The Vietnamese real estate market has recently changed positively. Transactions in the apartment segment in Hanoi and Ho Chi Minh City have become active again at many times, with prices increasing sharply. Land auctions in many localities, especially in Hanoi, have pushed prices very high. Many projects of real estate enterprises are gradually having legal problems resolved so that goods can be put on sale, such as the cases of Phat Dat Real Estate (PDR), Novaland (NVL)...

Normally, at such times, real estate stocks are sought after by institutional investors, including foreign investors, to catch a rising wave. However, there are signs that real estate stocks are no longer attracting the attention of foreign institutions. Many institutions are also accelerating divestment from businesses.

According to an announcement from Khang Dien House Investment and Trading Joint Stock Company (KDH), Vietnam Ventures Limited under VinaCapital registered to sell nearly 1.54 million KDH shares from December 5, 2024 to January 3, 2025, to restructure its investment portfolio.

If the sale is successful, Vietnam Ventures Limited's ownership ratio at Khang Dien will decrease from 0.89% to 0.73%.

In September, the fund successfully sold 9.54 million KDH shares out of nearly 12 million registered KDH shares. In total, since July, Vietnam Ventures Limited has sold nearly 11.1 million KDH shares.

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A project of Khang Dien House. Photo: KDH

Surprisingly, even real estate companies whose stocks hold their value do not have the same positive financial health as their financial reports.

Khang Dien House profits thousands of billions, why do foreign funds divest?

Khang Dien House has a charter capital of more than 10 trillion VND, and its capitalization as of December 3 reached nearly 33.2 trillion VND (about 1.3 billion USD). KDH has had after-tax profits of more than 1,000 billion VND for many years, such as in 2020-2022. In 2023, the results were worse, but KDH still recorded a profit of nearly 730 billion VND.

According to the financial report, Nha Khang Dien has quite positive business results with revenue of about 2,200-4,600 billion VND/year and profits mostly at the level of thousands of billion VND/year even in the most difficult times.

Gross profit is very high, often up to 50% of revenue, meaning selling 2 dong has a gross profit of 1 dong. In 2023 alone, gross profit will be up to 75% of revenue, meaning earning 4 dong has a gross profit of about 3 dong.

Despite such positive prospects, with after-tax profits at trillions per year, KDH shares did not break out and foreign funds still divested.

First of all, Vinacapital's divestment may follow the general trend in the market and not meet expectations. The business picture is not necessarily bright, and KDH's actual profit may not be that high.

In the first 9 months of 2024, KDH reported a gross profit of nearly VND 832 billion out of a total revenue of nearly VND 1,232 billion, financial expenses of VND 141 billion, other expenses of VND 104 billion and interest expenses of more than VND 45 billion... Profit after tax was more than VND 410 billion.

With a scale of tens of thousands of billions like KDH, the interest expense figure of 45 billion VND is very surprising, too small, and normally will attract the attention of many investors.

But is that really the case?

In the 9-month financial report, it can be seen that KDH has a total short-term loan of 1,100 billion VND and a long-term loan of more than 6,708 billion VND, a total of 7,708 billion VND. With the lending interest rate of banks assumed at 8 - 10%/year, the total interest in 9 months is about 540 - 580 billion VND. If so, KDH may lose money.

The cash flow statement also shows that in the first 9 months of 2024, KDH had to pay interest of more than VND 580.6 billion, not more than VND 45 billion on the income statement.

That number may be because KDH has capitalized interest expenses, recorded them in asset value, and in inventory.

KDH's inventory by the end of September 2024 reached nearly VND 22,450 billion, a sharp increase compared to VND 18,787 billion in the same period last year.

This is also not the first time KDH has used this technique. In its 2023 self-made report, KDH recorded interest expenses of more than VND 143 billion, but after auditing, it was adjusted to VND 217 billion.

In 2022, KDH recorded interest of 9.3 billion VND, but the actual interest paid was more than 496 billion VND.

In 2024, many real estate businesses will still face numerous difficulties, including bond debt, bank loans and large inventories.

According to Vietstock, the inventory of more than 100 enterprises in the residential real estate and industrial park group on the three exchanges in the third quarter set a new record, exceeding VND530 trillion, up 12% compared to the beginning of the year. Of which, Novaland (NVL) took the lead with more than VND145 trillion, up 5% compared to the beginning of the year. Vingroup (VIC) had an inventory of more than VND128.2 trillion, up 38% compared to the beginning of the period.

Apartment prices reach hundreds of millions per square meter, real estate giants rush to show off profits . Apartment prices reach hundreds of millions per square meter in the suburbs, auctioned land also skyrockets. Brokerage revenue at some real estate companies has increased sharply. Are real estate transactions really bustling again?