BUSINESS IN BRIEF 23/2
VHG offloads over four million treasury shares
Quang Nam Rubber Investment Joint Stock Company has announced that it will sell more than four million treasury shares to increase its working capital.
The rubber developer will sell the shares between March 1 and March 30. The pricing will be decided by HCM Stock Exchange (HOSE) regulations, and VNDirect Securities Company will serve as the trader.
The four million treasury shares make up all of the Quang Nam Rubber Investment JSC’s treasury share holdings. The company bought those shares in November 2015 at an average price of VND8,112 per share.
The company’s shares are traded on HOSE with code VHG. VHG ended yesterday session at VND2,310 per share, down 2.9 per cent from Tuesday’s closing level. The share price has dropped nearly three-quarters since November 2015.
Government unveils action plan to improve economic competitiveness
The government has announced an action plan to implement the Party Central Committee’s resolution on enhancing the quality of growth, labour productivity and economic competitiveness.
Under the plan, the government aims to maintain economic stability, keep annual inflation under 5% and gradually reduce the spending deficit to below 3.5% by 2020.
Public debt during the 2016-2020 period is not allowed to reach 65%, which is to be brought down to 60% in 2030, while the ratio of bad debt is targeted at below 3% by 2020.
The government also aims to increase the size of the stock market to 70% of GDP in 2020, divest all State stakes in enterprises where it is unnecessary for the government to hold more than half of capital.
In order to achieve these targets, the government will endeavour to streamline economic management, push through the equitisation of State-owned enterprises and reform the financial market and public services.
The government will also take action to build a clean and high-tech agricultural sector and restructure key industries in a more substantive manner.
Under the action plan, the role of the private sector will be promoted with a wide range of supportive policies.
The Ministry of Planning and Investment has been tasked with formulating the Law on Support for Small and Medium Enterprises, while other ministries and local authorities have been asked to step up administrative reforms to facilitate business activities.
Vietnam audit finds multiple projects with unnecessarily long toll period
Multiple road and bridge projects in Vietnam are applying toll-collecting periods that are up to 13 years longer than they should be, the country’s state auditor has said.
The State Audit Office of Vietnam (SAV) has inspected 27 toll roads developed under the BOT (build-operate-transfer) scheme countrywide and come to the conclusion that most of them have unnecessarily long fee-collection periods.
“Those toll periods could be slashed by ten months to 13 years from the developers’ financial plans without affecting their investment recouping,” deputy auditor-general Nguyen Quang Thanh said in a report to the National Assembly Standing Committee on February 21.
According to the SAV report, if those projects reduce their toll periods as suggested, the total amount of time saved will be more than 100 years.
“You have more than 100 years of toll after looking into only 27 projects,” Nguyen Van Thanh, chairman of the Vietnam Automobile Transportation Association said, implying that a number of similar projects across the country may be collecting tolls longer than they should.
“So will the SAV suggestion to cut those toll periods be met? And will any organizations or individuals be held responsible?” he questioned.
Of the 27 audited projects, one road in the central province of Quang Nam was found to have fully recouped investment but refused to stop collecting a toll, according to the report.
The SAV audit report also pointed out that many toll booths have been incorrectly placed, taking a toll on vehicles that have to pass them on a daily basis.
Despite a rule stipulated by the finance ministry that any two toll booths should be at least 70km apart, there are many facilities located within this distance following agreements between the finance and transport ministries and local administrations.
Moreover, there are cases when a toll booth for one road is located on another road, meaning people have to pay the fee even when they do not use the infrastructure.
The state auditor has also said that many roads which used to be toll-free have been selected to undergo “upgrade or renovation” under the BOT scheme, while there is no set of standards as to which facilities should be upgraded and become toll roads.
“People traveling on toll-free roads will all of a sudden have to pay a fee when the facilities become toll roads,” the SAV explained.
The state auditor therefore suggested that the government stipulate that only newly built facilities be developed under the BOT scheme.
“In the case of upgrades, the BOT should only be applied when the road to be improved is not the major access of local residents, so they will have other choices, instead of having to travel via that toll road,” the SAV said.
India – key supplier of pharmaceuticals for Vietnam
India has been the top supplier of pharmaceuticals for Vietnam as from last year with a value of US$22.4 million, accounting for 12.5% of Vietnam’s total pharmaceutical imports in January.
The Republic of Korea came second with US$19.5 million, up 2.26% which was followed by Germany with US$18.6 million, up 59.22% against the same period last year.
Particularly, drug imports from Canada saw a skyrocket growth of 1076.5% to just US$1.3 million while imports from Singapore dropped sharply by 84.98% to US$322,000.
Russia has become a new supplier of pharmaceutical products for Vietnam with a value of US$293,200.
Drug imports in the first month of this year hit US$183.8 million, down 17.6% against December and 7.2% over January last year.
Korea looks to become leading investor in HCMC
South Korea, the fourth largest investor in HCMC at the moment with 1,319 operational foreign direct investment (FDI) projects, is poised to take the first or second place this year given its big-ticket projects in the offing, said HCMC chairman Nguyen Thanh Phong.
Speaking at a meeting with a delegation of the Korean province of Gyeongsangbuk-do on February 21, Phong said many enterprises from the northeast Asian nation have expressed interest in seeking cooperation and investment opportunities in the city. Notably, Lotte Group is preparing necessary procedures for major infrastructure projects in the city.
“Korea is the fourth biggest investor among 86 countries and territories having investment projects in HCMC. And it is expected to take the first or second spot this year,” he said.
Lotte is planning to invest around US$20 billion in Vietnam, especially in HCMC. The conglomerate highly appreciates the city’s high economic growth potential.
Lotte E&C plans to inject a combined US$3.4 billion into metro lines No. 5 (phase two) and No. 6 under the public-private partnership format, and get involved in a wastewater treatment plant worth US$490 million in the southern part of the city.
The HCMC Management Authority for Urban Railways asked the municipal authorities for permission early this year to cooperate with the Korean company to develop these metro lines.
