Corporations seek strategic stakes

Securities have been listed in the investment portfolio of state owned general corporations in the last time. The corporations have spent a lot of money on purchasing shares to become the strategic investors in banks and joint stock companies.

By the end of 2006, the Saigon Trade Corporation (Satra Group) had made the capital contribution of VND547 billion (34.2mio US$) to other entities. Besides, Satra has also injected 2mio US$ in Vietnam Investment Fund, purchased over 4 million shares of the Hanoi Housing Development Bank (Habubank) to become the strategic shareholder (holding 5% of total capital) of the bank. It has also been one of the founders of the Rong Viet Securities Company, and purchased shares of many other companies.

Earlier this year, Satra Group became the strategic investor of Phuong Nam Bank (Southern Bank) when it purchased 1 million shares of the bank worth VND80 billion (5mio US$).
Huynh Van Minh, Satra Group’s Director General, said that the group’s capital contribution into other entities will support the group’s operation. For example, as a shareholder of Habubank, Satra’s members will be easier to access the bank’s loans. As a shareholder of Rong Viet, Satra’s members will be assisted in listing shares on the stock market.

Also in 2006, Satra Group joined forces with the partners in Vietnam Brewery Joint Venture to buy back the whole Fosters Vietnam, a brewery company, at 105mio US$, and bought 80% of shares of the Quang Nam Brewery Company, which has the total capital of 17.6mio US$.
In 2006, the post tax profit Satra gained from the Vietnam Brewery Joint Venture alone was VND363 billion (22.7mio US$). Besides, Satra could gain the dividends of VND18.6 billion (1.2mio US$) from its shares. Mr Minh said that the dividends are expected to increase to VND300 billion (18.8mio US$) this year (many share items were just bought in the last year).

The Vietnam Rubber Group (VRG) proves to be a big investor in stocks. The rubber latex price has been increasing continuously in the last few years, which has made the investor’s pocket clinking with plenty of money for financial investment.
Le Quang Thung, Director General of VRG, said that up to now, VRG and its 18 members have injected VND1,746 billion (109.1mio US$) in shares of 42 joint stock companies.
“We have bought the shares of the companies specialising in making car and motorbike tyres, or wooden furniture, which can serve our strategy on diversifying business operation,” said Mr Thung.
At the end of 2006, VRG spent VND24 billion (1.5mio US$) to purchase 60% of the total shares of the HCM City-based Ben Thanh Rubber Company.
Mr Thung has revealed that VRG is planning to make capital contribution or hold controlling stakes in several companies belonging to the Vietnam Chemicals Corporation (Vinachem), including the Sao Vang Rubber Company, Da Nang Rubber Company or Casumina.
In order to implement this plan, VRG has pumped more capital into the VRG Finance Company and set up the VRG Securities Company.

However, the big investors have complained that they are facing a lot of difficulties. Mr Minh said that by the end of 2008, Satra Group will equitise the parent company. The group will issue more shares to the public, but the State will retain the controlling stakes.
The biggest problem lies in the defining the value of financial investment items as it remains unclear the nominal value or market value of shares will be the basis for the calculation. If the assets are valued based on the nominal value, it would cause losses to the State. Meanwhile, it is very difficult to value the assets based on the market value as the prices always fluctuate. Mr Minh said that he has consulted state management authorities on the issue but no suitable solution has been found.

Not only aiming to join hands with foreign investors, local banks have also been intensively seeking domestic strategic partners.

Right before Tet, the market witnessed five big affairs between banks and powerful groups. The Vietnam Oil and Gas Group (PetroVietnam) now holds VND100 billion (6.3mio US$) worth of shares of G-Bank. The bank was just established in 2006, but it has successfully raised the chartered capital to VND500 billion (31.25mio US$) and total assets of VND2 trillion (125mio US$).

The Vietnam Shipbuilding Industry Corporation (Vinashin) has become the shareholder of the Hanoi Housing Development Bank (Habubank), which holds 10% of the bank. Prior to that, Lilama Corporation and Satra Group have also become Habubank’s shareholders (each of them holds 5% of shares).

The Saigon – Hanoi Joint Stock Bank, which once was the Nhon Ai Rural Joint Stock bank, has signed the agreement on strategic cooperation with the Vietnam Rubber Group and the Coal and Mineral Industries Group.

Most recently, Kinh Do Group spent US$90 million to purchase the shares of Eximbank (worth VND180 billion or 11.3mio US$ in nominal value). This is the biggest ever assignment deal which has been made by the domestic investors.

Source: VEN