VEAM valuated at billions of dollars despite mounting losses

Although the business results in VEAM’s major sectors are not good, VEAM’s ticker received higher valuation due to the firm’s affiliation with three leading automobile manufacturers, which contributed VND5.17 trillion ($227.8 million) to VEAM’s profit in 2017.

VEAM will be listed on the UPCoM on July 2

Next week, on July 2, Vietnam Engine and Agricultural Machinery Corporation (VEAM) will be officially listed on the UPCoM (Unlisted Public Company Market) at the offering price of VND27,600 ($1.2). Thus, VEAM’s capitalisation will be around VND36.675 trillion ($1.6 billion).

VEAM is one of the biggest Vietnamese businesses in mechanical engineering, machine building, and truck assembly and manufacturing with the VEAM Motor brand, but it usually runs in the red.

The audited 2017 business results showed that the after-tax profit from the parent company’s major business segments was negative VND123.8 billion ($5.45 million), while it was negative VND71.4 billion ($3.1 million) in 2016. The most valuable asset of VEAM is the contribution capital from the three leading automobile brands Honda (30 per cent), Toyota (20 per cent), and Ford (25 per cent).

VEAM gains around VND5 trillion ($220 million) every year through its contribution capital in seven affiliated companies. In 2017, it was VND5.17 trillion ($227.8 million) and VND4.576 trillion ($201.6 million) in 2016.

The net sales of Honda Vietnam Co., Ltd. in 2017 was VND86.8 trillion ($3.8 billion), up 13 per cent, and after-tax profit was VND14.95 trillion ($0.66 billion), up 12.1 per cent. In 2017, Honda Vietnam made up 71.5 per cent of the motorbike market, which brought 90 per cent of the profit, while the remaining 10 per cent came from automobile manufacturing.

According to Ho Chi Minh City Securities JSC (HSC), the sales of Toyota Motor Vietnam Co., Ltd. (TMV) in 2017 fell by 17.8 per cent to VND29.3 trillion ($1.3 billion) due to a sharp decrease in selling prices, and after-tax profit declined by 44.8 per cent to VND3.12 trillion ($137.5 million).

In 2017, TMV sold 60,303 cars, up 2.7 per cent on-year. The number of completely knocked down (CKD) vehicles sharply reduced by 16.7 per cent to 41,960 cars, while the number of completely built up (CBU) vehicles rose to 18,343 (up 120.4 per cent on-year). TMV is the second largest automobile manufacturer in Vietnam, capturing 24.1 per cent of the market, following THACO’s 35.8 per cent.

Meanwhile, Ford Vietnam sold 28,588 vehicles in 2017, down 1.5 per cent on-year. HSC estimated the after-tax profit of Ford Vietnam at VND500 billion ($22 million), up 8.7 per cent on-year.

In addition to these three big affiliated companies, VEAM has ten other affiliates and subsidiaries covering the fields of spare parts and mechanical products, as well as partnerships with motorbike manufacturers such as Honda, Yamaha, and Piaggio.

According to VEAM’s equitisation plan approved in April 2016, the state will reduce its ownership to 51 per cent after the initial public offering (IPO) of 12.57 per cent, selling 36 per cent to strategic investors, and a small percentage to employees.

VEAM conducted its IPO in August 2016. 90 per cent of the 167 million shares on offer were bought at the average price of VND14,291, and the state gained over VND2 trillion ($88.1 million). However, the share sale to strategic investors failed, thus the state still holds 88.47 per cent of VEAM, according to the financial statement of the corporation.

VIR