Oversupply seen hitting cement manufacturers hard
Vietnam’s cement output by 2020 could have amounted to 120-130 million tons a year, whereas domestic consumption is forecast to reach around 93 million tons, resulting in an excess of 25-35 million tons.
Chairman of the Vietnam Cement Association Nguyen Quang Cung said the cement industry from this year onward would start facing an oversupply as a result of the recent increase in capacity.
By end-2016, the total capacity of the cement industry had climbed to nearly 88 million tons a year. However, some more projects will be up and running in 2018, sending the annual capacity of the industry up to 108 million tons.
Last year saw the nation's cement and clinker exports totaling only 14.7 million tons worth US$561 million, down 7.1% in volume and 16% in value compared to 2015. The Philippines and Bangladesh remained the two biggest markets for Vietnam’s cement and clinker.
However, cement manufacturers have found it tougher to export. Therefore, if domestic consumption does not rise, they will be in trouble.
Vietnam looks to have 15,000 cooperatives by 2020
The Department of Cooperative Economy and Rural Development under the Ministry of Agriculture and Rural Development has set a target of having 15,000 cooperatives nationwide by 2020, with 45% of them operating efficiently.
The department announced the goal at a conference held in Ba Ria-Vung Tau Province on February 21 by the Ministry of Agriculture and Rural Development to review the 2016 performance of cooperatives and discuss the 2017 plan for the sector.
A report of the department says that the nation had had 11,000 agricultural cooperatives by the end of 2016 with 30% of them doing well. The average number of members in a cooperative was down from 600 to 400 and is forecast to drop to below 100 in the future.
According to the department, the decrease in cooperative members will help improve efficiency and increase incomes of members. Currently, the average revenue of a cooperative is about VND1.1 billion per year while profit reaches around VND200 million per cooperative. Average monthly income is VND1.5 million per member.
Data of the department reveals only 3% of the cooperatives get access to bank loans while 60% of them are in need of funds. Therefore, the Government should adopt policy to back cooperatives to easily access funding sources.
Mekong Delta logistics development plan to get approval in June
The Vietnam Logistics Association (VLA) and the Southwest Steering Committee agreed on February 21 to have a logistics development plan approved for the Mekong Delta in June.
The plan aims to improve the competitiveness of the delta’s logistical services sector and satisfy the demand for cargo transport which is predicted to shoot up in the future.
At a meeting on a plan for logistical services and infrastructure development between VLA and the Southwest Steering Committee in Can Tho City on February 21, Nguyen Trung Hieu, vice chairman of the committee told VLA to suggest new ideas for logistical services development in the Mekong Delta until 2020 with a vision to 2030.
Hieu of the Southwest Steering Committee asked VLA to take into account the current conditions of the region in the process of doing the planning.
According to Hieu, cargo throughput at the Mekong Delta’s ports would increase to 25-28 tons per year by 2020 and 66.5-71.5 tons by 2030.
Le Duy Hiep, president of VLA, said logistical services planning for the Mekong Delta should be based on the State’s general planning regulations, the orientation of the region and individual localities, the current socio-economic situation and the future vision of the region.
According to Hiep, the Government has suggested building a massive logistics center in Long An Province or Can Tho City. “Long An has an international port but it is near HCMC. Therefore, there is no need to build such a center in Long An.”
Vietjet promotes one million tickets
Vietjet said on February 21 it would sell one million promotional tickets from VND5,000 (20 U.S. cents) from February 22 to 24.
The promotional fares are available for booking at vietjetair.com from noon to 2 p.m. Passengers can use their debit and credit cards of Visa, MasterCard, JCB, KCP and American Express and ATM cards issued by 29 banks in Vietnam to pay for air-tickets.
The promotional fares will apply to all domestic flights of the no-frills carrier from March 15 to December 31, 2017 except for national holidays.
Nghi Son refinery complex becomes operational this year
The US$9 billion Nghi Son refinery and petrochemical complex in the central province of Thanh Hoa is expected to become operational in the last quarter of the year.
The Viet Nam National Oil and Gas Group (PetroVietnam) said the complex will complete important processes this year. Accordingly, it will complete mechanic works in March and start trial operations in the following month.
The project is scheduled to supply its first batch of oil in the third quarter of the year.
Following its operation, the complex will provide jobs to 1,400 people, including 1,200 Vietnamese labourers.
The 400ha project will meet 70 per cent of domestic demand for energy in the future, with an annual capacity of 10 million tonnes of crude oil (200,000 barrels) per day.
It will supply 2.3 million tonnes of gasoline, 2.9 million tonnes of diesel, 380,000 tonnes of polypropylene, 900,000 tonnes of aviation turbine fuel and nearly 700,000 tonnes of liquefied petroleum gas annually.
The project aims to meet the country’s increasing oil refinery demand while ensuring energy supply, thus creating momentum to attract foreign investment into Viet Nam.
Emirates to launch non-stop service to Hanoi
Emirates Airline will operate non-stop daily flights between Hanoi and Dubai from July 2 this year to meet increasing demand on the route.
The fast-growing airline said in a statement that the new service will use Boeing 777-300ER aircraft configured with 42 business-class and 386 economy-class seats. In addition, up to 20 tons of cargo will be offered in the bellyhold on this service.
Flight EK395 will depart from Noi Bai International Airport in Hanoi at 1:30 a.m. and land at Dubai International Airport at 5:05 a.m. Inbound flight EK394 will take off in Dubai at 3:30 a.m. and arrive in Hanoi at 1:05 p.m.
“The new service will help enhance connectivity for Hanoi and its neighboring areas, providing faster connections, additional opportunities for inbound tourism and regional products,” Emirates said.
The airline said the flight schedules are designed in a way that allows for seamless connections to many European cities via a stopover in Dubai.
Passengers on board all Dubai-Hanoi services will have a free baggage allowance of up to 35kg for economy class and 40kg for business class.
Emirates flights to and from Vietnam will have Vietnamese-speaking cabin crew on board, and inflight cuisine options with Vietnamese dishes.
