Swap plan favours minors

Shareholders are planned to enjoy better liquidity and higher benefits from FPT’s merger plan

At the company’s annual shareholders meeting last week, its leaders announced that the company would issue about 19.83 million additional shares, equivalent to 10.25 per cent of its current shares to swap with FPT Software, FPT Information System (FPT IS) and FPT Trading.

A new one-member limited company fully controlled by FPT would then be created.

The Ho Chi Minh Stock Exchange-listed FPT, the 16th largest market cap firm on the stock market with a share price of VND53,000, earning per share (EPS) of VND6,500 and foreign ownership of 44.1 per cent last Friday, is expected to begin trading the additionally issued stocks in August.

FPT chief executive officer Truong Dinh Anh said the consolidation of the three units would bring benefits both in the short and long term for FPT’s current shareholders and the three unit’s minor shareholders.

“In the short term, it will help FPT save management efforts and financial costs to raise profit and earning per shares for its investors. In the long term, the synergy of related sectors in these units will be the basis for FPT to expand business activity and reach a higher growth rate in the next few years,” said Anh.

“Besides, after reconstruction, FPT’s current shareholders will enjoy the whole three units’ profit,” said Anh.

Nguyen Quang Bao, deputy general director of Viet Capital Securities Corporation, also said the consolidation would create favourable conditions for FPT to strengthen its competitive ability and to efficiently carry out its general strategy to become the leading group in developing infrastructure and providing electronic services.

Meanwhile, Ta Thu Tin, chief analyst of Au Viet Securities Corporation (AVS), said the share swap would benefit the unit’s minor shareholders more than those of the parent company.

Tin said minority shareholders would own FPT shares with the much higher liquidity than their shares in the three subsidiaries.

According to AVS’s estimation, the swap of 3.48 million of FPT IS’s shares with 4.25 million of FPT shares would benefit FPT IS’s shareholders to at least at the tune of VND200 billion ($9.6 million).

Meanwhile the figure for FPT Software was VND123 billion ($5.9 million) and the number for FPT Trading was VND62.8 billion ($3 million).

In addition, Tin said despite the additional profit for FPT’s current shareholders from consolidation, the proposed conversion rate would see FPT’s share values diluted about 10.25 per cent.

The conversion rate between FPT and FPT IS is 1.22 which means a shareholder of one FPT IS share will receive 1.22 FPT shares. The rate of FPT and FPT Software is 1.0 and for FPT and FPT Trading of 0.91.

FPT Telecom, FPT Trading, FPT IS and FPT Software are considered FPT’s four most important companies, contributing up to 85-90 per cent of its total pre-tax profit in recent years.

In 2010, FPT’s revenue and pre- tax profit were VND20 trillion ($966 million) and VND2 trillion ($96.6 million), up 8.76 per cent and 19.7 per cent year-on-year, respectively.

In 2011, the corporation plans to gain 20 per cent in both revenue and profit with revenue of VND24.5 trillion ($1.1 billion) and a pre-tax profit of VND2.4 trillion ($115 million)

In the first quarter of this year, FPT reaped a revenue of more than VND5 trillion ($241 million) and a pre-tax profit of VND516 billion ($24.9 million). These figures were 20.1 per cent and 20 per cent higher than the year’s plan respectively.