Foreign-led groups prep for listing

Foreign-led groups prep for listing - C.P. Vietnam photo

Thai food giant Charoen Pokphand Foods (CP) has greenlit its Vietnam subsidiary’s plans to list its shares on the Ho Chi Minh Stock Exchange (HSX) in a fresh document submitted to the Stock Exchange of Thailand.

The decision was made at CP’s board meeting last week. In case the approval is granted by relevant authorities, C.P. Vietnam would proceed to file an application for listing on the HSX.

CP directly holds 29.18 per cent shares of C.P. Vietnam. The remaining 70.82 per cent stakes are indirectly held by CP through its subsidiary CP Pokphand (CPP), which is currently listed on the Hong Kong Stock Exchange.

Thai analyst Suttatip Peerasub told Business Times that she expects C.P. Vietnam’s upcoming initial public offering (IPO) could unlock the vast potential of the Vietnamese unit, as well as the CP Group as a whole.

C.P. Vietnam gets around 70 per cent of its revenues from processed and fresh pork and chicken products. It built its first processing plant in Vietnam in 1993 and now has nine plants across the nation.

After nearly 30 years in Vietnam, C.P. Vietnam is among the largest foreign-invested enterprises (FIEs) and dominates the domestic livestock market. In 2020, C.P. Vietnam’s revenue was nearly $3.5 billion, while net profit was $822 million. These impressive figures illustrate the Thai giant’s leading position in Vietnam, far exceeding other domestic competitors such as Dabaco.

The IPO will give C.P. Vietnam more room to tap into public funds and further grow, according to industry experts.

Another major FIE, Japanese retail giant AEON Group, also unveiled its ambition to file for an IPO in Vietnam last November. AEON has ramped up its presence in Vietnam since 2014 and has spent a total of $1.18 billion in the country.

Furusawa Yasuyuki, general director of AEON Vietnam, told VIR, “AEON Group considers Vietnam as the biggest key market after Japan to develop business activities and will take advantage of developing here in the future for expansion and growth. This is in line with AEON Group’s medium and long-term approach, with a vision to 2025.”

He also further mentioned that being listed on the Vietnamese stock market is one of AEON’s long-term goals since the special emphasis is on empowering the Vietnamese market to prosper.

In 2022, this plan has not yet been realised, and it will not be until then. AEON is now in the preparation stage to ensure full compliance with the Vietnamese legal framework. Given the market’s scarcity of listed FIEs, Yasuyuki and his team would need to work closely with the management agency to successfully execute this strategic plan.

“We do not regard this initiative as just a means of raising funds; rather, we seek to establish AEON as a truly Vietnamese firm that serves the Vietnamese market and address daily demands of its citizens,” Yasuyuki said. “At that point, AEON will assume the duties and liabilities that come with being a domestic corporation, which means a great deal to us.”

By April 20, an estimated $424.59 billion in the total capital were registered into 34,891 active foreign-invested projects in Vietnam, as reported by the Foreign Investment Agency under the Ministry of Planning and Investment. According to the State Securities Commission (SSC), there are 11 FIEs converting their structures from limited liability companies to JSCs and listing on domestic bourses, including Electric Wire and Cable JSC, Chang Yih Ceramic JSC, Interfood Shareholding Company, Full Power JSC, and Tung Kuang Industrial JSC, among others.

There are only eight FIEs which have been listed so far, and three have had their listings cancelled owing to their bleak operations. A study issued at the end of last year by the SSC revealed that seven out of 10 FIEs listed and registered for regular transactions had generated profits over the course of 2016-2019, while the rest recorded losses.

“FIEs only account for 0.3 per cent of the total publicly-listed entities’ capitalisation – just a tiny fraction of the total market value.” the SSC noted. “Furthermore, there has been no divestiture of FIEs’ founders, owners, and foreign investors yet. Eight out of 10 listed FIEs have seen an influx of foreign ownership after their listing, whereas only two FIEs have witnessed a reduction.”

For instance, Royal International Group is still a loss-making company. According to its latest financial report, the company’s pre-tax loss in 2021 reached $4.48 million, the third year in a row. For 2022, the company predicts losses of around $1.58 million.

Nguyen Thanh Ha, managing partner of SBLAW believed that one of the rigid requirements for companies listed on HSX is to disclose the accurate amount of debts as a step towards enhancing transparency, particularly for FIEs at risk of exploiting legal loopholes in tax policies.

“Becoming public entities could further boost FIEs’ financial reports while minimising transfer-induced risks and tax evasion and attracting foreign indirect investment,” he emphasised. “Competent state institutions should consider promulgating specific regulations linked to the requirements and procedures for FIEs to be publicly traded on the stock market.”