CIC Group (CKG) debt exceeds equity, shares are put on warning list

CIC Group (CKG) has just been put on warning list by HoSE.

Kien Giang Construction Investment Consulting Group Joint Stock Company - CIC Group (HoSE code: CKG) is a unit operating in the field of construction and real estate development.

Recently, the Ho Chi Minh City Stock Exchange (HoSE) has decided to put CKG shares of this unit on warning status from September 27, 2023 because the company was 15 days late in submitting its audited semi-annual financial statements compared to regulations.

The fact that CKG stock code was put on warning status also somewhat affected the operations of CIC Group because on September 11, 2023, CIC Group decided to implement a plan to issue individual shares to professional securities investors.

CIC Group's CKG exceeds the owner's capital and shares are put on warning list, picture 1 — CIC Group (CKG) shares were put on warning immediately after announcing a plan to issue an additional 13.4 million shares (Photo TL)

In particular, the Board of Directors approved the private offering of 13,400,219 shares to professional securities investors. The offering price is VND15,000/share. With this plan, CIC is expected to collect VND201 billion.

The amount of 201 billion collected will be allocated by the company as follows: 97.3 billion VND will be used to pay debts to contractors; 96.8 billion VND will be used to pay due loans and 6.9 billion VND will be used to buy materials and pay salaries to staff.

Thus, it can be seen that most of the money raised from this issuance is used to pay off debt.

Gross profit declines, CIC Group almost fails to complete annual plan

CIC Group's plan to issue shares took place in the context that this unit recorded a decline in both revenue and profit. In which, revenue in the second quarter of 2023 reached VND 372.8 billion, down 7.2% over the same period. Gross profit was VND 113.2 billion, gross profit margin decreased from 31.1% to only 30.4%.

The notable change in the period was financial expenses, which increased by 59%, accounting for VND8.6 billion in the revenue structure. Selling expenses and administrative expenses accounted for VND3.9 billion and VND34.8 billion, respectively. CKG's after-tax profit was only VND58.6 billion, down 16.5% compared to the first half of 2022.

By the end of the second quarter of 2023, CIC Group's accumulated revenue reached VND 623.9 billion, accumulated profit after tax reached VND 84 billion. Compared to the target plan in 2023 with revenue of VND 1,234.9 billion and profit after tax of VND 175 billion, CKG has currently only completed 47.1% of the revenue plan and 48% of the annual profit plan.

Cash flow down to 1/3, assets worth trillions but mostly debt

CKG's total assets reached VND4,729 billion at the end of the second quarter of 2023, a slight decrease compared to the beginning of the year. Although its total assets are in the thousands of billions, the amount of cash that CKG holds is extremely low, accounting for only VND20.5 billion. In addition, the company has an additional VND3.5 billion in deposits at the bank.

In the asset structure, CKG's total cash has decreased by nearly 70% compared to the beginning of the year. The amount of bank deposits has decreased from 14.7 billion to only 3.5 billion VND, equivalent to a decrease of 76%. Thus, the amount of cash that CKG is holding accounts for only 0.5% of total assets. This will increase the liquidity risk for the company.

In addition, inventories currently account for VND2,839.6 billion, a slight increase compared to the beginning of the year. Most of which is unfinished production costs. Goods and raw materials account for only VND5 billion.

In CKG's capital structure, the majority of this unit's capital is debt, accounting for VND 3,416.7 billion, equivalent to 72.2% of the total current capital. The company is borrowing short-term debt of VND 664.9 billion, long-term loans and financial lease debt also account for VND 891.2 billion. Total current debt accounts for VND 1,556.1 billion, 18.6% higher than current equity.

The asset structure is mostly debt, debt is higher than equity while the remaining cash is very little. It is not difficult to understand why CIC Group has to plan to issue more shares to increase capital by 201 billion VND. Most of it is used for debt repayment purposes.

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