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Vietnam’s FPT to Miss Profit Target, Aims to Boost M&A Activity

FPT Corp. (FPT), Vietnam’s biggest publicly traded telecommunications and software company, will miss this year’s profit target after the nation’s high inflation hurt demand, Chief Executive Officer Truong Dinh Anh said.

Pretax profit is estimated at 2.57 trillion dong ($122.3 million) this year, less than the company’s revised target of 2.62 trillion dong announced in July, Anh said in an interview in Hanoi yesterday. Revenue may be 26 trillion dong, compared with the target of 26.8 trillion dong, he said.

“High inflation plus the economic slowdown have affected the consumption power of citizens and companies,” Anh said. “Some units have missed their targets.”

Asia’s fastest inflation prompted the government to tighten credit this year and crimped demand. Vietnam’s trade deficit, slowing economic growth and risks in the banking sector have also damped businesses and the government last week said gross domestic product may climb about 6 percent this year, slower than the 6.78 percent pace in 2010.

Still, the economic environment presents FPT with opportunities to increase mergers and acquisitions, Anh said.

“The unfavorable economic situation is not good for business expansion but it is extremely good for M&A activity -- we can buy companies which we never thought we’d be able to,” he said.

The Hanoi-based carrier will use part of its “free cash” of about 3 trillion dong for acquisitions next year, Anh said.

“The current situation, when many companies are facing difficulties, is a good chance for us to take over companies either in the same industry or in other fields,” he said.

Shares of FPT have declined 23 percent on the Ho Chi Minh City Stock Exchange this year, in line with the drop in the benchmark VN Index. (VNINDEX)

FPT Telecom Stake

FPT, which announced a cloud-computing alliance with Microsoft Corp. (MSFT) in May last year, is in talks with the Ministry of Finance and the State Capital Investment Corp. to increase its stake in FPT Telecom Co. to 100 percent from the current 43 percent, Anh said. The deal is likely to be completed as early as the first quarter, and FPT may issue shares for a swap as part of the transaction and pay the rest by cash, he said.

FPT has also been in discussion with two local companies that publish weekly magazines, Anh said, without providing details. Companies operating in the digital content and education businesses are also likely targets, he said.

Mergers and acquisitions in industries ranging from coffee to medical services have increased in Vietnam this year as investors sought to profit from the country’s growing middle class, even as inflation and borrowing costs increased.

2012 Targets

Masan Consumer Corp. (MSN), a unit of Masan Group, agreed in April to sell a 10 percent stake to KKR & Co., the investment firm managed by Henry Kravis and George Roberts, for $159 million, Vietnam’s largest private-equity investment.

Vinacafe Bien Hoa Joint-Stock Co., a unit of Vietnam’s second-biggest coffee exporter, said Sept. 23 it accepted a takeover offer from Masan Consumer.

FPT aims to boost both pretax profit and revenue about 25 percent next year as “we forecast that the macro economy will still be volatile,” Anh said. He said the final numbers have not been decided yet.

“The target is quite conservative compared with our previous forecast,” the executive said. “We will consider adjusting the earnings target if need be, based on the real economic picture” after the first quarter, he said.

FPT will retain its focus on the “core” telecommunications and software businesses in 2012, Anh said. Revenue from telecommunications may rise 31 percent, he said.

The company has a “commitment” to boost revenue by up to 25-fold by 2020, former CEO Nguyen Thanh Nam said last year. The company has consolidated units including FPT Information System, FPT Software and FPT Trading Group as it seeks to restore annual earnings growth of more than 30 percent. Anh said in October that pretax profit may rise as much as 35 percent next year.

Retail Plans

FPT, whose customers include Microsoft, Panasonic Corp. and Hitachi Ltd., will spend $15 million to $20 million to open retail stores, Anh said. The company plans to increase the number of stores nationwide to 150 by 2014, from the current 15.

The company also plans to boost its operations in Laos and Cambodia and expand to Nigerian and Myanmar, Anh said. FPT has “almost” completed a transaction to buy a Cambodian telecommunications company, he said, without elaborating.

To contact Bloomberg News staff for this story: Nguyen Kieu Giang in Hanoi at giang1@bloomberg.net

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net

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