-
 In
my opinion, the Valuation Committee mechanism should be
abolished. The company valuation process requires in-depth
knowledge and experience, but members of the valuation
committees are often government officials that lack expertise,
and are not sufficiently capable of valuing the various assets
of firms.
Mr. Nguyen Van Nghia, Officer in charge,
Enterprise Reform and Development Department,
Office of the Government
-
The Ministry of Finance has undertaken some research on this
issue, and will submit specific proposals to the Government to
reform SOE valuation mechanisms and methods. More specifically,
it is proposed that we abolish the Valuation Committee
mechanism, and that we allow foreign and domestic auditing and
accounting firms, securities companies, valuation centers and
other capable organizations to participate in SOE valuation.
This should limit interference by government administrative
authorities and improve the transparency and accuracy of the SOE
valuation process, and thus accelerate the process of SOE
equitization.
Mr. Tran Huu Tien, Deputy Director,
Enterprise Finance Department, Ministry of Finance
-
 Before
its equitization, Vinabico used to be a JV with Kotobuki of
Japan. After taking over the investment contribution from the
Japanese partner to become an SOE, Vinabico started and
completed its equitization plan within seven months. For 10
years operating as a JV, the company was audited annually by an
independent auditor. In our case, both valuation mechanisms–i.e.
setting up a valuation committee and the use of an independent
consultant–were integrated. The valuation committee was set up
to identify the value of the firm based on audited financial
reports. As a result, the valuation was quickly approved by the
relevant authorities. In our opinion, using an independent
auditing firm is the most effective and efficient means of SOE
valuation.
Ms. Duong Hong Lam, Director, Vinabico Confectionery Joint Stock
Company
-
Our biggest question
is how to value the firm. Independent valuation consultants used
both of the two valuation methods proposed by the Ministry of
Finance. The net tangible asset (NTA) and the discounted cash
flow (DCF) methods resulted in two very different valuation
figures. More specifically, the value from the DCF method was
many times larger than that from the NTA method. We are not
comfortable with either of these two results, and we are
wondering if there is a better method of valuation.
In my opinion, regardless of what valuation method is applied,
we should bear in mind the principle that SOE valuation should
not be too low, so that the government does not lose revenue.
But equally, it should not be so high that equitized SOEs are
unattractive to investors.
It is necessary to distinguish between company valuation and
company auction. Many people believe that the best way to
identify the value of a firm is through public auction. However,
our major goal in equitization is to attract strategic
investors–large enterprises that would be both our shareholders
and our clients at the same time. This would help to stabilize
and expand our business. But public share sales on the stock
exchange may only attract small investors, rather than our
targeted strategic investors. In my opinion, using limited
bidding for shares could be a more suitable method of initial
equitization for large SOEs, like Bao Minh. Public offering of
shares on the stock exchange would be appropriate at a later
stage, when Bao Minh completes its initial equitization,
stabilizes its business, and needs more funds for business
expansion.
Mr. Pham Xuan Phong, Deputy Managing Director,
Ho Chi Minh City Insurance Company (Bao Minh)
-
 At
present, the valuation method for our company's equitization is
based on determining the value of its assets. However, my
concern is how the company, after being equitized, can perform
profitably, so that it can pay a dividend to shareholders. The
profit margin in the shoe industry is very low, especially since
China became a WTO member, and the price of inputs (e.g. rubber,
cloth, petro-chemicals) is escalating. As a result, we are
currently operating at loss. Therefore, if we do not have a new
business strategy after equitization, we will not be able to pay
dividends to shareholders, and consequently, the share price
will decrease. This factor has not yet been accounted for in our
company's valuation.
Mr. Tran Danh Dang, Director, Hanoi Leather and Shoes Company
-
SOEs comprise many
industries that each has different business characteristics and
determinants of value. Therefore, it is important to select the
valuation method most appropriate for each particular industry.
As a simple example, the way a property company is valued is
very different from how a technology company should be valued.
Regarding the two valuation methods currently allowed by the
Ministry of Finance, each has its own disadvantages. The net
tangible assets (NTA) method does not reflect a company's
earning capability, and therefore has less relevance. The
discounted cash flow (DCF) method is more commonly adopted.
However, DCF is a more complicated technique, and most effective
and useful where the information that is required is readily
available. Another critical component to be ascertained are the
future cash flows of the company. Estimating these with a high
level of certainty and accuracy requires considerable skill. It
should be noted, however, that the DCF method does not
specifically value goodwill.
I can understand the concerns of large SOEs preparing to
equitized–like Vietcombank and Bao Minh Insurance–who are
questioning the appropriateness of the DCF method, and wonder
whether there is another method that is better. An alternative
method of valuation used in other countries is the "Comparable
Companies" method. Put simply, this compares the value of a
number of companies, usually publicly listed ones, which are in
similar businesses and are of a similar size. The data is then
analyzed, and after making adjustments to accommodate unique
factors, a suitable benchmark is derived.
Mr. Kelvin Lee, Partner, Advisory,
Valuation and Strategy, PriceWaterhouseCoopers, Vietnam
-
 Valuation
is an inexact science. Available methods either borrow from the
past or call for judgments to be made about the future. The
former may be misleading and the latter guesswork. The only
means of avoiding these pitfalls is to call for offers in an
open and transparent market. Most sellers of publicly owned
assets need some reassurance that bids meet at least some notion
of real value, and therefore they will want to use standard
valuation techniques. However, this is particularly difficult in
a market such as Vietnam, where Land Use Rights often represent
the larger part of an SOE's value, and there is no market
information available on what the land may be worth.
The State has to perform two incompatible roles. As a
'regulator' it must assure an orderly sale, giving due weight to
the interests of both buyers and the managers and employees of
the SOEs that are being equitized. This requires a valuation of
the SOE being equitized. Decree 64/CP sets out relatively
unsophisticated, but clear, guidelines for share valuation. But
the State also has a responsibility to assure that the proceeds
from equitization are maximized for the good of the State and,
ultimately, all the citizens of the country. When larger SOEs
are being equitized, this latter role assumes greater
importance.
Mr. Daniel Musson, SOE Specialist, World Bank Vietnam
-
A major difficulty
in valuation is determining the value of production equipment,
because there is no market standard in Vietnam. Nor do Valuation
Committee members have much professional expertise in
undertaking valuations. There is also a lack of competent
valuers in Vietnam. Nationwide, there are only 37
nationally-accredited valuers, and only two valuation centers
under the Ministry of Finance that have adequately accredited
valuers. I think the Government should allow the use of
international consultants in valuing large SOEs.
Expenses for the whole equitization process, including
valuation, are capped at VND 500 million, according to Ministry
of Finance regulations. This is a constraint for large SOEs. For
example, for an SOE with assets of VND 500 billion, the
valuation expense alone – based on the current fixed price set
by the MoF's valuation center is 0.1 %–which is already almost
VND 500 million. To complete the equitization, SOEs also have to
pay fees for auditing, a share auction, announcements to the
public, and so on, which would put the costs above the maximum
amount allowed.
Ms. Nguyen Thanh Ha, Head of the Specialist Committee,
SOEs Reform Group, Vietnam National Cement Corporation (VNCC)
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