Vinamilk stake sale set to flop after Vietnam imposes investment caps

Fraser and Neave

12/12/2016 05:22

By Mai Nguyen 
    HANOI, Dec 12 (Reuters) - The Vietnamese government will 
likely fail to sell much of the 9 percent stake it has offered 
in dairy firm Vinamilk  VNM.HM , one of its most attractive 
assets, with investors put off by highly restrictive investment 
caps and unfavourable market conditions. 
    The State Capital Investment Corporation (SCIC), which 
represents the government's 44.7 percent ownership in Vinamilk, 
took the market by surprise last month when it announced each  
investor could only buy up to 2.7 percent of Vinamilk's shares. 
    That has helped result in just two bids, worth a combined 
$500 million, by wholly owned units of Thailand's Fraser and 
Neave Ltd  FRNM.SI  for the shares which are due to sold on 
Monday. One of the units is already Vinamilk's second-biggest 
shareholder with a 10.95 percent stake. 
    The muddled sale process has underscored Vietnam's relative 
inexperience and investor wariness about state control as the 
government seeks to push forward with a major privatisation 
drive - one that already been hampered due to the small stakes 
on offer and concerns about vested interests. 
    Also detering investors has been a drop in Vinamilk's share 
price below the minimum bidding price set by the government of 
144,000 dong. The stock has been hit by a sell off in Vietnamese 
shares as investors shun emerging markets amid uncertainties 
after the U.S. presidential election and a potential rates hike 
by the Federal Reserve. 
    "The minimum bidding price of 144,000 dong is actually not 
expensive for a strategic investor in Vinamilk, but the issues 
are the timing and the restrictions that come with it," said 
Nguyen Thanh Lam, deputy manager at Maybank Kim Eng Securities 
in Vietnam. 
    Vinamilk, Vietnam's top listed firm by market value, is seen 
as one of the country's most attractive companies as it commands 
around half of domestic market for dairy goods and has seen 
steady earnings growth. 
    Its shares have jumped 20 times in value since its debut on 
the Ho Chi Minh stock exchange 10 years ago. 
    Other shares offerings coming up include an initial public 
offering of budget carrier VietJet Air, which is expected to 
raise up to $194 million, and the sale of government shares in 
Vietnam's top brewers Sabeco and Habeco. 
    Fiachra Mac Cana, managing director and head of research at 
Ho Chi Minh Securities, said the Vinamilk share sale did not 
necessarily bode ill for other asset sales. 
    "I feel that the sale is actually a good initial step with a 
few lessons learned as to how to do better next time," he said.  
    "In any event, the government hasn't been doing this for 
that long so in a way we should expect them to be learning as 
they go." 
    ($1 = 22,585 dong) 
 
 (Reporting by Mai Nguyen; Editing by Edwina Gibbs) 
 ((mai.nguyen@thomsonreuters.com; +844 3825 9623; Reuters 
Messaging: mai.nguyen.thomsonreuters.com@reuters.net)) 
 
Keywords: VINAMILK SALE/