HAGL JSC, a real estate developer that’s transformed itself into Vietnam’s biggest listed farmer by acreage, is expanding overseas plantations and adding corn as it plans to list the agricultural unit in Singapore next year.
The company will harvest corn in Cambodia and Laos this year, adding to its sugar cane, palm oil and rubber plantations, Chief Executive Officer Nguyen Van Su said in an April 16 interview. The company is also pursuing deals to sell its rubber to Michelin CGDE (ML) and Bridgestone Corp (5108), he said.
HAGL is focusing on growth in food commodities to meet rising regional demand, Su said. The company plans to list its agriculture business on the Singapore stock exchange next year to raise capital for further expansion and meet terms of convertible and non-convertible bond sales to Temasek Holdings Pte and Credit Suisse (CS) Group AG, Su said, without giving a target price.
The farming division is valued at more than $1 billion, said Nguyen The Anh, Ho Chi Minh City-based analyst at CIMB Securities in alliance with VNDirect Securities.
A Singapore listing would make HAGL the second Vietnam-based company to trade in the country, according to data compiled by Bloomberg.
The company’s transformation from a real estate company to the country’s largest owner of agricultural land, with crops in Vietnam, Cambodia and Laos, in just a few years is a good sign, Anh of CIMB Securities said.
Real estate accounts for 6 percent of the company’s revenue today and is expected to drop to 200 billion dong ($9.5 million) in 2014, down from 247 billion dong last year, according to a company statement released April 18 at the annual shareholder’s meeting.
HAGL, which has said it has 100,000 hectares under cultivation, counted on real estate and rubber for about 74 percent of revenue in 2012, according to data compiled by Bloomberg.
The Pleiku, Vietnam-based company forecasts a 50 percent jump in 2014 after-tax profit to 1.46 trillion dong, according to a statement from HAGL.
“Listing on the Singapore exchange will make it easier for investors to trade our shares,” said Su, who joined the company in 1993.
HAGL has surged 24 percent in Ho Chi Minh City this year, compared with the benchmark VN Index’s gain of 11 percent. The stock fell 3 percent at close today.
The company is relying on crops such as corn to generate cash quickly while newly planted rubber trees grow to maturity and become productive.
Revenue from sugar cane, about 34 percent of total sales, is forecast to increase to 1.1 trillion dong this year, up from 838 billion last year, according to an April 18 statement. Rubber trees, which take about six years to reach maturity, are expected to generate 341 billion dong this year, or 10 percent of total revenue. Revenue from the company’s newest crop, corn, is expected to be 300 billion dong in 2014.
The company is also relying on quicker crops as rubber prices have declined to a more than four-year low.
Rubber futures traded in Tokyo have fallen 25 percent this year and closed at 206.4 yen a kilogram on April 18, the lowest settlement since October 2009. Prices slumped as the global surplus expanded. The glut will be 78 percent more than estimated in December as demand slows and production in Thailand exceeds forecasts, according to The Rubber Economist Ltd., a London-based industry adviser.
The company forecasts 2014 revenue will rise to 3.4 trillion dong, it reported in the shareholders’ meeting document. That compares with 2.8 trillion dong last year, according to data compiled by Bloomberg.
“We started to have revenue and profit from agriculture beginning in 2013,” Duc said at the shareholder’s meeting last week. “Over the 2008-2013 period, we just spent money on the sector and didn’t get income.”
When the company began to exit Vietnam’s property market in 2009-2010, its executives were viewed as leaving the party just as it was starting, Su said. Vietnam’s growth slid in 2008 and 2009 along with the global slowdown.
“Sometimes you have to know when to withdraw from a market,” Su said. “We want to expand more in our agriculture business.”
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