VOF makes loss on newly-bought state-owned firms

VOF has made a loss as both the tickers of BSR and PV Power fell after the IPOs

In the first quarter of this year, VOF spent $45 million acquiring stakes in Binh Son Refining and Petrochemical Company Limited (BSR) and PetroVietnam Power Corporation (PV Power).

Both BSR and PV Power are large-scale state-owned firms and their initial public offerings (IPOs) broke records on the stock exchanges.

The starting prices for the IPOs were also very high. However, after the successful deals, the share’s value dropped, decreasing the value of VOF’s investment.

Notably, VOF spent approximately $25 million acquiring 10 per cent of BSR at VND22,000 per share.

Factors that made VOF invest approximately $25 million in BSR include the fact that it is the only operating oil refinery in Vietnam, commanding 33 per cent of the market share, with the remaining 67 per cent of refined products being imported.

The refinery business tends to be less affected by oil price volatility than other segments of the oil and gas sector.

Besides, the market cap of the company at the starting price was $2 billion, making it one of the largest companies in Vietnam. More importantly to the investment, the starting price was very attractive, at an estimated 2017 P/E of 5.6x and 2017 EV/EBITDA of 3.8x compared to the current market P/E of 20x.

However, according to the transaction session on May 22, BSR’s share was valued at VND19,700. Thus, VOF has suffered a slight loss.

In PV Power, VOF’s investment was more than $20 million. VOF also saw this as an attractive investment with an estimated P/E of 11.5x at the starting price of VND14,400.

However, after the first transaction session at the price of VND17,800, PV Power’s shares decreased by 25 per cent to VND13,300. Most recently, the share value increased to VND14,000, thanks to the impact of the positive business results of the first quarter.

VIR contacted VinaCapital to clarify information as well as enquire whether VinaCapital, through VOF, will sell its stakes in BSR and PV Power if the share values continue to decrease. However, VinaCapital declined commenting.