FPT Corp (Vietnam)

Where is their head office?

The head office is in Cau Giay, Vietnam.

What does the company do?

FPT Corp is the largest technology company in Vietnam with significant market share in each of its three core businesses: technology (software outsourcing, systems integration and IT services), education (K-12, vocational, post-secondary diplomas and degrees), and telecommunications (fixed-line, PayTV and broadband internet services).

Why do we like the investment?

In our search for potential stock ideas, we cast a wide net that encompasses non-traditional markets and companies. One such market is Vietnam, where structural trends of increasing urbanisation and income levels are becoming central in driving growth. We have spent a lot of time over the years gaining comfort with Vietnam, and recognise its growing importance in global supply chains and the positive direction of the government to open up capital markets.

During this journey, we have been impressed by FPT Corp, which has demonstrated entrepreneurship and competence in this frontier market. Its revenue base is diversified and the industry backdrop is healthy. The company has a solid balance sheet that should support its pursuit of growth opportunities. We also rate its management highly because of its good execution track record and transparency with investors.

On the tech front, when it comes to its growth strategy, FPT aims to be in the top 50 global leading digital transformation (DX) solutions and services providers by 2030. It is seeing strong growth in DX revenues, which is already accounting for a significant portion of its overall outsourcing revenues. The industry is attractive with structural growth tailwinds and a huge market. FPT believes that growth in this area will ride on new technologies, such as cloud, AI, big data analytics and robotic process automation.

Across its businesses, the education segment is the most profitable and management expects this division to continue to deliver consistently strong revenue growth over the coming years. This will be driven by rising demand from growing middle-income students for quality education. Elsewhere, its telecom business is stable and defensive, supported by PayTV growth. This should provide a good buffer in times of weak macroeconomic conditions.

What is our key area of engagement?

We continue to engage FPT on better disclosure around data privacy and the setting of targets to track its progress around its carbon footprint and renewable energy mix.

What is the result?

FPT has one of the most developed board structures in Vietnam. Its seven-member board has three independent directors. The stakes of inside shareholders and major shareholders are around 18%. In response to shareholders’ feedback, FPT changed auditor to PwC from Deloitte in 2021. The company also provides business updates to its investors on a monthly basis.

Meanwhile, cybersecurity and talent management are key areas of focus. We think the company has done a good job in managing employee welfare so far. FPT also maintains good diversity in its workforce. Female employees accounted for 37.2% of its overall headcount in 2021 versus 36.1% in 2017. Separately, disclosures about data privacy and cybersecurity are limited, and we continue to engage with the company on better transparency.

FPT’s environmental record is clean. FPT has fully complied with waste and emissions management regulations, with no related violations recorded in the 30 years since its establishment. However, FPT has not set any trackable carbon emissions reduction or renewable energy targets. Instead, it discloses broad-based statements for its environmental initiatives, such as usage of smart energy and water control systems, timely maintenance to avoid energy losses and increasing the use of natural energy and water sources. We are also urging the company to track its carbon footprint better.

While MSCI has yet to rate FPT Corp for its ESG standards, overall we regard the company as a good ESG stewardship example in Vietnam.

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