Big foreign investors make fat profit from stake sale deals

Foreign investors seem to make an enigmatic decision when selling stakes in large quantities and discreetly withdrawing capital from leading Vietnamese companies.


Selling the goose that lays golden eggs

Two investors--Vietnam Enterprise Investment Ltd (VEIL) and Amersham Industries Ltd (Vietnam Growth Fund) on December 6 unexpectedly announced the sale of 8.8 million and 4.6 million Vinamilk shares (VNM), respectively. The transactions would be made in the time from December 11, 2013 to January 9, 2014.

If the investors successfully sell 13.4 million VNM, or 1.6 percent of Vinamilk’s shares, they would earn roughly VND1.9 trillion with the current market price at VND14,000 per share.

After the deal, Dragon Capital, which manages the two funds, would keep 24.4 million VNM, or 2.92 percent of Vinamilk shares, worth VND3.4 trillion.

The decision by Dragon Capital on selling VNM proves to be a big surprise to investors, who got excited with the increasing VN Index, and optimistic about the warmth up of the national economy, have been trying to buy more shares.

There is another reason that makes the decision “enigmatic”: the investors decided to sell VNM, the “goose that lays golden eggs,” while the other investors all want to keep the valuable shares.

The State Capital Investment Corporation (SCIC) has recently stated that it will withdraw capital from a lot of enterprises, but will make long term investment in four enterprises. One of the four is the “milk cow” Vinamilk.

Prior to that, in early September 2013, the investors also were astonished when the biggest shareholder of FPT Group – Orchid Fund from Singapore – sold 29 million shares, or 10 percent of FPT’s chartered capital, worth VND1.3 trillion just after two years of making the investment.

Making fat profit

In late November 2013, Singaporean OCBC announced the sale of its 85.93 million, or 14.88 percent of VP Bank shares to a group of three Vietnamese individual investors. The value of the deal was $55.5 million, or VND1.2 trillion.

Earlier this year, investors witnessed Mekong Capital selling 6.7 percent of the shares of The Gioi Di Dong, the leading mobile phone distribution chain in Vietnam, to a finance company.

Vietnam Debt Fund SPC (Cayman Island) sold all of its 1.1 million shares in the Refrigeration Engineering Enterprise (REE). HSBC withdrew capital from Bao Viet finance group. Bourbon plans to sell shares in Bourbon Ben Luc, while VinaCapital has offered to sell 50 percent of Metropole Hanoi’s shares.

Analysts believe that it is now the right time for foreign investors to withdraw capital, because they have got the expected profits from the investment deals.

For Dragon Capital, it is obvious that the big guy would make a big profit if selling 13 million VNM, as the VNM price has increased by two fold so far this year. Even if Dragon Capital sells a big amount of 13 million shares, the capitalization value of the stakes it retains after the deal would still be equal to the value at the end of the last year.

When selling VP Bank shares, OCBC also got a relatively big profit with the profitability of 35 percent, despite the current big problems of the Vietnamese banking system, including the high bad debt ratio.

The sale of 6.7 percent of The Gioi Di Dong shares brought Mekong Capital a profit which is 11 times higher than the investment capital.


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