M&As can help VN auto market flourish

TMT plans to issue VND1.5 trillion (US$70.1 million) in bonds to raise capital for the deal. - Photo cafef.vn

Most Vietnamese auto companies are small. They operate in tiny slices of the market involving import services, assembly and distribution. According to market insiders, auto companies must expand in order to catch up with the industry's rapid growth.

However, the industry seems to have been ignored during the M&A wave, which has proved very exciting in the banking and finance sector. Experts expect M&A activity to increase as more companies reveal their M&A plans.

The Ministry of Transport plans to sell almost all its stakes in the Vietnam Motor Industry Corporation (Vinamotor) this year, equivalent to 97.7 per cent of its capital. Two companies – TMT Automobile Corp (TMT) and Sacom Investment and Development Co (Sacom) – have offered to buy the shares.

While Sacom has yet to announce any details, TMT said it was planning to issue VND1.5 trillion (US$70.1 million) in bonds to raise capital for the deal.

The automobile industry is rife with opportunities for M&As, as many listed companies are undervalued.

Saigon General Service Corporation (SVC), the biggest domestic auto retailer, has a current market capitalisation of about VND500 billion (US$23.4 million).

The market capitalization of others like TMT Automobile (TMT) and Hoang Huy Investment Services Co (HHS) is bigger, between VND900 billion ($42.1 million) and VND1.1 trillion ($51.4 million).

Smaller firms like Hang Xanh Motors Service Co (HAX) and Truong Long Auto & Technology Co (HTL) are valued between VND100 billion ($4.7 million) and VND300 billion ($14 million).

HHS has recently revealed its plan to buy a 99.78 per cent stake in Hoang Giang Services Development Joint Stock Co, an auto sales company. HHS expects the takeover to help the company raise its market shares in mid-size and heavy trucks.

The company hopes to lift its total sales to VND3.4 trillion ($159 million) this year and raise its net profit to VND283 billion ($13.2 million) if the merger is concluded early this year.

Thai company Chairatchakarn paid around $3 million for 22.6 per cent of HTL, a major agent of Hino Motors Vietnam.