Falling business results major obstacle to tech unicorn VNG’s Nasdaq listing

By Khanh An, Hoa Khoa
Sun, October 1, 2023 | 11:04 pm GMT+7

Company leaders at Vietnamese tech unicorn VNG Corporation have had time to prepare for their U.S. listing, but declining business results have become a significant obstacle to the ambitions of chairman Le Hong Minh and his colleagues.

Big ambitions

According to a report by data analytics firms DataAI and AppMagic, Vietnam catapulted from the top 15 to the top 5 countries globally for app downloads from 2019 to the first quarter of 2023, amassing an impressive 4.2 billion downloads for apps originating in the country.

A recent assessment by Bloomberg also acknowledged Vietnam as a powerhouse in the gaming industry, counting among the top five countries globally in terms of mobile game production, based on download numbers in the first half of 2023.

With a rapid growth rate and much room for more, the Vietnamese gaming market is being targeted by many big names, including VNG Corporation - a nearly 20-year-old enterprise that has become well-known in the domestic market with popular games such as Swordman Online, PUBG Mobile, Valorant, and League of Legends.

VNG has also expanded to other fields such as media, fintech, and cloud computing services which have high potential in Vietnam.

VNG Campus at Tan Thuan Export Processing Zone in District 7, HCMC, southern Vietnam. Photo courtesy of the company.

VNG Campus at Tan Thuan Export Processing Zone in District 7, HCMC, southern Vietnam. Photo courtesy of the company.

In late August, VNG became the focus of attention when it announced that VNG Limited, which holds 49% of direct shares in VNG, had filed an initial public offering (IPO) on the technology-focused Nasdaq to the U.S. Securities and Exchange Commission (SEC).

Reuters quoted a person with direct knowledge of the matter that the tech unicorn plans to raise $150 million from this IPO. Its regulatory filings for the Nasdaq listing became public in late August, and it had aimed to debut in late September or early October

Founded in 2004, Ho Chi Minh City-headquartered VNG was Vietnam's first unicorn - a startup valued at $1 billion or more. The company's businesses include online games, payments, cloud services and Vietnam's most popular messaging app, Zalo.

Financial picture

Normally, for unicorns, investors will pay more attention to revenue growth targets. Although profits may be negative, the revenue growth rate shows that the company is following a strategy of continuously expanding its business activities - something common in startups such as Malaysia’s Grab and Uber of the U.S.

Similarly, VNG Corporation has achieved impressive revenue scale and growth. Its revenue increased from VND5.84 trillion ($239.6 million) in 2020 to VND7.52 trillion ($308.5 million) in 2021, equivalent to a compound annual growth rate (CAGR) of 13.5%.

However, VNG’s revenue growth rate in the above period showed signs of slowing, falling from 26.3% in 2021 to 1.99% in 2022. In the first half of 2023, the company's revenue reached VND3.23 trillion ($132.5 million), a slight increase of more than 4.2% over the same period last year.

VNG’s revenue is mainly driven by the number and level of user interaction on its platforms. In the gaming industry, a larger number of players will lead to more competition. This should create a "chain" effect that helps VNG maintain the popularity of its games. The business is based on a “free to play" model and most of this segment's revenue comes from selling virtual items in the game.

With many years of building a name in the hearts of gamers, as well as the release of many popular game titles, the game segment is the main contributor to the VNG revenue structure, with a proportion ranging from 81.7% in 2020 to more than 86% in the first six months of 2023. Notably, this is also the only field that has continuously generated profits for the company.

Besides games, another profit contributor is the media segment with the messaging application Zalo, the music platform Zing MP3, the online news aggregator Bao Moi, and the advertising platforms Adtima and Zalo Ads. The financial statements for the 2020-2022 period showed that this field was continuously profitable, with average growth of 137% per year. However, in the first half of 2023, the media segment reported a loss of VND153 billion ($6.28 million).

Revenue has failed to meet expectations while losses lingered, at VND650.6 billion ($26.7 million), VND732.3 billion ($30.05 million), VND2.06 billion ($84.53 million) and VND651.7 billion ($26.74 million) in 2020, 2021, 2022 and the first half of 2023, respectively.

