We are pleased to bring to you the Vietnam State-Owned Enterprises Investor Survey 2016 (Issue 1). In this issue, we focused on evaluation of equitisation reults of Vietnamese State-Owned Enterprises (SOE) including IPOs, divestures from non-core businesses and equitized SOEs during the period 2011 - 2015.

Our report on Vietnam SOE utilized extracted database with over eight years of historical records of SOEs equitization and divestment in Vietnam. In addition to data analysis, the report also relied on the authors’ extensive knowledge and experiences in SOEs in Vietnam. We have surveyed relevant foreign and local institutional investors as well as conducted a number of in-depth interviews with experienced policy makers and market players during our study.

We strongly believe that this report will be valuable to institutional investors, foreign players and institutions who are considering SOE acquisition as a strategy to set a foothold or to expand their businesses in Vietnam.

Below are the most critical findings in our 1^st issue:

1)      Vietnam has successfully conducted 375 SOE IPOs during period 2011 – 2015, around 71% of total planned IPOs.  It is clear that the Government has an ambitious plan for SOE reform but the practical progress has been way behind schedule. There are many factors leading to low achievement in SOE IPOs, in which long duration of IPO process is the leading factor.

2)      As the small & medium SOEs (charter capital between 0 – US$25mn) subjected for IPOs account for 73.3% total number of SOE IPOs, it is clear that small and medium SOEs would dominate the IPOs during 2011 – 2015. The small and scattered operation status of SOE is partially the reason which made them unattractive to foreign investors.

3)      Overall, the Government still holds 90% on average of one SOE after IPO. Our data indicated that up to 287 IPO deals (accounting for 90.3% of total SOE IPOs) have recorded minority share purchased by investors.

4)      Only 10% of strategic investors are foreign institutions, marking a low participation rate of foreign investors. Identified reasons for lack of participation were minority shares offering, unrealistic valuation of SOEs or the size of the SOEs.

5)      During the period 2011 - 2015, total successful divested capital was US$732.9mn. By the end of 2015, there is still approximately 60% of total non-core capital that has not been divested. There are many reasons for the slow progress of divestment, but most importantly was the requirement to preserve the State capital (i.e. no loss is acceptable).

6)      In upcoming period, the IPOs will be focused on Industrials and Consumer Services sector. More than half, 273 over 491, of upcoming equitisation are SOEs in industrials sectors. Also, divestments are expected the most at Construction & Materials, Financials and Food & Beverage sectors.

7)      Investors regard highly the M&A opportunities from SOE equitization process: Up to 86% of all investors are interested in upcoming SOE IPOs. This is a very positive sign for higher foreign participation in SOE IPOs and divestment in the coming year.

8)      However, investors cite many key challenges that impact their participation in SOE IPOs and divestment. The biggest challenge faced by foreign investors is the lack of transparency and information about the SOEs and their IPO plans, followed by the worries over corruption of Government Officials and the lack of high-quality SOEs to offer.

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