Billion dollar footprint
Hoa Phat Group - a business led by billionaire Tran Dinh Long - has just proposed a plan to arrange the planning area for Bai Goc port, Dong Hoa town, Phu Yen province.
According to the master plan, this port area has the function of directly serving the needs of forming and developing Bai Goc industrial park, oil refining, metallurgy and energy industry, with general wharf, bulk cargo, liquid or gas cargo.
The Group proposed to arrange the planning area including the port scale, capacity, breakwater, steel factory scale; analyze the advantages and disadvantages of each option and propose a feasible option... The arrangement of the port area is divided separately for functional areas: Oil port, port serving the steel factory, general port, public service port.
This latest move by Hoa Phat is part of its plan to invest about 5 billion USD (120,000 billion VND) in Phu Yen, related to 4 projects in the South Phu Yen Economic Zone. Bai Goc Port is one of the 4 projects, the others are Hoa Tam Industrial Park, Hoa Phat Iron and Steel Complex in Hoa Tam Industrial Park and the commercial - service area project.
The plan to invest in several projects in Phu Yen has stirred up information about Hoa Phat in the real estate sector, which has been quite quiet since the beginning of the year. Previously, in February, this group and Hop Nghia Investment Corporation were the only joint venture that met the preliminary requirements on capacity and experience to implement the Cao Xa Eco-Rural Residential Area project in Lam Thao district, Phu Tho province. The total investment of the project is expected to be more than 5,600 billion VND.
Or in June, a subsidiary of Hoa Phat was also the only investor registered to implement the Minh Hai - Phan Dinh Phung Urban Area in Hung Yen, with an investment capital of more than 3,200 billion VND.
Everyone does real estate.
Billionaire Tran Dinh Long - Chairman of the Board of Directors of Hoa Phat - once said: No one makes steel forever, Hoa Phat must diversify and real estate is a direction in that multi-industry strategy, at the company's 2021 annual general meeting of shareholders.
In fact, this group has been involved in real estate for more than 20 years with two main areas: industrial parks and urban areas.
The group's industrial parks are concentrated in Hung Yen and Ha Nam. According to information summarized at the end of 2021, Hoa Phat exploited 3 industrial parks with a total area of over 1,100 hectares after 20 years of investing in this field.
As for housing, this group has several projects in Cau Giay, Hoang Mai, Dong Da... and a large urban area of 262 hectares in Hung Yen.
Having participated for nearly 2 decades, it was not until 2020 that Hoa Phat identified real estate as its main business , alongside steel. The real estate corporation was established, one of the 5 key corporations of the group.
To increase land fund, billionaire Tran Dinh Long once determined the direction to participate in bidding and develop projects in localities. Mr. Long clearly stated that this direction has good prospects because enterprises participate in investment from the beginning, the company has money so it is not under financial pressure.
Explaining this strategy, the Chairman of Hoa Phat said that the issuance of bonds was easy, so real estate companies with a lot of money bought many projects, leading to an increase in land prices. Therefore, Hoa Phat has not bought any real estate projects , at the 2022 Annual General Meeting of Shareholders.
Earlier this year, also in a meeting with shareholders, Mr. Tran Dinh Long continued to update this orientation. Evaluating the industrial park, Mr. Long admitted that it did not bring in too much money but was stable, with a good profit margin. With experience, Hoa Phat will both develop existing industrial parks and buy back or apply for new ones to expand 4-6 more zones, by 2030 there will be 10 industrial parks.
For urban areas, Hoa Phat continues to register initial investment in localities and complete procedures. According to Mr. Long, this method may take "a long time" but Hoa Phat will calmly do it, without setting a target of how many hectares it must have. The company is also promoting legal procedures so it does not spend much money to buy the project. In the future, it may spend money to buy other projects, but not at this time.
With the "bidding" direction, in the past few years, Hoa Phat has proposed to invest and finance the planning of projects with an area of hundreds of hectares in many provinces and cities such as Khanh Hoa, Quang Ngai, Hai Duong, Can Tho, Thua Thien Hue, Dak Nong... In 2022, Hoa Phat participated in bidding for housing projects in Bac Giang, Hung Yen, Phu Tho.
The real estate corporation has three subsidiaries in this field, including Hoa Phat Urban Development and Construction Joint Stock Company (charter capital of VND6,500 billion), Hoa Phat Hanoi Real Estate Joint Stock Company (VND550 billion) and Hoa Phat Saigon Real Estate Joint Stock Company (VND500 billion). In addition, the company also has other level 2, level 3 and level 4 companies.
In 2022, billionaire Tran Dinh Long sees the real estate industry "going from hot to cooling down and freezing at the end of the year".
Although it is a key industry, in 2022, real estate only accounts for 1% of Hoa Phat's revenue and 3% of its profit.
Real estate contributes a small proportion to Hoa Phat's revenue and profit structure in 2022 (Source: 2022 Annual Report).
The group's report shows that real estate revenue in 2022 decreased by 59% and profit decreased by 41% (meeting the target compared to the assigned plan). Specifically, revenue reached 686 billion VND and net profit reached 299 billion VND.
Although the results decreased compared to the previous year, the proportion is still small in the group's business structure, but the real estate business performance is quite good. The company earns 1 dong for every 2 dong earned. The after-tax profit margin reached nearly 47%, a significant increase compared to 31% compared to the previous year.
One advantage of Mr. Tran Dinh Long's business when doing real estate is that the business always has money available. The amount of cash and idle money is high every year. In 2022, this number is nearly 34,600 billion VND, accounting for 43% of total short-term assets.
Challenges from the spiral of fluctuations
Hoa Phat is oriented to become a multi-industry enterprise with 5 different fields. In 2022, real estate and household appliances achieved their targets; the refrigeration industry doubled its plan. However, the steel industry saw a 76% decrease in profits and agriculture decreased by 92% compared to the same period.
Mr. Tran Dinh Long called 2022 a year of fluctuations in war, interest rates, inflation, and exchange rates. In which, real estate "went from hot to gradually cooled down and froze at the end of the year". Exchange rates and interest rates also reached an unprecedented fever and only cooled down in December 2022. Hoa Phat recorded consecutive deep losses for the first time in the second half of 2022.
Looking back, the difficulties of the real estate industry do not only affect it. In fact, steel is also greatly affected by real estate, which is a business segment that is bringing great profits to Hoa Phat. In 2022, revenue and profit after tax of this segment accounted for 94% and 95% of the structure, respectively.
Specifically, the weakening real estate market will reduce consumption in the market, while the supply of goods at factories is still piling up inventory.
Faced with the frozen real estate market since the second half of 2022, Hoa Phat has adjusted production according to market supply and demand in the direction of reducing inventory turnover and cutting production costs. The Group also expects public investment to be the driving force to boost steel consumption demand in the coming time.
This year, the group assessed that the steel industry still faces many difficulties, in which institutional framework barriers have not been removed, especially the real estate industry, related to the output of the steel production industry.
The domestic steel consumption market remained low in the first half of the year and competed with imported steel products from China. However, the company chaired by Tran Dinh Long is promoting its export channel and recorded positive signs when the steel export output reached 98,000 tons in August, double the average of the first 6 months of the year.
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