Thai firms chase Vietnam dairy giant’s shares

The State Capital Investment Corporation (SCIC) will divest 130 million Vinamilk shares, equaling 9% of the total outstanding shares, on December 12. The chosen method is competitive offering, and each investor is allowed to buy between 20,000 and 38.2 million shares. The starting price in this highly anticipated sale is VND144,000 (US$6.36) per share.

Sole participants in the sale are F&N Dairy Investment Pte. Ltd and F&N Bev Manufacturing Pte.Ltd, both of which are subsidiaries of Fraser&Neave Limited. The two firms registered last week to buy 5.4% of Vinamilk’s shares together, which is the highest amount of stakes that the two investors can buy at the sale.

Originally a Singaporean  conglomerate, F&N was taken over by Sirivadhanabhakdi in 2012 in his efforts to expand in Southeast Asia. F&N Dairy Investment is already a strategic investor at Vinamilk with a 10.95% stake. As a result, if the two F&N subsidiaries succeed at the public sale, they will control 16.35% of shares at Vietnam’s largest dairy altogether.

Last month Sukit Udomsirikul, head of research at Maybank Kim Eng Thailand, told VIR that Thai investors are excited about the Vietnamese food and beverage sector thanks to its strong growth potential. The sluggish Thai economy is only expanding at 3% per year, thus investors in Thailand are eager to target high-growing companies with a high level of transparency like Vinamilk.

The seller SCIC has also shown great determination to welcome foreign investors to the share sale. For the first time in the Vietnamese state divestment process, road shows about Vinamilk have been organized in London, Singapore, and Hong Kong, and announcements were posted in the world’s largest financial newspapers. 

Nguyen Duc Chi, chairman of SCIC, revealed that out of 100 foreign investors invited to the road shows, at least 20 have shown significant interest in Vinamilk. “We want to spread the news to as many investors overseas as possible. SCIC would like to invite any interested and financially capable investors to join the auction, as it increases transparency and prevents any small group of investors from taking over Vinamilk”, he said.

However, as only two Thai companies have registered to the auction, it seems that foreign investors are still waiting for a better opportunity to purchase Vinamilk’s shares.

If the two F&N companies succeed in buying 5.4% of stakes, SCIC will retain approximately a 41% stake at Vinamilk, remaining the firm’s largest shareholder. Further divestment are in store for the future, as SCIC plans to withdraw completely from the dairy firm. It is also notable that in the weeks leading to the public offering, the listing prices of Vinamilk have gone downhill as foreign investors kept on net selling the shares. Throughout the past month, Vinamilk’s share prices have dropped by 3.7%. The stock reached its nadir on November 28, at VND129,200 (US$5.71).

This surprising movement, which took place right before the big share sale, has sparked concerns that some investors may have deliberately pushed down Vinamilk’s share prices for their own gain. However, experts notes that the consistent selling may have been conducted by the two Vietnam-focused exchange-traded funds (VanEck Vectors Vietnam and FTSE Vietnam) who restructured their portfolios in early December. The restructuring process takes place every quarter of the year.

For the first nine months of 2016, Vinamilk recorded VND35 trillion (US$1.5 billion) and VND7.5 trillion (US$331 million) of revenue and after tax profits, respectively. With these results, the dairy giant has reached 91% of its 2016 target and is slated to end the year on a positive note.