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Banking & Finance

SCIC to retain cash cows for now

Released at: 13:31, 02/06/2016

SCIC to retain cash cows for now

Photo: Viet Tuan

Many companies in the State Capital Investment Corporation's portfolio are solid earners and won't be sold this year at least.

by Sy Nguyen

The State Capital Investment Corporation (SCIC) has disappointed investors in deciding not to divest at this time from any of the big names in its possession.

It announced it had sold shares in 120 enterprises during 2015, retrieving VND4.491 billion ($204 million) from initial investments of VND1.682 billion (76.4 million). The corporation still needs to divest from 197 more enterprises in the time to come, with total capital of VND19.74 billion ($897 million).

Divestment activities are part of the SCIC’s restructuring program determined by the government. Last October, under the Prime Minister’s direction, it announced plans to divest the entire State holding in ten large companies in various industries, including Vinamilk, FPT Telecom, Binh Minh Plastics Company, Tien Phong Plastics Company, and Bao Minh Insurance Corporation. These divestments are expected to bring in a total of $3.5 billion to the State budget.

SCIC yet again disappointed the market, however, by announcing that it would not sell stakes in Vinamilk, Bao Minh or FPT Telecom this year. Instead, under its 2016 plan, it will sell shares in concerns such as FPT Corporation and the Sa Giang Import and Export Company.

The reason for not selling stakes in Vinamilk, Binh Minh and Bao Minh at this time is that those companies are the best performing shares in the SCIC’s portfolio. In 2015 they paid the SCIC a collective dividend of VND5.062 trillion ($230 million), an increase of 40 per cent against 2014.

Based of market value, Vinamilk is considered its most valuable investment. It holds 45.1 per cent, equivalent to almost $2.46 billion. Last year Vinamilk paid a dividend of VND2.705 trillion ($123 million) to the SCIC. Other companies such as FPT Telecom and Binh Minh Plastics also paid significant dividends to the SCIC.

This year these companies plan to pay dividends primarily in cash. Sixty per cent of the Vinamilk dividend is to be paid in cash while Binh Minh Plastics and Tien Phong Plastics have offered to pay shareholders 45 per cent and 25 per cent of dividends in cash, respectively. This major source of dividends, and especially the fact they will come in the form of cash, makes it difficult for the SCIC to decide to sell.

Established in 2005, the SCIC is seen as an arm of the government in enhancing the efficiency of State capital utilization. As at December 31, 2015 its portfolio comprised 197 companies.

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