Vietnam's leading state owned giant Vinamilk says scrapping foreign ownership cap

By Reuters/Mai Nguyen   May 16, 2016 | 07:52 pm PT
The board of Vietnamese dairy firm Vinamilk has decided to remove its 49 percent foreign ownership cap, an official said on Monday, paving the way for an expected flood of interest from overseas investors in a company valued at $7.85 billion.

No timeframe has yet been agreed on when the current limit will be removed and shareholders will need to approve the decision for it to go ahead, Vinamilk investor relations manager Tran Chi Son said.

"That's the intention of the board of directors," Son said when asked to confirm details of a note about the decision to remove the cap sent to shareholders.


Vinamilk products are displayed for sale at a Vinamilk shop in Hanoi. Photo by Reuters

Vinamilk, or Vietnam Dairy Products JSC, has long been the country's most sought after firm among foreign investors due to its strong prospects and expansion plans. Vinamilk's share value has grown 18 times since it first listed in 2006 to VND146,000 ($6.54) as of Monday's close.

Foreign investors have been frustrated by Vietnam's lack of progress toward liberalizing equities following a surprise announcement last year that it would dismantle foreign ownership limits in many sectors, one of the country's boldest economic reforms yet.

"This is the most significant single development in the Vietnam market for close to 10 years and we expect a very positive reaction," PXP Vietnam Asset Management head Kevin Snowball said in a note to clients.

Vinamilk earlier this year dropped or adjusted some business lines that remain subject to foreign limits in a move analysts said was designed to prepare for the share cap removal.

The decision to open up Vinamilk is made more significant by the planned divestment of the government's 45 percent stake, held by the State Capital Investment Corporation (SCIC) and worth $3.5 billion.

SCIC has given no timeframe for the planned sale.

The largest foreign shareholder at present is F&N Dairy Investment, part of the Fraser and Neave conglomerate, with 11 percent. The firm is controlled by Thai beer tycoon Charoen Sirivadhanabhakdi, who has been making big inroads into Vietnam via his conglomerate Thai Charoen Corp.

Vinamilk's net income grew 28 percent last year to VND7.77 trillion ($348 million). Its first-quarter net profit in 2016 jumped 38.5 percent from the same period last year.

"We are very positive on the performance of the business, the earning growth is tremendous," said Andy Ho, managing director of VinaCapital, Vietnam's biggest fund and a shareholder in Vinamilk.

"The key is when will this (lifting the cap) happen ... hopefully very soon."

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