Sabeco continues to attract despite delays in share sale

April 05, 2017 | 17:19
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Though the company is months behind its plan to sell the state’s stake, investors’ interest in Saigon Alcohol Beer and Beverages Corporation (Sabeco) has not waned.

Undying appeal

As reported by the Manila Times, the Philippines’s largest beer maker San Miguel Brewery (SMB), a unit of San Miguel Corp. (SMC), is considering a potential bid for Sabeco.

“At the moment, we are evaluating the deal and will definitely join the public bidding of the Vietnamese government for the brewery,” the newspaper quoted Ramon Ang, SMC president and chief operating officer.

The company has thus joined the long list of suitors that include names such as Asahi, Singha, AB InBev, and more.

At the moment, the price of Sabeco’s shares has not yet been announced. Since it was listed on the HoSE in December last year at the price of VND110,000 ($4.85) a share, the price has almost doubled, to end April 5 at VND200,400 ($8.8) a share.

According to Sabeco’s prospectus, the Ministry of Industry and Trade is holding 89.59 per cent of the company’s chartered capital. Last August, the MoIT announced a divestment plan through which it would sell 53.59 per cent of the shares in 2016 and the remaining 36 per cent in 2017. So far, it has not made a move to sell, even though one after another investor has shown interest. The MoIT expected to earn VND40 trillion ($1.76 billion) from the divestment. If the shares are sold at the current price of VND200,400 ($8.8), the amount is going to be more than double of that.

Yet Deputy Minister of Trade and Industry Do Thang Hai said at the April 3 regular government press meeting that the current price of VND200,400 ($8.8) per share is only an “expected price, and not the real price of SAB.”

2017 prospects

Sabeco (HoSE: SAB) is going to hold its 2017 annual shareholders’ meeting on April 18. According to the report to be submitted to shareholders to ratify during the meeting, the board of directors targeted Sabeco’s 2017 sales at 1.7 million litres, up 3 per cent on-year.

Revenue is targeted at VND34.5 trillion ($1.52 billion) and net profit at VND4.7 trillion ($207 million), representing respective increases of 9 and 1 per cent on-year. Dividend will increase from 2016’s level of VND3,000 (13 US cent) per share to VND3,500 (15 US cent).

The board said that there are favourable conditions that would enable the company to realise these targets. First of all is a sharp decrease in the price of input materials and the preferential tax on malt, the growing and still young demographic, and the steady growth of the rural market, where Saigon Beer is a very strong brand due to its correct product positioning and large distribution system. In the short term, the company is going to launch new products to diversify its portfolio and replace product lines that no longer fit the taste of consumers.

Sabeco is still facing difficulties, such as competition from partners and an excise tax of 55 per cent since January 1, 2017 (an increase from the earlier 50 per cent). If the proposal to put a stamp on all beer products is ratified, the cost of production will increase by about VND200 (1 US cent) per can of beer, or as the company estimated, VND900 billion ($39.7 million) in expense for stamping, not including equipment for the task.

The board proposed to the shareholders that the company increase the fund for the salary of four members of the board and the board of supervisors that do not hold any other position in the company by 60 per cent and decrease their bonus fund by almost 20 per cent. Effectively, these members are going to see an increase of almost 50 per cent in their income, from the monthly VND105.5 million ($4,650) per person in 2016 to VND150 million ($6,610) in 2017.

Meanwhile, the number of members of the boards that also hold one or more other posts in the company is proposed to expand to six from the original four, and with the proposed increase in the wage fund, each member is going to see an increase of 65 per cent in their annual pay from VND196 million ($8,640) to VND324 million ($14,280) per person.

In 2016, Sabeco earned VND30.66 trillion ($1.34 billion) in revenue, up 12.88 per cent on-year. The company’s net profit was VND4.66 trillion ($205 million), up 33 per cent on-year. This is the highest profit ever since the company was founded.

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By By Ha Duy

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