(Corrects profit before tax and company corrects segment analysis in 11th paragraph of story published Feb. 19.)
FPT Corp., Vietnam’s largest publicly traded telecommunications and software company, enlisted Temasek Holdings Pte to help it identify a Singapore technology company for acquisition to boost sales overseas.
FPT will spend as much as $20 million on a Singapore acquisition, Chief Executive Officer Bui Quang Ngoc said in an interview today. The company, which had sales of 28.6 trillion dong ($1.4 billion) in 2013, seeks to more than triple revenue from overseas to $400 million by the end of 2016, co-founder Ngoc, who took charge in July, said in Hanoi.
“Singapore is a very attractive market,” Ngoc said. “If we can be successful in Singapore, it means we have enough experience to do it in other countries.”
FPT joins other Vietnam companies looking for opportunities overseas as domestic sales growth slows. Vietnam Dairy Products Joint-Stock Co., or Vinamilk, the nation’s largest dairy producer, plans a global expansion to more than double revenue to $3 billion by 2017.
“The idea of them doing the work that Accenture and IBM would normally do and doing it in other emerging markets is a great idea,” said Michael Kokalari, head of Vietnam research at CIMB Securities International Ltd. “It is a really good story. A bunch of things are going right that makes it interesting. FPT has been our top pick in Vietnam.”
Shares of FPT rose 3.5 percent to 59,000 dong at the close of trading in Ho Chi Minh City, the highest level since November 2010. The stock has climbed 25 percent this year, outperforming the 15 percent gain in the benchmark VN Index.
The telecom and information technology company aims to increase operations in Japan, the U.S. and Europe to tap demand outside Vietnam, where growth is constrained, Ngoc said. FPT will also simultaneously expand in developing countries such as Myanmar, Cambodia and the Philippines, he said.
“It’s hard to get revenue growth of more than 10 percent a year” from the domestic market, Ngoc said. “For growth in revenue and profits, FPT has to go global. Our clear strategy the coming year is globalization.”
FPT, which has more than 17,000 employees, targets to increase group revenue by 11 percent and pretax profit by 6 percent in 2014, the CEO said. The aim is to boost sales by an average 15 percent annually through 2016, Ngoc said.
Profit before tax increased 5 percent last year to 2.52 trillion dong, the company reported last week. Technology and telecommunications accounted for 75 percent of profit, with software exports climbing 24 percent, FPT said.
FPT is looking to acquire a Singapore company that specializes in software services such as inventory management, order processing and employee payroll, said Duong Dung Trieu, chief executive officer of FPT Information System Co., a unit that contributes 25 percent of the parent’s pretax profit.
Getting into developed economies such as Singapore requires FPT to acquire an established IT services provider, which has expertise and a track record with clients, Ngoc said. The company, which failed to clinch two deals last year, could double its annual Singapore revenue to $12 million this year through a potential acquisition, he said.
The company plans to make the acquisition in Singapore “as soon as possible,” Ngoc said. Temasek holds less than 5 percent stake in FPT as of end-2013, according to the Vietnamese company.
FPT faces competition from outsourcing companies from India such as Wipro Ltd. (WPRO) and Tata Consultancy Services Ltd. (TCS), as well as Hewlett-Packard Co. (HPQ) and International Business Machines Corp. (IBM), according to Lam Nguyen, a Ho Chi Minh City-based analyst at International Data Corp.
“They will face very strong competition,” Nguyen said. In emerging markets, FPT should be able to win deals as it understands the issues of developing countries, he said. “Those markets share the same type of growing pains and opportunities” as Vietnam.
To contact the editor responsible for this story: K. Oanh Ha at email@example.com