TMT Automobile plans takeover of Vinamotor

Visual from the company's website

Shareholders of Vietnam’s TMT Automobile have agreed for the take over of Vietnam Motors Industry Corporation (Vinamotor), the state-owned firm which was equitised one year a go. For the purpose, TMT is issuing corporate bonds of VND1.5 trillion ($70.4 million).

TMT chairman Bui Van Huu said during the company’s shareholder meeting: “If we succeed in acquiring Vinamotor, we will build TMT as Vietnam’s leading automobile company.”

TMT is meeting potential buyers of the bond issuance, including domestic and foreign banks.

Huu revealed his company had acquired Automobile Transportation Service No 8 and 30-4 Design Consulting Construction and Mechanical JSC, and had successfully transformed them into high growth achievers. He was positive that he could do the same with Vinamotor.

TMT stock price hit its ceiling price during today’s trading session on the Ho Chi Minh City Stock Exchange.

State management failure

 

Initially, the Vietnamese government expected to reduce its holding in Vinamotor to some 49 per cent after restructuring the company. However, at the initial public offer (IPO) auction, the corporation managed to sell only 1.57 million out of the 51 million offered units.

After failing to dilute the state holding, the government then decided to sell the entire stake in the 51-year-old corporation.

Chosen to be a core entity to drive the development of automobile industry in Vietnam, Vinamotor received VND800 billion ($37.5 million) from the state capital, It has not proven to be a financial success as most of its subsidiaries posted big operational losses. The companies (using Vinamotor brand name) that recorded profits were mostly joint ventures where Vinamotor’s capital contribution accounted for less than 50 per cent.

Although it has a total asset of VND2 trillion ($93.9 million), recent annual profits were modest, reaching VND11.5 billion ($539,900) in 2012 and VND16.7 billion ($784,000) in 2013. The company made a loss in 2010.

The so-called “Vinamotor failure” is more of a state management failure, that failed to percieve its limited role in the open economy system.

Meanwhile, TMT earned a profit of VND62.5 billion ($2.9 million) in 2014 and plans to increase the number to VND150 billion ($7 million) this year, with the ambition to conduct dividend payouts as high as 40 per cent.

In 2013, the company promised to give a bonus of 1.5 million shares to the board of directors if they could manage the stock price to rise by five times within three years, which meant TMT price should reach VND30,000 by next year. It has already hit VND26,000.

TMT was not the sole company interested in Vinamotor stake. Sacom Development and Investment Corp had shown willingness to purchase the entire state stake in the automobile component producer.

Sacom, which is in the electrical equipment manufacturing business, was willing to spend VND856 billion ($40.2 million) to buy Vinamotor, a firm in a completely different industry.

Sacom might find real estate properties of Vinamotor profitable to its operation, said industry experts.

By September 30, 2014, Sacom had registered capital of VND1.3 trillion ($61 million) and assets worth VND3.07 trillion ($144.13 million). Its net revenue was VND1.14 trillion ($53.5 million), with VND104 billion ($4.8 million) in profits.

It is said that while planning to spend a large amount of money to buy a large volume of shares at Vinamotor, Sacom surely saw the development potential and profitability of the corporation, even though Vinamotor’s current business results are not impressive.

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Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.