February 14, 2018 12:40 pm JST

Vietnam Sugarcane meets Hanoi's fundraising target

State-owned company's final IPO ahead of holidays rakes in $29m, but outlook for others unclear

A farmer harvests dried sugarcane on her farm in Soc Trang province in the Mekong Delta, Vietnam. © Reuters

HO CHI MINH CITY -- Vietnam Sugarcane and Sugar Corporation II, a state-owned company engaged in the manufacture and trade of sugar, raised more than 663 billion dong ($29.4 million) from the sale of 63.6 million shares, or a 93% stake, at its initial public offering on Tuesday on the Ho Chi Minh City Stock Exchange.

Seven local investors, paying an average price of 10,420 dong apiece, acquired all the shares from the company better known as Vinasugar II, which as a state-owned enterprise comes under the Ministry of Agriculture and Rural Development. The fundraising met the government's target for the IPO just before the stock market closed for Vietnam's national Tet holidays, which run from Feb. 14-21.

Vinasugar II's auction came on the heels of two unsatisfactory IPOs held earlier in the month. Vietnam Rubber Group sold 21% of its offered shares, while Power Generation Corporation 3 sold just 2.8%, falling far below the government's targets. An analyst from Saigon Securities pointed out that stocks of commodities companies such as sugar and rubber might not be as attractive to investors as other parts of the Vietnamese market.

Analysts argue that markets need more time to digest the shares issued from the IPOs and divestments of the country's SOEs, after the government announced privatization plans.

Hanoi aims to equitize 64 SOEs and divest from 181 companies over 2018. It is estimated there will be five IPOs and 15 divestments every month this year, not including the 25 IPOs or divestments that were delayed from 2017.

In addition, last week's volatility in global stock markets, as well as local ones, also discouraged investor activity. Many investors have indicated they will wait for more stability as local markets saw rapid gains over the past year.

The value of the country's leading VN-Index increased 48% in 2017, marking a 10-year record high. Sectors experiencing the best growth rates included banking, food and beverage, building contractors, producers of construction materials and retailers.

Meanwhile, foreign investors are staying away from some stocks due to investigations of corruption within some SOEs.

Vietnam's state revenue in 2018 is projected to reach $58 billion with expenditure of $67 billion. The $9 billion deficit will have to be covered by borrowing, while payments on principal total $7 billion this year. Hanoi is desperate to rake in money in order to continue funding big-ticket infrastructure projects. Total spending is projected at $17.6 billion this year, an increase of 12% compared to 2017. 

More SOEs are scheduled to go public next month after the Tet holidays. Vietnam Southern Food Corporation or Vinafood 2, a trader of agricultural products, will hold an IPO on March 14, expecting to raise 1.4 trillion dong from the sale of a 22.97% stake. It will seek strategic investors to buy another 25% later. Protrade Corporation, a trading company based in Binh Duong Province, will offer a 10% stake on March 28, aiming to raise at least 360 billion dong. Hapro, another trading company headquartered in Hanoi, will have an IPO on March 30, offering a 34.51% stake with the aim of raising 1 trillion dong. The company plans to offer a 65% stake for strategic investors following the IPO.

(Nikkei)

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