The route between Hanoi and Dubai will be launched together with daily services from Dubai to Phnom Penh. The new Dubai-Yangon-Phnom Penh route will also enable passengers from Yangon to travel to Phnom Penh and vice versa.
Long An seeks to sustainably develop its IP complexes
The southern province of Long An plans to build industrial complexes in hi-tech parks, according to Phan Nhan Duy, director of its Department of Natural Resources and Environment.
The province has assigned priority to environment-friendly technologies and strengthened environmental management to ensure sustainable operation of its industrial parks, he said.
It has 28 IPs and 16 IP complexes currently in operation, with over 1,000 plants with a total investment of over US$5 billion.
All had to file reports on their environmental impacts and environmental protection commitments to get their licences. They have their own wastewater and solid waste treatment facilities.
Many of their developers have invested in modern environmental treatment systems and want environment-friendly projects in their IPs, Duy said.
Exports from these IPs and IP complexes account for over 50 per cent of the province’s annual exports of over $4 billion.
The measures taken by the province have helped it restructure its economy from agricultural to industrial, Duy said.
Lê Anh Hieu, marketing manager of Long Hau JSC, the developer of Long Hau IP in Can Duoc District, said his company is focused on environmental protection.
The IP prescribes environmental protection to its tenants, he said.
Its wastewater treatment system is testament to the IP’s environmental protection efforts, he said.
The effluent treatment and water supply systems cost over VND10 billion to build, he said.
Recently it increased its wastewater treatment capacity from 2,000cu.m per day to 6,500cu.m, and the treated water is used to water trees in the IP.
Long An regularly monitors surface water and air quality and does studies of the environment at places facing pollution risks.
The province has taken measures to prevent pollution and encourages the use of new technologies for clean production, ISO 14000 and green consumption, and helps polluting enterprises relocate from residential areas.
Hieu said the province has also done a study of the waste discharged in rivers to protect them.
Logistics expected to boost Dong Nai’s growth
Dong Nai province plans to establish an advanced logistics network to serve the entire southern key economic region.
Under a blueprint until 2025, logistics services will grow 35% and contribute 15% to Dong Nai’s budget annually. 3 inland container depots will be built by 2020 and another 3 will be available by 2030.
Dong Nai will also develop an IT system connecting with other provinces and cities to facilitate cargo transportation from the Central Highlands, the Mekong River Delta, and the economic hub of Binh Duong to Vung Tau port.
At a recent conference on logistics development in the Mekong Delta held in Can Tho city, the World Bank predicted a healthy growth for logistics services in Vietnam, citing increasing import-export values and retail sales.
“Lower logistics costs will help improve Vietnam’s competitiveness globally. A successful logistics industry depends on many factors including financial and human resources”, Deputy Prime Minister Vuong Dinh Hue told the conference.
A favorable location and an elaborate network of rivers and sea ports, highways, and railroads, and the future Long Thanh airport lays a strong foundation for Dong Nai’s logistics development.
Over 590 Vietnamese firms win product high-quality recognition
The Business Association of High-Quality Vietnamese Goods has released a list of more than 590 firms having products recognised as high quality this year.
Consumers across the country voted for 805 firms for the recognition. The association then coordinated with relevant agencies to select the qualified ones among them.
The consumer survey also showed that 92 percent of participants used made-in-Vietnam goods, but only 72 percent of them preferred these products to their foreign equivalents.
The figure showed that Vietnamese producers have not lived up to local buyers’ expectations, which is the reason why they are facing challenges in the home market, while there are abundant opportunities for foreign firms.
The survey results also highlighted consumers’ concern over food safety, with one fourth of polled people saying they worried about the use of banned chemicals or harmful materials in food production and preservation.
Experts said the problem is that people still have to consume unsafe food, due to the small scale of the “clean market”.
According to the survey, 60 percent of consumers still prefer to shop at traditional retail channels, such as wet markets and stores, but the rate of those who choose modern channels including shopping malls and convenient stores has risen to 34 percent.
Head of the Business Association of High-Quality Vietnamese Goods Vu Kim Hanh said the rising popularity of modern retail is attributable to improved living standards and concern over food safety.
US firm eyes investment in renewable energy in Binh Duong
The US ACO Investment Group wants to implement renewable energy projects in Vietnam’s southern province of Binh Duong, Chairman and CEO of the group Hari Achuthan said at a working session with local authorities on February 22.
He noted that the company is devising projects on two renewable energy plants in Vietnam, including the first solar power factory in Phuoc Dinh commune (Thuan Nam district) and Vinh Hai commune (Ninh Hai district) in the south central province of Ninh Thuan.
The construction of the plant, which is designed with a capacity of 100 MW and a total investment of 150 million USD, will be commenced in the third quarter of 2017 and put into operation in July 2018.
The US group hopes to cooperate with Binh Duong to build a solar lighting system instead of the current high-pressure lamps, he said.
Vice Chairman of the provincial People’s Committee Tran Thanh Liem welcomed the US firm to invest in renewable energy projects.
With over 10,000 hectare of industrial land, Binh Duong is a suitable location to build a solar power plant, he said.
Along with Hanoi, Ho Chi Minh City, and Dong Nai, Binh Duong has a high consumption of over 1 billion kWh of electricity each year. The power demand for production always surge, estimated at 12 percent per annum, he noted.
Binh Duong is also one of the five leading cities and provinces nationwide in drawing foreign direct investment with over 2,800 FDI projects worth 25.5 billion USD.
In 2016, the locality attracted more than 2 billion USD in FDI, including over 1.3 billion USD from 240 newly-licensed projects and 675 million USD of capital increase from 123 existing ones.
Anti-base erosion, profit shifting measures talked at APEC seminar
Representatives of the 21 APEC economies have agreed to cooperate in preventing base erosion and profit shifting (BEPS) at a seminar on the implementation of a BEPS action plan in Nha Trang city.
The function, wrapping up on February 22, was chaired by the General Department of Taxation under the Vietnamese Ministry of Finance.
