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Why are merely 30 of the 6,000 textile & garment firms listed?

Naming new listed firms

Duc Quan Investment and Development Corporation JSC (Fortex) is the latest firm in the textile and garment industry getting listed on the first days of 2017. 50 million shares of this company are listed on HOSE with ticker FTM The total par value of listed shares is VND 500 billion.

Chairman of Fortex Le Manh Thuong said that the listing demonstrates Fortex’s objective to become a leading, transparent and strong company in the yarn industry, generating further trust for partners to cooperate and to attract capital for more investment in product development.

After the listing of FTM, the event of 500 million shares of Vietnam Textile and Apparel Group (Vinatex) listed on UPCoM with ticker VGT draw investors’ attention in early February 2017.

Before Fortex, in June 2016, Damsan Textile Joint Stock Company - a firm in yarn and woven sector also listed its 16.07 million ADS shares on HOSE.

The next name that plans to get listed on UPCoM in 2017 is Garco 10 Corporation. After a delay, Garco revealed to be listed on UPCoM in the end of 2017. All necessary procedures for listing is being completed by the firm in compliance with regulations.

Hesitation due to fear of takeover

Talking to reporter of Investment Review, representative of Garco 10 Nguyen Manh Ha said that firms are not interested in listing, for multiple reasons, including the fear of being taken over, the worry that the goals of production, business, and job creation will not be maintained. As textile & garment firms are listed on stock exchange, foreign investors with abundant financial resources, are willing to spend generously on buying large stake of firms, then gradually take over and change business strategy.

Hesitation due to the fear of being taken over is the common story of many textile and garment firms, not only Garco 10.  

2016 is considered as the "falling point" of textile and garment export in the past 10 years, when the sector's indicators dropped. 2017 continues to be a difficult year for the world textile and apparel market.

"2016 was the most difficult year for textile and garment industry in the last 10 year. The sector focused 90% production business activities on export, however the export growth was low at only 4.9%, below target by USD 1.7 billion USD, the performance of firms, including listed one, was therefore not good "

The business results of some companies listed on the stock exchanges clearly showed this difficulty. By the end of 2016, Century Synthetic Fiber Corporation (STK) recorded revenue growth of over 31%, reaching VND 1,358 billion, but only realized 83% of the year plan. Profit after tax reached nearly VND 29 billion, down 60% y-o-y and achieved only 23% of the year target.

Also, a textile and garment “giant” - Thanh Cong Textile Garment Investment Trading JSC (TCM) recorded revenue of VND 3,070 billion in 2016, up 10% but profit after tax reached only VND 114 billion, down 25% y-o-y. Both revenue and net profit were below the target, achieving 94% and 72% respectively.

Vice President of Vietnam Textile and Apparel Association (Vitas) Le Tien Truong said that among two important agreements that Vietnam joined being the Transpacific Partnership Agreement (TPP) and the Vietnam - EU Free Trade Agreement (EVFTA), the TPP status is unclear, while EVFTA will take effect in 2018 with some tariff lines being eliminated completely, the remaining will follow the 3-7 year roadmap, therefore this agreement will not have a big impact on Vietnamese textile and garment businesses in 2017.

The free trade agreement between Vietnam and the Eurasian Economic Union came into effect, but Vietnam's market share is too small (USD 120 million out of total union-wide consumption of USD 13 billion) .

In addition, global textile and garment export competitors such as China, India, Bangladesh, Pakistan, Indonesia, emerging countries such as Cambodia and Myanmar will continue to implement policies to support their local firms as they did in 2016, especially the currency devaluation policy to boost export and attract customers which will bring in huge difficulties for Vietnamese textile and garment enterprises in competing for orders“, said Truong.

As production and business activities are facing difficult, textile and garment enterprises worry not only about being taken over when listed but also their stocks perform poorly and their enterprise value declines.

The Hoang - DautuOnline

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