Investors work up thirst for VNM

The Ho Chi Minh Stock Exchange (HoSE)-listed Vinamilk (VNM) last week increased its foreign ownership ratio to a maximum 49 per cent limit from 46 per cent, equivalent to an additional 6.5 million shares. The three per cent point was equivalent to shares the company wanted to float abroad but now it cancelled.

On June 27, the date Vinamilk’s foreign ownership ratio was expanded, around 6.3 million shares matched between locals and foreigners with only 200,000 shares available for normal orders.

Nguyen Ngoc Phuong, StoxPlus analyst, said the purchase of Vinamilk shares was understandable as foodstuff and consumption  stocks were favourite investment portfolios for foreign investment funds, and even foreign exchange-traded funds (ETFs). Foreign investors now hold a 24.5 per cent stake in Vietnam’s foods sector.

“Compared with other stocks in the foodstuff sector, Vinamilk’s fundamental data is better while the debt ratio is much lower,” said Phuong. 

Vinamilk has around VND1,000 billion ($47.9 million) cash in bank deposits to build two new milk products plants, according to a Vinamilk source. The source also revealed that its 2011 second quarter corporate earnings would be positive, as was the case in the first quarter. In the first quarter of this year, the firm earned a VND1,006 billion ($48 million) after-tax profit, up 23 per cent year-on-year. 

Nguyen Thi Ngan Tuyen, KimEng Vietnam Securities’ corporate analyst, said shareholders Vinamilk’s annual general meeting in 2011 voted to invest VND4,255 billion ($206 million) in milk projects this year. With an estimated net profit of VND4,244 billion ($205 million), its book value will rise to VND35,336 a share in 2011, up from VND22,561 a share in late 2011.

“We recommend investors buy Vinamilk at the target price of VND145,000 a share,” said Tuyen. It was traded at VND110,000 a share on June 28, and the price to earning ratio is 10.2.

In a related development, thanks to its leading position in Vietnam for several years, Vinamilk has been recognised among the best 200 small- and medium-sized enterprises in Asia’s 200 Best Under A Billion list by Forbes, marking the entry of the first Vietnamese company in the well-recognised list.

In Vietnam, the firm has been among a few domestic firms holding its leading position in the State Bank’s Credit Information Center (CIC)-rated Vietnam’s annual Best Stocks list for three consecutive years in terms of creditworthiness and profitability.

Domestic dairy product consumption per capita rose sharply during 1997–2009. The company’s full cream milk powder product reported the biggest rise with average annual growth of 28.9 per cent, rising from 0.07 kg per head in 1997 to 4 kg per head in 2009, followed by fat-free milk with average growth of approximately 20 per cent per year and liquid milk at 10 per cent rise per year, according to the Ministry of Agriculture and Rural Development.

Surging demand for dairy products in Vietnam is offering opportunities for enterprises to invest in the sector. Vinamilk is a domestic leader in processing and providing dairy products. However, its position is being challenged by the new milk firm TH True Milk.

Phan Sy Minh, deputy director of International Dairy Products Joint Stock Company, added that not every enterprise investing in the dairy sector enjoys profit. Recently, Nestle had to sell its Ba Vi-based plant to Anco while an Italian firm which invested in a plant in Ho Chi Minh City ceased operations.