Participants discussed opportunities and challenges and shared experience in implementing anti-BEPS measures in the APEC economies, with attention paid to the four BEPS minimum standards, the BEPS Implementation Forum, and the Multilateral Instrument for BEPS tax treaty measures (MLI).
They showed their full awareness of the importance of BEPS prevention and BEPS’s impacts on the fairness and effectiveness of international taxation systems.
Statistics show that 76 percent of the APEC members have joined the BEPS Implementation Forum, and this participation provides the economies which are not OECD members or G20 countries with a chance to be involved in global efforts against cross-border tax avoidance.
Meanwhile, the MLI was built with a view to facilitating the amendment to existing bilateral tax treaties so as to carry out related tax measures within the framework of the BEPS initiative.
About 40 percent of the double-taxation avoidance agreements belong to the APEC economies, and 19 percent of these economies have confirmed that they will sign the MLI this June, which is believed to be a foundation for the implementation of the BEPS action plan in 2017, when Vietnam is the APEC Chair.
A BEPS action plan was completed and is set to be included in a report of the meeting of APEC deputy finance ministers and central bank deputy governors on February 23. It will be reported to the APEC finance ministers at their meeting slated for this October.
Can Tho to host Aquaculture Vietnam 2017
The Aquaculture Vietnam 2017, the country’s first show on the fishery sector, is scheduled to take place in the Mekong Delta city of Can Tho from October 25 to 27.
The event is expected to draw 120 businesses from 20 countries and territories, the organising board said on February 22.
Several international conferences on aquaculture will also be held at the event, featuring many leading experts.
According to the Vietnam Fisheries Society, aquaculture contributed three percent to the country’s gross domestic product in 2016. Export turnover of aquatic products increased 7.4 percent year-on-year, reaching 7.05 billion USD.
The figure is expected to rise 5 percent this year, hitting 7.5 billion USD, 65 percent of which would come from aquaculture.
MWG 2017 growth prospects uncertain
In 2016, thanks to the growth of its revenue, profit, and the expansion of its operating network, Mobile World Investment Corporation (MWG) continuously reported record stock prices.
However, a saturated personal electronics market, which made up the bulk of MWG’s revenue and profit, raised questions about this year’s business.
MWG is a leading consumer electronics retailer. By the end of November 2016, there were 938 The gioi Di dong and 211 Dien may XANH stores. Besides, MWG is making an entrance in the food retail industry with the Bach hoa XANH chain.
According to its released 2016 financial report, MWG recorded a net sales of VND44.613 trillion ($1.967 trillion), and after-tax profit of VND1.577 trillion ($69.53 million), increases of 77 and 47 per cent, respectively, compared to 2015. Its revenue also overtook the initial annual target by 14 per cent. Over the last five years, MWG’s revenue and after-tax profit have risen by 43.87 and 65.7 per cent a year on average.
Despite the sharp growth in revenue and profit, over the last two years, the amount of inventory, cost of goods sold, selling expenses, administrative expenses, goods rejected, and goods repurchase has increased not only in terms of absolute value but also in the proportion of each account over revenue.
Although there have not been any worrisome signals about these ratios, their rise should be controlled, otherwise they will become a significant burden to MWG’s revenue.
At the end of 2016, MWG’s long-term assets accounted for 16.8 per cent, with the largest portion of 64 per cent (VND9.500 trillion - $418.87 million) belonging to inventories. Generally, consumer electronics and electronic appliances inventories often go out of date quickly without an appropriate inventory policy.
MWG has a typical retailer asset structure as it does not depend on long-term borrowings. Instead, its owner’s equity can meet the need for long-term assets and a part of the additional working capital. During the period of 2012-2016, the average growth rate of owner’s equity was 40.3 per cent and the firm’s size also rose by 56 per cent per year on average. The percentage of liabilities in the capital structure was 74 per cent by the end of 2016 (56.44 per cent in 2014).
The high short-term debt as well as the low quick ratio has led to certain risks in capital flows. However, retailers retained some advantages from their high liquidity inventories, a large amount of positive operating cash flows, and not suffering appropriating funds from customers.
Along with mounting expenses, MWG’s returns on equity (ROE) and returns on assets (ROA) have also been on the decline since 2014, although the gross profit margin was still maintained over 15 per cent.
The decreasing operating efficiency ratios resulted from the high initial expenses of the stores which need time to enhance their efficiency. Thus, it is hoped that these ratios will recover after MWG finishes its expansion and focuses on improving its performance.
MWG’s board of directors have released the 2017 business plan, targeting VND63.280 trillion ($2.79 trillion) in revenue and VND2.200 trillion ($97 million) in profit, which is equivalent to increases of 38.7 and 39.5 per cent, respectively, in comparison with 2016.
Consumer electronics distribution is the key contributor to MWG’s success. The gioi Di dong stores make up approximately 70 per cent of MWG’s sales and account for 38 per cent of its market share.
Nonetheless, after a strong growth period, it is forecasted that the consumer electronics market is saturated, especially in big cities, such as Hanoi and Ho Chi Minh City, which are also the company’s major markets. MWG can still increase its revenue due to a rising preference of strong brands over small outlets, however, it is difficult to maintain a high growth rate.
In the appliance distribution sector, through the Dien may XANH chain, MWG has recorded high growth rates of revenue and market share thanks to the rapidly increasing number of outlets.
According to market research and user experience research firm GFK Vietnam, the domestic appliancemarket is predicted to have the size of VND97 trillion ($4.28 trillion) in 2020, which is equivalent to a growth rate of 11.3 per cent in the period of 2016-2020. This signifies high potential to flourish in the future. MWG is targeting a 30 per cent market share by the end of 2017. This goal was 16-17 per cent only in 2016. MWG has determined that this will be its main growth driver in the next one or two years.
When the consumer electronics market is saturated, the chain of Bach hoa XANH shops, which was developed at the end of 2015, is hoped to become the new main growth driver. With the slogan of “fast and cheap,” the chain compete directly with other strong brands, like Coop Food or Vinmart+.
