRE FORESTRY & AQUAPRODUCT IMPORT EXPORT 88.42% basa fish
Source: Horizon Securities, Company data 2007
Antibiotic residue in seafood & anti-dumping tariff: Major threat to aquaculture
industry
Japan is currently the third largest market for Vietnam’s aquaculture exports.
However, shrimp exports to Japan fell 15.6% because Vietnamese products were
repeatedly found to have traces of antibiotics. Japan now tests 100% of aquaculture
products from Vietnam, for animal chemicals. Another major concern for Vietnam’s
aquaculture industry is the dumping charges in the US. Since the US placed anti-
dumping tariffs on Vietnamese companies, aquaculture exports to the US have
decreased significantly.
6.5 Soft drink: Still enough room for local players to growth
The sector is dominated by Coca Cola Vietnam and Pepsi International Vietnam, who
jointly share 84% of the soft drink (sparkling) market. The remaining 16% is divided
between a host of local players. To avoid direct competition with the giants, the
domestic companies have been focusing on niche markets. TNS Worldpanel
estimates that Vietnam’s carbonated soft drink market will grow at 5% to 10% per
year, while the non-sparkling segment should grow at 20-25%.
Figure 52. Listed companies in soft-drink sector
Ticker Name
Market Cap.
(VNDmln)
Net sales
(VNDmln)
EBITDA Margin Net Profit Margin ROA ROE
SCD.HM CHUONG DUONG BEVERAGE 227,800 238,894 NA 9.2% 14.4% 18.9%
TRI.HM TRIBECO SAIGON BEVERAGE 275,515 384,639 NA 4.0% 3.5% 14.2%
IFS.HM INTERFOOD 195,948 723,272 15.0% 10.0% 9.7% 18.1%
Source: Horizon Securities, Company data
Having lost market share to Coca Cola and Pepsi when they entered Vietnam in
1990’s, Tribeco Beverage (ticker: TRI.HM) turned to soymilk products for which it has
built a popular brand. The company reported US$24.9 million revenue in 2007, up
31.8% from 2006. The company plans to invest over US$20 million to build two new
factories with total capacity of 39 million cases per year. Net sales in 2007 increased
to US$24mln from US$18.36mln in 2006, representing 30.9% growth.
Chuong Duong Beverage (ticker: SCD.HM) focuses on sarsaparilla-based drinks. The
company also intends to construct a new factory, with a capacity of 100 million liters
per year, worth US$22.8mln. Sales have been growing at 27% CAGR since 2005, and
the company has been able to maintain operating margins around 8%.
Interfood Shareholding Co. (ticker: IFS.HM) owns the Wonderfarm brand and
produces a wide range of tropical fruit juices, coffees, canned bird's nest drinks,
winter melon tea, and a Korean ginger drink. Operating profit grew 22% from 2006 to
2007, and the company maintained its operating margin at 12% of sales.
Among the unlisted companies, Tan Hiep Phat Group is worth mentioning. THP Group
is a private, diversified beverage company with strong brand names in soft drinks
…carbonated soft drink market
will grow at 5% to 10% per year
and non-sparkling segment
expect to grow at 20 -25%
Tan Hiep Phat Group owns
Number One Energy, which
holds 30% to 40% of the
energy drink market
The company reported
US$24.9 million revenue in
2007, up 31.8% from 2006.

and beer. It manufactures the Number One Energy drink, which holds 30% to 40% of
the energy drink market. THP Group also manufactures the O Degree Green Tea,
which was the fastest growing brand in Vietnam between 2006 and 2007. The
group’s owns three beer brands; Ben Thanh Beer, Ben Thanh Gold, and Laser.
VII. Distribution: The rise of supermarkets
We estimate that total retail sales in Vietnam reached US$36bln in 2007, growing at
over 21% CAGR in the last five years. The food retailing sector has grown at 11%,
reaching US$10.2bln in 2006. Even though traditional wet markets still dominate
retail trade, Vietnam’s supermarkets are becoming more popular among urbanites.
Since 1993, when the first supermarket opened its doors, there has been a
significant increase in the number of supermarkets. Global chains, namely Big C and
Metro, have been in the country for years and have been increasing their foothold.
Local chains, like Co-op Mart, have been aggressively opening new stores in large
and intermediate cities in the South of Vietnam. Currently, there are more than 200
supermarkets all over the country.
We believe the rise of supermarkets in Vietnam will affect the whole agribusiness
value-chain. As modern procurement systems invariably exert more demanding
requirements from processors and farmers, there will be a need for increased
investments and changes in current practices. We see greater demand for industrial
farming, cold storage and warehousing, processing facilities, and logistics.
As supermarkets tend to source products from medium to large processors and
wholesalers, we believe there will be opportunities for a greater level of integration
along the supply chain.
Figure 53. Traditional shopping still dominates
Vietnam
Figure 54. …but modern shopping trend is on the
rise
Japan
Korea
India
Hong Kong
Tai wan
Singapore
Australia
Philipines
Thailand
NZ
Malaysia
Vietnam
Indonesia
Traditional Grocery Stores - Regular users %
WetMarkets-Regularusers%
50%
50%
0
20
40
60
80
100
120
140
2001 2002 2003 2004 2005 2006
No.of supermarkets No. of department stores
Source: AC Nielsen Source: Euromonitor
Currently, there are no listed companies operating in the distribution business. Co-op
Mart is the market leader with more than 24 supermarkets and 34 convenience
stores in operation. Total turnover of Co-op Mart last year was around US$200mln.
Figure 55. Modern trading form is changing agribusiness value chain
Farmers/Co-operatives
Retailers/Supermarkets/
Hypermarkets
Consumers
Farmers/Co-
operatives
Farm collectors
Wholesalers
Wet markets Street vendorsGroceries
Consumers ConsumersConsumers
…modern shopping form is
becoming more popular among
urbanites

