VietnamCredit: Opportunity to buy Vietnamese state assets at cheap prices

From listed companies…

The stock price of PetroVietnam Power Joint Stock Corporation (stock code: POW), 80% shares of which is own by Vietnam Oil and Gas Group, has witnessed a 60% fall, to VND 7,000 per share in March, although the profit in 2019 increased 5 times compared to 2018 and exceeded 125% of the year plan.

The stock price of another giant in Vietnam’s electricity industry, Power Construction Joint Stock Company No1 (PCC1), also dropped by more than 50% in just over six months, though earnings per share (EPS) in 2019 remained higher than VND 2,400, pushing the price-to-earnings ratio (P / E) to around 6.

In the oil and gas industry, a series of large state corporations also saw their stock prices evaporating by tens of percent in the context of the economic downturn and the plunge of international oil prices. Stocks of PetroVietnam Drilling and Well Services Corporation (PVD) sometimes fell below VND 7,000 / share, the lowest since it was first listed. Stock price of PetroVietnam Technical Services Corporation (PVS) sank deeply to VND 8,000 / share while that of PetroVietnam Transportation Corporation (PVT) plummeted from VND 17,000 earlier this year to the lowest level of VND 7,500 at the end of March.

Things are the same on UpCom. Shares of Binh Son Refinery and Petrochemical Joint Stock Company (BSR) reached a new bottom low at less than VND 5,000 / share in March, losing nearly 85% of the value. Stock price of PetroVietnam Oil Joint Stock Corporation (OIL) also sank to nearly VND 5,000 / share, which is equivalent to a cup of iced tea.

The stock price of Vietnam Airlines Corporation (HVN) has also dropped from a peak of more than VND 58,000 / share two years ago to just below VND 18,000 / share recently. The State owns more than 86% shares of this enterprise, while strategic shareholder ANJ Holdings Inc Japan also owns nearly 8.8%. HVN recently said that if the epidemic lasted and ended in the fourth quarter of 2020, the total revenue would reach only about VND 38,140 billion, down 34% compared to the plan and there would be a loss of VND 19,651 billion.

However, saving large corporations is not easy. Recent supportive policies for HVN have been said to violate laws, while some protective measures may go against the policy of developing a market economy with fair competition platform.

It is important to know that most state-owned enterprises own quite a large number of properties located in prime locations, high-value fixed assets, and enjoy privileges to access business opportunities and monopoly position. The unprecedented sinking of stock prices has become an opportunity for investors, especially foreign ones, to increase their ownership of shares in large state-owned enterprises in Vietnam.

… to businesses about to be equitized

In the past two years, the progress of equitization of state-owned enterprises has become significantly slow, often failing to meet the set plan and putting pressure on subsequent years. In the coming time, with large initial public offerings (IPO) of MobiFone, VNPT, Genco 1, Genco 2, or equitization deals such as Agribank and many state-owned corporations operating in developing industries, the opportunity to bid and buy shares in these businesses with low price is evident.

Worrying about the possibility that corporations with large asset value will be acquired when stock prices go down is reasonable. Statistics show that in the first quarter of 2020, there were 2,523 times of capital contribution and share purchase by foreign investors with a total capital contribution of nearly USD 2 billion, decreasing 65.6% over the same period.

It is noteworthy that there were only 455 times of capital contribution and share purchase with the total value of USD 0.71 billion, a sharp decrease of 85% over the same period, that helped increase the charter capital of enterprises. In contrast, there were 2,068 purchases of domestic shares without increasing the charter capital. Deals that do not increase charter capital often take place when domestic shareholders conduct divestments, or businesses sell themselves to foreign investors.

Source: Bonny Le - VietnamCredit



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