Answered Vietnam Investment Review, Mr. Chris Freund, CEO of Mekong Capital believed that, disadvantage news about Dong A Bank will temporarily affect PNJ's stock, but there won't be long-term effect to core business of the company. If worst scenario happen to Dong A Bank, PNJ will still be profitable.

As an investor representative in PNJ, who holds 7% of Dong A bank, equivalent to VND 395 billion, how do you respond to recent burst of Dong A Bank?

We look at it as an one-off incident. It will hit the company performance this year, but it has no long-term impact on the core business of PNJ. PNJ's core business has been growing extremely well. The net profit has been growing at 40% annually on average during the 2013 and 2014 year.

During the first six months of 2015, the company delivered an operating profit growth of [57%], grew its gold retail space by [30%] and achieved exceptional same-store-sale growth of 27%.

We still are convinced that PNJ team are one of the most advanced retail management teams in Vietnam. In short, we stay very positive about the outlook of PNJ that the company will be able to continue its strong growth.

Mekong Capital have been on the Board of Directors since 2012, have you made recommendation to the management team regarding their non-core portfolio, including the investment in Dong A Bank?

Since 2012, PNJ has made efforts in divesting from their non-core investments, consistent with the intention communicated to its shareholders. Major divestments included Saigon Fuel Corporation; Dai Viet Gas, Saigon Food JSC….

Also since 2012, PNJ has not injected any additional capital into Dong A Bank but instead focus 100% into their core business which is jewelries. They have achieved great outcome from such focus. One of which was an increase of gold retail market shares from 12% in 2012 to 22% in 1Q2015, making them a clear leader in the market.

The senior leadership team of PNJ, including Md Dung who is the CEO and Chairwoman of PNJ, and wife of the CEO of Dong A Bank, have direct ownership in the bank thus subsequently will be impacted by this incident. What is your view on this? Would this create any short-term instability for PNJ?

We are still convinced that PNJ team are one of the most advanced retail management teams in Vietnam. We have full respect for the team and what they have achieved so far. In our experience working with them in multiple strategic and operational improvement projects, we found them very open-minded, eager to learn and willing to change. We particularly have great respect for Md Dung for her exceptional leadership in leading the company through the corporate transformation in 2012 that laid a solid foundation for sustainable fast growth of PNJ. The net profit has been growing at 40% annually on average during 2013 and 2014.

During the first six months of 2015, the company delivered an operating profit growth of [57%], grew its gold retail space by [30%] and achieved exceptional same-store-sale growth of 27%. With their proven capability in continuing to evolve the business and further implementing best practices in retails and manufacturing, they will be able to deliver fast growth in the coming years.

So would the firm consider to exit PNJ in such a not-so-positive sentiment around the stock?

To the contrary, we are convinced in the strong growth outlook of PNJ and its potential upside as a stock. We actually think it is a good time to buy the stock when the short-term sentiment is negative but the fundamental business is exceptionally great and keeps growing fast.

Thuy Vinh

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