UPDATE 2- Vietnam's Vinatex set for July IPO to capitalise on trade pact

Tue Jun 17, 2014 7:05am EDT

* Vietnam sees garment sector benefiting from TPP trade pact

* Privatisation of state firms priority for govt

* Vinatex to offer up to 24 pct of firm in IPO

* SOEs difficult to value due to lack of public information (Adds implications of trade pact, details of privatisations)

By Ho Binh Minh

HANOI, June 17 (Reuters) - Vietnam's Vinatex, a state-run producer of garments and textiles, is planning an initial public offering next month to fund expansion and capitalise on a potential Pacific trade pact that would boost exports.

Vietnam's textiles industry, its second-biggest cash earner after cellphones, is expected to gain from a long-awaited Trans-Pacific Partnership (TPP), a trade pact that would make its garments more competitive than those of China, the biggest textile exporter to the U.S. market.

The offering by the country's biggest textile firm could also be the biggest so far in a series of share sales by state-owned enterprises - part of a government plan to reform a state sector blighted by inefficiency and debt.

With the partial privatisations, the government hopes to win the confidence of foreign investors as it pursues ambitious goals to achieve GDP growth of around 6 percent.

"Only IPOs of major state-owned companies can help draw foreign investment and Vinatex coming in is a good sign to show progress is being made," said Nguyen Chi Trung, deputy general director of Ho Chi Minh City-based Rong Viet Securities.

Vinatex, or Vietnam National Textile and Garment Group, as the company is formally known, said late on Monday it would conduct its IPO on July 22. Its prospectus is set to be released next Monday.

It did not say how much it plans to raise and it was unclear when it would list on one of Vietnam's two stock exchanges. In Vietnam, companies offering shares can take up to a year after the IPO before listing.

DIFFICULT TO VALUE

Analysts say it is difficult to value state-owned companies as many need restructuring and there is little public information about their assets. State-run lender BIDV raised around $75 million its initial public offering in December 2011.

Vinatex has government permission to offer up to 24.4 percent of its shares in the IPO. Another 24 percent is slated to be sold to strategic investors, while the state plans to retain 51 percent of the firm.

Vinatex, an expected September offering from national carrier Vietnam Airlines and one from mobile phone network operator MobiFone are likely to catch the eye of foreign investors but most IPOs of state-run firms will not.

Hanoi has said it aims to privatise 432 state-owned enterprises in 2014 and 2015 - a pace that officials doubt is sustainable, while stock analysts say a glut of IPOs would help neither investors nor businesses.

Vietnam's benchmark index was Southeast Asia's best performer last year, rising 22 percent and while it took a bit of a knock last month on tensions with China, it is still up 13 percent for the year to date.

TPP FOCUS

Vinatex expects to have exported $1.62 billion worth of textile and clothing products in the January-June period, up 15 percent from a year ago and accounting for nearly 16 percent of Vietnam's total in the period.

Its outlook would improve tremendously if Pacific trading partners were to agree to deal on a new trade zone. Sources close to the negotiations have said some countries are pushing for a deal in the next few months but others caution that a pact is still a long way off.

The TPP, which has been under negotiation for five years, aims to connect 12 countries, including the United States and Japan, by cutting trade barriers and harmonizing standards in a deal covering a third of global trade.

Around 60 percent of Vietnam's textiles and garments are shipped to countries that would be covered by the TPP.

The government has been boosting investment in the industry, which contributes up to 15 percent to the country's annual gross domestic product.

Textiles and garments exports drew $18 billion in 2013, up 19 percent from the previous year and Vinatex expects that to rise to $24 billion this year due to better economic conditions in export markets. (Editing by Martin Petty and Edwina Gibbs)