Australian investor poised to inject $60-100 million into Hoa Binh Construction Group

Hoa Binh Construction Group's AGM 2023

On the afternoon of June 27, Hoa Binh Construction Group (HBC) held its highly anticipated AGM for 2023.

In a pre-meeting video statement, Le Viet Hai, chairman of the Board of Directors, shared insights into the company's resilience amidst turbulent times, attributing it to their robust foundations.

Surprisingly, Hoa Binh Group presented an updated business plan for 2023, which surpassed previous expectations. The revised plan forecasts a revenue of approximately $520 million (an increase of about $208 million from the earlier projection), and an after-tax profit of around $5.2 million (an increment of approximately $1 million). Additionally, HBC aims to secure contracts worth an impressive $708 million this year.

During the meeting, HBC chose to omit information regarding the audited financial statements for the parent company in 2022 and the consolidated financial statements in 2022 from the Board of Directors' report.

Based on unaudited financial results, HBC reported a net revenue of approximately $590 million, equivalent to about 80.7 per cent of the initial plan, along with a net loss of around $107 million.

The AGM witnessed the presence of Bolat Duinov, chairman of Coteccons, a formidable competitor in the industry.

Furthermore, Tran Quang Tuan, chairman of Central Construction Company, also engaged in cordial discussions with prominent figures in Vietnam's construction sector.

However, by nearly 4pm, the AGM had only achieved a 50 per cent participation rate, dangerously close to the point of cancellation for the inaugural session of the meeting.

In the final moments of anticipation, the participation rate slightly surpassed the threshold, reaching 50.49 per cent and ensuring the successful continuation of the meeting.

In an intriguing revelation, CEO of HBC Le Van Nam unveiled that the company has garnered significant interest from four potential partners in its recent share issuance, with an MoU already signed. Notably, an Australian investor has expressed readiness to invest between $60-100 million to acquire HBC shares.

According to Nam, the company is not only mobilising capital to address issues with suppliers and subcontractors but also prioritising debt recovery efforts, restructuring loans with banks, and planning divestment from underperforming subsidiaries.

In mid-June, HBC's Board of Directors approved the transfer of a 100 per cent stake in its subsidiary, Matec Construction Machinery Company, to Ashita Group. The expected total value of the transfer, including partially depreciated equipment, exceeds $45.8 million, which will be utilised to augment HBC's working capital.

In addition, the revaluation of some real estate projects is also expected to contribute to a value increase of over $41.7 million for HBC.

Nam cited examples such as the Vo Thi Sau property, originally valued at around $1.25 million but currently estimated to be worth no less than $6.25 million. Similarly, a 3-hectare property in Nha Be, initially acquired at a cost of around $83 per square meter, now has legal proceedings completed for conversion to residential land and is projected to command prices as high as $833 per square meter, according to Nam.

The asset revaluation strategy primarily aims to augment the company's credit capacity. Nam also confirmed that HBC successfully negotiated a one-year extension for its debts with the bank, thereby mitigating the immediate debt pressure.

Hoa Binh Group acknowledged the direct impact of macroeconomic fluctuations and the challenging real estate landscape on its business operations in the past year. Cash flow was severely hampered due to construction delays, slow settlement processes, and the accumulation of outstanding debts.

The company's revenue witnessed a decline in 2022, primarily attributed to project delays or suspensions, while profit margins suffered from escalating material and labour costs, higher financial expenses, and a significant increase in the provisions for bad debts.

In 2022, HBC achieved a total contract value of approximately $661 million, accounting for 79.42 per cent of the annual plan and matching 95 per cent of the corresponding period in 2021.

New contract values in different regions included approximately $453 million in the South, around $76 million in the North, approximately $30 million in the central region, and an impressive $103.5 million in Phu Quoc.

Before the general meeting, chairman Le Viet Hai conveyed a sincere letter, appealing for the understanding and support of the shareholders regarding the encountered challenges and the company's business performance.

As of June 23, Hai reported that 89 suppliers and subcontractors had agreed to offset their debts through the issuance of shares, amounting to a total value of approximately $27 million.

He stated that once the asset revaluation is completed, shares are issued to strategic shareholders, and the recovery of short-term receivables (totalling around $86 million) is successfully accomplished, HBC's equity capital will not only regain its former strength but also exceed previous levels.

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