According to a newly released report from KIS Vietnam Securities Corporation, by December 2016, although the chain of Bach hoa XANH shops reached the revenue of VND1 billion ($44.1 thousand) per month in each shop, it still suffered losses, requiring more improvement from MWG.
Moreover, at the end of 2016, MWG’s website vuivui.com has been launched to sell almost all products of the firm. MWG aimed to turn vuivui.com into a Vietnam-version of Amazon to compete with Tiki, Lazada, Sendo, and other competitors, catching the leading online consumption trend. However, as it is a new business, the possibility of success is questionable.
With positive business results, MWG’s stock price has doubled in 2016, bringing MWG to the top enterprises with amarket capitalisation of over $1 billion. The company’s price per earnings ratio (P/E) is over 15, which is equivalent to the market P/E, but it is still highly appreciated in comparison with many other firms in the Vietnam retail industry.
Recently, Dragon Capital has become a major shareholder of MWG. The foreign ownership limit, the maximum percentage foreign investors are allowed to own, was maximised at 49 per cent.
MWG has no intention to raise this cap due to the manifold limitations in the retail sector over foreign investors, especially in opening new outlets. Thus, investors may not expect huge surprises in terms of foreign investment.
Many shareholders pegged high expectations on MWG, recognising the large room to enhance the efficiency of its new store chain and its strong operational capacity with an effective inventory control system. Nevertheless, as competition intensifies, it becomes increasingly difficult to improve operating efficiency next to maintaining positive growth rates and controlling expenses.
In the next general shareholders’ meeting, the primary expectations centre around the answer of MWG’s leadership to overcome these difficulties to reach the 2017 business targets.
MWG has set the goal of $10 billion in revenue by 2020. Chris Freund, general director of Mekong Capital, which currently holds a little over 7 per cent of MWG, said, “I do not think that it is a plausible target for a company of the scale of MWG to grow ten-fold in only five years. However, in the past ten years, the company has always met its targets earlier than it planned. MWG has changed its long-term vision three times since we first invested in it in 2007. I believe that the newest vision of MWG will bring the company a lot of growth in the coming years.”
Petrolimex reports 50 per cent growth in net profit ahead of listing
Vietnam National Petroleum Group (Petrolimex), the biggest fuel distributor in Vietnam and where JX Nippon Oil and Energy Corporation is the sole foreign investor besides the Vietnamese government, reported a net profit of VND5.16 trillion ($226 million), up 50 per cent on-year, before its planned listing by the end of March.
According to the company’s recently released consolidated financial statement, in 2016, Petrolimex earned a total consolidated revenue of VND123.1 trillion ($5.4 billion), down 16.2 per cent on-year. The company attributed this to the decreasing price of WTI crude oil, from $48.8 a barrel on average in 2015 to $43.32 in 2016.
The company also announced completing all the procedures to be listed and is only awaiting the approval of the State Securities Commission.
Petrolimex is one of the companies in which the government is going to hold a controlling stake. Additionally, the company is tasked with stabilising the market through the supply of gasoline, oil, and other petrochemical products.
After the restructuring, the company intends to position oil and gasoline production and sales as its main activity. Next in line will be fuel transportation, refinery and construction in oil and gas. In the past few years profit from fuel have accounted for between 50 and 60 per cent of the company’s total profit.
According to Nguyen Quang Dung, head of investment strategy at Petrolimex, the company aims to expand its market inside and outside of Vietnam, by developing its fuel retail network with a focus on providing added value at Petrolimex gas stations.
In May 2016, JX Nippon Oil and Energy Corporation officially acquired 8 per cent of Petrolimex. According to JX Nippon’s press release on the share subscription agreement, JX Nippon will enhance the corporate value of Petrolimex through “[exploring] various business opportunities in the petroleum products supply chain, from refining to marketing, using its long business experience in Japan.”
At the moment, Petrolimex has 2,400 gas stations all over Vietnam, holding a 55 per cent market share in fuel distribution. Foreign companies, such as JX Nippon, cannot join the field of fuel distribution. Exceptions are made only to companies that also invest in fuel production.
Most recently, Idemitsu Q8 Petroleum Limited Liability Company, a joint venture between Idemitsu Kosan Co., Ltd. and Kuwait Petroleum International Ltd., was allowed to set up to sell the products of Nghi Son refinery, where both companies are investors.
JX Nippon and Petrolimex have also signed a memorandum of understanding to start a joint study for the construction of South Van Phong Refinery in Khanh Hoa province. Licensed in 2008 with a planned capacity of five million tonnes of crude input per year, the refinery has been at a standstill because the government has not agreed to the incentives requested by Petrolimex.
Following an inspection of the group’s operations between December 26, 2013 and June 17, 2014, the Government Inspectorate of Vietnam found that Petrolimex incurred significant losses through its financial investments into businesses far removed from its core operations.
For example, the VND76.5 billion ($3.4 million) investment into Petrolimex Aviation resulted in a dividend of VND6.4 billion ($287,000), a 2.8 per cent gain, while the VND102 billion ($4.6 million) investment into PetrolimexLand yielded a thin VND6.12 billion ($274,000), equal to 2 per cent.
Central bank vested with broader powers to tackle serious violations
The Government has delegated greater powers to the State Bank of Vietnam (SBV) to deal with credit institutions which seriously infringe monetary and banking regulations.
The authorization is provided in the Government’s Decree 16/2017/ND-CP governing the functions, tasks, rights and organizational structure of the SBV. The decree defines the SBV as a ministerial-level agency and the nation’s central bank tasked with managing monetary issues, banking and foreign exchange activities, printing money, acting as the bank of credit institutions, and supplying money for the Government.
In addition to the tasks, rights and functions of ministerial or ministerial-level agencies detailed in the law on the SBV and the Government’s Decree 123, the central bank has to do 36 other specific tasks assigned by the Government and the Prime Minister and regulated in relevant regulations.
