VietNamNet Bridge – How much does the Central Group have to pay to acquire Nguyen Kim? Why has the Thai investor accepted to buy only 49 percent of Nguyen Kim’s shares? Both questions remain unanswered.

Nguyen Thi Hong, media director of Central Group Vietnam, confirmed that Power Buy, one of Central Group’s subsidiaries, has finished negotiations to acquire NKT New Technology and Solution Investment Development JSC, the owner of Nguyen Kim, one of the two largest home-appliance distribution chains in Vietnam.

Regarding the value of the deal, a source quoted by a local newspaper said Nguyen Kim is valued at $200 million. This means that the Thai investor would have to pay roughly $100 million to acquire the Vietnamese chain.

Tran Vinh Du, general director of TNK Capital, said the price is neither too high nor too low, considering Nguyen Kim’s P/E (price on earnings) ratio.

With revenue of VND8.434 trillion and post-tax profit of VND352 billion, the P/E would be over 10, which indicates a company with high potential.

However, Du said, the P/E ratio is just one of many measures used to assess the value of businesses. Nguyen Kim’s EBITDA (earnings before interest, taxes, depreciation and amortization) should also be assessed.

Some analysts said it was a big surprise that Nguyen Kim sold stakes, when it is a leader in the home appliance market. However, those who understand Nguyen Kim well said it was a wise move taken by the retail chain’s owners.

Every electronics retailer knows that the profitability rate in electronics retailing is not high, only 5 percent, and that in order to exist, retailers have no other choice than to expand their networks.

Nguyen Kim increased its number of shops from four in 2010 to 21 in 2013. However, since then, Nguyen Kim has not set up any new shop.

In 2012, Nguyen Kim opened five big stores named “The Gioi So 24G” (Digital World), stating that it would develop 100 such supermarkets throughout the country in some years.

However, only after several months of operation, Nguyen Kim had to give up the model and focus on household electronics distribution. The retailer has failed in its latest expansion campaign.

Why did the Central Group accept to buy only 49 percent of Nguyen Kim’s shares? In general, foreign investors want higher proportions of shares so as to have more power in businesses.

Robert Tran, a senior executive of Robenny, a Canadian consultancy group, noted that with the investment in Nguyen Kim, the Central Group would reach its goal of making a profit, but it would not be able to bring Thai products to Vietnam through this channel.

NCDT