Mar 17, 2013

Vietnam - As fortunate as SCIC

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VietNamNet Bridge – Deposit interests and dividends were the two main sources of income for the State Capital Investment Corporation (SCIC), the powerful corporation which specializes in making investments in businesses with the state’s money.

The 2012 finance report of SCIC showed that deposit interests and dividends brought 96 percent of the total income of the corporation. SCIC has reported the pretax profit of VND4,582 billion, post tax profit of VND3,974 billion, up by 36 percent over 2011.

The noteworthy thing is that the total expenses of the corporation in 2012 was VND121 billion only, or three percent of the post tax profit and 0.2 percent of total assets. The figures may catch the attention from any finance expert, because this shows that SCIC’s asset management skills have been in no way worse than that of passive management funds.

Deposits and “milk cow”

In 2012, SCIC got VND1,568 billion from the interests of the deposits at commercial banks and VND1.001 billion from Vinamilk, a leading dairy producer in Vietnam. As such, commercial banks and “milk cows” brought two thirds of the total turnover of SCIC.

SCIC said that the financial turnover only fulfilled 98 percent of the plan, but it still represented the six percent increase because of the higher amount of deposits.

Of the VND2,151 billion worth of dividends it got from the invested enterprises, the dividends from Vinamilk alone made up nearly 50 percent. Since the income from dividends are not subject to the corporate income tax, the dividends from the “milk cow” brought 25 percent of the post tax profit.

SCIC also received dividends from other profitable enterprises in 2012, namely FPT Telecom (VND175 billion), Vinare (VND61 billion), Hau Giang Pharmacy (VND57 billion), Bao Minh insurance (VND46 billion) and FPT Holding (VND47 billion).

Being a giant investor, SCIC did not earn much money from the stock trade. In 2012, it could collect VND170 billion only from selling the state’s capital contributions in enterprises. Of this amount, 2/3 came from the sale of the Tan Tien plastic packaging company’s stakes.

The turnover from the stock sale of SCIC in the whole year 2012 could fulfill 25 percent of the yearly plan in term of value and 14 percent in quantity.

As fortunate as SCIC

Commented about the profit SCIC made in 2012, economists said luck played quite a part in its success.

SCIC successfully withdrew capital from Jetstar Pacific, where it held 70 percent of stakes (VND921 billion out of the chartered capital of VND1,317 billion), an unprofitable airline, in early 2012.

Since Jetstar Pacific continued taking loss (it once reportedly took a loss of VND40 billion a day), by the end of 2011, SCIC, as an investor, had had to make provision of VND815 billion against the risks.

It was so lucky for SCIC that it safely withdrew capital from the unprofitable airline, as the government decided to transfer Jetstar Pacific from SCIC to Vietnam Airlines, the state owned air carrier. The decision then lifted a burden on SCIC, because the provisioned money has been reimbursed.

SCIC sits on a heap of money

The SCIC’s finance report showed that the corporation got VND1,568 billion from deposit interests in 2012. If noting that the average interest rate was 8 percent per annum, one could make a guess that SCIC is now holding VND19 trillion in cash, or 25-30 percent of the VND62 trillion worth of total assets.

Apple, which had reportedly had $137 billion in cash by the end of 2012, has been urged to pay back a part of the sum of money to shareholders. And a question has been raised that if SCIC should pay a part of the cash it holds and sell some investment portfolios to pay back to the State – the owner, who now seriously lacks money?


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