Continuous losses, heavy debt burden

Duc Long Gia Lai Group Joint Stock Company (DLG) is a large and famous enterprise in Gia Lai, starting from the wood processing industry for domestic consumption and export. Chairman Bui Phap's enterprise expanded its operations to many industries and caused a stir in the stock market with the acquisition of the American component company Mass Noble in 2015. This company has a factory in China.

Since then, Duc Long Gia Lai's revenue has had a large additional source of income from the electronic components sector. This is also considered a strategic industry of the group, besides wood, real estate, hydropower, hotels and restaurants...

However, after 20 years of operation, Duc Long Gia Lai has not made the breakthrough as expected. The multi-industry strategy with agriculture, energy, infrastructure, electronic component manufacturing... caused Mr. Bui Phap's business to get bogged down in too many fields and operate ineffectively.

Duc Long Gia Lai has been in decline, making losses for the past two consecutive years. As of the end of the first quarter of 2024, the accumulated loss was up to VND 2,637 billion, compared to the charter capital of VND 2,993 billion. Shares fell to VND 1,960, not even worth a cup of iced tea. Current capitalization is over VND 595 billion.

DLG has a huge debt, up to more than 2,722 billion VND as of the end of March; of which nearly 1,073 billion VND is short-term loans and financial lease debt.

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Duc Long Gia Lai is a famous corporation in the mountainous town of Gia Lai. Photo: DLG

Duc Long Gia Lai also borrowed several thousand billion VND from many banks such as BIDV, VietinBank, Sacombank. By the end of March 2024, DLG still had an outstanding debt of about 1,700 billion VND from BIDV Bank, including nearly 1,329 billion VND in long-term loans.

The collateral for Duc Long Gia Lai's loans at BIDV is mainly fixed assets, BOT projects,...

Duc Long Gia Lai also has an outstanding debt of about 410 billion VND at VietinBank, mortgaged by the right to exploit and collect tolls at BOT stations on National Highway 14 in Dak Nong province.

DLG shares have been on warning status since April 2023 due to the auditor's exception on the 2022 financial statements. From April 11, 2024, DLG has been transferred from warning status to control status due to negative after-tax profit on the audited financial statements for the last 2 years.

Regarding bonds, at the end of 2023, DLG was only able to pay a small part of the total 200 billion VND of principal and interest payable for a batch of bonds. The reason was that the business production situation of the enterprise encountered many difficulties due to the impact of natural disasters and epidemics. In 2022, DLG also delayed paying the principal and interest of the bonds.

In the second half of 2023, Duc Long Gia Lai was involved in a scandal when Lilama 45.3 Company filed a petition to Gia Lai People's Court requesting to open bankruptcy proceedings because it could not collect a debt of 20 billion VND.

DLG said at that time that the company was not insolvent and had total assets of nearly VND6,000 billion. The company's financial resources were sufficient to repay its partners, customers, and banks from its production and business activities as well as receivables from its partners.

Consider selling the "money printing machine"

According to an announcement on July 15, Duc Long Gia Lai Group Joint Stock Company said it plans to restructure its capital contribution at Mass Noble Investments Limited (Mass Noble). The company wants to divest all of its capital contribution at this subsidiary.

Previously, Duc Long Gia Lai invested more than 249 billion VND, equivalent to 97.73% of Mass Noble's charter capital.

This is a deal that attracted the attention of investors 9 years ago. In May 2015, Duc Long Gia Lai announced that it had acquired Mass Noble through the form of issuing shares to Mass Noble shareholders at a conversion price of VND12,500/share, total value of VND249 billion. The conversion ratio is 1:1.4 (1 DLG share for 1.4 Mass Noble shares).

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Duc Long Gia Lai wants to divest all its capital contributions at Mass Noble.

In mid-2016, DLG acquired foreign enterprises, invested in high technology just to produce screws... in an effort to join the global production chain. At that time, Mass Noble Investments Limited officially acquired Hanbit Company (Korea) with an initial total investment of 10 million USD.

By becoming the new "owner" of DLG-Hanbit Co. Ltd (Hanbit), DLG officially entered the Korean electronic components manufacturing industry, becoming a partner of giants in this field.

To date, the electronic components segment contributes the majority of DLG's revenue. The company has three component manufacturing plants in Vietnam, Korea and China.

The most prominent of these is the ANSEN electronic components factory, located in Dongguang City (Guangdong Province, China). The factory covers an area of ​​40,000m2, specializing in manufacturing and processing high-tech electronic and telecommunications products such as high-end LED lights for interiors, cars, LCD screens, etc.

In the financial report, DLG had to pay the Chinese side 30 billion VND for land rent for the factory for 50 years.

Although electronic components are a major revenue generator for DLG, they are on a downward trend. Revenue from this segment in 2023 is VND573 billion, down from 2022 due to supply chain disruptions.

According to the recently announced divestment plan, DLG will hire a valuation company to re-evaluate the value of Mass Noble Company and transfer it at a price not lower than the face value as well as the ownership value of Duc Long Gia Lai at Mass Noble.

Besides electronic components, Duc Long Gia Lai also invests heavily in wind power, solar power and hydropower in Gia Lai with a total capacity of nearly 4,000MW, most of which is waiting to be added to the planning.

In 2024, Duc Long Gia Lai plans to increase net revenue by 25% to VND 1,400 billion and profit after tax of VND 120 billion.

Duc Long Gia Lai: Assets of thousands of billions, bankruptcy proceedings opened because of a debt of 20 billion? DLG shares of Duc Long Gia Lai were sold off in the context of the Gia Lai Provincial People's Court's decision to open bankruptcy proceedings against this group. Meanwhile, DLG's ability to continue operating is also questioned by the auditing firm.