Analyzing VNG’s surprise listing and prospectus

The decision of Vietnamese tech major VNG Corporation to list its shares locally came as a surprise. Considered the Tencent of Vietnam, the company has been long rumored to go public in the US.

Image credit: Timmy Loen

“But 2022 wasn’t exactly a good year, especially for tech companies, let alone a lesser-known one from Vietnam. For example, the share price of its larger US-listed peer, Sea Group, was down by almost 80% in 2022,” says Alec Tseung, partner at Hong Kong-based research firm KT Capital Group.

Tseung adds that it does make sense for VNG to wait and get used to the disclosure and scrutiny by listing on the Unlisted Public Company Market (UPCoM), which is the board for firms not yet listed on the Hanoi Stock Exchange.

However, since its first trading day on January 5, only a handful of transactions had transpired, shooting its stock price to VND444,300 per share, or US$18.95 apiece. This represents a 85% increase compared to the reference price of VND240,000.

There’s also been speculation that VNG still harbors US IPO plans, using the local bourse as a springboard. The company has declined to comment on the matter.

“Owing to VNG Joint Stock Company (JSC)’s ‘public company’ status under Vietnamese law, VNG JSC was required to make its shares available for trading on UPCoM or another Vietnamese exchange,” a company spokesperson tells Tech in Asia.

Meanwhile, we have analyzed the firm’s prospectus to understand how it’s doing and where it’s headed.

Online gaming: still a game-changer?

Similar to Sea Group, VNG has its deep roots in gaming, which still contributes about 70% to 80% of its total revenue. The company operates and distributes games from other studios and it also develops some titles on its own.

Its online gaming revenue saw a year-on-year increase of over 29% in 2021. However, this segment’s revenue dropped 12.7% in the first nine months of 2022 compared to the same period in 2021. This wasn’t a surprise as demand induced by the pandemic started fading.

Even Sea Group, which reportedly cut 7,000 jobs last year, experienced a similar decline in Garena, its digital entertainment segment. Our analysis of Sea’s Q3 2022 results suggested that Garena’s top line is set to slow down further, attributing to the prolonged headwinds impacting user number, engagement, and monetization for Free Fire.

It should be noted that VNG doesn’t have a self-developed title that can match the scale of Sea Group’s Free Fire. The Vietnamese company, however, cites some progress in international markets for Dead Target and other titles developed by ZingPlay Studio (ZPS) after spending more aggressively in overseas markets since 2021.

See also: Vietnam’s first unicorn is finally serious about its global gaming ambitions

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