The SBV is responsible for preparing draft laws, draft resolutions of the National Assembly, draft ordinances and resolutions of the Standing Committee of the National Assembly, and draft Government decrees. It must carry out relevant projects and plans as assigned by the Government and the Prime Minister; annual and long-term development strategies and zoning plans; national programs and action plans for important projects and programs in the areas under its management.
The SBV is in charge of proposing annual inflation targets for the Government to consider and approve and use necessary tools for implementation of monetary policy in Vietnam. It should manage data in economic, financial, monetary and banking areas in Vietnam and abroad to support the drafting and execution of monetary policy in the country; and publicize monetary and banking information in line with law.
The SBV has the right to issue, revise and withdraw licenses of credit institutions, and those of foreign bank branches and representative offices in Vietnam. It is authorized to take special measures against institutions which seriously breach monetary and banking rules and struggle with financial problems that threaten the safety of the banking system.
The new decree allows the SBV to set up a communications department in addition to its departments for monetary policy, foreign exchange management, payment, credit for economic sectors, forecasting and statistics, international cooperation, monetary and financial stability, internal auditing, legal matters, finance and accounting, organization, reward and emulation, information technology, governance, transaction, inspection and supervision, among others.
The entities under the SBV include branches in cities and provinces, the Banking Strategy Institute, the National Credit Information Center of Vietnam, the Banking Academy, and banking publications.
Vinh Phuc province to get $92m property project
Hoa Binh Construction & Real Estate Corporation has won a contract worth VND2.066 trillion (US$91.8 million) to design and build a golf and garden villa complex in Vinh Phuc Province.
The project, Times Garden Vinh Yen, covers an area of 27ha, comprising 558 garden villas, three 18-floor building blocks, trade centre, park and entertainment facilities.
The owner of the project is the Urban Development and Construction Joint Stock Company.
Leaders of the company committed to complete construction as scheduled, while ensuring labour safety and product quality by using modern design solutions and cost-efficient material.
Earlier this year, the company was also assigned by the Khang Dien House Trading and Investment Joint Stock Company to design and build a high-quality residential project in Phu Huu Ward in HCM City’s District 9.
The project, with total investment of VND1 trillion, will provide 900 apartments for house seekers.
Vinacomin announces financial reports of 2016
Vietnam National Coal and Mineral Industries Group (Vinacomin) has published a report about the coal mining projects and headquarter constructions.
Lam Dong Bauxite Aluminium Complex project was approved in 2006 with total investment of VND7.7trn (USD337m) and was expected to be completed in 2009. After four adjustments, this figure ballooned to VND15.4trn and the deadline was pushed back to 2013. Since 2014, Vinacomin has completed the main project and started building support constructions including red mud reservoir.
The Nhan Co Aluminium Factory project was approved in 2007 and scheduled to be completed in 2010. However, it also went through three adjustments. Costs increased from VND3.2trn to VND16.8trn and the completion date was changed to 2014.
According to Vinacomin, Nhan Co Aluminium Factory went into pilot operation. It will go into commercial operation within the first quarter of 2017.
Thach Khe iron mine is the biggest in Vietnam and valued at approximately USD35bn. However, the project has been halted and the investor has asked to withdraw from the project.
In 2016, Vinacomin sold 35.2 million tonnes of coal. Vinacomin's revenue last year was VND101.3trn (USD4.4bn) of which VND50.9trn was revenue from coal mining, a decrease of 5% compared to 2015. Vinacomin spent VND15.7trn on construction. The debts owed to Vinacomin’s mother company by the end of 2016 reached VND19.7trn, a decrease of 12.16% compare to the early of that year. Meanwhile, it also owed VND80trn.
Vinacomin didn't disclose its profits but said that it will continue spending trillions of VND to build offices and other constructions. New headquarters were agreed in 2012 with an investment of VND3.7trn (USD162m), and they are estimated to be opened in 2018. The VND964bn project to build headquarters in Quang Ninh Province was also approved in 2011 and is expected to be opened next year.
In addition, trillions will also be used for coal mining. Vinacomin is finishing the preparation to start investments in Khe Cham II mine with an investment of VND12.5trn (USD547m). The new pit of Mao Khe Coal Company has the investment of VND5.8trn. The open pit-mines of Nui Beo Coal JSC has the investment of VND5.3trn and will produce the first batch of products this year.
There are several coal mining projects that are behind schedules or in-progress such as the Ha Lam, Nga Hai and Binh Minh mines.
Milbank advises on Vietjet's IPO
Milbank, Tweed, Hadley & McCloy LLP has advised BNP Paribas, Deutsche Bank, JP Morgan and Viet Capital as placement agents in the initial public offering (IPO) by Vietnam’s leading budget airline, Vietjet Air.
The listing of shares on the Ho Chi Minh City Stock Exchange is set for February 28.
The approximately $170 million offering of 44.78 million shares represents the largest IPO in Vietnam’s history and the country’s first internationally-marketed IPO.
A private placement of shares by Vietjet’s founder and Chairwoman, Nguyen Thi Phuong Thao, is scheduled to be followed by a top-up subscription after listing.
Capital Markets partner James Grandolfo led the Hong Kong-based Milbank team, which included senior associate Kurt Sherwood and associate Ari Singzon. The transaction was supported by aviation partner Paul Ng, based in Singapore.
“We are exceptionally pleased to have advised these leading investment banks in helping Vietjet take a historic step, for both the country and the company,” Mr. Grandolfo said. “The success of the Vietjet IPO is an important milestone in the development of Vietnam’s capital markets. In addition, the capital raised by Vietjet in the offer will help support expansion of its international routes and the enlargement of its fleet, which are critical for it to compete in the Asian aviation market - one of the fastest growing and dynamic aviation markets in the world.”
Milbank was recently named “Most Innovative US Law Firm in Asia” by IFLR. In addition to its highly-respected and industry-recognized Hong Kong capital markets practice, Milbank also boasts one of the most respected global aviation law practices.
