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Competition around state capital divestment of Vinamotor
A lot of firms are interested in acquiring a stake in Vietnam Motors Industry Corporation (Vinamotor), Vietnam’s biggest bus manufacturer, as soon as the government issues its permission to divest the state’s entire 97 per cent stake for VND 855 billion ($40 million).
The two most notable enterprises are TMT Motor Joint Stock Company (TMT) and SACOM Wires and Cables Company Limited (Sacom).
In February, Sacom requested permission from the Ministry of Transport to buy the Vinamotor’s entire state-owned stake at VND10,000 ($47.3 cent) per share.
Sacom’s leader was confident that it would be a resounding success to acquire Vinamotor although the company specialises in the production of copper and fibre optic cabling and electromagnetic wire while Vinamotor’s three main operation fields are car assembly, construction engineering and transport services.
Regarding the TMT, it has announced to launch VND1.5 billion ($70,258) of shares to collect money for this purchase. The company enjoys advantages in the competition with Sacom as it is a Vietnam-based manufacturer of automobiles, light trucks and motorcycles.
The company also trades in motor vehicle spare parts and provides repair and maintenance services for automobiles and motorcycles.
As of now, a number of other enterprises and investment funds have also expressed their interest in buying out state-owned Vinamotor, although most of them are small and medium businesses.
Vinamotor’s divestment appears due to its grim operation prospects. In recent years, many its subsidiaries reported very low levels of profit.
Vinamotor’s total revenue was VND11.5 billion ($538,647) in 2012 and VND16.7 billion ($782,209) in 2013. During this short period, some subsidiaries had incurred losses in the range of trillions of VND.
Furthermore, the company failed painfully in its IPO in March 2014. It auctioned 51 million state-owned shares for an initial price of VND10,000 ($47.3 cents) per share. However, the company managed to sell only 3.1 per cent of its shares, falling incomparably short of its original expectations, and acquired only VND15.7 billion ($735,370).
In 2015 the firm expects revenues of VND388 billion ($18.2 million) and pre-tax profits of VND11 billion ($516,000) with a chartered capital of VND875 billion ($41 million), which amounts to a slight return of just 1.26 per cent on assets.
As Vinamotor is nearly doubling its car assembly output in 2016, it targets to reach a revenue level around VND650 billion ($30.5 million) and pre-tax profits of VND33.7 billion ($15.8 million), and a ROA of 3.85 per cent, equal to about half the deposit rate of commercial banks.
Vinamotor’s main products are coaches and trucks under the Vinamotor and Transinco brands. The firm also engages in car repair and assembling, and produces spare parts, but it faces heavy competition from foreign counterparts in these fields.
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