Figure 56. List of major supermarkets, hypermarkets and department stores in Vietnam
Retailer Name Ownership No. of Outlets Estimated Sales
Turnover (US$mln)
Locations and expansion plan Imported Food Purchasing Agent
COOPMART Local company operated under
cooperative law
24 supermarkets
34 convenient stores
200 - Mainly in HCMC (14 stores). - Just
expanded to Can Tho, Long Xuyen,
Phan Thiet, Gia Lai - Plan: other cities
(Ben Tre, Buon Me Thuoc)
- Mainly from importers/distributor s and
wholesalers. - Small portion of food
imported directly
BigC (CORA) Local Joint Venture with Casino
Group of France
5 Hypermarkets
1 Supermarket
> 65 - HCMC, Dong Nai, Hanoi, Hai Phong,
Danang. - Plan: open 4 more stores.
wholesalers. - Small portion of food
imported directly
Maximart An Phong Private-Owned
Company
4 48 - HCMC, Nha Trang, Cantho, Binh
Duong - Expand to Binh Duong soon
wholesalers.
Citimart Private-Owned Company 12 Supermarkets
4 minimarts
38 - HCMC, Hanoi, Can THo, Dong Thap - Mainly from importers and distributors
Intimex Joint-Stock Company 10 25 Hanoi, Haiphong, Hai Duong, Nghe
An, Danang
- Mainly from importers and distributors
FIVIMART Private-Owned Company 10 25 - Hanoi, HCMC, Binh Duong - Mainly from importers and distributors
Binh Dan Supermarkets Private-Owned Company 2 N/A -HCMC - Mainly from importers and distributors
SATRA Supermarkets State-owned Company 2 N/A - HCMC - Mainly from importers and distributors
Select Supermarts Private-Owned Company 5 supermarkets
5 minimarts
N/A -HCMC - Mainly from importers and distributors
Metro Cash & Carry 100% Foreign Invested Company
(Germany)
8 >350 - HCMC, Hanoi, Hai Phong, Cantho,
Danang. - Plan: open 4 more stores
in HCMC, Hanoi, Dong Nai
- Mainly from importers and distributors. -
Direct imports for fresh and frozen
products.
SEYU Supermarket Local Joint-Venture with Seyu of
Japan
1 N/A - Hanoi - Mainly from importers and distributors.
PAKSON Local Joint-Venture with Pakson
of Malaysia
3 N/A - HCMC, hai Phong. - Plan: open a
total of 10 stores.
- Mainly from importers and distributors.
VINATEX State-owned company 20 supermarkets
10 minimarts
N/A HCMC, Dong Nai - Mainly from importers and distributors.
HAPRO State-owned company 7 Hapromarts and
18 convenient stores
7 - Mainly from importers and distributors
Wellcome Supermaket (Dairy
Farm)
Business Cooperation Contract
with Citimart
1 N/A - HCMC. -Plan: open a total of 6
stores in Vietnam for the first phase.
- Mainly from importers and distributors
Source: USDA Foreign Agricultural Service

