VietNamNet Bridge - Vinamilk, the nation’s leading dairy producer and a highly profitable company, is a share worth investing in, but it is still unclear how attractive the share actually. 

Vinamilk is the largest company listing its shares on the bourse with capitalization value of $7.5 billion. 

The largest dairy producer now controls 50 percent of the Vietnam’s dairy market and has had steady high growth of 35 percent in the last five years and 25.3 percent in the last 10 years.

The company’s board of management has developed Vinamilk, a company with revenue of VND3.655 trillion in 2004, into a company with revenue of VND35 trillion 10 years later, in 2014. Meanwhile, Vinamilk’s profits increased from VND517 billion in 2004 to VND6.068 trillion in 2014.

In the latest report released by HVS Vietnam, the securities company pointed out Vinamilk’s growth would be affected due to the stiff competition from its rivals.

In the liquid milk market segment, Vinamilk will have to confront TH True Milk, Friesland Campina Vietnam (FCV) and Nutifood. In the milk powder market, its biggest rivals would be Abbott, Mead Johnson, Nestle and Meiji. As for yoghurt products, it will have to compete with TH True Milk, IDP, FCV and some smaller companies.

HVS Vietnam also noted that once TPP (the Trans Pacific Partnership Agreement) takes effect, Vinamilk will have to compete with foreign products which will flood the Vietnamese market thanks to the low tariffs.

HVS Vietnam does not think Vinamilk can maintain high growth rates in the next 10 years.

Three scenarios have been designed for Vinamilk. First, in an optimistic scenario, Vinamilk would gain an annual growth rate of 20 percent in the next 10 years. Second, the projected growth rate is 17 percent. And in third scenario, the growth rate is 15 percent.

If the first scenario comes true, Vinamilk share should be valued at VND154,600 per share, which is 15 percent higher than the current market share. Meanwhile, under the second and third scenarios, the market prices would be no more attractive or higher than the real value.

HVS, with a cautious view, thinks Vinamilk is no longer attractive to invest in.

Meanwhile, Vinamilk shares continue to be ‘hot’ in the market.

DC Developing Markets Strategies Public Company and Norges Bank have registered to buy 100,000 and 500,000 Vinamilk shares, respectively. If they can complete transactions successfully, the two funds will raise the numbers of shares they hold to 370,016, or 0.03 percent of stakes, and 5.53 million, or 0.46 percent of stakes, respectively, in Vinamilk.

Meanwhile, the State Capital Investment Corporation (SCIC) has registered to buy 300,000 Vinamilk shares in December.

CV