Vietnam Airlines’ value set to be announced

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Speaking at last week’s national conference on state-owned enterprise (SOEs) equitisation for 2014-2015, Vietnam Airlines chairman Pham Viet Thanh said the airline was working with its advisors to complete its corporate valuation so that it could submit the results to the ministry on February 28 for report to the prime minister in early March.

“The airline is now carrying out initial public offering (IPO) plans and choosing a strategic partner to complete equitisation this year and officially begin operations as a joint stock company from January 1, 2015,” said Thanh.

Vietnam Airlines Corporation, which operates the national flag carrier Vietnam Airlines, expects to hold its much-awaited IPO no later than summer this year.

In December 2012, the airline, which now controls 69.7 per cent of the domestic market, submitted a plan for an IPO in 2013. The national carrier will sell a 20-30 per cent stake to the public and will issue additional shares.

Johan Kruimer, managing director of Institutional Clients of Ho Chi Minh City Securities Corporation (HSC), believed the IPO could be very successful depending on the valuation.

“The timing seems ok as the bear market seems over. Of course, the valuation will be crucial. But if the government allows the IPO to go ahead at a reasonable valuation and perhaps even throw in a nice dividend yield, there could certainly be demand for the company’s shares,” he said.

Vietnam Airlines signed advisory contracts with Citigroup, Morgan Stanley, BIDV Securities and Vietnam Valuation and Finance Consultancy Joint Stock Company.

Michel Tosto, head of institutional sales at Viet Capital Securities, also said price would be the determining factor of the IPO’s success.

“This deal is more likely to attract private equity investors provided the deal can be structured adequately to provide downside protection, as well as interest from strategic investors,” said Tosto.

Thanh added that the defining of some assets that would be equitised such as planes and training costs for pilots were now waiting for government opinions.

“The foreign investors we are working with also want to know the results of the corporate valuation before deciding to become a strategic shareholder,” he added.

According to local media, Vietnam Airlines planned to raise $200 million by selling 383 million shares in the IPO, but the chairman noted the figures were only estimates.

The government will maintain a 70-75 per cent stake in Vietnam Airlines during the first phase after the IPO. The remaining shares will be made available for strategic investors and the public.

Sources have suggested the likelihood of the government cutting its stake further largely would depend on the popularity of the initial sale and future prospects for the airline.