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VOF outlays $45mn in IPOs of PetroVietnam subsidiaries

Released at: 10:18, 23/02/2018

VOF outlays $45mn in IPOs of PetroVietnam subsidiaries

Photo from vietnamfinance.vn

VinaCapital Vietnam Opportunity Fund picks up holdings in BSR and PV Power at January IPOs.

by Quang Huy

The VinaCapital Vietnam Opportunity Fund (VOF), the flagship fund of the Vietnam-focused fund management firm VinaCapital, said in a report it invested a total of $45 million in acquiring shares in two subsidiaries of the State-owned PetroVietnam at their respective initial public offerings (IPOs) in January.

It spent nearly $25 million picking up around 10 per cent of available shares in the Binh Son Refining and Petrochemical Co. (BSR), the operator of the only operating oil refinery in the country.

Its winning price was a discount of 4 per cent on the average winning price of VND23,000 ($1) per share. The government sold 7.8 per cent of the company’s charter capital at the IPO and has plans to sell 49 per cent to strategic investors.

The starting price of VND14,600 ($0.64) a share was “very attractive”, according to the report, at an estimated 2017 P/E of 5.6x, compared to the current market P/E of 20x.

VOF also invested more than $20 million in the PetroVietnam Power Corp. (PV Power), Vietnam’s second-largest power generator, with a total capacity of 4.2 GW. PV Power sold 20 per cent of its shares in its IPO in late January and plans to sell an additional 29 per cent to strategic investors this month.

The investment in the power company was also “attractive”, given an estimated P/E of 11.5x at a starting price of VND14,400 ($0.63) a share.

Both IPOs were considered “blockbusters” given their volumes and market capitalization. The government raised a higher-than-expected $245 million from the BSR and $305 million from the PV Power sale.

“While we had ample cash to invest in all five of the IPOs scheduled for January, we were very selective and only took part in two: Binh Son Refinery and PV Power,” the VOF report stated. “We believe the combination of a reasonable valuation and the significant medium-term growth potential of these two companies offer a substantial upside to the starting IPO price.”

The fund said its cash position had reduced substantially at end-January, to 5.7 per cent of its net asset value (NAV), from 7 per cent in December.

“The government has an ambitious schedule of initial and secondary offerings in 2018 and we will continue to evaluate such opportunities,” the report noted. “At the same time, we are in advanced negotiations regarding several private equity opportunities.”

VOF acquired stakes in a number of local companies last year, such as Tasco, FPT Retail, Oriental Commercial Bank (OCB), and HDBank. Its NAV increased 9.1 per cent month-on-month in January to nearly $1.2 billion, according to the report, and listed equity accounted for 70.3 per cent of its portfolio value.

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