Why does equitization remain slow? Vietnam Rubber Group faces difficulty due to its large land fund

It is hard to define the value of VRG due to its large land fund.

It’s hard to evaluate enterprise

The VRG’s restructuring plan was approved by the Prime Minister in the Decision No. 38/QD-TTg dated January 5, 2013. The implementation of equitization in the parent company with 20 one-member limited liability company and 4 non-profit units was implemented under the Document No. 2296/ TTg-DMDN dated December 16, 2015, of The Prime Minister on the overall plan for restructuring and renovating the agricultural companies of the Group.

According to the schedule, the equitization plan of the VRG was approved from the third quarter in 2016 to the first quarter in 2017, and it is implemented in the the first quarter in 2017. Starting from the actual conditions, at the conference on implementing the restructuring plan of SOEs in 2017 held by the Ministry of Agriculture and Rural Development in the mid-February 2017, the target set by the Ministry is to complete equitization, IPO VRG in the third quarter 2017. The target has been rescheduled, but now, in order to achieve, it is still difficult.

According to the MARD, the VRG is the land management unit, with more than 244,000 hectares, of which 239,300 hectares are agricultural land, more than 5,300 hectares is non-agricultural land. Notably, VRG not only manages many rubber areas in the country but also overseas (Laos, Cambodia). The MARD argues that the equitization of the parent company with 20 subsidiaries of the VRG aims to implement the good management of land, maintain stability, especially land located in strategic defense areas. In addition, this also contributes to strengthen the position of the parent company, create a large scale of land, gardens, capital, assets, labor... After arranging, transforming into the joint stock company, the parent company still plays the leading role in the development orientation of the VRG and attracts qualified investors to restructure the group.

The starting point is that, but in fact, the equitization of the parent company and its 20 subsidiaries in the context of the large land fund, the area of rubber plantation both in the country and overseas is the important cause for equitization delay process. Specifically, the valuation stage of the enterprise, in which the value of the rubber plantation is more difficult. "With a large asset volume, a lot of land fund, VRG's business valuation has been carried out with caution. There are lots of land valuation companies, deployment departments also have written requests for comments from local authorities. The VRG's enterprise valuation alone takes a whole year," said an official from the Enterprise Management Department (MARD).

In addition, according to the Ministry of Agriculture and Rural Development, most of the rubber companies in the VRG are in remote areas, people's lives are difficult. Therefore, the sale of shares to strategic partners must be accompanied with the guarantee of living for local workers and efficient management of land. That is one of the issues to consider and seek the direction of the Government.

Seek… the direction

Deputy Minister of Agriculture and Rural Development Ha Cong Tuan said: Recently, the VRG has hired consultants to determine the value of enterprises under the regulations on equalization. The State Audit has audited the results of the valuation of enterprises and dealt with the financial issues before evaluating the enterprise. The audit report was attached to the Official Letter No. 149/KTNN- TH dated March 3, 2017. On that basis, the VRG, the consultancy company have adjusted and implemented the recommendations of the State Audit. "At this moment, the MARD has reported to the Government and the Prime Minister on the equitization of parent company - VRG in the Document No. 5231/BC-BNN-QLDN dated June 23, 2017, the focus is the results of determining the value of enterprises and the propose to extend the extension to continue equalisation", said Deputy Minister Ha Cong Tuan.

According to the reporter of the Customs News, the MARD is now waiting for instructions from the Prime Minister both on the valuation of businesses and whether they continue to agree to VRG extension for equitization or not. After receiving instructions, the equitization plan will be quickly "decided" and take action. Some experts said that if the Prime Minister approved the renewal plan to continue equalization, with the current progress, the VRG is also difficult to complete equalization, IPO in 2017, and have to the extent to the beginning of the year 2018.

From the view of enterprises, it can be seen, despite missed schedule error, with the momentum of the rubber industry, the VRG is quite ready, confident waiting for equitization, IPO. Mr. Tran Ngoc Thuan, General Director of VRG said: the rubber price in 2017 has not really overcome difficulties, but the average is expected can reach 40 million vnd/ ton. Besides China, the VRG is also expanding its export activity to other markets such as the US, Japan... Expectedly, the rubber prices will increase. Therefore, in the short term, rubber stocks may not be attractive, but in the long run, this is a potential stock.