Vietnam's Biggest Company Willing to Boost Foreign Ownership Limitby
Vinamilk is biggest driver of country's benchmark VN Index
Company says it's willing to increase foreign investment
Vietnam Dairy Products JSC shares surged to a record in Ho Chi Minh City trading after the country’s biggest company said it’s willing to allow foreign investors to increase their stakes to the maximum level the government will allow.
Vinamilk shares jumped 4.7 percent at the close to 111,000 dong per share, the highest level since the company’s trading debut in 2006. The stock was the biggest driver of the VN Index Monday, which rose 0.3 percent.
“We want to open the room by the limit allowed by the government because the investment of overseas investors will not just bring capital but also advanced corporate management experiences,” said Ho Chi Minh City-based Bui Thi Huong, an executive director at the dairy producer. The company is awaiting government guidance, she said in an e-mailed response to questions Oct. 16.
Vietnamese regulators see foreign investment as one of the keys to growing the country’s stock market which is about one-eighth that of Singapore, Southeast Asia’s largest. The State Capital Investment Corp., a government investment arm, plans to divest its entire 45.1 percent stake in Vinamilk, according to a statement on the government’s website Oct. 14. That holding is worth 60.1 trillion dong ($2.7 billion) at Monday’s close.
Vinamilk, as the Ho Chi Minh City-based company is commonly known, “welcomes” the government decree allowing foreigners to increase stakes in certain industries to as much as 100 percent from a cap of 49 percent.
“Vinamilk’s always at the top of foreign investors’ interests, and the 49% cap has been a hurdle for overseas investors to access the company for a long time,” says Dang Tran Hai Dang, deputy manager of research at VietinBank Securities JSC in Hanoi. “The story definitely moved the stocks today."
The divestment decision is “terrific” and a “great move in the right direction,” Mark Mobius, chairman of the emerging-markets group at Franklin Templeton Investments, said in an Oct. 14 interview in Bangkok.
“Liquidity is quite low, which is why this move from the government is a giant step forward," he said. "We have quite a big holding in Vinamilk and we’d probably buy more at the right price."
Vinamilk has participated in non-deal roadshows in Singapore and the U.S. and is going to meet other investors in Europe this quarter, according to Huong. Foreign investors currently hold 49% of the company’s shares. The company expects third-quarter earnings will exceed its target and is on course to meet the full-year profit projection, she said. The company plans to list about 200 million newly-issued shares, it said last month.
Shares of the company have rallied 39 percent this year, set to rebound from a 15 percent slump in 2014, the first annual decline in six years. The gains also outpaced the 9 percent advance in the benchmark VN Index.
SCIC, which holds the government’s stake in Vinamilk, hasn’t decided when it will sell the shares, Vietnam Television reported.