VNR plans huge divestment bout

February 05, 2018 | 16:41

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Vietnam Railway Corporation (VNR) is expected to divest all its capital in 15 subsidiaries this year.

Parent company VNR has been divesting at the 15 subsidiaries

Ordinary stock at higher prices

After a two-month wait, VNR’s divestment of 15 subsidiaries has just been approved by Document No.1142/BGTVT-QLDN of the Ministry of Transport (MoT).

“Based on the opinions of the Ministry of Finance, Ministry of Planning and Investment, and the corporation’s powers, VNR’s Board of Directors will decide to sell shares at these subsidiaries and conduct the transfer according to regulations. Furthermore, the company should ensure maximum benefit for the state as well as transparency during the proceedings,” noted Nguyen Ngoc Dong, Deputy Minister of Transport.

The 15 subsidiaries’ charter capital is VND680.5 billion ($30 million), VND139.1 billion ($6.13 million) of which is held by VNR and is divided into three groups.

Group	Companies	Description
First group	Transport Investment and Construction Consultant JSC, Danang Building Construction JSC, Vietnam Railway Signal Telecommunication JSC, Vinh Nguyen JSC, Saigon Railway Printing JSC, Hai Van Nam JSC, Investment and Construction Consultant Building 1 JSC, Railway Urban Infrastructure JSC, Railway Construction and Investment JSC	VNR has previously attempted to divest these nine companies, but only a part of their shares have been sold
Second group	Transport Construction and Investment Consultant JSC, Building Construction and Investment 3 JSC, Building Construction and Investment 6 JSC, Railway Construction JSC	VNR has previously attempted to divest these companies, but sold no shares
Third group	Dong Mo Stone JSC and My Trang Stone JSC	VNR is preparing to divest for the first time

Despite being in the dull trading status, the stocks of these companies are still evaluated at high. For example, My Trang Stone JSC is evaluated at 11.2 times, Dong Mo Stone JSC at 4.2 times, Railway Construction JSC at 2.3 times, and Vietnam Railway Signal Telecommunication JSC at 2.7 times compared to the unit price of VND10,000.

Thereby, if the divestment process goes according to plan, VNR will acquire more than VND139 billion ($6.12 million) in proceeds. This amount will be spent on purchasing train cars and repairing stations.

Diversified divestment solutions

In order to raise the chances of this large-scale divestment, VNR submitted specific solutions to MoT. Accordingly, VNR wants to list on the Hanoi Stock Exchange (HNX) or on an intermediary financial institution for the first group of companies.

The second group is to be listed on HNX and UPCoM and VNR will choose a suitable time to make a public offer. The two remaining companies will be publically offered on HNX.

VNR proposed an initial offer price higher than the price appraised by the appraisal outcome of the consultant organisation. Deputy Minister Dong said that MoT agrees with this solution and has submitted it for comments to the Ministry of Planning and Investment (MPI) and the Ministry of Finance.

MPI agreed with the divestment solution for the four JSCs listed on HNX and UPCoM, and the two JSCs in the third group. They basically suit Article 38 of Decree No.91/2015/ND-CP dated October 13, 2015 on state capital investment in enterprises as well as the use and management of capital assets in enterprises.

However, the stock prices of some companies on the UPCoM are lower than their real valuation and the price proposed by the consultant organisation. Particularly, Transport Construction and Investment Consultant JSC's stock price on the UPCoM is at VND900 apiece now, while that proposed by the consultant is VND16,682.

MPI's document noted: " MoT should request VNR to clarify the reasons of this difference in price, as well as select a suitable time to divest and publish the information to potential investors."