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VinaCapital step up interest in acquiring SOEs
Ngoc Thuy 19:14, 2018/02/26
VinaCapital`s Vietnam Opportunity Fund (VOF), invested approximately US$45 million into two subsidiaries of PetroVietnam (PV Power and Binh Son Refining and Petrochemical) at their initial public offerings (IPOs) conducted in January.
"We invested in the two companies as they are large and important players in their respective sectors," said Andy Ho, VinaCapital's Managing Director and Chief Investment Officer, to Hanoitimes. 
 
VinaCapital will continue explore opportunities to invest in SOEs.
VinaCapital will continue explore opportunities to invest in SOEs.
"We feel that the upside potential is very strong and these assets are poised to deliver a very attractive annual return over a three-to-five year period and maybe even longer."

VOF purchased the BSR shares at a discount of 4% compared to the average price of VND23,000 (US$1.01) paid at the equitization, according to its latest announcement. The fund was able to secure around 10% of the available shares on offer with an investment of nearly US$25 million in the refinery operator. 

BSR's large market capitalization (around US$2 billion at the starting price) and its 33% market share of the domestic oil refinery market made it an attractive target. The refinery business, VOF observed, tends to be less affected by oil price volatility than other segments of the oil and gas sector. 

On the other hand, BSR is expected to make its debut on the Unlisted Public Company Market (UPCoM) with the total registered share volume of 241 million, according to Vietnam Securities Depository's latest announcement. The company is expected to have a charter capital of VND31,000 trillion (US$1.3 billion) after completing the equitzation process. 

Meanwhile, VOF invested more than US$20 million into PV Power, the second-largest power generator in Vietnam, with a total capacity of 4.2 GW and a current market capitalization of US$1.5 billion. 

"With a market value of more than US$1 billion at the starting IPO price, PV Power's valuation of an estimated P/E of 11.5x at the starting price of VND14,400 (US$0.63) was very attractive compared to the 16-17x for the VN Index," Ho added.

The IPOs of PV Power and BSR, which raised US$308 million and US$245 million, respectively, marked a milestone in the equitization process of State-owned enterprises in Vietnam. 

On the plan to continue acquiring stakes in State owned enterprises (SOEs) in the future, Ho revealed, "We think there are some good assets on the equitization schedule that can offer strong returns for funds such as ours."

The strong stock market and high valuations gave the fund an opportunity to significantly trim a few of its holdings and re-deploy money into IPOs such as BSR and PV Power, where the returns can be significantly higher.

"We expect the shares of these companies to trade on the main exchanges in the near future, which will improve liquidity as well as attract more international investors given how large and important these companies are both in relation to the Vietnamese economy as well as to the Vietnamese stock market," Ho concluded.

Founded in 2003 and targeting multiple asset classes, VOF focuses on private equity deals. While the consumer and industrials sector accounts for the majority of its portfolio, the financial sector takes up nearly 10%. 

VOF's net asset value (NAV) per share was $6.03, an increase of 9.2% from the previous month. The discount between share price and NAV per share narrowed down to 14.2%. 
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