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Builder eyes bigger stake in fixtures maker
HCM City Infrastructure Investment Co's (CII) management board plans to increase its ownership in Lu Gia Mechanical Electric (LGC) to 80.24 per cent. The purpose of the move was to attract foreign investment in the future.
CII's director Le Quoc Binh said they had much in common that could improve operational efficiency for both sides.
CII specialises in the construction of urban infrastructure, industrial and civil engineering, while LGC specialises in manufacturing mechanical devices and electrical lighting.
"Transforming LGC into one of our subsidiaries will create benefits for both companies," he told the Dau tu Chung khoan (Securities Investment) publication.
In addition, he said the LGC share price was lower than its intrinsic value.
Excluding brand value and LGC's business contracts, its fixed assets in a Binh Duong-based factory and the Lugia Plaza Building in HCM City were worth VND500 billion (US$23.8 million).
The company's debts were modest at around VND100 billion ($4.7 million).
"At the current price, LGC is a very attractive long-term vision," Binh said.
Earlier this year, a plan to delist shares was not discussed during LGC's shareholder meeting. Instead, it planned to allow CII to buy more than a 25 per cent stake without making a public offering.
CII has now acquired a 45 per cent stake in LGC. However, Binh noted his company was merely a financial investor.
Meanwhile, a source from LGC on the condition of anonymity disclosed that Japanese investors were also interested in the company.
"CII's move may be to serve the purpose of selling a large amount of shares to foreign investors," the source said. "Divestment activities in affiliates of CII have been quite common over the past two years, so I think it could be a possibility with LGC too," they added.
Binh, who is also the Chairman of LGC, said if foreign investors wanted to invest in LGC, it was a positive sign.
He added that LGC's profits were connected to its real estate operations. However, electrical products were being tested and showed potential. "If foreign investors are interested, instead of building factories, buying shares is a smarter choice," he advocated.
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