VNG Corporation (VNZ) has suffered losses for 7 years for ZaloPay, how is business?

Tech unicorn sinks into 11th consecutive quarter of losses

Starting out as a game publishing company, founded by Mr. Le Hong Minh in 2004, VNG Corporation (Code: VNZ) has grown to become a multi-industry corporation, hailed as Vietnam's "technology unicorn".

Besides domestically released game products, VNG is also the owner of a series of products including: Zing MP3, Zing TV, Bao Moi, ZaloPay or the messaging and calling application Zalo.

In contrast to its growing scale, VNG's multi-industry investment activities seem to be gradually reaching a dead end as the group has suffered nearly 3 consecutive years of losses.

VNG lost an additional VND586 billion in the first 6 months of 2024. 84% of the company's assets are liabilities (Photo TL)

Specifically, from Q4/2021 to the end of Q2/2024, VNG has experienced 11 quarters of losses. The most significant of which is the loss of 547 billion in Q4/2022 and the loss of 400 billion in Q2/2022. In 2022 and 2023, VNG's after-tax losses were 1,534 billion and 2,317 billion VND, respectively.

In 2024, the target of escaping losses was set by VNG and achieved well in the first quarter of 2024, the company recorded revenue of 2,259 billion and a loss after tax of 31 billion VND.

In the second quarter of 2024, VNG brought in 2,055 billion VND in revenue, but its after-tax loss once again escalated, reaching an alarming 489 billion VND.

The reason is that VNG has to "carry" two relatively large operating expenses including sales expenses of VND555 billion and business management expenses of VND332 billion. In addition, the deferred corporate income tax expense increased sharply to VND269 billion, 9.6 times higher than the same period, also pushing VNG's loss skyrocketing in the period.

At the end of the first 6 months of 2024, VNG recorded a total revenue of VND 4,314 billion, with accumulated loss after tax reaching VND 586 billion. This figure is still far from the revenue target of VND 11,069 billion and profit after tax of VND 195 billion set at the beginning of 2024.

ZaloPay, the burden of "bearing losses" for VNG

Despite its multi-industry development, the online game service segment is still playing a pivotal role in VNG's revenue structure. Specifically, the online game service segment brought in VND3,112 billion, equivalent to 72% of the group's total revenue in the first half of 2024.

This was followed by value-added services on telecommunications and the internet with VND653 billion. Online advertising activities achieved revenue of VND436 billion.

It can be seen that VNG's online game business is still bustling. But multi-industry investments, especially with ZaloPay e-wallet, are losing thousands of billions of VND.

In 2021, ZaloPay had a net loss of VND1,200 billion. This loss continued to increase to VND1,300 billion in 2022 before decreasing to VND721 billion in 2023. Including 2023, ZaloPay has suffered losses for 7 consecutive years.

Thus, despite having a large number of users, reaching 14 million users by mid-2024, ZaloPay is still a "burden" on VNG's business results.

84% of VNG's assets are liabilities

As of the end of the second quarter of 2024, VNG's total assets remained at VND10,126 billion, an increase of VND531 billion compared to the beginning of the year. Notably, the company is accumulating a large amount of cash, accounting for VND3,341 billion, equivalent to 33% of total assets.

Regarding capital structure, liabilities are overwhelming equity with VND 8,446 billion, equivalent to 84% of total capital. Most of which is short-term debt.

Short-term debt in the first 6 months of the year increased to 571 billion, accounting for 1,436 billion VND. Meanwhile, long-term debt was recorded at 595 billion VND. Thus, VNG's debt alone exceeded its equity, not to mention other payable obligations.

Owner's equity only accounts for VND 1,680 billion, equivalent to 16%. The accumulated undistributed profit after tax of VND 2,842 billion at the end of 2023 has decreased sharply, remaining only VND 1,402 billion at the end of the second quarter of 2024. Thus, in just the first 6 months of the year, undistributed profit after tax has decreased by VND 1,440 billion.

Source: https://www.congluan.vn/ganh-lo-7-nam-lien-cho-zalopay-du-co-14-trieu-nguoi-dung-vng-vnz-kinh-doanh-ra-sao-trong-6-thang-dau-nam-post310885.html