In order for local and foreign investors to have additional objective view over listed companies in particular and capital market in general, reporter interviewed Mr. Pham Van Thinh, General Director of Deloitte Vietnam Co., Ltd.
It is now a peak season of annual shareholders’ meeting, do you have any comment on the information quality provided by listed enterprises in 2018?
According to survey result of voting for best Investor Relation among top enterprises in 2018 – IR Awards 2018, there have been 266 out of 686 listed enterprises which are qualified for information disclosure in accordance with criteria set out, taking account for 38.78%, sharply increasing as compared to 16.96% in 2017. Such growth reveals that listed enterprises have been progressing in their
obligation to disclose their own information in accordance with current stipulations.
However, on the other hand, number of listed companies which are not qualified for the standard information disclosure is still high when more than 60% listed enterprises cannot fully satisfy those stipulations, especially those with low capitalization. This matter shows that the State competent authorities should strive more and enterprises should do the same themselves to enhance
information quality in listed enterprises and in the entire market in general.
There is another matter that there are now a majority of foreign investors investing in listed companies. However, most of Financial Statements are prepared in accordance with Vietnamese Accounting Standards. This also causes difficulty to foreign shareholders in the understanding of financial information of an enterprise.
Banking sector with a series of banks achieving dramatic growth in accumulated profit by 30 to approximately 180%. In the position of an audit and strategic consultancy company, what do you comment on the aforesaid performance?
High growth in accumulated profit shows very great profit level of banks in the year, far more exceeding the dividend paid for shareholders and funds which were made. This is a very good signal that banks have passed 2018 very successfully, and many banks have disclosed great profit level in the past year.
We should recognize this matter in the context of rather good credit control in 2018. Actual credit growth rate in 2018 was only 14%, which is the lowest growth rate in the last 05 years. As reported by the State Bank of Vietnam, the whole banking sector also continued to resolve VND 150,000 billion of bad debts in 2018. Loan interest rates of banks were rather stable. This shows that banks were doing better in the asset management, lowering doubtful debts, then allowance for bad and doubtful debts also fell down. The operating management was also improved, operation was step by step digitalized, etc. contributing to the cut-down of the operating costs in banks.
With business performance in 2018, banks would have more opportunity to raise capital for the improvement of minimum prudential ratio while the application of Circular 41/2016/TT-NHNN requires that all the banks shall be mandatory to apply Basel II standards in the capital adequacy ratio from 01/01/2020.
In 2018 and forecast for 2019, some listed enterprises with great profit paid and will pay very high dividend in cash. In the position of a strategic consultant, what do you comment on the dividend payment of Vietnamese enterprises? How is it different from the international practice?
As a matter of fact, dividend payout is an ordinary activity of an enterprise. When an enterprise decides to pay high dividend, that means the enterprise has high profitability and robust cash flow. In addition, there are quite many enterprises which pay dividend by shares, its nature is to transfer retained earnings into owners’ equity without any effect on cash flow.
Dividend payout policy totally depends on the strategy and position of the
company and expectations of shareholders. As usual, companies in strong development phase will need much capital for investment and expansion and will not pay much dividend in cash. Instead, they might select the dividend payout with shares or zero dividend payout. Value for shareholders does not come from investment method – profit from operations but it results from share capital appreciation. There are many cases in the world that companies select the zero dividend payout policy in a long run, for example the giant Microsoft in technology was incorporated in 1975 but the first dividend payout was disclosed in 2003.
However, as aforesaid, the dividend payout also depends on the expectation of general shareholders. In particular in Vietnam conditions, many listed enterprises have major shareholders, who even hold the controlling proportion, the
expectation of these shareholders will govern the decision on dividend payout.
In your opinion, what are factors required from enterprises and the Government for Vietnamese capital market to “attract” more foreign funds in 2019?
For enterprises, in addition to a healthy and profitable business, with attractive and ambitious business plan, we much mentioned the story of company management and transparency of information. At present, Vietnamese enterprises are ranked low in the relation with enterprises in the region in the ratings of International Monetary Fund (IMF). This is a shortcoming of Vietnamese enterprises to be overcome and also a weak point in the attraction to investors. Enterprises should apply modern enterprise management method and well prepare for capital
mobilization plan, be willing to share information to the allowable extent, which will help investors understand and assess the right companies they want to invest in.
For the Government, the management of macro-economy has great impact on trust and decision of investors. For the past time, the Government has well shown its role in the maintenance of growing trend of Vietnamese economy. Inflation, exchange rates and interest rates remain quite stable. However, there are many problems that the Government is striving to resolve and improve, for instance, public debt, increasing tax expenses, simplification of administrative procedures, etc. the Government should keep on completing legal systems, especially legal systems for investment, finance and taxation. We shall improve legal framework for securities and stock market, continue to strengthen the requirements on information transparency, apply International Financial Reporting Standards (IFRS) and good practices in information disclosure, enterprise management, etc. in the world. On the other hand, the Government shall balance the legal system completion and stability of legal environment, this is a big challenge that the Government is facing.
Bond Club’s point of view:
The most important factor for Vietnamese businesses’ CEOs to consider at this moment is to adjust their mindset in management and be self-transparent of information, in accordance with global integration trend to help their
businesses step out into the world market.
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