Condo Boss

http://www.forbes.com/global/2009/1130/companies-nguyen-duc-vietnam-condo-boss.html
Lan Anh Nguyen, 11.20.09, 10:10 AM EST
Forbes Asia Magazine dated November 30, 2009


Doan Nguyen Duc makes news in Vietnam, and it's not always favorable.
He's scored big money, first off the timber trade, amid speculation
regarding illegal deforestation of the Central Highlands (charges Duc
denies). He plunked down part of his winnings to bring Thailand's
number-one striker to the Vietnamese football league. That gesture won
more fans than his 2008 purchase of a private airplane-- the country's
first--during a nasty economic period for almost everyone else.

Now, flush anew following a massive rollout of Ho Chi Minh City
condominiums from an advantageous property buy, he is looking to
neighboring Laos and beyond to compound his fortune yet again.
What is driving the man known ever more widely as Bau (Big Boss) Duc?
"To be on the top," he says, which means being a billionaire, a goal
he is more than halfway to reaching. But that compulsion, it is clear,
is more than a grasp for riches. For Duc-- the given name now
functions as his surname--attaining such a first for his nation would
validate a people still often relegated to second-class status in too
many eyes.

Duc is now able to fly throughout the region in his own jet (for
longer trips he flies first-class commercial). He lives in five-star
hotels, even in the former Saigon. (His wife and three children are
permanent residents of Singapore--for schooling reasons, he says.) He
is welcomed abroad, by owners of London's Arsenal football club, where
his corporate ads appear alongside the pitch, as well as by high
Laotian officials. But he cannot forget his first overseas travels
more than a decade ago, when he felt humiliated because Vietnamese
were often perceived as poor people and looked down upon. It was so
bad, he says, "even the national carrier's flight attendants didn't
respect their own fellow citizens."

Today, however, politically repressed Vietnam can boast a decent
economy whose thinly traded stock market is once again pushing up
valuations. A prime beneficiary is Duc's Hoang Anh Gia Lai, or HAGL
(Hoang Anh is his daughter's name, Gia Lai his modest home base in the
Highlands). On the basis of a reported $52 million net profit on $180
million in revenues in the first nine months of 2009 HAGL has passed
$1 billion in market capitalization. Duc holds 55%.

The 47-year-old entrepreneur has made so quick a rise from dirt-poor
carpenter to richest man in a dizzyingly fast-changing economy that
his tale stretches credulity. He himself belies the part. Duc is
short, fast-talking and partial to wearing jeans. "I don't have taste.
I wear whatever my wife bought for me," he says. He believes the
really successful, like the billionaires he's met in England, don't
care how they look. His distaste for formality is so strong that HAGL
subordinates eschew suits as well.
The company has been a topic of speculation since well before Duc took
it to an initial listing last December. Today it has 23 condo projects
in various stages of development, with 5,000 units already sold to a
middle-class clientele in the former southern capital. Duc has priced
at a discount in accord with what has been a rocky two years for many
in Vietnam. But it is the wood that frames his structures that was the
initial core of his gains.

After moving about central Vietnam in his youth, he failed to pass a
college entry exam for three straight years. He took up carpentry, at
first producing simple works for schools in Gia Lai. But the business
and its small staff grew into a sizable lumber player. That coincided
with a period in the early 1990s regarded as the most devastating for
Vietnam's forests since the American war. The government imposed a
logging ban, but still the trading carried on, with wood being sourced
in Laos and Cambodia as well. By 2000, Duc says, he was making nearly
$10 million a year in that sector. The circumstances are hazy. He
repeatedly denies processing illegal timber. At another point,
regarding his business interests in land, forestry and mining, he
says, "I think natural resources are limited, and I need to take them
before they're gone."

Those latest resource efforts include a 37,000-acre (15,000-hectare)
rubber plantation in Laos, one of several big endeavors he has hatched
with the also nominally Communist government there. Duc likes to frame
the plantation as arboreal restoration. Environmentalists say he is
only compounding whatever sins he may have committed. "Those are
nonnative trees that have no value for biodiversity, and the role they
play in sequestering carbon from the atmosphere, to offset global
warming, is negligible," says Jonathan Eames of Bird Life
International Indochina. "A very crude analogy would be cutting off
one of your legs and replacing it with a wooden leg."

