Investment rush expected as listed firms look to raise capital in Vietnam

Securities firms expect an investment rush in Vietnam as many listed firms get busy at the year-end with plans to raise capital via private placements and public offerings.

They say that after a lull of nearly two years, capital-raising activities have picked up in the last few months of the year.

Hoa Binh Construction Corporation, listed on the Ho Chi Minh Stock Exchange (HoSE) as HBC, has announced a plan to issue 252.48 million shares to increase its charter capital.

Of this, 220 million will be sold via private placements and 32.48 million used for debt swaps. If the issuance is successful, the company's charter capital will increase from VND2,741 billion ($112.93 million) to VND5,266 billion ($216.97 million).

For its private placements, Hoa Binh will offer prices of VND12,000 ($0.49) to VND14,500 ($0.6) per share, expecting to raise VND2,640-3,190 billion ($131.43 million).

The firm also revealed that two foreign investors – Tumaz Enterprises Ltd (100 million) and PrimeTech VN Development and Investment (120 million) – will buy the private placement shares, to own a 41.78% stake. To secure the issuance plan, the company will lift the foreign ownership cap from the current 15.8% to 50%.

Meanwhile, real estate developer Dat Xanh Group (HoSE: DXG) plans to offer 57 million private placement shares to foreign investors at VND15,000 ($0.62) each.

Deo Ca Traffic Infrastructure Investment JSC (HoSE: HHV) is offering 82.3 million shares to existing shareholders at VND10,000 ($0.41) each (one new share for four existing ones).

Many other businesses have sought shareholders’ approval for their capital raising plans. BaF Vietnam Agriculture Company (HoSE: BAF) plans a public offering of 68.4 million shares at VND10,000 each; and City Auto Corporation (HoSE: CTF) has said it will offer 12 million shares to professional stock investors.

From November 22 to December 20, top Vietnamese broker Saigon Securities (HoSE: SSI) has lined up consultations on the issue of bonus shares at a ratio of 20% and the offering of shares to shareholders at a price of VND15,000 ($0.62) each at a ratio of 10%, with a total of 452.1 million shares.

What’s the money for?

The plans of many businesses to attract capital recall what happened in 2021 after the Covid-19 outbreak. Cheap capital flows sought attractive refuge as they could not be poured into production, which helped the stock market take off. Taking advantage of this opportunity, many businesses successfully offered shares to increase capital for their post-pandemic expansion plans.

However, in 2024, it is the need to survive and overcome difficulties that is likely to stand out. The world has experienced many shocks since 2019, including the pandemic, armed conflicts, inflation, interest rate hikes, tightened credit, and a struggling bond market, draining many businesses.

For example, Hoa Binh is raising capital to repay debt. It wants to collect VND2,640 billion to VND3,190 billion from its private placement plan to pay off loans, including VND1,754 billion ($72.27 million) at BIDV, VND998 billion ($41.12 million) at VietinBank and VND158 billion ($6.51 million) at Maritime Bank.

After planning private placements at VND100,000 ($4.12) per share, Hodeco (HoSE: HDC) had to lower the selling price to VND15,000 ($0.62) in another plan to issue 20 million shares to existing shareholders, which has been underway since August. The goal is to mobilize VND300 billion ($12.36 million) to pay off debts at credit institutions including BIDV, PG Bank, TPBank and Vietcombank.

Similarly, Hoang Anh Gia Lai (HoSE: HAG) wants to offer 130 million private placement shares at VND10,000 VND per share to restructure debts for its subsidiaries and repay bond principal and interest.

However, besides the urgent need for survival, there is a brightening economic context that has also prompted businesses to prepare for a return.

City Auto is raising funds to supplement its business capital. The distributor of Ford and Hyundai cars plans to open six showrooms late 2023 - early 2025 in Ho Chi Minh City, Binh Duong, Tien Giang, Phu Yen and Binh Phuoc.

Securities firm SSI is looking at raising additional capital for margin lending activities and investments in bonds, certificates of deposit and other valuable papers.

Meanwhile, BaF Vietnam needs capital to invest in livestock farms and supplement operating capital for its subsidiaries.

Good times for Vietnam stock market

The big investment waves in 2021 and the first half of 2022 were supported mainly by domestic individual investors. In 2024, foreign capital is expected to be more active.

According to SSI, cash flows into the stock market will be more positive next year thanks to better market messages and expectations of U.S Federal Reserve’s (Fed) rate cuts.

“The Vietnamese stock market will be an attractive destination in the long term as it partly benefits from the trend of net withdrawal from China, and from the high valuations in some markets like Taiwan and South Korea,” it says.

At the same time, the government, the Ministry of Finance and the State Securities Commission (SSC) have expressed their determination to implement solutions for market status upgrades before 2025, it notes.

“If upgraded, the opportunity to attract foreign capital is huge and Vietnam's stock market will rise to new heights. Therefore, securities companies need to prepare resources to catch this opportunity.”

In this context, the capital raising activities of businesses will not only help them tap funds for development, but also expand the scale and liquidity of the stock market.

However, to avoid overheating growth like the 2021-2022 period, the increased stock market bustle needs close supervision by the SSC and market members, an SSI report says.

The VN-Index, which represents the HoSE, closed Thursday at 1,094.13 points, down 0.79% from the previous session. More than 723 million shares changed hands for VND14.67 trillion ($604.43 million).