Bourbon sells its assets in Vietnam

The French Bourbon Group has decided to leave Vietnam perhaps because it has run out patience with making investments in the country, especially since they have not made satisfactory profits over the last 15 years.

From Paris, where the stakes of Bourbon Group are listed and traded under the code of GBB, on November 18, 2010, Dow Jones Newswires reported that Bourbon Tay Ninh Joint Stock Company (SBT shares are listed on the HCM City Stock Exchange – HOSE), has officially sold 68.52 percent of stakes to a domestic company for 34 million euros.

Domestic sources have confirmed that SBT has sold 97 million shares to Thanh Thanh Cong Company and other legal entities at the prices equal to face value – 10,000 dong per share.

Several years ago, Bourbon once sold its asset Cora supermarket and now Bourbon is selling its assets in Vietnam for the second time after 15 years of investing in Vietnam. However, Jaccar Holding, the holding company of Bourbon, is still in Vietnam and making portfolio investments.

Cheap shares, opportunities, time

The 9-month finance report showed that SBT’s post tax profit reached 262.3 billion dong in the first nine months of the year, the highest level of profit the company has gained since its establishment. Explaining the high profit, SBT said that the sugar output has increased by 26 percent while the sugar price has increased by 45 percent.

Supposed that SBT’s post tax profit will be 300 billion dong this year (a level that is well within reach because the sugar price keeps increasing). with the chartered capital of 1419 billion dong, the EPS will be 2000 dong per share. With purchase prices equal to face value, and the PE index at 5, it is clear that it is a good opportunity to invest in the production of consumer goods.

The price is 20 percent lower than the SBT price at which the stakes were traded on November 26, 2010 (12,000 dong per share).

Analysts believe that Thanh Thanh Cong has made a good deal when purchasing SBT. The company has enough experience to manage the factory and the 16,000 hectare sugar cane field left by SBT in Mekong Delta.

In fact, Thanh Thanh Cong has been a big shareholder of SBT for the last three years since the day Bourbon Tay Ninh was equitized and became a joint-stock company from a 100 percent foreign owned company

Why did Bourbon leave?

Bourbon is a big name among the French business circle. Fifteen years ago, it decided to invest in Vietnam. SBT was set up in 1995 as a joint venture, where the French partner accounted for 70 percent of chartered capital, In 2000, the foreign partner purchased the Vietnamese capital contribution and Bourbon Tay Ninh became a 100 percent foreign owned enterprise.

With the support from AFD which provided long term capital at 4.62 percent per annum, the company tried to develop sugar cane fields and assist farmers to grow sugar cane. They injected more capital in the project, raising the total investment capital to $113 million in February 2001. In the same year, the Vietnamese Ministry of Planning and Investment approved a corporate income tax of 10 percent applied to the whole life of the project.

However, it was a difficult period for sugar industry. SBT only ran at 50-60 percent of the designed capacity.

Only from 2005 did SBT begin making profit. The profit was 121 billion in 2005, 192.5 billion dong in 2006, 191.3 billion dong in 2007 and 210 billion dong in 2009.

In 2007, SBT sold 31.48 percent of stakes to strategic partners, including foreign funds and sugar consumers such as Vinamilk or Kinh Do, at 25,000 dong per share. Since 2008, SBT have been listed on the bourse.

The highest price of SBT was 22,800 dong per share which was gained on February 26, 2008 and the lowest level was 5300 dong on February 27, 2009.

In the announcement posted on HOSE’s website on November 26, 2010, SBT said that the French group is restructuring to concentrate its strength on maritime petroleum services.

French investors love Vietnam where the vestiges of the French culture still exist exist today. However, business is business. Will Bourbon return to Vietnam one day?- Thoi bao Kinh te Saigon

Tags: Bourbon Vietnam