Duc drew favorable notice in 2001 when, on the back of the wood
venture, he began sponsoring a HAGL football club and signed Kiatisuk
Senamuang from Thailand to play for it. Kiatisuk had helped beat
Vietnam's national team the year before, so buying him away was a
point of national pride, as well as a p.r. coup for the company. "I
knew for sure that football was the fastest way for people to know
about me," Duc says. Kiatisuk played for a few seasons in Vietnam and
now works for HAGL in Thailand, where Duc is aiming to expand his
corporate reach in undisclosed ways.

Although he remains linked to football in the public mind--he teamed
with Arsenal on a training academy in Gia Lai and supposedly sought an
ownership interest in the club on top of his sponsorship--he says the
sport is just a marketing interest. What consumes him are HAGL's basic
businesses.

Those took on a new character, when over 2002--03 he was able to
purchase dozens of plots in Ho Chi Minh City and elsewhere. "Not many
people invested in land at the time. The market was icing," he says.
"But I accumulated enough land to build 20,000 condominium units." How
he managed it is murky. Some parcels were considered agricultural at
the time. Later urbanization boosted the land value by roughly ten
times. That cushion, along with his lumber holdings and a granite
interest, has allowed him to build and price competitively, and only
the giant Phu My Hung planned community rivals HAGL as a development
force in the metro area.

Marc Townsend, managing director of CB Richard Ellis Vietnam, credits
Duc for reading the market. "He is obviously the biggest local
developer in the south [of Vietnam]. He was very early to understand
and deliver the right products, while very few others got it."

When the national financial bubble popped and the market was squeezed
in 2008, new rumors about Duc's dealings arose. HAGL, since it
acquired land, has borrowed from the state Bank for Investment &
Development of Vietnam, and earlier this year it got approval for $300
million in additional loans. The bank is headed by Tran Bac Ha, a
power in the country's tight business/government circle for the past
few years; he wouldn't discuss the HAGL matter for publication in
forbes asia.

In the wake of murmurs about its condition, including reports of
central bank and police inquiries, Duc's company sought to dispel
doubts by having the public listing. The process included retaining
Ernst & Young as auditor. The stock has nearly tripled, and the
Vietnam economy appears to be rebounding. Duc, for his part, shrugs
off the bad-mouthing his commercial activity has attracted, mostly
blaming jealous competitors.

Of late he has drawn attention over his expansion efforts in the
Highlands and across the Laotian and Cambodian borders. Whereas 80% of
HAGL's sales now come from property, he expects the bulk will soon be
from mining, milling and hydroelectric projects. It has invested in
two midsize hydro units in Vietnam and says it has rights to build at
least four more. An HAGL steel mill in Gia Lai will use iron ore from
two mines planned in the area. Similar activity is afoot in Laos, in
addition to the rubber operation, and another plantation is in
Cambodia.

According to Duc, the company will invest $260 million in Laos, and he
personally has helped to build a sports village there with a $4
million gift and $15 million interest-free loan. The village is needed
for Laos to host the Southeast Asian Games in December. Duc put a
reporter in touch with Laotian deputy prime minister Somsavad
Lengsavad, who confirmed Duc's generosity and said Duc was a kindred
Lao spirit.

Obviously, Bau Duc has come a long way in a hurry, for the most part
in political environments not generally hospitable to outsize
capitalists. He credits his achievements, without benefit of any
management training, to an intuitive gift for spotting profit
opportunities that others miss. And this is a frontier for capitalism.
"His business combines good things and bad things, like any other
business," says Dominic Scriven, managing director of Dragon Capital,
which holds 6% of HAGL. "But Mr. Duc should be congratulated for the
way he developed his enterprise into a public company" and for its
subsequent transparency.

The founder himself, recalling the commotion his purchase of a $5
million BeechCraft plane caused amid a shortage of foreign-currency
reserves, casts his ambitions in nationalistic terms. Vietnamese need
be no one's inferior, and he is the country's prototypical tycoon.
"Five years ago nobody in Vietnam thought about buying an airplane,"
he says. "I bought an airplane to prove that I can. Now I want to
become a billionaire, because I totally believe that I can do that,
and I want to prove that."