The firm recently advised Vietjet in several other important transactions, including an $11.3 billion purchase agreement for Boeing aircraft, announced in May 2016, and a $2.39 billion agreement to acquire Airbus aircraft, announced in September. Milbank also advised Vietjet in a $3 billion contract with Pratt & Whitney for the purchase of aircraft engines and in several multimillion-dollar agreements for maintenance, services, and flight training simulators.
Milbank, Tweed, Hadley & McCloy LLP is a leading international law firm that provides innovative legal services to clients around the world. Founded in New York 150 years ago, Milbank has offices in Beijing, Frankfurt, Hong Kong, London, Los Angeles, Munich, São Paulo, Seoul, Singapore, Tokyo and Washington D.C.
Its lawyers collaborate across practices and offices to help the world’s leading commercial, financial and industrial enterprises, as well as institutions, individuals and governments, achieve their strategic objectives.
Japense steel maker sets up JV
Japanese steelmaker the JFE Steel Corporation has worked with the Mechanization Electrification Construction Corporation Joint Stock Company (AGRIMECO) to establish a joint venture company in Hanoi to sell processed construction materials.
AGRIMECO constructs hydroelectric power plants and steel high-rise buildings and also processes construction materials. The new company, AGRIMECO & JFE STEEL PRODUCTS CO., LTD. (A&J), will sell processed construction materials by leveraging AGRIMECO’s strong local presence and JFE Steel’s capabilities in technological development and value engineering and value analysis. A&J is the first joint venture JFE Steel has established with a construction and steel-processing company such as AGRIMECO.
A&J is the JFE Group’s latest initiative to expand its involvement with infrastructure-related construction materials outside of Japan, a key medium-term priority for JFE. The group also established GECOSS VIETNAM COMPANY LIMITED in August 2016.
JFE Steel contributes to infrastructure development in Southeast Asia by drawing on diverse advanced technologies from JFE Group companies, including Vietnamese subsidiaries J-Spiral Steel Pipe Co., Ltd. and GECOSS VIETNAM.
Vietnam, the largest steel-consuming country in Southeast Asia, is enjoying GDP growth in excess of 6 per cent and is forecast to continue growing. Domestic demand for construction materials is expected to remain strong and stable as the country actively expands its roads, railways, and other transportation infrastructure, as well as power plants.
JFE Steel Corporation, one of the world’s leading integrated steel producers, was established through the consolidation of NKK Corporation and Kawasaki Steel Corporation in 2003. The company operates several steelworks in Japan and numerous branch offices and affiliates throughout the world. JFE Steel leverages world-class technologies and know-how to produce a wide range of products based on its “Only One, Number One” strategy of focusing on unique and best-in-class products.
Cholimex to list on UpCOM
The Hanoi Stock Exchange has approved a plan by the Cholimex Food Joint Stock Company to trade on the UpCOM market, with the stock code CLX. It has charter capital of VND866 billion ($37.92 million), with 86.6 million shares to be traded.
The first trading day is expected to be March 1, with a reference price of VND10,200 ($0.44) per share.
The State formerly held 100 per cent of Cholimex, which operates under the model of parent – subsidiary and is affiliated with the Ho Chi Minh City People’s Committee.
Cholimex held an IPO in March 2016, with 199 investors buying 13.84 million shares. At a price of VND10,000 ($0.43) per share, the company brought in more than VND138 billion ($6.04 million).
Its equitization steering committee sold the remaining stake of 8,290,600 shares via direct negotiations on March 29, 2016. Twenty-seven investors bought the shares at VND10,000 (0.43) per share.
The company held its first shareholder meeting in late June 2016 and changed to a joint stock company with charter capital of VND866 billion ($37.92 million). At its first board meeting, Ms. Tran Thi Thanh Nhan was elected Chairwoman of the company, Mr. Bui Tuan Ngoc Vice Chairman, and Mr. Huynh An Trung CEO. The company has not increased its chartered capital since.
Cholimex had three major shareholders as at September 20, holding a total of 92.35 per cent. The biggest is the State-owned Ho Chi Minh City Finance and Investment Company (HFIC), with 49 per cent. Transimex holds 35.02 per cent and the Van Hoa Viet Service Joint Stock Company 8.33 per cent
SBV gives in principle approval to BIDV trust bank deal
The State Bank of Vietnam (SBV) gave in principle approval on February 21 to the conversion of partial ownership of the BIDV Leasing Finance Company (BLC) to Japan’s Sumitomo Mitsui Trust Bank (SMTB).
Formally 100 per cent owned by BIDV, SMTB is to have 49 per cent of BLC, which will change its name to BIDV-SuMi Trust (BSL), the SBV’s Official Correspondent No. 946 states.
SMTB, the largest trust bank in Japan and the fifth-largest commercial bank overall measured by assets, had total assets of $585.4 billion as at September 30, 2016 and total charter capital of $19.9 billion.
The two entered into a strategic partnership in n2013, followed by research and development (R&D) cooperation in many business projects, training, and technology transfer.
The two also signed a partnership contract on financial leasing on April 29, 2016 in Hanoi.
Under the contract, BIDV will sell 49 per cent of BLC to the Japanese bank, while at the same time raising charter capital at the company from VND448 billion ($19.6 million) to VND896 billion ($39.2 million), to meet the business development demand in the time to come.
BSL is the first Vietnamese financial leasing company to apply the joint venture model between a domestic commercial bank and an international financial institution. Together with the establishment of BSL, BIDV will have new financial products to complete their diversified product range, including credit, insurance, financial leasing, and securities trading.
Mergers and acquisitions (M&A) between banks and financial companies has become a trend over the last few years. SHB completed its M&A deal with Vinaconex-Viettel Finance (VFF) after two years of negotiating. With the acquisition of a financial company, banks can participate in the unsecured lending sector, which incurs higher risks but also higher returns than ordinary loans.
ACB’s management board has shown an interest in acquiring Posts and Telecommunications Finance Ltd (PTFinance). Founded in 1998, PTFinance has charter capital of VND500 billion ($22.1 million) and is 100 per cent owned by the State-run telecoms provider VNPT.