In contrast to game production, the company's remaining business segments have suffered continuous losses. Fintech was the worst performer with a loss of VND858 billion ($35.2 million), VND1.47 trillion ($60.32 million), VND2.02 trillion ($82.89 million) in 2020, 2021, and 2022, respectively. A positive signal is that this segment’s loss dropped to only VND465 billion ($19.08 million) in the first six months of 2023.

The company attributed the shrinking losses to reduced marketing costs and increasing user engagement. For many years, VNG has poured capital into ZaloPay to encourage Zalo users to make transactions. However, the corporation said the strategy has shifted to focus on attracting merchants to reduce the burn rate. In its filing with the SEC, VNG admitted that it cannot compete with companies that have a broader selection of fintech products. Instead, the products it provides are mainly through cooperation with other financial institutions.

A notable point is that VNG had nearly VND2.3 trillion ($94.38 million) at the end of Q2 2023. The company has continuously received cash flows from capital mobilization activities and business segments recording profits from 2020 to the first half of 2023.

VNG reported after-tax profit of VND50.2 billion ($2.1 million) in the second quarter of this year, its first profit since the fourth quarter of 2021. The company's net revenue reached nearly VND2.25 trillion ($94.6 million) in the period, up 12.4% year-on-year, according to the company's consolidated Q2 financial statement.

It has targeted revenue of VND9.28 trillion ($394.5 million) and a loss of VND572 billion ($24.3 million) in 2023.

VNG is registered on the Unlisted Public Companies Market (UpCOM) as VNZ, which was trading for VND803,800 ($32.98) per share last Thursday.

Relationship between VNG Limited and VNG Corporation:

VNG Limited, which plans to list on the Nasdaq, holds a 49% stake in VNG Corporation. In addition, it also indirectly holds 21.3% of VNG Corporation’s shares through an agreement with BigV Technology Corporation.

BigV is a holding company in Vietnam (VN HoldCo), holding shares in VNG Corporation on behalf of foreign shareholders.

Comments (0)
  • Read More
Vietnam to soon raise taxpayers' personal deduction: official

Vietnam to soon raise taxpayers' personal deduction: official

The personal income tax deduction in Vietnam is "very likely" to increase to VND21.7 million ($823,940) per month, including VND15.5 million (588,530) for the taxpayer and VND6.2 million ($235,410) for each dependent.

Finance - Thu, October 16, 2025 | 6:25 pm GMT+7

Business confidence climbs as reforms gain traction amid global headwinds: EuroCham Vietnam

Business confidence climbs as reforms gain traction amid global headwinds: EuroCham Vietnam

The index climbed to 66.5, surpassing pre-tariffs level and reaching its highest in three years – showcasing resilience and adaptability amid global headwinds and evolving U.S. tariff pressures.

Economy - Thu, October 16, 2025 | 4:36 pm GMT+7

Vietnam's stock market watchdog suspends two Grant Thornton auditors

Vietnam's stock market watchdog suspends two Grant Thornton auditors

Vietnam's State Securities Commission (SSC) has suspended two auditors from Grant Thornton Vietnam after determining that the 2024 audited financial statements of Saigon Water Infrastructure Corporation (HoSE: SII) failed to meet required standards.

Banking & Finance - Thu, October 16, 2025 | 3:35 pm GMT+7

Law No. 56 a major policy breakthrough for Vietnam's stock market development

Law No. 56 a major policy breakthrough for Vietnam's stock market development

The Law No. 56, effective January 1, 2025, is one of the major legal breakthroughs in recent years that will enhance the transparency and operational efficiency of the Vietnamese stock market.

Finance - Thu, October 16, 2025 | 2:30 pm GMT+7

WHA Group breaks ground on smart technology industrial zone in central Vietnam

WHA Group breaks ground on smart technology industrial zone in central Vietnam

Thailand's WHA Group on Tuesday broke ground on a world-class, modern, and environmentally friendly industrial zone in central Vietnam, namely the WHA Smart Technology Industrial Zone-Thanh Hoa.

Real Estate - Thu, October 16, 2025 | 2:00 pm GMT+7

Vietnam a key partner in Murphy Oil’s global strategy: exec

Vietnam a key partner in Murphy Oil’s global strategy: exec

Vietnam remains a key partner in Murphy Oil’s global business strategy, said Eric Hambly, the U.S. corporation's president and CEO.

