CII borrowed 13,000 billion, where to get money to do 6 BOT projects worth 75,000 billion?

Ho Chi Minh City Infrastructure Investment Joint Stock Company (Code CII) failed to organize the 2023 Annual General Meeting of Shareholders due to insufficient number of voting shares attending in April 2023. It is worth mentioning that the company had a plan to give money to shareholders but only 45.76% of the total number of voting shares attended.

In addition, declining business results in the first half of 2023 and debts of up to thousands of billions of VND show instability in the company's capital structure.

Q2/2023 just escaped loss thanks to financial operating revenue

The business results of Ho Chi Minh City Infrastructure Investment in the second quarter recorded net revenue of VND843.4 billion, down 15.2% over the same period. Of which, the cost of goods sold accounted for a large amount of VND641.6 billion. The company's gross profit reached VND250.6 billion, down 55.4% over the same period. The company's gross profit margin decreased from 45.5% to only 23.9%.

The high cost of goods sold ratio and the decline in gross profit indicate that CII's business operations are having problems. In addition, financial revenue in the second quarter also increased sharply, from VND259.5 billion to VND461.9 billion, an increase of 128.2%.

Borrow 13000 billion, pay back 4 billion every day, get the first money to do 6 projects worth 75000 billion, picture 1 — CII borrowed 13,000 billion, paying 4.04 billion VND in interest each day (Photo TL)

Most of this financial revenue comes from investment cooperation, capital support, deposits and bonds. This is also the main revenue that helps the company's profit escape loss in the second quarter.

Although financial revenue increased sharply, financial expenses also increased by 41.2% to VND454.8 billion. The expense, a large part of which is interest expense, is putting great pressure on CII's revenue.

Business administration expenses and sales expenses both recorded a decrease in the second quarter, at 35.8 billion and 121.6 billion VND respectively. Profit after tax in the second quarter reached 83.3 billion VND, down 34.3% over the same period. If it were not for the 461.9 billion VND in financial revenue, CII would have certainly suffered a loss in the second quarter.

Debt of 13,000 billion and daily interest expense of up to 4 billion VND

By the end of the second quarter, CII's total assets reached VND26,649.2 billion, down 6.7% compared to the beginning of the year. The company is holding VND954.6 billion in cash and cash equivalents. In addition, there is a small deposit of VND2.5 billion along with VND615.6 billion recorded in securities investments.

A notable point is that the debt structure in CII's assets is taking up a relatively large proportion. Short-term debt has increased from 5,166.4 billion VND to 6,039.4 billion VND. This means that short-term loans have increased to 615.6 billion VND in just the first 6 months of the year.

Long-term debt currently accounts for VND 7,112.3 billion in CII's assets. If we calculate the total short-term and long-term debt, CII is currently borrowing up to VND 13,151.7 billion. This huge debt is currently 62.2% higher than the company's equity, causing great risks to CII's capital management.

With such a large proportion of debt, the interest expense that CII has to pay is also a relatively large number. In the second quarter alone, the interest expense that CII has to pay has reached 363.6 billion VND, equivalent to CII having to pay 4.04 billion VND in interest every day.

As of June 30, 2023, the company also confirmed the payment schedule of loans in 12 months up to VND 5,107.7 billion. The amount to be paid for bond loans in the next 12 months is also recorded at VND 2,004.7 billion.

Borrowing thousands of billions of dong, CII still plans to research 6 BOT projects with a total investment of 75,000 billion dong.

In the document of the 2023 Extraordinary General Meeting of Shareholders scheduled to be held on September 19, 2023 in Ho Chi Minh City, CII announced the study of 6 BOT projects with a total investment of up to 75,000 billion VND.

Borrow 13000 billion, pay back 4 billion every day, get the first money to do 6 projects worth 75000 billion, picture 2 — 6 BOT projects with a total investment of up to 75,000 billion that CII is researching, despite the huge debt of 13,000 billion that is currently existing (Documents of the 2023 Extraordinary General Meeting of Shareholders of CII)

The projects include: Ho Chi Minh City - Trung Luong - My Thuan Expressway Phase 2 with 22,000 billion VND; Improving traffic capacity in the Northwest area of Ho Chi Minh City with 19,059 billion VND; Project to upgrade and expand National Highway 1A from Tan Kien intersection to Long An border with 11,982 billion VND; Project to improve traffic capacity along Pham Van Dong - Nguyen Xi - Ung Van Khiem - Nguyen Huu Canh route with 10,108 billion VND; Project to upgrade and expand the North-South axis from Nguyen Van Linh to Ben Luc Long Thanh Expressway with 6,625 billion VND; Project to upgrade and expand the connecting route of Ho Chi Minh City - Trung Luong Expressway with 5,048 billion VND.

The study of BOT projects with a total investment capital of up to 75,000 billion VND has attracted investors' attention because currently, the debt structure accounts for a very large proportion of CII's total assets. Where will this unit get the resources to carry out large projects like this?

Source