Vinamilk's Jan-Sep gross profit jumps 28 percent ahead of share sale

By VnExpress October 24, 2016 | 09:21 pm PT

Vinamilk products are displayed for sale at a Fivimart supermarket in HanoiVietnam on October 7, 2016. Photo by Reuters/Kham

The government's investment arm SCIC is set to sell a 9 percent stake in the dairy giant this year.

Vinamilk, the country’s largest company by market value, has posted a 27.6 percent jump in January-September gross profit to VND9 trillion ($403 million), the company said in its quarterly financial statement.

The dairy giant’s revenue in the first nine months increased by 17.6 percent from the same period last year, to VND35 trillion ($1.6 billion), according to the statement.

The Vietnamese government, in its latest privatization push, has decided to sell its entire 45 percent stake in Vinamilk.

Vietnam has just removed the 49 percent cap on foreign ownership in Vinamilk, paving the way for foreign investors to acquire more shares.

The State Capital Investment Corp., better known as SCIC, said the state-owned stake at Vinamilk, worth more than $800 million at the current market price, would gradually decrease through several public offerings.

According to SCIC chairman Nguyen Duc Chi, the government’s investment arm has fixed the timeline for the first sale of a 9 percent stake this year.

SCIC has already picked Morgan Stanley as the lead consultant on the sale. The team of advisors also includes Saigon Securities JSC and VinaCapital Corporate Finance Vietnam Ltd.

Morgan Stanley has accepted a fee of $25,000 for helping SCIC evaluate options for the $800-million sale of shares, according to the Financial Times, which compares the deal with Morgan Stanley’s record $120 million worth of fee for advising Monsanto on its $66 billion takeover.

The reason for Morgan Stanley accepting such a low fee is because of the potential to earn brokerage fees from the deal, the Financial Time cited a banker as saying.

“[Morgan Stanley] will make nothing from the issuer,” said the banker, explaining that brokerage fees will be charged on the buyer of the Vinamilk shares, not the issuer.

The banker also estimated that brokerage fees, which are a fraction of the transaction, could be as high as 1 percent of a deal, equivalent to more than $8 million to be shared between the three advisers.

“The government has a 45 percent stake, they are only doing 9 percent now so there is more to come,” added the banker.

Commenting on how the government is about to divest from Vinamilk, the Vietnam Association of Financial Investors said by selling Vinamilk shares through several small offerings, the state will earn $1 billion less than putting up for sale the whole 45 percent stake.

Big investors are not interested in buying minority stakes in state-owned enterprises because they will not have much saying in corporate governance or have enough power to push through reforms, said the association.

>Vietnam taps banks to advise on $900 mln Vinamilk stake sale: sources