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    VIC   VN000000VIC9

VINGROUP JOINT STOCK COMPANY

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Exclusive: Vingroup weighs selling school, health units, sources say, as Vietnam's biggest firm refocuses

09/11/2020 | 06:48am EDT
FILE PHOTO: Labourers work at Vinfast auto plant on the occasion of its opening ceremony in Hai Phong city

Vietnam's Vingroup is considering selling controlling stakes in its medical and education units, two sources with direct knowledge said, although the company said it had made no such plans.

Vietnam's largest listed firm could look for buyers for Vinschool, a private school business, and Vinmec, a chain of private hospitals, the sources told Reuters.

The conglomerate has not appointed any advisers for the stake sales so far, but in its informal talks two buyers have shown interest in the two businesses, the sources said.

A third source aware of the matter said Vingroup has received preliminary interest, and the controlling stakes could fetch roughly $1.5 billion. The source said the interest was rejected.

It is also planning to raise as much as $1.1 billion in debt before the year-end for refinancing existing debt, one of the sources said.

The sources declined to be identified because they were not authorised to speak to the media. In a statement, a Vingroup spokesman said the company had no plans to sell stakes in Vinschool or Vinmec, which it said play "important roles in the Vingroup Eco System".

"We commit to develop Vinmec and VinSchool to bring much more better services here in Vietnam," said the spokesman, who added that Vingroup was evaluating international bond markets.

Vinschool runs 27 educational facilities and Vinmec operates seven hospitals in Vietnam.

If finalised, the plans would be part of moves by Vingroup, which has a market value of $13 billion and posted half-year revenue of $1.7 billion, to stem losses in some of its units that have been compounded by the COVID-19 pandemic.

Founded by Vietnam's richest man, billionaire Pham Nhat Vuong, Vingroup is omnipresent in the Southeast Asian country.

Just a year ago, one could be born in a Vinmec hospital, go to Vinschool, live in a Vinhomes apartment and drive to Vinmart in a Vinfast car.

But the group sold Vinmart last year, and with the potential stake sales of Vinschool and Vinmec, Vingroup is quickly scaling back its ambitions.

Expansion over the years has pushed up Vingroup's debt, and losses at some of the ventures have squeezed its cash flow.

S&P Global and Fitch cut their ratings outlook on Vingroup to negative from stable last year, citing concerns about its over-reliance on cash-rich property unit Vinhomes to fund its new ventures.

Vingroup's first-half net profit tumbled 60% to 1.35 trillion dong ($58.26 million). Its shares on the Ho Chi Minh Stock Exchange have underperformed this year, falling 21% compared to the benchmark index's 7.6% drop.

Its interest coverage ratio, which indicates the company's ability to pay off debt, dropped to 3.8 times in the first half of this year from 5.0 in 2019, according to a copy of an earnings presentation prepared by Vingroup for potential investors that was seen by Reuters.

AUTOMOBILE GAMBLE

Vingroup scrapped plans to launch Vietnam's sixth airline, "Vinpearl Air" in January.

Late last year, the group also abandoned moves to form a new unit from its sports, entertainment and hospitality business due to "profitability concerns" of some of the assets, a source with direct knowledge of the plans told Reuters.

It has made real estate, technology and automobiles its key growth focus, but it remains to be seen how the plan shapes up, especially its big bet on cars.

In 2017, Vingroup earmarked $3.5 billion to create its Vinfast car unit with plans to produce around 250,000 cars annually within the next five years, a period when it does not expect the venture to be profitable.

Last year, Vinfast sold 19,400 cars and 50,000 e-scooters, according to company data. Its net loss ballooned to 6.6 trillion dong in the first half of 2020 from 1.6 trillion dong in the year-ago period.

Vinfast's latest offering, a gold-trimmed limited edition luxury SUV only available in Vietnam and billed as "the most powerful commercial vehicle in the world" is, at over $160,000, priced out of reach of most Vietnamese car owners. And its entry-level "Fadil" model is around 13% more expensive than competing models from Kia and Hyundai.

Vinfast equipment, real estate and inventory have all been put up as security for loans with international banks, as have 20 million shares that the company received from Vinhomes, according to its 2019 draft earnings report seen by Reuters.

($1 = 23,172.5000 dong)

By Phuong Nguyen and James Pearson


ę Reuters 2020
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Financials
Sales 2021 137 296 B 6 041 M 6 041 M
Net income 2021 3 621 B 159 M 159 M
Net Debt 2021 108 332 B 4 767 M 4 767 M
P/E ratio 2021 61,3x
Yield 2021 -
Capitalization 342 765 B 15 032 M 15 082 M
EV / Sales 2021 3,29x
EV / Sales 2022 2,54x
Nbr of Employees 88 220
Free-Float 23,4%
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Mean consensus OUTPERFORM
Number of Analysts 4
Last Close Price 92 600,00 VND
Average target price 118 805,64 VND
Spread / Average Target 28,3%
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Managers and Directors
Quang Viet Nguyen Vice Chairman & Chief Executive Officer
Vuong Nhat Pham Chairman
Hiep Khac Le Vice Chairman
Marc Villiers Townsend Independent Director
Hang Thuy Pham Vice Chairman
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