In an interview with Forbes in January, ACB Chairman Mr. Tran Hung Huy revealed that the bank has been conducting research to acquire a financial company in order to develop unsecured lending products. He affirmed that ACB has no plan to move into the field as yet, due to a fear of accumulating bad debts.
Last year, the VPBank-owned FE Credit-Consumer Finance Services added 2.7 million accounts, to take its total number of customers to 3.3 million. Business Monitor International (BMI) and the World Bank have attributed the strong growth of the consumer finance market to Vietnam’s rapid urbanization. The country is estimated to have some 18 million adults living in urban areas, which is expected to further increase considering the speed of urbanization.
Most are considered to be potential customers for financial services. To join the race, many foreign finance companies are ready to buy into local players. Japan’s Credit Saison and Shinsei Bank now respectively own 49 per cent of HD Saison and Military Bank’s MC Credit.
VSIP commitment to a long-term vision
Nearly a decade ago, L. D. Hung moved from his hometown at Quang Ngai province to the South, seeking a better life.
After years away from home, Hung left behind a successful career at Binh Duong province for a position in VSIP Quang Ngai, where a prosperous life and a promising job are no longer just dreams.
This is one of the stories that we see happening every day at Vietnam Singapore Industrial Parks (VSIPs). In just a single day, we hear so much about the meaningful connection between VSIP and its employees. We also met other employees who came to see Binh Duong their hometown, who told us about simpler days in the past and their decade-long journey with VSIP.
By seeking job opportunities at VSIP Binh Duong, many employees also excitedly volunteered to return and work for new VSIP projects in their hometowns. Although they have all started their careers differently, their stories end with the same sense of pride for contributing to the success of a model for IPs in Vietnam.
According to the 2015 National Internal Migration Study, the Vietnamese workforce has undergone a significant transition from rural to urban areas which caused difficulties for remote areas to recruiting labourers. It also led to a marked gap in the economic development and social environment throughout the country as labourers seeking higher-paying job opportunities relocate to bigger cities.
In this context, VSIP has a unique business approach to develop a network of integrated townships and industrial parks that offer comprehensive solutions to work, live, and play to attract better investment to Vietnam. Therefore, people from smaller provinces benefit by living in their hometowns with stable incomes and are further equipped to contribute to local economic development.
This strategy was set out following VSIP’s industrial development experience, in resonance with the Singaporean partner's future-forward vision in urban planning. The joint venture aims to help an entire generation of workers like Hung from different provinces to grow and guides them to contribute to the economic development of their home provinces.
VSIP is playing a role in directing and leading workforce migration in the country, with a long-term vision to benefit all provinces. During its more than 20-year journey in Vietnam, VSIP has remained steadfast in its commitment to pioneering the industrial park model in line with international quality standards and has helped to unlock the economic potential, while contributing to the overall development of the provinces where its parks operate—Binh Duong, Bac Ninh, Hai Phong, Hai Duong, Nghe An and Quang Ngai.
With seven parks in Binh Duong, Bac Ninh, Hai Phong, Quang Ngai, Hai Duong, and Nghe An, totaling a gross area of 6,660 hectares, VSIP has thus far attracted investments from 658 companies. The operations of these companies have brought in $9.1 billion in investment capital, with the combined strength of more than 179,000 workers.
Through enabling further business growth in the areas of operation, VSIP has also seen the wider impact of its operations and have been heartened to see local SMEs take root in the surrounding communities. As a result of its operations, VSIP has seen greater development and infrastructure growth as well as employment for local residents in the provinces.
Nguyen Van Hung, co-chairman of VSIP Group, shared, “VSIP sees improving the life of local communities and contributing to the comprehensive development of Vietnam as part of our mission. We also leverage the experience that Singaporean partners bring to develop sustainable business models which not only create economic value but also have long-term benefits for the community.”
To ensure staying ahead of the competition, VSIP constantly looks for differentiators and value-added services for our customers. VSIP is managed completely as a commercial entity, with strong systems and processes that include a corporate governance structure and enterprise risk management capabilities.
Exploring innovation hubs in Vietnam is a key focus for VSIP’s next chapter of development, with the belief that Vietnam can embrace the greater sophistication expected of world-standard factories. There is less emphasis on low wages, with the growing importance of advanced infrastructure and developing workers’ skills. VSIP has proved the long-term value of its strategy for both businesses and Vietnamese labourers.
SeaBank to set up asset management arm
The State Bank of Viet Nam (SBV) will allow Southeast Asia Commercial Joint Stock Bank (SeaBank) to set up its own asset management firm.
In a statement released on Monday by the SBV, SeaBank will be able to found its Southeast Asia Asset Management Co Ltd, of which SeaBank will hold 100 per cent of the chartered capital.
SeaBank will have to make sure its procedures of foundation comply to current regulations. The bank must also assure that it will operate safely before and after the foundation of its asset management arm, supervise strictly the business operation of the new firm and provide reports to the SBV about the issue.
In 2006, SeaBank was a founding shareholder of the Asean Securities Company. At the end of 2015, the bank held total assets of VND84.75 trillion (US$3.76 billion), chartered capital of VND5.77 trillion and net profit of VND92 billion.
EVN International to trade on UPCoM
EVN International Joint Stock Company has obtained approval from the Ha Noi Stock Exchange to trade its 36.67 million shares on the Unlisted Public Company Market (UPCoM).
EVN International will start trading on UPCoM on February 28 at a starting price of VND10,500 (46 US cents) per share.
EVN International JSC is a joint-venture firm founded by some leading State-owned corporations, including Viet Nam Electricity (EVN), Pha Lai Thermal Power JSC, Viet Nam Rubber Group (VRG), Viettel Group and PetroVietnam Power Corporation, with initial chartered capital of VND2.4 trillion ($106.67 million).
In April 2016, EVN International adjusted its chartered capital from VND2.4 trillion to VND366.77 billion to match the registered market capitalisation.
The company has not increased its chartered capital since then. On December 28, 2016, EVN International had six major shareholders, holding 81.83 per cent of the company’s chartered capital.