Why did FPT decide to sell the "golden goose" FPT Shop?

In 2016, FPT still has high expectations for the distribution and retail sector, but is also planning to reduce ownership in this business segment which is no different from their “golden goose”. Will FPT be able to do what they want?

FPT hired a consulting unit to carry out the sale of FPT Shop in 2016.

FPT's plan to sell shares in the distribution and retail sector, as expected, continued to receive great attention from shareholders at FPT's 2016 Annual General Meeting of Shareholders.

“If we need money, we have many options to raise capital. The first way is to divest, the second way is to issue shares to increase capital or raise bonds. Why did FPT choose to divest when the distribution and retail sectors are still operating well?”, a shareholder asked.

In a clever way, Mr. Truong Gia Binh - Chairman of the Group replied that the divestment in this business segment was due to the shareholders' proposal and for the shareholders' benefit. "Shareholders have suggested that FPT should focus on core areas," Mr. Binh said.

Specific information related to this divestment has not been announced yet, except that recently, Mr. Nguyen The Phuong - Deputy General Director of FPT confirmed that he had hired a consulting unit to carry out this deal. And the plan is to carry out this deal this year.

Planning to sell, but in the 2016 business plan, FPT still has high expectations for the growth of this sector. Specifically, in the total revenue plan of 45,796 billion VND, an increase of 14.5% of 2016, the distribution and retail sector still contributes 28,586 billion VND, an increase of 13.4% compared to last year.

Meanwhile, in the total pre-tax profit of VND3,151 billion, the distribution and retail segment contributed VND826 billion, up 13.4%.

This will not be a problem for FPT in 2016, because it seems that the restructuring plan implemented since last year has brought good business results for FPT in 2015 and will create momentum for FPT to continue to achieve double-digit profit growth in 2016 (plan to increase by 10.5%).

The distribution and retail sector - the sector that contributes the most to the total revenue of the Group - is continuing to grow. After only the first 3 months of 2016, FPT Shop has completed its expansion plan ahead of schedule, with 300 stores and estimated revenue and profit of VND2,459 billion and VND43 billion, up 36% in revenue and 51% in profit compared to the first quarter of 2015.

The question is, after selling off the distribution and retail segments, what will happen to FPT?

In 2016, the profit of both the telecommunications and education sectors is expected to decrease compared to the previous year. This means that these two sectors, especially telecommunications, cannot have a breakthrough soon next year. FPT is still focusing on investing in telecommunications infrastructure, not to mention that it may have to pay into the public telecommunications fund, so the profit cannot be high.

This means that all expectations will have to be placed on the technology sector - the business sector that has made FPT's name in the past three decades. However, in 2016, the revenue plan of this sector is only VND9,990 billion, an increase of 16.1%; and pre-tax profit is VND1,210 billion, an increase of 30.5%, a rather modest figure compared to the distribution and retail sector.

Not hiding the Group's plan, at the General Meeting of Shareholders, Mr. Nguyen The Phuong said that the divestment money will be used for M&A purposes and increasing the ownership ratio at FPT Telecom. Currently, FPT only holds 45.64% of shares at FPT Telecom, therefore, if FPT increases its ownership ratio at FPT Telecom, the after-tax profit will belong to the shareholders of the parent company FPT and EPS will improve positively in 2016.

FPT is also continuing to focus on software exports, providing IT outsourcing services and services based on new technology platforms such as SMAC and IoT. This is a business segment that promises many breakthroughs in the coming years.

At the 2016 Annual General Meeting of Shareholders, Chairman Truong Gia Binh surprised shareholders by introducing a book called “The Fourth Industrial Revolution” to share his innovation strategy for growth. At the same time, a roundtable discussion was also held, with the hope of sending a message to shareholders about FPT’s enormous opportunities in this revolution.

It is undeniable that FPT, like many large corporations around the world, has a great opportunity when information technology is starting a "earth-shattering" revolution. But will all those opportunities be realized, to first compensate for the lack of revenue and profit after selling off the distribution and retail segment and then bring about strong development of FPT in the coming time?

According to Investment Newspaper