VietNamNet Bridge – Though the VN Index is on the rise, market liquidity remains weak, with large corporations reluctant to launch initial public offerings (IPOs) to help them raise funds.

One hot topic, however, among securities investors is the IPO of the Vietnam Textile and Garment Group (Vinatex), that is expected to sell VND1.22 trillion worth of shares, or 24.4 percent of the group’s chartered capital.

Vinatex has been a key factor in the textile and garment industry in Vietnam over many years. Last year, the group had 14 percent of total garment export turnover.

Vinatex’s shares are expected to be put at auction on July 22 at the starting price of VND11,000 per share.

The subsidiaries of Vinatex have been operating in many different fields with a closed production line, from weaving to dying, seaming and trimming.  

This is believed to be a great advantage for the group to compete with rivals when Vietnam joins free trade agreements and the Trans Pacific Partnership Agreement.

Vinatex is powerful not only in its production capacity, but also with its large distribution network with 58 sales points all over the country.

All these factors, according to experts, make Vinatex shares attractive.

However, the experts themselves have warned that Vinatex should not put too much hope in its IPO, slated for July.

A series of recent IPOs made by state-owned enterprises have failed.

A report showed that by the end of May, 35 enterprises had launched IPOs, but only 14 of them could sell all the shares offered.

Meanwhile, the total value of the shares sold on both the Hanoi and HCM City bourses was modest, at VND1.74 trillion.

The Ministry of Transport reportedly had nine enterprises launching IPOs, a higher number than any other ministry.

Results of the IPOs made by enterprises belonging to the Ministry of Construction have been unsatisfactory. Only Viglacera was able to sell 10.1 million shares, or 52 percent of its shares sold, to foreign investors.

Barriers

Only a few businesses have been satisfied with their IPOs, while others have not been successful.

There are many reasons to explain the failures, including technical issues.

Cienco 5, a construction company, could sell only 13.47 percent of the share amount offered at a price of VND10,025 per share, a low price level, which was just slightly above the starting price.

The Hanoi Construction Corporation (HCC), operating in the same business field with Cienco 5, could sell only 3 percent of the share amount offered at VND10,201 per share.

Analysts said the investors might have compared Cienco 5’s and HCC’s share starting prices and found that Cienco 5 could not sell out the shares, even though the share prices were lower. Therefore, they decided not to buy HCC’s shares, which were priced higher.

In this case, analysts said, the problem was in the wrong valuation, not in  investors’ declining interest in obtaining shares.

DNSG