The equitization of Binh Son Refining and Petrochemical Company (BSR), the operator of Dung Quat Oil Refinery in central Vietnam, has drawn strong attention of big foreign investors given the company’s strong financial readings and its market position.
Under the equitization plan approved last week by the Government, BSR will launch its initial public offering (IPO) on the Hochiminh Stock Exchange on the third week of next month.
Via this IPO, BSR will sell 7.79% of its chartered capital, equivalent to 242 million shares at a price starting from VND14,600 per share, generating an estimated VND4 trillion. A 49% stake will be sold to strategic investors in the next phase with nearly US$1 billion to be collected.
Of the VND31 trillion chartered capital of BSR, Vietnam National Oil and Gas Group (PVN) owns 43% (1.3 billion shares), and 0.21% (6.4 million shares) will be sold to staff and 49% (1.5 billion shares) to strategic investors.
General director of BSR Tran Ngoc Nguyen was quoted by Tien Phong newspaper as saying that the company has worked with 17 investment funds and five partners, which are big companies and want to become strategic investors of BSR. Of these, two companies, America’s World Petro and Macron Petro Petroleum of Africa, are eyeing a maximum stake of 49%, he added.
Last month, many foreign petroleum companies came to sound out cooperation opportunities at BSR, including Spain’s Repsol which has a refining capacity of around 890,000 barrels a day and projects in 37 countries. Repsol not only wants a stake at BSR but also seeks to get involved deeper in corporate governance.
In addition, the ASEAN Council on Petroleum (ASCOPE), the U.S.’s Kevcomp and Russia’s Rosneft are also interested in cooperating with BSR.
“We are still considering (potential partners) and have yet to pick any official strategic partner,” Nguyen said.
After seven years of operation, Dung Quat Oil Refinery has paid almost US$7 billion in tax to the State budget, an amount doubling its initial investment.
BSR’s 2016 revenue was recorded at VND74 trillion and net profit at VND4.492 trillion, or a return on equity (ROE) of 14%. The company earned VND63.3 trillion in revenue in January-October this year and paid VND7.44 trillion in tax.
Its ROE in the ten-month period was 16.09%, whereas the return on assets (ROA) was 9.1%. The company is having VND15.179 trillion in cash.
BSR is ranked 16th in the top 500 most profitable enterprises as rated by Vietnam Report Joint Stock Company, and is the seventh biggest company in the country.
Another advantage of BSR is the oil refinery’s expansion, which is set for completion in 2021 and will increase its capacity by 30% with products meeting Euro 4 and 5 standards.
With the sale of a 49% stake, the State ownership will be below 50%, offering more room for private investors amid recovering oil prices.
Besides, there is a chance for foreign investors to get involved in petroleum distribution in Vietnam if they buy into Dung Quat Oil Refinery. Under the prevailing regulations, foreign investors cannot retail fuels in Vietnam unless they have a refinery. Therefore, investors may choose to acquire shares at domestic oil refineries to secure the privilege.
Vu Minh Khuong at National University of Singapore’s Lee Kuan Yew School of Public Policy was quoted by Tien Phong newspaper as saying that rapid market growth, growth potential of Vietnam’s petrochemical industry, and the equitization of the first and leading oil refinery of Vietnam are major factors that attract investors.