Huy động vốn vẫn là vấn đề lớn đối với Hodeco

With limited cash, debt maturing pressure and large capital needs when implementing many projects, Ba Ria - Vung Tau Housing Development Joint Stock Company (Hodeco, code HDC) is having to promote the issuance of shares and bonds.

Maintain low cash levels when investment needs are high

By the end of 2023, Hodeco had a cash fund of VND 17.5 billion (accounting for 0.37% of total assets), total debt up to VND 1,704.7 billion, equal to 89.4% of equity (the industry average recorded total debt to equity of 69%).

In 2024, Hodeco plans to increase investment by 645.7% compared to 2023, to VND 2,856 billion (disbursement of VND 383 billion in the same period). In particular, the Company focuses on implementing projects such as Hai Dang Residential Area (The Light City); Doi Ngoc Tuoc II Villa Area; Dai Duong Tourist Area (Antares); Residential Area No. 2, West of 3/2 Street; Ecotown Phu My; Phuoc Thang Urban Area ...

With the plan to boost disbursement in 2024 in the context of limited cash, the Company plans to mobilize VND 1,000 billion through bank loans and capital mobilization from issuance. In particular, for the bond issuance plan, the Company plans to issue up to VND 500 billion in individual bonds in 2024 to serve production and business activities.

In fact, in addition to raising loans, in 2023, Hodeco planned to issue 20 million shares to existing shareholders, but has not yet implemented it.

Explaining the delay in raising capital, Hodeco said that the process of reviewing documents was difficult and lengthy, and the Company plans to continue offering shares to raise capital in the first and second quarters of 2024.

It is known that according to the initial capital mobilization plan, the Company plans to offer 20 million shares to existing shareholders at VND15,000/share, raising VND300 billion. The entire amount raised will be used to pay off bank loans and interest.

As of December 31, 2023, Hodeco had a total debt of VND 1,704.7 billion, of which VND 1,009 billion was short-term debt and the remaining VND 695.7 billion was long-term debt. Particularly for short-term debt, VND 575.2 billion was debt with a term of less than 1 year. Meanwhile, VND 336.2 billion was long-term debt due within 1 year.

Thus, with huge debt maturing pressure, limited cash funds, and slower-than-expected stock issuance, Hodeco must soon mobilize new capital to ensure debt repayment, while implementing an ambitious investment plan in 2024, when the total disbursed capital is expected to reach VND 2,856 billion.

Ambitious plans at the beginning of the year, but results are quite modest

In addition to its ambitious investment disbursement plan, in 2024, Hodeco also attracted the attention of investors when it planned strong business growth. In particular, Hodeco planned revenue of VND 1,657.6 billion, an increase of 146.7%; expected after-tax profit of VND 424 billion, an increase of 222.4% compared to the implementation in 2023.

It is known that in recent years, Hodeco has continuously set ambitious business plans, but the results achieved have been quite modest and the Company has had to use financial transactions to improve its operating results.

In 2022, Hodeco recorded revenue of VND 1,558 billion, completing 81.44% of the plan and after-tax profit of VND 420.6 billion, completing 97.85% of the plan. Notably, in the fiscal year, the Company recorded financial revenue of VND 260 billion, accounting for 48.1% of total pre-tax profit, mainly due to the sale of 5 million shares of Dai Duong Vung Tau Entertainment Construction Investment Joint Stock Company, transferring accounting from a subsidiary to an associate.

If we eliminate the financial transaction of selling subsidiary capital to switch to accounting for affiliated companies, Hodeco's profit is still far from the set plan.

Similarly, in 2023, when it no longer recorded extraordinary financial revenue, Hodeco immediately recorded a decline in business results, with revenue reaching VND 665.58 billion, down 48.7% over the same period and profit after tax reaching VND 131.59 billion, down 68.7% over the same period.

In 2023, Hodeco plans to do business with revenue of VND 1,770 billion, an increase of 13.6% and expected profit after tax of VND 488 billion, an increase of 17.6% compared to the implementation in 2022. By the end of 2023, the Company only completed 27% of the annual plan.

In fact, with the business results plummeting, HDC's stock price has recently shown signs of rebounding when the Company announced its ambitious business plan. However, at the current price of VND33,350/share, HDC's stock is trading at a much higher valuation than the industry with a P/E valuation of 32.11 times (industry average is 15.96 times) and a P/B valuation of 2.24 times (industry average is 1.45 times).

It can be seen that at the beginning of fiscal year 2024, Hodeco has ambitious plans to accelerate its capital mobilization plan to support stock prices, but because the stock price is no longer cheap compared to the industry average, investors will take many risks if they buy stocks regardless of valuation.

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