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SCIC to divest from GMD

Released at: 10:38, 17/08/2016

SCIC to divest from GMD

Photo: Duc Anh

State Capital Investment Corporation to sell entire 8.42% holding in Gemadept Corporation from August 15 to September 13.

by Duy Anh

The State Capital Investment Corporation (SCIC) has announced it will divest its entire 8.42 per cent stake, or 15.1 millions shares, in the Gemadept Corporation (GMD) from August 15 to September 13.

SCIC’s announcement was made through a statement sent to the State Securities Commission (SSC) and the Ho Chi Minh City Stock Exchange (HoSE) on August 9.

The shares will be competitively offered at an initial price of VND28,000 ($1.26) and SCIC is expected to reap VND420 billion ($18.8 million) from the divestment.

GMD, the local leader in port operations and logistics with business in rubber plantations and real estate, was initially a State-owned enterprise and founded in 1990. As at the end of May it had two main shareholders: Re Collection Pte Ltd with 11.98 per cent and the SCIC with 8.42 per cent.

In the first half GMD’s consolidated after-tax profit was VND506 billion ($22.7 million), up 10 per cent year-on-year. Its consolidated net profit margin increased of 28.5 per cent year-on-year.

While holding the leading domestic position in port operations and logistics, GMD’s investment in rubber plantations has not been as effective as expected.

As at the end of 2015 it had invested approximately VND1.35 trillion ($60.5 million) in planting rubber in Cambodia. The project consisted of 30,000 ha, of which 10,000 ha have been planted, and GMD is expected to expand by a further 1,000 ha every year.

Operating costs have cut into GMD’s consolidated profit. Its financial statement for the second quarter this year saw the transfer of fixed assets resulting in a loss of VND55.3 billion ($2.48 million), which brought down after-tax profit by 16 per cent year-on-year.

GMD shares have not been overly attractive to investors in recent times due to concerns over the VND900 billion ($40.3 million) convertible bonds GMD issued to the Vietnam Investment Fund II and the impact on the share price if these were to be sold. Another issue is the threshold of 30 per cent foreign ownership.

However, Beta Securities Incorporation (BSI) has emphasized GMD’s potential to grow during the second half of 2016, especially with the divestment from Gemadept Tower, which BSI estimates would bring in profit of VND100 billion ($4.48 million) for the corporation. The construction of a new depot will also help boost annual capacity at Nam Hai-Dinh Vu Port by 25 per cent to 625,000 TEUs.

SCIC still holds shares in other profitable companies and is not showing an interest in divesting, including the Bao Minh Insurance Corporation, where it holds 51 per cent, Vinamilk (45 per cent), Tien Phong Plastics Company (45 per cent), and Binh Minh Plastics Company (30 per cent).

These all have high growth in revenue and profit each year so SCIC retains the shares to earn dividends. This has raised questions over whether SCIC is selling its holding because it doesn’t believe GMD can earn profits over the longer term or whether it considers its 8.42 per cent holding no longer worth retaining because of its small size.

GMD’s shares have been “cold” compared to the rest of the market. Since the start of this year, despite a significant increase in the VN-Index of some 14 per cent, GMD’s stock has only traded around the reference price.

GMD owns and operates a port network consisting of Phuoc Long Port, Gemalink, Gemadept-Hoa Sen International Port, Dung Quat Port, Nam Hai Port, and Nam Hai-Dinh Vu Port.

The Gemadept Logistics Company (a 100 per cent owned subsidiary) has been developing a vast range of logistics services, including a distribution center, an air cargo terminal, maritime shipping, cargo transport, inland transport, and freight forwarding.

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