Vinhomes IPO on Course to be Biggest Ever

Real Estate - Vietnam: May 14, 2018

Vingroup subsidiary Vinhomes JSC, Vietnam’s biggest and most successful property developer, has chosen four foreign banks to assist with its plan to go public with a US$1 billion listing of its residential property business, according to Reuters. Bloomberg reports that it could be the biggest first time share sale ever.

Vingroup has turned to Citigroup, Deutsche Bank, Morgan Stanley and Credit Suisse for the proposed initial public offering of Vinhomes.

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A press release from Vingroup states that the proposed transaction “marks a strategic step for Vingroup, as it continues to expand its reach and diversify its shareholder base to a wider set of investors.”

Past Success

The new IPO follows last year’s listing of Vincom Retail Joint Stock Company, Vietnam’s largest shopping mall operator, which is also a subsidiary of Vingroup and raised about USD$700 million.

Vinhomes JSC currently manages 10 projects, which are comprised of almost 18,000 apartments, villas, and shophouses, according to Vingroup’s recent annual report. Included in these properties are Vinhomes Royal City in Hanoi, and Vinhomes Dong Khoi in Ho Chi Minh City. Vingroup’s shares have increased in value over 83 percent in the past year, bringing the company’s overall market value to US$9.1 billion.

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We spoke to a representative of Vingroup who chose not to be named about its recent success. “Vingroup's share price has tripled in the past 12 months” to VND132,000 per share. The representative wrote that the stock has “taken over Vinamilk's crown as the largest market cap [belonging to any] company in Vietnam.

“Vingroup also has a very good history of successful IPO[s] with VRE [Vincom Retail Joint Stock Company] in Nov 2017 which will obviously attract[ed] a lot of attention.”

The newest “IPO is expected to even surpass VRE's record as Vietnam[’s] equities and properties market[s] are both doing extremely well this year, propelled by strong economic growth and business reforms.”

Emerging Opportunities

What does all of this mean for the everyday people of Vietnam? Our source at Vingroup says that it makes at least two things clear. “One: Vietnam is an attractive destination for business and investment. Opportunities are there for both entrepreneurs and investors.”

“Two: We might have hope that Vingroup will continue to develop more high quality living environment[s] for the Vietnamese people, (maybe targeting ... middle income people like VinCity projects) … [and] helping with the urbanization progress of Vietnam's biggest cities.”

When asked about challenges to the development of the IPO, our source explained that according to current regulations, foreign ownership of a company is limited to 49 percent, but that the current IPO only applies to a fraction of outstanding shares.

Just last November Vingroup acquired Vincom Retail (VRE)—the biggest trading center in Vietnam—listed on the Ho Chi Minh City Stock Exchange (HoSE). As a result of this event, Vingroups’ shares rose sharply for the second half of 2017, making it the top gainer in the market.

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Vinhomes JSC’s share sales are just a part of Vietnam’s overall strong economic growth. Forbes magazine announced that Vietnam’s economy is set to grow by a 6.7 percent, while the Asian Development bank forecasted a growth of 6.5 percent. Even the conservative and cautious World Bank estimates that this year’s growth will surpass that of last year.

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