ANZ – Investing in Now

Implications: Pursuing high growth investment opportunities in Asian region and participation in future of regional industry.An opportunity to develop institutional debt capability in the Vietnamese market.

Analysis:  

ANZ is a large, highly leveraged financial institution operating across a number of markets. Established in 1835 in the UK, its growth to  present status illustrates how a combination of strategic mergers, acquisitions and partnerships over a long period of time across various countries could work in its favour and catapult the bank to the top 50 banks of the world.

ANZ has long pursued a two pronged strategy in Asia :

1. Investments in Trade and infrastructure through its Asia network and
2. Retail banking through Asian partnerships as result of which it has participated in 11 partnerships till now and proposal to increase to 20.

Thus, in pursuance of this goal, ANZ has acquired a 10 % stake in Saigon Securities Incorporation (SSI) a leading listed securities and investment firm in Vietnam for USD 88 million (A$102mn) and enable ANZ to nominate a representative on the SSI board and play a role in management. The transaction is split in two parts :

1. Issue of new equity at AUD12.27 per share and
2. Conversion, at the discretion of ANZ, of interest bearing bonds purchased in 2006, would provide access to 5.55m shares at A$0.72c per share.

SSI, one of the largest Securities firm in Vietnam, was established in 2000 as a equity markets brokerage, proprietary trading and securities investment advisory firm and listed on the Hanoi Stock Trading centre in 2005. In 2006 SSI’s NPAT grew to A$20m, up from A$2m in 2005 and is forecast to reach A$50m in 2007 which implies a PE of 20.

Longer term ANZ is seeking to increase NPAT from its Asia investments (currently at 4%) to be on a like footing with its New Zealand investments ( currently at 22%). ANZ’s current investments in Asian Partnerships is around A$2.0bn which is 8.6% of its present shareholding equity.The SSI transaction would push its Asian investments to A$2.1 bn or 10% of its capital base which is half way to its objective.

This investment is consistent with the ANZ strategy of positioning investments in Asian region for high growth and participate in future industry consolidation.