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Thursday, 22 February 2018

Frontier Market Issue

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Vincom Retail’s D16.1trn (US$708.5m) initial equity offering was a landmark in every respect. As well as being Vietnam’s largest IPO on record, the deal also introduced a settlement structure that put the promising market on many investors’ radar for the first time.

While Vietnam’s economic growth story has remained intact, international investors have played little part in equity financings in the country, in large part because of the cumbersome listing process.

Listings and equity offerings are viewed as separate processes in Vietnam, and the gap between an IPO and the first trades on the Ho Chi Minh Stock Exchange can run into years.

The IPO of VietJet Aviation, the biggest from the private sector before Vincom, reduced the gap to a matter of months, but investors in its D3.78trn IPO in December 2016 still had to wait until February before their shares became free to trade.

Vincom, however, brought the delay down to two weeks, roughly in line with other emerging markets.

Order books were open from October 16 to 24, and Vincom listed on November 6. That timeframe provided enough comfort for a long list of global equity funds, and the books were multiple times covered with over 90 accounts participating – many for the first time in a Vietnamese IPO. The investors were a mix of sovereign funds, frontier funds, regional funds and consumer-focussed funds.

Cornerstone investors GIC, Templeton, Avanda, Dragon Capital, Genesis, HSBC GAM, Karst Peak, RWC Partners and TT International bought close to 59% of the offer.

Vincom’s bankers came up with a way of accelerating settlement by offering only secondary shares in the listing. A nominal number of shares were listed on November 6 and the stock from the offer crossed on the exchange the following day, allowing investors to begin trading by November 10.

The model, in theory, is applicable to any IPO involving existing shares, potentially setting a precedent for the government’s stalled privatisation drive.

Warburg Pincus, Credit Suisse and individual shareholders were the vendors, offering a combined 20.9% stake in a deal that was upsized to 396.5m shares from an original target of 380.2m. Owner Vingroup did not sell any shares from its 58.9% stake.

The shares were priced at the top of the D37,000–D40,600 range and have traded well since listing. Vincom finished the review period at D44,500, 9.6% above the IPO price.

Citigroup, Credit Suisse and Deutsche Bank were the joint global coordinators and Saigon Securities the domestic bookrunner.

Vincom Retail is Vietnam’s largest retail developer and owner and has a market share of 60%. As of 30 June 2017, Vincom Retail operated 40 retail malls and planned to increase the count to 200 in the medium term.

To see the digital version of this report, please click here

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