Sudico shares feeling great market heat

The dispute at Sudico (SJS) has intensified since major shareholder Song Da group demanded SJS chairman Phan Ngoc Diep be dumped from his post and sent off to the group’s human resources department. Previously, Diep was designated by Song Da Group as representative of its shareholding or state ownership in SJS.

The dramatic move by Song Da, which holds a more than 30 per cent stake in the developer, came after the chairman and Ho Chi Minh Stock Exchange-listed SJS’ board of directors dismissed SJS general director Vi Viet Dung and appointed a new person to the role.  
To observers, Song Da Group’s latest move – part of an ongoing bitter dispute – comes as little surprise. While market commentators are busy debating the legality of the announcement, it is SJS shareholders who are bearing the full brunt with the firm’s share prices in freefall.
On November 11, SJS shares were down 30 per cent from their value in late October when the dispute occurred to trade at VND18,200 per share. This was down 50 per cent on mid-September prices.

“The stock has dropped a lot [due to the recent management dispute] and we still see some downside risks over the next month or so. We will wait as the story may have some other twists and turns before it gets any closer to a resolution,” said Fiachra MacCana, Ho Chi Minh City Securities Corporation’s (HSC) head of research. Analysts said current disputes at SJS were a big concern for shareholders after share prices fell sharply.

SJS has always been a blue-chip stock thanks to its strong core business in property construction. The firm is one of Vietnam’s 50 biggest market cap stocks with foreign investors holding a 30 per cent stake. “The key concern [for us] is how the replacement of Diep [if it happens] will affect SJS operations,” said Dang Hong Quang, VinaCapital Hanoi chief representative and a member of SJS’ board of directors.

Cao Ba Khoat, managing lawyer with K & Associates corporate consulting firm, said it was difficult to know where the SJS dispute would lead. “If this dispute is not solved [which negatively impacts shareholders rights], they should take legal action,” he said.

This dispute is likely to drag on with both sides trying to win support for their cause. Diep was elected as SJS board of directors by a perfectly valid shareholder vote at the last annual general shareholder meeting (AGM) and was then appointed SJS chairman by the board of directors.
According to the company’s own charter and Vietnam’s Law on Enterprises, a duly elected chairman cannot be dismissed by the unilateral decision of a more than 30 per cent stake shareholder alone even when that chairman is the authorised representative of that shareholder on the board of directors. To have Diep dismissed, Song Da Group would have to wait for the AGM next year or call for an extraordinary shareholder meeting and then vote to dismiss the sitting chairman and nominate another individual.

In other SJS news, the Government Inspectorate recently proposed Prime Minister Nguyen Tan Dung to put its key project Nam An Khanh Hanoi urban complex on hold, saying this project  could have been illegally transferred.