Vinamotor surprise bid

Cable-maker SACOM has made a bid for the ailing domesticauto manufacturer Photo: Le Toan

Do Van Trac, general director of SACOM Wires and Cables Company Limited (Sacom), has just requested permission from the Ministry of Transport (MoT) to buy the state’s entire 97.7 per cent stake in the Vietnam Motors Industry Corporation (Vinamotor) for VND10,000 (47.3 US cent) a share.

The request came less than a month after the government allowed the MoT to sell the whole state stake in the Vinamotor, which failed painfully in its IPO in March 2014.

“Sacom is confident that it’s going to acquire Vinamotor,” said Trac.

Sacom’s bid comes as a bit of a surprise given the lack of experience the cable maker has in this field. In its document sent to the MoT, Sacom introduced itself as specialising in producing copper and fibre optic cabling and electromagnetic wire while Vinamotor’s three main operation fields are car assembly, construction engineering and transport services.

“Sacom wants to make Vinamotor efficient,” Trac said. He also expressed the hope to contribute to Vietnam’s auto assembly industry.

Prospects for Vinamotor appear grim. In 2015 the firm expects revenue of VND388 billion ($18.2 million) and pre-tax profit of VND11 billion ($516,000). With charter capital of VND875 billion ($41 million), that amounts to a return on assets of just 1.26 per cent.

As Vinamotor is nearly doubling its car assembly output in 2016, it targets revenue of VND650 billion ($30.5 million) and pre-tax profit of VND33.7 billion ($15.8 million), and a ROA of 3.85 per cent, equal to about half the deposit rate of commercial banks.

Vinamotor’s leaders have shown concern about the divestment of the state in this context. In its 40 years of operation, except for a brief flurry during 1999-200, Vinamotor has recorded highly disappointing results.

Vinamotor’s main products are coaches and trucks under Vinamotor and Transinco brands. The firm also repairs cars and car assembly machinery and produces spare parts, but it faces heavy competition from foreign counterparts in these fields.

It is said that Vinamotor’s appeal lies in the subsidiaries where the parent company holds a majority stake. The subsidiaries, which include the Ngo Gia Tu Engineering Company, 3/2 Car Engineering Company, 1/5 Car Engineering Company all boast large workshop facilities.

Vinamotor has chosen Saigon - Hanoi Securities JSC as the consultant in the divestment process.