EVN Genco 3 IPO raises a meagre $8.13m in yet another dud for Vietnam

Vietnam raised VND184.8 billion ($8.13 million) from the initial public offering (IPO) of Power Generation Corporation 3 (Genco 3), a subsidiary of Vietnam Electricity Corporation (EVN), on February 9. The proceeds were a measly 3 per cent of the government’s target of raising at least VND6.5 trillion ($286 million) from the stake sale.

In a reflection of low investor interest, only 7.45 million shares were sold of the 267 million shares on offer in the auction.

The disappointing auction followed the IPO of Vietnam Rubber Group (VRG) on February 2 that saw the government raise VND1.31 trillion ($57.7 million), far lower than its expectation of raising at least VND6.2 trillion ($273.1 million).

The Ho Chi Minh Stock Exchange earlier said in a statement published on its website that a total of 336 investors had registered interest in only 2.8 percent of that stake – amounting to less than 0.36 percent of the company – by the February 1 deadline.

According to analysts, the disappointing result was due to Genco 3 being overvalued. The power firm’s prospective price-to-earnings valuation of 19 times compared to an average of 15 for regional peers, senior analyst Vu Thu Ha of Ho Chi Minh City Securities was quoted as saying by Reuters.

“It is also more expensive than PetroVietnam Power (PV Power), which is valued at price-to-earnings of 13 times and the prospects of Genco 3 are not as promising as PV Power,” Ha said, adding that the latter’s power plants were more efficient.

The government last month raised $492 million by selling 20 per cent stakes in electricity producer and distributor PV Power and oil firm Petrovietnam Oil Corp (PVOIL).

Genco 3’s revenue in 2017 was estimated at over VND34.6 trillion ($1.52 billion) and profit at VND1.27 trillion ($55.8 million). Its total capacity reached 6,304MW, accounting for 16 per cent of the nation’s electricity system.

EVN currently owns 51 per cent of Genco 3’s charter capital. It would divest its capital at the subsidiary to less than controlling level after 2019 if successful in restructuring its debts and negotiating with lenders.

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