Companies - Thu, October 16, 2025 | 12:06 pm GMT+7

VNPT, Qualcomm debut Vietnam’s 1st original design-based excellence center

VNPT, Qualcomm debut Vietnam’s 1st original design-based excellence center

State-owned Vietnam Posts and Telecommunications Group (VNPT) and Qualcomm have officially launched the VNPT-Qualcomm Excellence Center (VQEC), the first facility in the country to operate under an original design co-development model using Qualcomm’s core technologies.

Companies - Thu, October 16, 2025 | 8:41 am GMT+7

Indonesia enjoys steady growth in nine months

Indonesia enjoys steady growth in nine months

Indonesia's Ministry of Finance on Tuesday announced the country’s 2025 budget performance as of September, reporting that Southeast Asia’s largest economy continued to post steady growth despite global economic uncertainties.

Southeast Asia - Wed, October 15, 2025 | 9:53 pm GMT+7

Malaysia on progressive path towards AI nation status: experts

Malaysia on progressive path towards AI nation status: experts

Malaysia is on a progressive track towards becoming an Artificial Intelligence (AI) nation by 2030, a goal seen as achievable under Budget 2026 - the Malaysian Government’s fiscal and policy framework for 2026.

Southeast Asia - Wed, October 15, 2025 | 9:44 pm GMT+7

Thailand steps up development of semiconductor industry

Thailand steps up development of semiconductor industry

Thailand’s Board of Investment (BOI) plans to propose a new national semiconductor and advanced electronics policy board to the government, which will spearhead Thailand’s semiconductor development strategy.

Southeast Asia - Wed, October 15, 2025 | 9:40 pm GMT+7

ASEAN sets ambitious energy targets

ASEAN sets ambitious energy targets

Senior energy officials from ASEAN member nations and Timor-Leste on Tuesday convened in Kuala Lumpur, Malaysia, to finalize key outcomes and policy recommendations to be submitted to the 43rd ASEAN Ministers on Energy Meeting (AMEM).

Southeast Asia - Wed, October 15, 2025 | 9:33 pm GMT+7

Sun Group gets nod for $375 mln inland waterway tourism project in central Vietnam

Sun Group gets nod for $375 mln inland waterway tourism project in central Vietnam

A subsidiary of Sun Group, one of Vietnam’s leading real estate developers, has received approval to invest VND9.88 trillion ($375 million) in an inland waterway tourism project in the central coastal city of Danang.

Industries - Wed, October 15, 2025 | 5:21 pm GMT+7

Vietnamese luxury car dealer Haxaco’s business slumps, stock nears two-year low

Vietnamese luxury car dealer Haxaco’s business slumps, stock nears two-year low

The operations of Hang Xanh Automobile Service JSC or Haxaco (HoSE: HAX), known as the largest distributor of Mercedes-Benz vehicles in Vietnam, are under pressure as consumers tighten spending and competition among car brands intensifies.

Companies - Wed, October 15, 2025 | 5:13 pm GMT+7

Vietnam sets 2026 GDP growth target at 10%

Vietnam sets 2026 GDP growth target at 10%

The Vietnamese Government has set the targets for economic expansion in 2026 at about 10% and inflation at 4.5%.

Economy - Wed, October 15, 2025 | 4:28 pm GMT+7

Movement of mega projects creates momentum for central Vietnam's Van Phong Economic Zone

Movement of mega projects creates momentum for central Vietnam's Van Phong Economic Zone

A series of large-scale projects in Van Phong Economic Zone are being accelerated, opening new prospects for breakthroughs in this key growth hub of Khanh Hoa province.

Industries - Wed, October 15, 2025 | 12:24 pm GMT+7

Vietnam's International Financial Center ambition can unlock new wave of innovation

Vietnam's International Financial Center ambition can unlock new wave of innovation

By embedding clarity, consistency, and collaboration into the foundations of its International Financian Center, Vietnam can create not just another financial center, but a hub for innovation that connects Asia to the world, writes Phil Wright, COO, HSBC Vietnam.

Consulting - Wed, October 15, 2025 | 11:03 am GMT+7