Core business key as companies pull out of real estate

June 05, 2023 | 11:55
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Inauspicious market conditions have compelled many producers to make a U-turn on ventures into real estate to focus on core areas.

In early April, the Board of Directors at Nam Viet JSC, a seafood producer in the southern region, gave the nod to the decision on dissolving Nam Viet Real Estate Co., Ltd.

This company, based in Long Xuyen city in the Mekong delta province of An Giang, was founded in March 2022 to operate in real estate.

Core business key as companies pull out of real estate
Real estate might not always prove a fertile venture

At the inception, the company had $3.5 million in chartered capital, which was scaled down to around $391,300 in mid-June 2022 before terminating operation in the recent past.

At the company’s 2022 general annual shareholders meeting in June, CEO Doan Toi told shareholders that the company owned land, and that they would unveil two real estate projects later in the year, and another two in 2023.

Last year, Nam Viet set an ambitious pre-tax profit target of VND1 trillion ($43.4 million) compared to a mere $6.5 million pre-tax profit posted in 2021, and committed to maintaining its profit in the range of a trillion VND in successive years.

However, from mid-2022 its fish business turned unfavourable amid high inflation in Vietnam’s major seafood export markets.

Consequently, last year the company’s pre-tax profit came to $$33.6 million, equal to 77.4 per cent of the full-year plan.

In the first quarter (Q1) of this year, its pre-tax profit shed 54.7 per cent on-year to just $4.6 million.

Experts assumed that the most favourable period for the seafood business had gone, and this could be behind the recent decision by Nam Viet’s Board of Directors to stop expanding into real estate.

Similarly, the International Dairy Products JSC (IDP) has just got the thumbs-up to dissolve its subsidiary Green Light Investment JSC which was founded in August 2022 with an estimated chartered capital reaching $21.7 million to conduct real estate investment and business.

The possession of a large cash pile thanks to stable business might be the reason behind IDP’s venture into real estate. As of June 30, 2022 the company possessed $71.3 million in cash flow and financial investment, accounting for 48.6 per cent of its total asset value.

The venture, however, was wrapped up quickly as IDP decided on dissolving the new firm just nine months.

Business expansion into new fields is the way many firms decided to develop.

In the stock market, a few firms having with available land have invested in building housing blocks or rental offices and generated big incomes.

However, not all have witnessed success.

For instance, during 2011-2012, local tech giant FPT Corporation created a stir upon announcing on its engagement in mini condo development. But the company finalised one single project in Danang.

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By Thuy Bac

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