State firms fail to attract investors at IPO

Viet Nam National Seafood Corporation (Seaprodex) had a better record with 75 per cent of auctioned shares being sold in December 2014 but in the second auction early this year, only 2.8 per cent were sold. — File Photo

HA NOI (Biz Hub) — Many State-owned companies with a charter capital of more than VND1 trillion (US$44.4 million) failed to elicit investors' interest with their recent initial public offering (IPO). Analysts attributed it primarily to their unproductive operation, as well as poor preparation for the IPO.

On the Ha Noi Stock Exchange, only 184 million shares out of a total 566 million shares auctioned in the first half of this year were sold, thus leaving more than 67 per cent of shares as unsalable, the exchange's data showed.

Meanwhile, 11 out of the total 29 companies that floated IPOs on the HCM Stock Exchange in the first six months had to cancel their auctions due to very low investor participation.

Many of these companies had a large charter capital from VND1 trillion to nearly VND7 trillion ($311.1 million).

According to Minh An, an analyst on the financial website vietstock.vn, these companies generated low profits although they had big charter capital and assets.

"No businesses posted profits of VND300 billion ($13.3 million), and some even registered losses," An said.

Many State-owned companies are rushing to complete their equitisation by the end of this year as ordered by the Government. Data of the Ministry of Planning and Investment showed only 251 enterprises out of a total of 479 enterprises required to make equitisation during 2014-15 have come up with IPOs, which means the number of those that remain to be equitised in the next few months is very large.

Along with additional share issues of other listed companies on the two exchanges, investors had many choices for quality products. That explained why ineffective State corporations faced many difficulties in attracting investors.

Vinacomin Power Corporation under the Viet Nam National Coal – Mineral Industries Group (Vinacomin) saw the poorest result since only 1.2 million shares out of total 263 million shares put up for sale were sold.

This company, while having a charter capital of VND6.8 trillion ($302.2 million), suffered a heavy loss of VND916 billion ($40.7 million) in 2011. Its operation improved in the last three years but its profit in 2014 reached only VND277 billion ($12.3 million).

Other subsidiaries under Vinacomin also posted poor IPO results. Both Vinacomin Minerals Holding Corporation and Vinacomin Viet Bac Mining Industry Corporation were able to sell less than three per cent of total shares.

These two companies had total assets of VND3-5 trillion ($133-222 million) by the end of 2014 but their profit was below VND100 billion ($4.4 million).

The most valuable asset of the company is a vast land size of over 878,000 sq. metres in big cities like Ha Noi, HCM City, Hai Phong, Binh Duong and Vung Tau. However, their profits were modest at just around VND110 billion (nearly $5 million) while their total assets reached VND3.6 trillion ($160 million).

According to Dang Quyet Tien, deputy director of the Department of Entrepreneurial Finance under the Ministry of Finance, many SOEs were not well prepared for making a demonstration before the investors, including issues related to debt and financial indicators. — VNS