VIII. Companies in focus

Figure 57. Return on Agribusiness stocks
Price (VND)
22-Feb-08 1M 3M 6M 12M 1M 3M 6M
DPM.HM PVFCCo Fertilizer (urea) 56,500 380,000,000 21,470,000 1,342 842,584 -7% -28% N/A N/A 3% 2% N/A
HSI.HM MF JSC Fertilizer (NPK) 27,500 10,000,000 275,000 17 31,750 -2% N/A N/A N/A 8% N/A N/A
TSC.HM TSC Fertilizer (trading) 83,500 8,312,915 694,128 43 36,298 -1% -11% N/A N/A 9% 20% N/A
HAI.HN HAI Crop protection 49,000 11,400,000 558,600 35 13,887 -13% -28% -14% -28% -2% 2% -10%
NSC.HM NSC Seed 34,400 3,600,000 123,840 8 12,328 -8% -27% -7% -27% 3% 4% 17%
SSC.HM SOUTHERN SEED Seed 42,100 10,000,000 421,000 26 8,074 -13% -39% -25% -43% -3% -8% -1%
TRI.HM TRIBECO SAIGON Berverage 36,500 7,548,360 275,515 17 10,906 -15% -21% -10% -20% -5% 10% 14%
SCD.HM CHUONG DUONG BEV. Berverage 26,800 8,500,000 227,800 14 19,826 -11% -36% -32% -59% -1% -5% -8%
VTL.HN THANG LONG JSC Berverage 41,000 1,800,000 73,800 5 3,490 -7% -11% 24% -5% 5% 19% 29%
VDL.HN LAM DONG FOOD Berverage 73,500 1,200,000 88,200 6 13,600 -10% N/A N/A N/A 2% N/A N/A
IFS.HM INTERFOOD Berverage 28,500 6,875,359 195,948 12 9,010 -14% -27% -22% -28% -4% 4% 2%
VNM.HM VINAMILK Dairy 114,000 175,275,670 19,981,426 1,249 141,460 -12% -34% -30% -42% -2% -3% -6%
HNM.HN HANOIMILK Dairy 24,600 7,049,500 173,418 11 29,663 -11% -35% -20% -53% 1% -5% -15%
KDC.HM KINH DO CORP Confectionery 143,000 46,999,665 6,720,952 420 45,456 -7% -29% -42% -21% 4% 2% -18%
NKD.HM NORTH KINH DO Confectionery 125,000 10,079,782 1,259,973 79 9,299 -14% -34% -47% -15% -4% -3% -23%
BBC.HM BIEN HOA CONF. Confectionery 85,000 10,528,208 894,898 56 23,805 10% -12% 22% 80% 20% 19% 46%
HHC.HN HAI HA CONF. Confectionery 39,900 5,475,000 218,453 14 15,560 -5% -31% N/A N/A 7% -1% N/A
ABT.HM BENTRE AQUATEX Aquaculture 70,000 6,299,999 441,000 28 17,287 -1% -22% -29% -41% 9% 9% -5%
ICF.HM INVESTMENT COM. Aquaculture 22,500 11,800,000 265,500 17 32,516 -17% -50% -16% -44% -7% -19% 8%
ANV.HM NAM VIET CORP Aquaculture 71,500 66,000,000 4,719,000 295 73,755 -12% N/A N/A N/A -2% N/A N/A
MPC.HM MINH PHU SEAFOOD Aquaculture 36,100 70,000,000 2,527,000 158 58,178 -21% -47% -28% -45% -11% -17% -4%
VHC.HM VINH HOANG Aquaculture 41,000 30,000,000 1,230,000 77 33,194 -12% N/A N/A N/A -2% N/A N/A
AGF.HM AN GIANG FISH. Aquaculture 53,000 12,859,288 681,542 43 17,017 -20% -40% -46% -59% -10% -10% -22%
ACL.HM CUU LONG FISH. Aquaculture 68,000 9,000,000 612,000 38 20,192 -6% -20% N/A N/A 4% 11% N/A
TS4.HM SEAFOOD NO.4 Aquaculture 23,600 5,448,355 128,581 8 11,621 -9% -37% -26% -11% 1% -6% -3%
SJ1.HM SEAFOOD NO.1 Aquaculture 31,900 3,500,000 111,650 7 4,816 -9% -24% -16% -29% 1% 7% 7%
FMC.HM SAO TA FOOD Aquaculture 37,100 6,900,000 255,990 16 13,428 -7% -31% -26% -53% 3% -1% -2%
FBT.HM FAQUIMEX Aquaculture 26,000 15,000,000 390,000 24 N/A -14% N/A N/A N/A -4% N/A N/A
LAF.HM LAFOOCO LONG AN Aquaculture 35,000 5,798,901 202,962 13 68,077 -15% -15% 98% 56% -5% 15% 122%
SGC.HM SA GIANG IM. Food processor 47,500 4,088,700 194,213 12 3,514 -8% -19% 14% -18% 2% 11% 38%
SAF.HM SAFOCO Food processor 40,800 2,706,000 110,405 7 2,983 -22% -24% 2% -16% -12% 6% 26%
CAN.HM HALONG FOOD Food processor 21,000 5,000,000 105,000 7 15,766 -8% -25% -22% -40% 2% 6% 2%
TAC.HM TUONG AN OIL Cooking oil 113,000 18,890,200 2,134,593 133 61,952 3% -16% -9% 75% 13% 14% 15%
LSS.HM LAM SON SUGAR Sugar 30,000 30,000,000 900,000 56 N/A -8% N/A N/A N/A 2% N/A N/A
BHS.HM BIEN HOA SUGAR Sugar 36,500 16,847,727 614,942 38 20,711 -9% -30% -14% -28% 1% 0% 10%
SBT.HM BOURBON TAYNINH Sugar 21,700 44,824,172 972,685 61 N/A N/A N/A N/A N/A N/A N/A N/A
Notes: SBT price was on 27-Feb-2008
Absolute performance (%) Relative to VNI/HASTC Ind
Ticker Company name Subsector
Market Cap
(mln'USD)
Avg. volume
(30 days)
Outstanding
shares
Market cap
(mln'VND)
Source: Horizon Securities, Reuters, Company’s data

Vietnam Agribusiness_From farm to chopsticks 290208

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