Construction enterprises advance abroad

Coteccons Construction Joint Stock Company and Hoa Binh Construction Group Joint Stock Company have taken the first steps to enter the world market.

Mr. Bolat Duisenov (sitting in the middle) is cautious about expanding construction services abroad at Coteccons. Photo : Le Toan

Start expanding construction services overseas

Both of the two construction giants in Vietnam, Coteccons Construction Joint Stock Company (Coteccons, code CTD) and Hoa Binh Construction Group Joint Stock Company (HBCG, code HBC), are planning to expand their construction business internationally, aiming to operate in many countries.

There are many reasons why the two "big guys" want to do this, partly because they accompany investors in Vietnam to expand abroad, partly because they see the opportunity to create a construction supply chain by taking advantage of low labor and material costs in Vietnam compared to developed countries and are confident in the level of engineers in Vietnam.

However, the actual results are still modest. Coteccons said that in the 2023-2024 fiscal year (from July 1, 2023 to June 30, 2024), 99% of revenue will come from the domestic market and only 1% from the international market.

Although there have been additional moves to open offices, establish investment subsidiaries abroad, as well as a strategy to accompany investors and proactively seek potential markets, Coteccons' Board of Directors still shows caution in its expansion strategy and considers this to be a stage of exploring new markets.

“The construction projects that Coteccons participates in have started to bring foreign currency to the Company. In particular, Coteccons is moving slowly but surely towards sustainable development. This is the time for the Company to build a solid foundation when entering the foreign market. Therefore, Coteccons does not want to be hasty in the opening stage,” Mr. Bolat Duisenov, Chairman of Coteccons emphasized.

At HBCG, in the first half of 2024, the Company has not shared its revenue structure by region. However, Chairman Le Viet Hai said that in early 2024, the Company received a letter of intent to bid for 5 social housing projects in Kenya with a total investment of 72 million USD. This is the first step in the direction of exporting comprehensive construction services abroad.

Vietcombank Securities Company expects that, in case the proposed solutions of HBCG are successful, the recorded profit will partly offset the accumulated loss in equity, helping to thicken the capital buffer and create momentum for recovery in the coming time.

Announcing the detailed plan from 2023 - 2028, Mr. Le Van Nam, General Director of HBCG said that the Company will restore its position within the next 3-5 years, increase its equity capital to over 10,000 billion VND and promote foreign markets, aiming to be in the top 50 construction companies in the international market.

It can be seen that both leading construction enterprises in Vietnam are in the early stages of their ambition to expand their construction services to the world. In which, the initial stage is still mainly expectation, the enterprises have not yet recorded significant revenue and profit.

Good financial position when expanding into foreign markets

To expand into the world market, Coteccons has proposed two main strategies including accompanying existing customers to invest abroad, such as the case of implementing VinFast 's project in India, and proactively seeking potential markets through direct bidding, joint venture bidding, or mergers and acquisitions (M&A) of construction companies in the host country to participate in bidding.

It is worth noting that, despite its goal of expanding overseas markets, Coteccons is still cautious in maintaining a cash fund of VND3,800 to VND4,000 billion to prepare for bad situations. In addition, the Company maintains domestic operations with an average revenue growth of 30% over 2.5 years, higher than the industry growth rate of 8% and a workload of more than VND22,000 billion by 2025.

In contrast to Coteccons, HBCG is in the process of restructuring, and has proposed 9 options from now until 2026 to increase its equity to VND 8,200 billion. Of which, the Company has issued shares to convert subcontractor/supplier debt (on June 27, 2024, 73.08 million shares were issued to convert VND 730.8 billion of debt); expected to sell debt worth VND 269 billion; sell part of construction equipment worth VND 400 billion; hand over the Lake Side Project, of which the Company is both the investor and general contractor, with an expected profit of VND 72 billion.

In addition, HBCG accelerated debt collection to recover VND938 billion in provisions; implemented the Asscent No Trang Long Project; transferred a number of real estate projects at No. 1 - Ton That Thuyet and 233 & 235 - Vo Thi Sau; M&A two projects at 127 - An Duong Vuong and Hai Luu Resort by issuing shares to partners; and finally, issuing shares to strategic partners.

Despite a profit of VND 828.98 billion in the first half of 2024, HBCG still has an accumulated loss of VND 2,403.2 billion (charter capital of VND 3,472.1 billion) and cash of only VND 320.5 billion, but total debt is up to VND 4,485.4 billion, equal to 269.8% of equity (industry average in 2023 is 125%).

Thus, because they are still in the early stages of providing construction services to the outside, both Coteccons and HBCG have not contributed much, the main market is still domestic, so this is the story of expectation.

Source: https://baodautu.vn/doanh-nghiep-xay-dung-tien-quan-ra-nuoc-ngoai-d225955.html