Vietourist Holdings "adventurous" with resort real estate investment

With the decision to invest in assets with a value more than twice the charter capital, the debt burden and financial costs will directly threaten the profits of Vietourist Holdings Joint Stock Company.

Travel agency is the main business of Vietourist Holdings.

Closing loan to buy hotel worth hundreds of billions of dong

The extraordinary general meeting of shareholders in mid-February 2024 of Vietourist Holdings Joint Stock Company (code VTD, UPCoM floor) agreed on a "huge" investment plan in Iris Can Tho Hotel in Ninh Kieu district, Can Tho city. The hotel building on a 723 m2 land area that has been put into operation is expected to be purchased by the Company for VND 254 billion.

Hundreds of billions of dong is a large number compared to the scale of assets of this travel business. Total assets by the end of 2023 will reach more than 221 billion dong. Not to mention, the capital for investment will be taken entirely from loans (200 billion dong from bank credit and 54 billion dong from other investors).

As of December 31, 2023, Vietourist Holdings mobilized more than VND 45 billion from bank loans, accounting for more than 20.3% of capital sources. Including other sources of debt, the company's debt ratio is less than 33%. Although it has implemented a capital increase through a share offering to existing shareholders in October 2022, the charter capital of this travel agency has only reached VND 120 billion, and equity is approximately VND 150 billion.

With the decision to invest in assets with a value more than twice the charter capital, the burden of debt and future financial costs will directly threaten the company's profits, especially for activities that only bring in "thin profits" such as the travel agency sector that Vietourist Holdings is mainly doing business in.

In 2023, the Company earned VND 167 billion in revenue, down 3.5% compared to 2022, mainly due to a decrease in revenue from tourism services. While input costs increased, net profit was only less than 20% of the same period, reaching only VND 2.1 billion, completing less than 1/10 of the set target. With nearly VND 30 billion in undistributed profit after tax, the plan to pay a 5% dividend, equivalent to paying VND 6 billion, is still sufficient to implement, but may need to be considered if prioritizing investment goals.

From travel business to resort business ambition

Mr. Nguyen Duong Trung Hieu, General Director of Vietourist Holdings, said that the testing of tours to the West in 2023 received good feedback, in which the 4-day, 3-night West route achieved a positive number of visitors and showed potential. "This is the basis for the Company to decide to invest in accommodation and food services to control costs to ensure competitiveness," said Mr. Hieu.

Vietourist Holdings also planned to own the 3-star Doan Gia Resort with an area of 1.3 hectares in Quang Binh by purchasing 100% of the capital contribution of Doan Gia QB Investment Company Limited, for 145 billion VND. However, the above plan was stopped because "the current time is not suitable". The recent shareholders' meeting also canceled this plan.

Tourism has been the core business of Vietourist Holdings for nearly 13 years of operation. Although both aim to exploit the tourism market, the two business segments of travel agency and resort real estate investment/business have very big differences, especially in terms of capital scale requirements.

In fact, this is not the first time this travel agency has presented its shareholders with a plan to invest in resort real estate. At present, the company has spent nearly 11 billion VND to deposit to reserve the purchase of 5 small hotels at the Regal Legend Quang Binh International Investment - Tourism Project. In addition to the deposit, the additional amount needed to complete the purchase is 50 billion VND.

Previously, Vietourist Holdings also had ambitions to acquire Dong Xanh Cultural Park (13 hectares) and Tre Xanh Hotel, which are assets of Hoang Kim Tay Nguyen Group (code CTC) - an affiliated company in which Vietourist Holdings owns 22.6% of the capital. Vietourist Holdings has also leased this hotel for business in recent years.

As a collateral asset that is being seized by the bank, the Tre Xanh Hotel of the “tycoon” of the Central Highlands has been auctioned for the third time with a starting price of over VND80.66 billion. The loss-making business situation of Hoang Kim Tay Nguyen is causing CTC shares to plummet.

Not only did the market value of the investment that Vietourist Holdings contributed capital “evaporate” by 87%, the provision for the investment also significantly increased the Company’s expenses last year. Using too much financial leverage is a risky option, and the most recent and clear lesson is right at Vietourist Holdings’ affiliated company.

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