Vietnam’s privatization drive seen intact despite power firm’s IPO flop

Poor demand for the initial public offering (IPO) of Vietnam’s Power Generation Corp 3 was due to volatile markets and company-specific factors such as a high valuation, and should not derail the country’s privatization drive, analysts and investors said. Exchange data showed on Friday the government sold just 0.36 percent of Vietnam’s second biggest generating company by installed capacity to raise around $8 million, far short of its target to sell a 12.8 percent stake for $290 million. However, market players said that was not a sign investors were turning their back on the privatization campaign of the fast-growing Southeast Asian country, but rather of this week’s global stock market sell-off and concerns about Power Generation Corp’s (EVNGENCO 3) debt, valuation, and coal-fired plants. “It’s not the right market environment right now,” said Thomas Felix Baden, acting CEO at United Capital Management Company (UNICAP). “You also have a bit of a heavy balance sheet.” Though EVNGENCO 3’s debt-to-equity ratio had fallen to 6.5 by September last year from 8.8 in 2016, analysts said debt remained a concern, particularly given the currency risk of its foreign loans. Another worry was the fact that coal fuels about 40 percent of its electricity output, at a time when Vietnam’s coal output is falling and environmental concerns are rising. Investors also cited a high valuation. Vu Thu Ha, a senior analyst at Ho Chi Minh City Securities, said the company’s prospective price-to-earnings ratio of 19 times compared with 15 for regional peers. The IPO… [Read full story]


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