Seaports attract investment from major firms

Monday, Jun 15, 2015 08:00

Quang Ninh Port, for instance, a large port that can handle vessels of over 75,000 DWT, has four warehouses with a combined area of 10,700sq.m and a 142,000sq.m freight yard. On top of that, it is location in a prime place. — Photo quangninhport

by Compiled

According to the HCM City Stock Exchange, Sai Gon Port Company Limited will make its initial public offering (IPO) on June 30.

Last year the State-owned port's pre-tax profit was VND79 billion (US$3.64 million) on consolidated turnover of VND1.073 trillion (US$49.45 million).

After equitisation, the Government will retain 64 per cent of its estimated capital of VND2.162 trillion (US$98.9 million).

The IPO will see more than 35.7 million shares with the starting price of VND11,500 sold, equivalent to 16.51 per cent of registered capital.

Sai Gon Port plans to sell another 16.5 per cent to strategic partners, but three investors have registered to buy a combined 102 per cent stake.

Many ports have become attractive for major private investors, even as the Government and Ministry of Transport want to reduce State ownership in seaports to not more than 51 per cent.

Five ports under the control of the Viet Nam National Shipping Lines (Vinalines) launched IPOs soon after the government announced this policy.

The shares of Quang Ninh, Nha Trang, Da Nang, Hai Phong, and Can Tho ports became red hot soon afterwards.

In a second IPO, Da Nang Seaport sold all 13.2 million shares to five private companies at a price of VND15,677, much higher than its minimum price of VND12,000.

The Oman Investment Fund and the T&T Group also want to buy stakes in Quang Ninh and Hai Phong ports.

Vingroup has said it is ready to buy 80 per cent of Hai Phong and Sai Gon ports.

Last August Vinalines sold 8.5 million shares or 34.7 per cent of Nha Trang Port to Vingroup.

Ha Tinh port reportedly attracted interest from 47 private companies who registered to buy more than 8.57 million shares, double the number planned, when it equitised in 2008.

The question is, why are private investors, including many who have nothing to do with the business, so interested in ports, even those that are not efficient?

Admittedly, cargo volumes are growing and the involvement of private investors in their management post-IPO means their revenues and profits are soaring.

However, their business is not the only attraction; most ports also enjoy prime locations and have large land parcels, which can be used to develop property projects.

Quang Ninh Port, for instance, a large port that can handle vessels of over 75,000 DWT, has four warehouses with a combined area of 10,700sq.m and a 142,000sq.m freight yard. On top of that, it is location in a prime place.

Not surprisingly, though the volume of cargo it handles has shrunk significantly in recent years due to various factors, many property developers are keen to get in.

Analysts are clear that the Government's policy of allowing the private sector to develop transport infrastructure like roads, airports and ports is the right one since public funds are limited.

But they warn that this should be carefully monitored to ensure public interest is safeguarded.

M&A activities gather pace

The Viet Nam Competition Authority's 2014 Annual Report says that mergers and acquisitions (M&A) have gathered pace in most industries.

In 2009-11 there were around 750 M&A transactions totally worth US$6.89 billion.

This rose to $11.13 billion in 2012-14.

The average value of each transaction has also been rising concurrently, for instance going up from $10 million in 2012 to $15 million in 2013.

Significantly, mergers and acquisitions have been taking place in a range of industries, with finance and banking, consumer goods, retail, and energy heading the list.

Last year the retail sector topped with well over a third of the value of transactions even as domestic businesses accounted for 74 per cent of all transactions.

It was followed by consumer goods that accounted for 21 per cent, followed by the energy industry with 18 per cent.

Analysts attribute the M&A boom to the Government's strong push for restructuring in recent years, especially of the financial sector.

Many transactions in the finance and banking industries have been completed in double quick time to eliminate small and weak banks and create new stronger banks in line with the Government's target of having only 15 to 17 lenders instead of the current 40.

The housing sector's prolonged slump has also encouraged a slew of transactions and the entry of many new investors into the market.

But the sharp increase in the number of transactions has analysts worried. They fear the possibility of some firms abusing their dominant market position and creating unhealthy competition.

It is to preclude such a threat that the Government issued Decree No 71 last year warning against violation of anti-trust regulations.

It provides for penalties of up to 10 per cent of turnover for any enterprise that flouts anti-trust regulations, up from the earlier 5 per cent.

Nevertheless, the analysts want the Government to keep a close eye on M&A transactions to prevent any actions that will affect market competition.

Target met

In May Sai Gon Commercial Bank achieved its goal of increasing charter capital to VND14.29 trillion (US$660.2 million) from VND12.29 trillion.

The bank did this by offering investors 200 million shares through put-through transactions.

It sold a 13.2 per cent stake to two British investors, Noble Capital Group Limited and Glory Capital Investment.

According to the bank's board, the foreign shareholders want to soon hike their stake further.

VinaCapital too is interested in picking up bank shares after the real estate market got back on the road to recovery.

Its VOF Investment Limited owns a 5.02 per cent stake in Eximbank, which makes it the third biggest shareholder in the lender.

A fund spokesperson said further investments are likely in the Vietnamese financial and banking sector.

Dong A Bank is discussing with some foreign investors the possibility of selling stakes to them.

After selling its stakes in Mekong Bank, Singapore's Fullerton Financial Holdings –FDH is now exploring opportunities to buy into other Vietnamese banks.

Japanese investors have expressed interest in picking up stakes in HDBank.

State giant BIDV will offload more than 20 per cent of its equity to foreign investors this year, selling 15 per cent to a strategic partner and 10 per cent to a financial investor.

For the banks, the foreign investors will provide technical assistance, help improve governance and risk management capacity, develop new products and enhance their competitiveness.

Another benefit, this one for the overall financial system, is that foreign investors will urge the banks to become more transparent.

Analysts attribute foreign investors' interest in the banking sector to its recovery, saying though the economy is yet to show clear signs of recovery, shares of listed banks have appreciated sharply.

Vietcombank, for instance, has risen by 25 per cent in the last seven months and Vietinbank by 26 per cent.

Investors also like the fact that the banking industry's restructuring and ongoing settlement of bad debts have made banks more efficient and transparent, bolstering their competitiveness.

To encourage more overseas investors, the analysts say the foreign ownership cap in banks should be raised from the current 30 per cent, which is not enough to give them a say in running them. — VNS

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