Investors swallow Vinamilk shares

Sweet taste of success: Vinamilk’s latest share offering was quickly snapped up by mostly foreign purchasers

According to figures from the Ho Chi Minh City Securities Trading Centre (STC), eight of the nine buyers at the auction were foreign investors. Overseas firms purchased a total of 1,826,900 shares, leaving only 100 shares for the sole local buyer.
One foreign investor alone bought nearly 800,000 shares in the company.
The highest amount fetched for one share was VND2.222 million, 10 times the floor price, which was paid by the local investor. Meanwhile, the lowest bid was VND266,100 against the face value of VND100,000, and the average price paid was VND313,100, or some 42 per cent above the floor price.
The auction was an unqualified success for Vinamilk, which collected more than VND572 billion ($36.4 million) from the share sale.
Vietnam Investment Review has learned that interest in Vinamilk shares reached fever pitch in the run-up to the auction, with a total of 122 firms — including 20 foreign companies — registering to buy more than 6.3 million shares, well in excess of the 1.827 million on offer, according to STC figures.
Including the new shares purchased in this latest offering, foreign investors now hold a 16 per cent stake in Vinamilk. Among them are PXP Vietnam Fund, Dragon Capital Ltd, Vietnam Opportunities Fund and various unnamed foreign dairy producers in Vietnam.
Vinamilk was the first company to auction shares via the STC since the State Securities Commission introduced new rules last month requiring share auctions in excess of VND10 billion to be conducted through either the STC or the Hanoi Securities Trading Centre, which is scheduled to open on March 8.
The Vinamilk auction, designed to reduce state ownership in the company to 60 per cent from 75 per cent, will pave the way for Vinamilk to be listed on the bourse. The company now meets a requirement stipulating that firms can list on the bourse only if at least 15 per cent of its shares are held by the public.
Mai Kieu Lien, Vinamilk general director, said the company would offer more shares in the future to reduce state holdings to 51 per cent.
While there will certainly be much discussion about domestic investors being pushed aside by foreigners, financial analysts believe the auction demonstrated that foreign institutional investors will pay a premium for large, well-managed companies listed in Vietnam.
“We obviously like Vinamilk on a fundamental basis and hope that the success of the offering will encourage more companies to follow and make a significant contribution to the development of Vietnam’s stock exchange,” said Kevin Snowball, director of PXP Asset Management Company, the management arm of PXP Vietnam Fund.
PXP Vietnam Fund successfully purchased 65,000 Vinamilk shares for VND285,100 each.
Snowball said foreign investors believe that Vietnamese companies like Vinamilk are good bargains compared to similar firms in the region.
“The best way to demonstrate foreign valuation methods to domestic investors in practice is to introduce a mechanism whereby the shares of companies which are 30 per cent foreign-owned can be traded between foreigners,” he said.
“Domestic investors would thereby gain an insight into the price that foreign investors are willing to pay for stock before the 30 per cent limit is raised. If domestic investors can see that foreign investors value certain companies higher than they are currently traded, they will hold stock rather than sell it and the market will have a chance to trade at higher prices,” he said.
Vinamilk is Vietnam’s largest dairy producer, holding a 75 per cent market share and operating seven factories nationwide. Its products have been exported to the US, Australia, the Middle East and around Southeast Asia.
The company recently won a $21 million contract to export 12,000 tonnes of powdered milk to children in Iraq, along with another contract with Australia worth $3 million this year.