Vinamilk no longer attracts foreign funds?

Vinamilk: out of the top 10 investments of Dragon Capital

According to the latest report of Vietnam Enterprise Investments Limited (VEIL) published in December 2018, Vinamilk’s stock is no longer one of its top 10 biggest investments. VEIL is a closed-end fund trading on the Main Market of the London Stock Exchange.

Vinamilk (HSX: VNM) has always been one of the top 10. Previously, in 2011-2015, Vinamilk made up over 20 per cent of VEIL’s portfolio, peaking at 27 per cent in 2012.

VNM has been one of the favourite stocks in the Vietnamese stock market so far and has accounted for a large proportion of the portfolios of investment funds. However, during the last year, many big investment funds have been selling their VNM stocks, with VEIL being just one example.

By the end of November 2018, VEIL’s asset value hit $1.41 billion. The funds investment in VNM is currently only $41 million.

VNM’s dropping out leaves Sabeco (HSX: SAB) as the sole food and beverage (F&B) firm among VEIL’s top 10 investments, holding 5.67 per cent. VNM was replaced by FPT on the list, with the proportion of 2.84 per cent, ranking ninth.

Despite lifting the foreign ownership ratio to 100 per cent, VNM seems to have lost its shine for foreign investment funds.

Yielding the game for other funds

According to Bao Viet Securities JSC (BVSC),VNM losing its traction with foreign funds may be a result of the stall in the operations of the Vietnamese “milk king” in recent years. According to the published financial report, in the first nine months of 2018, Vinamilk’s revenue increased slightly by 2 per cent to VND39.6 trillion ($1.72 billion), while pre-tax profit decreased by 8 per cent to VND9.4 trillion ($408.69 million).

In addition, the export revenue of VNM fell 17 per cent due to instability in its Iraq market, which accounting for over 70 per cent of the total revenue of Vinamilk. Meanwhile, other export markets still posted growth of about 15 per cent. This matches Vinamilk’s plan to diversify its export markets and reduce dependence on Iraq.

“Investors may be waiting to see Vinamilk’s growth strategy in the upcoming time. They do not see any potential growth in VNM for now,” said a representative of a securities company.

BVSC believes that although Vinamilk has stepped into a slower but more stable growth phase, it still has good prospects from M&A, as Platinum Victory Pte., Ltd. – an investment company belonging to Jardine Matheson Group – and F&N Dairy Investments Pte., Ltd. will fight to gain control over Vinamilk in case State Capital Investment Corporation (SCIC) continues to divest.

Many experts in the stock market were of the opinion that foreign investment funds are selling VNM to yield the game to Platinum Victory and F&N.

Long-term foreign investment funds buying into Vinamilk have been on a strong selling drive at the end of 2017, reacting to the huge demand from Platinum Victory. Besides the 48 million shares bought from SCIC, Platinum Victory bought more than 100 million shares from other investors to become a major shareholder holding more than 10 per cent of Vinamilk.

Platinum Victory has just announced that it did not buy any of the 17.41 million shares Vinamilk offered to sale in November 2018.

Meanwhile, F&N is also a major shareholder owning nearly 301.5 million VNM shares, equivalent to 17.31 per cent of Vinamilk’s outstanding voting shares.

In Vinamilk’s shareholder structure, SCIC holds 36 per cent, F&N 20 per cent, and Platinum Victory 10.6 per cent.

While VNM experienced good recovery in the second half of November, it is still about 23 per cent lower than its 2018 peak.