2017 is a special year for the Vietnam stock market as the VN Index continued to boom along with a number of large businesses such as Vietjet Air (VJC), Vietnam Airlines (HVN), Petrolimex (PXL), VPBank (VPB), Vincom Retail (VRE), etc. who gradually listed on the floor. All pushed the market capitalisation to about $150 billion, up 73 percent from the end of 2016, equivalent to 74.6 percent of GDP.
In particular, foreign capital accounted for $1.1 billion. According to data from Viet Dragon Securities Company (VDSC), over the 10 years (2007-2017), foreign direct investment (FDI) in 2017 alone accounted for 25 percent of total investment. Foreign investors pay attention to and pour money into Vietnam stock market because of many reasons but it is impossible not to mention the role of investment bank (IB) services of securities companies.
*The year of big deals
This service segment includes IPO consulting, strategic partner search, private placement, stock transfer, listing consultation, etc. Any company wishing to carry out the above plans must select one or several securities companies to place orders for consultancy. According to representatives of Saigon Securities Inc. (SSI), the task of consulting units is to help businesses systematise the strengths, create attractiveness to investors, find optimal offer plan, connection of buyers and sellers, etc. According to Thomson Reuters’ data, fees collected from IB services on global scale rose 16 percent to $104 billion in 2017, the highest since this data was collected in 2000.
In Vietnam, these requirements are not easy to be implemented and only some large-scale securities companies with back-up resources, strong brand names, good personnel, etc. such as Viet Capital Securities Company (VCSC), SSI, Bao Viet Securities Company (BVSC), BIDV Securities (BSC), Hochiminh Securities Company (HSC) can create positions in IB segment. They are also units that are preferred by businesses whenever financial advice is needed.
For example, to carry out IPO and listing plans, HDBank selected both SSI and HSC as advisors. As a result, under the advisory and connection capacity of HSC and SSI, in the past IPO, HDBank’s HDB shares were three times higher than the offer volume. Seventy six foreign investors, including Credit Saison (Japan), Deutsche BankAG (Germany), JPMorgan Vietnam Opportunities Fund spent about $300 million (over six trillion dong) to own 21.5 percent stake in HDBank. In fact, HDBank’s IPO is just behind Vietcombank in the history of banks.
HDBank is careful when choosing the two largest securities companies in the market for consultancy. SSI confirmed that it is the leading position and experience in transaction consultancy for valuable deals of various economic sectors that SSI has won major consulting contracts. In addition, if a company maintains its leading position in the brokerage market, and is highly appreciated in the analytical domain, it is also easy to fall into the eye of businesses when the company offers consulting services to customers.
In fact, apart from HDBank, SSI involved in consulting many prominent deals in 2017.Noticeably, there must mention the consultancy for SCIC to withdraw capital from Vinamilk, helping SCIC collect nearly nine trillion dong or advised VRE to sell secondary shares to foreign investors and list shares.
In these deals, SSI usually did not stand alone, but joined consulting joint venture. For example, in advising SCIC to withdraw 3.33 percent of capital from Vinamilk, SSI cooperated with UBS AGSingapore Branch (UBS). Meanwhile, in the consultancy on offering secondary shares to Vincom Retail, SSI participated in a four-party consortium including SSI, Citi, Deutsche Bank, and Credit Suisse.
According to SSI, it is the participation in these consortiums that helped boost sales effectiveness and shorten time. Each unit will carry out the work based on its own strength and high specialisation. In addition, SSI also learns experience and profession from foreign firms. For example, in a consulting joint venture on secondary share sales to Vincom Retail, SSI acquired additional skills and experience in offering secondary shares in the form of book-building, in accordance with 144Aa rigorous offering standard for QIBs (Qualified Institutional Buyers) in the United States. Vincom Retail also attracted foreign orders at five times higher than the offering and sold shares at the maximum price, bringing the total value of transactions to $741 million.
This is also the story at VCSC. In 2017, VCSC was the biggest IPO consultant for VPBank and also participated in a joint venture to advise IPO and list American Depositary Shares (ADS) on New York Stock Exchange (US) for Sea ( former name for Garena Interative Holding Ltd), helping this leading Southeast Asian technology firm earn over $800 million.
*Profit potential
Ngo Vinh Tuan, Executive director of IB Department at VCSC, said that Sea selected VCSC because of the prestige of VCSC in the IB market. Previously, VCSC used to advise IPO for Vietjet, M&A for Central Group to buy Big C, etc. These experiences helped VCSC to be more professional, understand businesses’ needs, have ability to search and expand relationships with the buyer/seller, to connect businesses and investors, and to predict the right time… These are all factors that contribute to the promotion of the successul consulting deals.
VCSC has launched a number of private placement deals, searched strategic investors for PVOil, Techcombank. In fact, IB segment plays an important role in VCSC. In 2017, this segment brought VCSC more than 254 billion dong, 3.8 times higher than the previous year. For SSI, revenue from IB was over 114 billion dong. On BVSC’s side, SCIC has been prominent with the consultancy for SCIC to divest from Sabeco. Like other companies in the same industry, BVSC has consulted in the form of partnership with Earstn & Young Vietnam and Southern Information and Valuation JSC. The consortium has helped Sabeco offer a capital divestment solution and help connect investors. As a result, the state collected 110 trillion dong, equivalent to $4.8 billion from divesting from Sabeco.
The divestment, IPO, listing whose scale amounts to hundreds of millions of dollars, even billions of dollars appear more and more in Vietnam, and will create more opportunities for securities companies to promote IB segment. At present, the opportunities are being seen in State-owned divestments, such as the IPO of PV Oil (Vietnam), Binh Son Petrochemicals Limited (BSR), the parent companyPetroVietnam Power Corporation (PV Power).
Opportunities are also seen by VCSC from participating in overseas and domestic listing consultancy. Or, securities companies can advise on listing in foreign stock exchanges for Vietnamese companies.
SSI itself will continue focusing on transactions to offer shares to foreign investors by large private businesses with good growth potential. In addition, SSI will participate in the divestment of state capital from listed companies, and seek strategic partners for mergers and acquisitions (M & A).
Trinh Hoai Giang, HSC’s deputy general director, acknowledged that benefits from IB are not just consulting fees, but values that affect brand reputation, competitiveness, and promotion of brokerage segment, financial services (margin lending), and self-employment of securities companies. For example, thanks to the advice for PLX that SSI earned a large amount of profit from PXL proprietary. Or VCSC also made high profit from its investment in the MWG, after giving listing advice for MWG. Therefore, in the development orientation, most major securities companies said they would prioritise investment and promotion of IB segment.
