Vietnam Daily News

Note on BIDV's Roadshow And Meeting on Wednesday: VCSC

Written by Dailynews.vn Friday, 16 December 2011 17:45

We attended BIDV's roadshow on Sunday and met with them again this afternoon, appreciated the straightforwardness and clear manner in which the BoD was able to answer investors' questions, wrote Marc Djandji, director of research department of VCSC.

The following is taken from the note:

"On 28th December 2011, BIDV will start the auction for IPO for 84.75m shares, equivalent to 3 percent of charter capital at the starting price of VND18,500 per share. BIDV will then offer another 4 percent of charter capital for staff and its labour union. An additional 15 percent of charter capital will be sold to a strategic partner sometime in late 2012.

We attended BIDV's roadshow on Sunday and met with them again this afternoon. We appreciated the straightforwardness and clear manner in which the BoD was able to answer investors' questions. According to Tran Bac Ha, there has been bidding for more than 100 million shares, which would mean that the auction is already oversubscribed by 17 percent above the 84.75 million shares for this IPO. This is without a doubt an encouraging sign, considering the current stock market downturn.

Market positioning. With VND12,947bn BIDV ranks 4th in the country in terms of charter capital and 3rd in terms of total assets with VND398,583bn as at September 2011. The bank currently owns the 3rd largest network after Agribank and CTG with 487 branches and transaction offices, taking up 11 percent nationwide market share for both lending and deposits. In 2012, BIDV plans to increase its total assets by 13.4 percent to VND506,567bn.

Earnings ability. BIDV's net income has increased at 30.31 percent CAGR for 2006-2010. However, in 2011, partly because of Vinashin debacle and partly because of the threat of rising NPLs, the bank had to increase its loss provisions from VND1,316bn 2010 to VND4,800bn 2011. Consequently, 2011 net income is estimated to drop 9.6 percent YoY to VND3,400b. The banks forecast it will need to make loss provisions of VND4,474bn in 2012, but will manage to deliver net income growth of 33.2 percent to VND4,529bn.

Operational efficiency. BIDV has maintained its CAR above the required benchmark of 9 percent and managed to improve it from 9.32 percent 2010 to 10.28 percent 9M2011. Because of lower earnings and increasing equity base ROE could drop from 17.95 percent 2010 to 12.8 percent 2011 and ROA could also decrease from 1.13 percent 2010 to only 0.86 percent 2011.

Asset quality. Together with Techcombank and Vietcombank, BIDV is one of only three banks that apply both quantitative and qualitative standards for loan classifications according to Rule No.7, Decision 493/2005QD-NHNN. NPL have dropped significantly from 9.6 percent of total loans 2006 to 2.6 percent 9M2011. Regarding loans to Vinashin, BIDV's management disclosed a total amount of VND6,600bn, among which the responsibility for VND1,600bn has been transferred to Vinalines. Loan loss provision for Vinashin is VND1,500bn for 2011 and another VND3,000bn is supposed to be reserved for 2012. We were told that the collateral assets for Vinashin's loans were mainly ships and that the collateral was valued at VND6,853bn. Also, management disclosed that the bank has not extended any loan facility to Cai Lan diesel power plant, Hoa Sen Ship and Song Hong Thermal power plant, all of which are being considered as Vinashin criminal cases.

The fact that the auction will be oversubscribed will definitely help support the price above the initial IPO price. However, from what we got at the roadshows and in the prospectus, we would struggle to find any fundamental factors to support the price until we see such catalysts as: (i) the joining of a foreign strategic partner in late 2012; (ii) the improvement of efficiency, especially via ROA and ROE and (iii) the clearance and provision process of Vinashin's debt.

More on this soon."

Source: www.intellasia.net/news/articles/finance/111350960.shtml