Tien Len Steel continues to miss capital call deadline

Continuously planning to raise capital to implement real estate projects and supplement working capital, Tien Len Steel Company could not implement when the stock price remained below par value and business results had not improved.

After failing to complete the offering of 102.1 million shares at VND10,000/share in 2022, Tien Len Steel Group Joint Stock Company (code TLH) continues to plan to offer shares to shareholders in 2023. In particular, the Company plans to offer to existing shareholders at a ratio of 1:1, equivalent to offering 112.32 million shares at VND10,000/share to raise VND1,123.2 billion.

In fact, since the plan to continue offering in mid-April 2023 was approved until the end of 2023, TLH shares have only traded between VND6,000 and VND10,000 per share. As of February 1, 2024, TLH shares were VND8,030 per share, 19.7% lower than the offering price of VND10,000 per share.

The fact that TLH shares are trading below the offering price raises many doubts about the ability to successfully raise capital. And in fact, the 1:1 offering in 2023 was not carried out. Besides the obstacle of the stock price not attracting investors to put more money into the company, Tien Len Steel's business activities still show many signs of instability.

When steel prices began to plummet in the second half of 2022, the Company reported a 14.6% increase in revenue to VND5,324.5 billion and a 98.3% decrease in after-tax profit to VND7.5 billion. Of which, gross profit margin dropped sharply from 14.6% to only 5.4% and recorded a record loss of VND114.2 billion in the fourth quarter of 2022.

After a record loss in the fourth quarter of 2022, Tien Len Steel has made a profit in three consecutive quarters, namely the first, second and third quarters of 2023, with values of VND 6.28 billion, VND 5.03 billion and VND 5.2 billion, respectively. However, in the last quarter of 2023, the Company recorded a loss of VND 12.5 billion, with a cumulative profit of VND 4 billion for the whole year of 2023, down 46.7% over the same period and only completing 4% of the profit plan of VND 100 billion in 2023.

With business declining and losses returning, Tien Len Steel began to show signs of being unable to "bear" losses in securities investments like previous years, forcing it to liquidate its non-core investment portfolio despite large losses. As of December 31, 2023, the Company had reduced the value of its securities investments to VND 3.06 billion (at the beginning of the year, it invested up to VND 105.6 billion).

In particular, a series of stocks were sold in full, such as IJC stocks (invested 18.2 billion VND at the beginning of the year, provisioned 11.2 billion VND); SHB stocks (invested 23.5 billion VND at the beginning of the year, provisioned 13.5 billion VND); VIX stocks (invested 21.2 billion VND at the beginning of the year, provisioned 14.7 billion VND) ...

Cutting losses from non-core operations in the context of a continued business downturn in 2023 has helped Tien Len Steel's cash fund and short-term financial investments increase by 60% compared to the beginning of the year, equivalent to an increase of VND 117.3 billion, to VND 312.9 billion and accounting for 7.6% of total assets.

According to research, Tien Len Steel is a trading company whose business activities depend on domestic and international steel price movements, as well as domestic demand. Historical data shows that with an inventory of up to VND 2,413.4 billion, accounting for 58.5% of total assets, Tien Len Steel continuously makes large profits when steel prices increase sharply, or has poor business performance when it has to set aside provisions due to falling steel prices.

The Vietnam Steel Association (VSA) forecasts that Vietnam's steel production could increase by about 10% in 2024 and 8% in 2025 as demand for steel in economic sectors increases due to the sharp increase in disbursement of public investment capital for large transport infrastructure projects...

SSI Research also expects that steel companies' profits will grow strongly in 2024 from a low base in 2023 thanks to improved consumption output, especially at leading enterprises. Gross profit margins will also increase again from a multi-year low as steel prices are likely to end the downward trend of previous years.

It can be seen that 2024 is expected to be the next year of recovery for steel enterprises in general and Tien Len Steel in particular. With more than half of its assets being inventory, the recovery in steel prices will immediately help increase the value of inventory that Tien Len Steel owns.

Source