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State to soon divest from Vinamilk

Released at: 08:46, 15/09/2016

State to soon divest from Vinamilk

Photo: Viet Tuan

SCIC preparing plan for State holding to be sold this year.

by Duy Anh

The divestment of State holdings in the Vietnam National Dairy Products Company (Vinamilk) is to be conducted before the end of this year while divestment from nine other State-owned enterprises (SOEs) will be conducted in early 2017.

The State Capital Investment Corporation (SCIC) is preparing a detailed divestment plan for Vinamilk for submission to the Ministry of Finance (MoF) and the Prime Minister, Deputy Director of the Corporate Finance Department at MoF, Mr. Dang Quyet Tien, said in a press release on September 14.

Mr. Tien stressed that the process needs to be conducted carefully so as not to overly affect the stock market, as many investors may only focus on Vinamilk.

He added that the market value of the State holdings in Vinamilk, at nearly VND93.49 trillion ($4.2 billion), means the divestment will be split into multiple stages.

Vinamilk is a high value brand with good corporate governance and is innovative and creative, Mr. Tien went on. It is not only a domestic brand but also a regional brand. Authorities, therefore, need to reach out to foreign investors and not just domestic investors.

After the trading session on September 14, Vinamilk’s share price stood at VND144,000 ($6.46). Its market capitalization is estimated at over VND209 trillion ($9.37 billion); among the largest on Vietnam’s stock exchange.

At the end of 2015 the government directed the SCIC to “choose an appropriate time” for divesting State holdings in the ten enterprises.

SOE

State Holding

Bao Minh Insurance Corporation (BMI)

50.7%

Vietnam National Reinsurance Company (VNR)

40.36%

Ha Giang Mineral Mechanics Company (HGM)

46.6%

Tien Phong Plastics Company (NTP)

37.1%

Vietnam Infrastructure Investment and Development Company (VIID)

47.6%

Binh Minh Plastic Company (BMP)

29.6%

Vietnam National Dairy Products Company (Vinamilk)

44.73%

FPT Corporation (FPT)

6.0%

FPT Telecommunications Company (FPT Telecom)

45.1%

Sa Giang Import Export Corporation (SGC)

50.17%

SCIC had earlier said that it would not sell the State holdings in Vinamilk, Bao Minh and FPT Telecom this year. Instead, under its 2016 plan, it would sell shares in concerns such as FPT Corporation and SGC.

The reason given for not selling stakes in Vinamilk, Binh Minh and Bao Minh this year was that the 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. The SCIC holds 44.73 per cent, or 649.26 million shares, equivalent to almost $4.2 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, made it difficult for the SCIC to decide to sell.

Established in 2005, the SCIC is charged with enhancing the efficiency of State capital use. As at December 31, 2015 its portfolio comprised 197 companies.

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