Vietnam dairy producer milks limit on foreign stakes to record profit

The stock was the biggest driver of the VN Index on Monday, which rose 0.3 per cent.

“We want to open the room by the limit allowed by the government because the investment of overseas investors will not just bring capital but also advanced corporate management experiences,” said Bui Thi Huong, an executive director at the dairy producer. 

The company is awaiting government guidance, the Ho Chi Minh City-based executive said.

Vietnamese regulators see foreign investment as one of the keys to growing the country’s stock market, which is about one-eighth that of Singapore, Southeast Asia’s largest. The State Capital Investment Corp (SCIC), a government investment arm, plans to divest its entire 45.1 per cent stake in Vinamilk, according to a statement on the government’s website October 14. That holding is worth 60.1 trillion dong (Bt95.55 billion) at Monday’s close.

Vinamilk, as the Ho Chi Minh City-based company is commonly known, “welcomes” the government decree allowing foreigners to increase stakes in certain industries to as much as 100 per cent from a cap of 49 per cent.

“Vinamilk’s always at the top of foreign investors’ interests, and the 49 per cent cap has been a hurdle for overseas investors to access the company for a long time,” says Dang Tran Hai Dang, deputy manager of research at VietinBank Securities JSC in Hanoi. 

“The story definitely moved the stocks today.”

The divestment decision is “terrific” and a “great move in the right direction”, said Mark Mobius, chairman of the emerging-markets group at Franklin Templeton Investments.

“Liquidity is low, which is why this move from the government is a giant step forward. We have a big holding in Vinamilk and we’d probably buy more at the right price,” said the Bangkok-based chairman.

Vinamilk has participated in non-deal roadshows in Singapore and the United States and is going to meet other investors in Europe this quarter, according to Huong. Foreign investors currently hold 49 per cent of the company’s shares. 

The company expects third-quarter earnings will exceed its target and is on course to meet the full-year profit projection, she said. The company plans to list about 200 million newly-issued shares, it said last month.

Shares of the company have rallied 39 per cent this year, set to rebound from a 15 per cent slump in 2014, the first annual decline in six years. 

The gains also outpaced the 9 per cent advance in the benchmark VN Index.

SCIC, which holds the government’s stake in Vinamilk, hasn’t decided when it will sell the shares, Vietnam Television reported.