Hapro shopping for strategic investorFriday, March 17,2017
State-owned Hanoi Trade Corporation (Hapro), operator of a chain of supermarkets and convenience stores and owner of many land plots and properties at prime locations in the city, is looking for a strategic investor to buy over half of its shares.
On March 7, 2017, the Hanoi People’s Committee issued Decision No. 1558/QD-UBND on criteria for selecting Hapro’s strategic investors.
According to this decision, strategic investors should satisfy the following conditions: they should have an owner’s equity of over VND2 trillion (US$87 million) in the most recently audited financial report by an independent auditing company, no bad debts, a debt/equity ratio less than three in their 2015 audited financial statement, and they should also have positive after-tax profit in 2014, 2015, and 2016.
Besides, the investors must obey the law and be able to prove that they have the amount of money or assets with a value at least equal to the value of stakes registered to purchase.
Particularly, they must deposit 30% in advance and have a bank guarantee for the remaining 70% they register to buy at the initial offering price of Hapro.
Bidders will have to buy after winning in the auction and if they refuse to buy after all, their deposit will not be refunded.
The investor should be experienced in commercial operations. Priority will be given to those with experience in import-export, domestic retail, and those who have an established retail system or are holding stakes in such enterprises.
Strategic investors must commit to taking over all the rights and obligations of the corporation at the moment of valuation. Meanwhile, strategic investors are also responsible for the workforce in this state-owned corporation in accordance with the law after undertaking equitisation.
Attractive land bank
Hapro is on Hanoi’s list of equitisation in the period of 2016-2020. The company currently owns many attractive properties.
In 2016, though it divested from many state-owned and joint venture companies, Hapro still held controlling interest in numerous subsidiaries, which have plenty of huge real estates. Hapro is scheduled for further divestment in the future.
One of the attractive real estates owned by Hapro is the shopping mall and office building on Le Duan Street.
The construction covers an area of 1,624 square metres, however, it has been delayed for months due to financial obstacles and failing to get approval from local authorities to increase the building’s height beyond what was previously approved. Another real estate project is on Cat Linh Street, which currently serves as Hapro’s headquarters.
In addition, a range of Hapro subsidiaries hold further valuable parcels of land, like Hapro Holdings, which owns eight real estate projects in Vietnam or Long Bien Trade Investment Joint Stock Company with its 11 office buildings, and Trang Thi Trade & Service Company, with 42 land plots for leasing.
When Hapro divested from some of its subsidiaries, the stake sale attracted a lot of attention from investors.
At the beginning of 2016, when Hapro announced selling all of its stakes in CMC Hanoi (51%, 510,000 shares) at the initial offering price of VND23,100 (US$1.01), there were 18 investors who registered to purchase the stakes with a total registered volume of 2.55 million shares, five times as much.
In the end, three individual investors purchased shares from Hapro, paid VND38.25 billion (US$1.67 million), which was equivalent to VND75,000 (US$3.28) per share.
In September 2016, Vinaconex 3 planned to purchase a maximum of 5.7 million shares of CMC Hanoi, equivalent to 95.34% of CMC Hanoi’s chartered capital, at a price of VND35,000 (US$1.53) per share.
Notably, before equitisation, CMC Hanoi continuously reported decreasing revenue and profit. In 2015, the firm suffered a loss of VND9.6 billion (US$422,400), and recorded a cumulative loss of VND38.21 billion (US$1.67 million) by December 31, 2015.
\With these poor results, it is believed that investors were interested in CMC Hanoi due to the prime location of its headquarter on Thuy Khue Street, Hanoi.
Another case of Hapro’s successful divestment due to prime location is Hapro-Bat Trang, a ceramics and pottery company. Hapro-Bat Trang reported poor business results.
As of the end of the first quarter of 2015, the company had cumulative loss of VND2.5 billion (US$110,000) and total assets of VND16.5 billion (US$723,000).
Yet in March 2015, Hapro offered price of VND140,000 (US$6.13) per share. In total, the 63.6% stake offered by Hapro had a value of nearly VND17 billion (US$740,000), higher than total assets of Hapro.
It can be said that besides the land plots that Hapro-Bat Trang owns, there was almost nothing worthy left in this company. But 21 individual investors signed up to buy a total seven times as many shares. In the end one investor bought all the shares at the price of VND421,600 (US$18.5) per share.
Despite advantages in commercial spaces, over the years, return on sales has been quite low, about 0.7% to 0.8% only.
According to Nguyen Huu Thang, Hapro’s chairman, in 2016, the company earned a revenue of VND5.923 trillion (US$259 million), which is up 5% on-year, and an import-export turnover of US$164.5 million.
Of the total, export turnover reached US$158.9 million and import turnover was US$5.6 million.