Raising capital remains a big problem for Hodeco

With limited cash, debt maturing pressure and large capital needs when implementing many projects, Ba Ria - Vung Tau Housing Development Joint Stock Company (Hodeco, code HDC) is having to promote the issuance of shares and bonds.

Maintain low cash levels when investment needs are high

By the end of 2023, Hodeco had a cash fund of VND 17.5 billion (accounting for 0.37% of total assets), total debt up to VND 1,704.7 billion, equal to 89.4% of equity (industry average recorded total debt to equity is 69%).

In 2024, Hodeco plans to increase investment by 645.7% compared to 2023, to VND 2,856 billion (disbursement of VND 383 billion in the same period). In particular, the Company focuses on implementing projects such as Hai Dang Residential Area (The Light City); Ngoc Tuoc Hill Villa Area II; Ocean Tourist Area (Antares); Residential Area No. 2, West of 3/2 Street; Ecotown Phu My; Phuoc Thang Urban Area...

With the plan to boost disbursement in 2024 in the context of limited cash, the Company plans to mobilize 1,000 billion VND through bank loans and capital mobilization through issuance. In particular, for the bond issuance plan, the Company plans to issue a maximum of 500 billion VND of individual bonds in 2024 to serve production and business activities.

In fact, in addition to raising loans, in 2023, Hodeco planned to issue 20 million shares to existing shareholders, but has not yet implemented it.

Explaining the delay in capital mobilization, Hodeco said that the process of reviewing documents was difficult and lengthy, and the Company plans to continue offering shares to raise capital in the first and second quarters of 2024.

It is known that according to the initial capital mobilization plan, the Company plans to offer 20 million shares to existing shareholders at a price of 15,000 VND/share, raising 300 billion VND. The entire amount mobilized will be used to pay off bank loans and interest.

As of December 31, 2023, Hodeco has a total debt of VND 1,704.7 billion, of which VND 1,009 billion is short-term debt and the remaining VND 695.7 billion is long-term debt. Particularly for short-term debt, there are VND 575.2 billion of debt with a term of less than 1 year. Meanwhile, there are VND 336.2 billion of long-term debt due within 1 year.

Thus, with huge debt maturing pressure, limited cash funds, and slower-than-expected stock issuance, Hodeco must soon mobilize new capital to ensure debt repayment, while implementing an ambitious investment plan in 2024, when the total disbursed capital is expected to reach VND 2,856 billion.

Ambitious plans at the beginning of the year, but results are quite modest

In addition to its ambitious investment disbursement plan, in 2024, Hodeco also attracted the attention of investors when it planned strong business growth. In particular, Hodeco planned revenue of VND 1,657.6 billion, an increase of 146.7%; expected after-tax profit of VND 424 billion, an increase of 222.4% compared to the implementation in 2023.

It is known that in recent years, Hodeco has continuously set ambitious business plans, but the results achieved have been quite modest and the Company has had to use financial transactions to improve its operating results.

In 2022, Hodeco recorded revenue of VND 1,558 billion, completing 81.44% of the plan and after-tax profit of VND 420.6 billion, completing 97.85% of the plan. Notably, in the fiscal year, the Company recorded financial revenue of VND 260 billion, accounting for 48.1% of total pre-tax profit, mainly thanks to the sale of 5 million shares of Dai Duong Vung Tau Entertainment Construction Investment Joint Stock Company, transferring accounting from a subsidiary to an associate.

If we eliminate the financial transaction of selling capital of subsidiaries to switch to accounting for associated companies, Hodeco's profit is still far from the planned target.

Similarly, in 2023, when it no longer recorded extraordinary financial revenue, Hodeco immediately recorded a decline in business results, with revenue reaching VND 665.58 billion, down 48.7% over the same period and after-tax profit reaching VND 131.59 billion, down 68.7% over the same period.

In 2023, Hodeco set a business plan with revenue of VND 1,770 billion, an increase of 13.6% and expected profit after tax of VND 488 billion, an increase of 17.6% compared to the implementation in 2022. By the end of 2023, the Company only completed 27% of the year plan.

In fact, despite the decline in business results, HDC's stock price has recently shown signs of rebounding as the Company announced its ambitious business plan. However, at the current price of VND 33,350/share, HDC's stock is trading at a much higher valuation than the industry, with a P/E of 32.11 times (industry average is 15.96 times) and a P/B of 2.24 times (industry average is 1.45 times).

It can be seen that at the beginning of fiscal year 2024, Hodeco has ambitious plans to accelerate its capital mobilization plan to support stock prices, but because the stock price is no longer cheap compared to the industry average, investors will take many risks if they buy stocks regardless of valuation.

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