PNJ unaffected by Dong A Bank’s crisis

Phu Nhuan Jewellery’s (PNJ) - photo source PNJ

Yet PNJ leader Cao Thi Ngoc Dung said that the small investment does not affect the company’s operation at large.

As Dong A Bank (DAB) has been placed under special supervision by the central bank, PNJ investors have been worried over the possibility that the company may have to make a big risk provision for its investment in the bank, or in the worst case, lose its entire capital at Dong A Bank.

PNJ currently holds 38.5 million DAB shares with a total book value of VND395 billion ($18.37 million) and another VND65.4 billion ($3.04 million) stake at Saigon M&C Real Estate JSC. Both were classified as long-term investments and in the first half of the year PNJ has set aside VND45 billion ($2 million) worth of risk provisions, without specifying the amount of provisions for each investment.

Provided that the full amount of these provisions was set aside for DAB, the figure would only account for a mere 14 per cent of the total VND395 billion worth of shares at DAB.

PNJ’s shares have been on the rise since early 2013, hitting VND40,000 ($1.86) in July this year. However, the company’s stocks have started to plummet since the beginning of August, losing some 20 per cent of their value, to VND32,500 ($1.51) as of August 14.

Last Saturday, PNJ chairman and general director Cao Thi Ngoc Dung and deputy general director Nguyen Thi Cuc met with PNJ’s investors at the company office, on account of the company’s first-half financial results and the investment issues with DAB.

Dung said that the loans from DAB only took up a very small amount of PNJ’s loan volume. Arguing that since PNJ does not rely on DAB’s loans, the current crisis will not have an impact on PNJ’s operation as a whole, he was quick to appease investors.

When asked whether PNJ has ever given a thought about the worst case scenario of losing its investment capital in DAB, Dung stated that “as an enterprise and a financial investor, we always make back-up plans for the worst outcomes possible. In this regard we set aside an adequate provision in line with the market price of each stock invested, including the DAB stocks, and at the same time ensure the shareholders’ rights”.

According to Dung, since 2012, PNJ has been making every effort to divest of its non-core investments, in order to be consistent with the company’s objectives communicated with PNJ shareholders earlier on.

PNJ has not made any additional investments in DAB since 2012, but has focused completely on its core line of jewellery. As a result, the company has achieved significant results. In particular, PNJ’s market segment has grown from 12 per cent in 2012 to 22 per cent in the first quarter this year, taking the lead in the country’s jewellery industry.

In addition, PNJ’s mid-year financial report revealed its estimated revenue to stand at roughly VND3.846 trillion ($178.88 million), signalling a 6 per cent increase compared to the same time last year, while its estimated gross and pre-tax profits were recorded at approximately VND546 billion ($25.39 million) and VND228 billion ($10.6 million), respectively. These figures have improved by 43 and 46 per cent compared to the same period last year. PNJ’s revenue from jewellery sales, as of June 31, notably grew some 45 per cent over the same period last year.