On 13 March 2019, Vinamilk (HoSE: VNM) officially sent a letter to State Securities Commision to buy shares of GTNFoods (HoSE: GTN).
The company will purchase a maximum of 46.68% of GTN shares, equivalent to 116.71 million outstanding shares of the company at the price of VND13,000 per share. At this price, VNM will spend USD65.23 mn to own 46.68% of GTN shares.
GTN Foods currently owns Moc Chau – a dairy company which has been strongly contributing to its consolidated business results. Moc Chau milk production has increased to 100,000 tons of fresh milk per year. According to the company’s strategy, by 2020, the company is expected to increase to 35,000 cows and potentially reach in range of 70,000 to 100,000 units by 2030. Milk production from Moc Chau would significantly help VNM to lower its COGS by reducing its imported raw materials. Vinamilk’s market share in the export market has been declining, while domestic dairy industry is nearing saturation.
With its latest M&A plan Vinamilk hopes to improve its market share. At the end of 2018, the company reached 58% of the total dairy market share in Vietnam and expected to improve 1% each year to reach 60% by 2021.
If this deal is successful, the company could gain 10% of market share immediately. In a recent meeting, VNM’s BOD stated that the company’s revenue had grown at double-digits compared to the same period last year in the first 2 months of 2019. By 2021, M&A activities would continue and increase USD258 mn in revenue. Overall, total revenue in 2021 is expected to reach USD3,010 mn – 30% higher than 2018 result.
The stock is currently trading at VND137,200 per share with P/E of 25x. Please feel free to contact us to speak with our analyst.