| |
| Stock market faces convertible bond oversupply from banks |
| 22/Mar/2010 Intellasia | Dau Tu Chung Khoan page 34 |
|
| 22 Mar, 2010 - 11:28:54 AM |
|
|
Having a big headache with the charter capital increases, many banks are planning to issue convertible bonds in 2010 with the expectation to raise capital source for expanding business, production and investment. But due to the difficulties in market, the issue is not successful easily.
Shareholder meeting of Habubank lately passed a plan to offer 1.050 trillion dong of bonds in last half of 2010. The conversion time of these bonds is one year with the ratio of one bond for 10 shares. Coupon rate of the bank's bonds will be decided by the board of directors under SBV's regulations.
Habubank will offer all 10.5 million convertible bonds worth 1.050 trillion dong at par to the existing shareholders according to their corresponding ownership ratio at the time of closing the shareholders list. With a sum of money of 1.050 trillion dong expected to be raised from the offering, Habubank will supplement about 70 percent or 735 billion dong to its business capital, invest 10 percent or 105 billion dong in joint venture projects, and 20 percent or 210 billion dong in infrastructure. Also the bank plans to list shares on Hochiminh Stock Exchange (STC) within Q3 or Q4 of 2010. This year Habubank targets to earn 650-690 billion dong in pre-tax profit and a dividend of 12-15 percent.
Similarly, Techcombank will seek shareholders' approval on March 28 to issue thirty million 10-year convertible bonds equalling to three trillion dong at par value to the existing shareholders. Accordingly, in five years from the issue date, these bonds will be converted into ordinary shares. In case bondholders do not conduct the conversion right, these bonds will become longer term bonds with annual coupon rates. In first five years, the coupon rate of the convertible bonds is 1 percent pa and in following five years, bondholders will enjoy 12 percent pa.
Also Techcombank plans to increase its chartered capital by 1.531 trillion dong to nearly seven trillion dong in late 2010. Its pre-tax profit is targeted at 3.467 trillion dong this year.
SHB also obtained SBV's approval to sell 15 million 12-month convertible bonds at the face value of 100,000 dong. The distribution time is 90 days from last December 31.
Differing from the strong growth of stock market between 2006 and 2007, prices of bank shares are not attractive for investors anymore. Banks now difficultly raise capital from convertible bond issues. A lot of convertible bond issues of banks continuously had to be cancelled whereas the pressure of increasing chartered capital is heavier.
For example, Orient Commercial JS Bank (OCB) plans to issue six million shares worth 600 billion dong at coupon rate of 10.49 percent pa based on the shareholders list closed on December 15, 2010. These bonds will be converted in shares in one year from being issued. But till now after SBV approved the bond issue, OCB has not yet announced the issue date.
Replying to Dau Tu Chung Khoan newspaper on this issue, Tran Van Vinh-general director of OCB said that after considering a number of reasons, the bank decided to delay the issue plan and wait for shareholders' opinion in the meeting scheduled on April 12. But instead of issuing convertible bonds, the bank could allocate 300 billion dong of convertible bonds and offer shares to the existing shareholders.
Like OCB, Saigon Commercial JS Bank (SCB) also decided to delay the issue of one trillion dong of bonds obtaining Central bank's permission in 2009 end. Problems relating to the convertible bond issue will be decided by the shareholders on March 27. Previously, the bonds of SCB were planned to carry a face value of one million dong, conversion ratio 1:110.5 (one bond will be converted into 110.5 shares), and the coupon rate of 10.5 percent for 13 months.
VietA Bank was licensed to offer nearly 272 billion dong of convertible bonds at the pre-paid coupon rate of 10 percent pa by late 2009 to raise working capital. The offering price is 100,000 dong per bond with unlimited registration volume and the registration deadline on December 12, 2009. Time for investors to register to buy these bonds was from last December 15 to January 1, 2010. However, because of the inconveniences on the stock market, the bank had to extend the money payment deadline to February 26, 2010. As for the shareholders who paid money already before February 26, they will receive an interest rate of 10.49 percent pa for the sum of paid money (calculated from the payment date till February 25).
This year VietA Bank's charter capital is expected to reach three trillion dong against current 1.631 trillion dong and its pre-tax profit is targeted at 498 billion dong.
Factually, stock players now are only paying attention to the shares of large sized banks with high potential. Meanwhile, the pressure of capital increase of small banks is becoming tenser with the high share volume set for issue. Thus, both convertible bond and share issues of banks will be difficultly reached as expected.
Current prices of bank shares now are around face value of 10,000 dong per share of small sized banks namely DaiA Bank, KienLongBank, OCB and ABBank. Share prices of listed banks like ACB, STB, VCB, CTG, EIB and SHB almost stand still despite the market saw point-increasing trend.
|
|
|
|
