How Vincom Retail performed before Vingroup sold it

By Minh Son March 24, 2024 | 02:30 am PT

Before Vingroup recently decided to sell its stakes in Vincom Retail, the mall operator had reported record profits and was the conglomerate’s third most profitable business.

It was incorporated in 2012 as one of the first subsidiaries of Pham Nhat Vuong’s giant company.

Like other Vingroup subsidiaries, Vincom Retail had also aimed for fast-paced growth and rapid expansion.

Starting in 2015 the firm opened dozens of new malls each year and absorbed several smaller brands.

It developed multiple shopping mall models on different scales along with office space, apartments and shophouses in or near its malls.

Within five years it had developed a total of one million square meters of retail space and sold over 1,000 shophouses, apartments and condotels.

Vincom Retail’s revenues and profits grew along with its speedy expansion.

Between 2014 and 2019 its revenues jumped 4.8 times from VND1.92 trillion (US$77.4 million) to VND9.2 trillion, and profits from VND105 billion to VND2.85 trillion.

It then suffered a 30% decline in revenues and 40% fall in profits during the Covid years in 2020 and 2021.

But in the next two years its performance recovered and even surpassed that of pre-pandemic levels.

Last year the firm reported record revenues and profits of VND9.7 trillion and VND4.4 trillion.

This meant Vincom Retail only trailed the conglomerate’s real estate and automobile subsidiaries in terms of profits.

But despite this stellar performance, Vingroup’s board on Monday approved the sale of 100% stake in SDI Trading Development and Investment JSC, which owns Sado, the biggest shareholder in Vincom Retail with a 41.5% stake.

This effectively lowers Vingroup’s ownership to 18.8%.

Analysts estimated the deal to be worth VND39.1 trillion ($1.6 billion).

Vingroup is expected to divest 55% of its stakes in SDI this month for VND21.49 trillion and the rest within six months.

It will rake in an estimated VND21.52 trillion in profits from the deal, according to securities firm Vietcap.

Vingroup deputy chairman and CEO Nguyen Viet Quang explained that the company needs to focus all its resources on key brands that have high growth potential.

Taiwanese investment bank Yuanta Securities said this transaction would significantly reduce the debt pressure on Vingroup.

It has around $3.9 billion falling due this year, it said.

As for Vincom Retail, Yuanta analysts said: "It will not see much change to its fundamental factors."

The most notable risk for the mall operator is the rising land costs that would affect future projects and potentially drag down its stock price, they added.