Vietnam’s Largest Listed Company Is Up For Sale and Fraser and Neave Limited Might Stand to Benefit

Vietnam Dairy Products Joint Stock Company, or better known as Vinamilk, is the largest listed company on the Hanoi Stock Exchange in Vietnam with its current market capitalisation of around US$8.8 billion.

The company’s largest shareholder right now is the Vietnam government’s investment arm, with a 44.7% stake according to a recent article from Reuters. The article also mentioned that the Vietnam government may want to sell its shares in Vinamilk over time, starting with a 10% stake.

In Singapore, there might be one company that could benefit from this new development: Fraser and Neave Limited  (SGX: F99). The company is currently a major shareholder of Vinamilk, with ownership of an 11.04% stake at the end of 2015.

Although Fraser and Neave has not indicated any interest so far in buying more of Vinamilk, a purchase of more shares would be a good way for the company to increase its exposure to Vietnam, one of the fastest growing countries in Southeast Asia.

Vietnam is home to 90 million people and its GDP per capita has been growing at around 5% annually since 2000. Fraser and Neave’s dairy business currently serves customers in Singapore, Malaysia, and Thailand, with a combined population of slightly more than 100 million people. Therefore, the Vietnam market has the potential to almost double the company’s customer base for its dairy business.

Fraser and Neave currently has a net cash position of close to S$850 million, showing that it has more than enough dry powder to invest in more Vinamilk shares if it wants to.

But, even if Fraser and Neave is not planning to buy more of Vinamilk, a sale of the Vietnam government’s stake could still be beneficial. For instance, if another global food and beverage company were to buy the Vietnam government’s shares, it might help Vinamilk hasten its growth both within and beyond Vietnam. This is a positive for Fraser and Neave as well given its ownership of Vinamilk’s shares.

With all that said, how any deal would eventually pan out is still anyone’s guess. But, the sale of the Vietnam government’s stake in Vinamilk could be a once-in-a-lifetime opportunity for a company such as Fraser and Neave, so it’d be interesting to see how things shake out.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore writer Stanley Lim doesn't own shares in any companies mentioned.