Hoa Sen Group crumbles?

Dropping rates of return

Hoa Sen Group's rates of return in 2018's first quarter dropped by 80 per cent on-year. Photo: zing.vn

The firm’s first quarter financial report shows that its revenue growth increased by 23 per cent on-year but the profit just reached VND87 billion ($3.83 million), equaling one-fifth against the same period last year.

Many experts said that rising debts to maintain its market share (from 33.1 per cent in 2016 to 34.7 per cent in 2017) has led to Hoa Sen Group’s reduced rate of return.

In addition, zing.vn quoted Hoa Sen Group’s representative as explaining that higher costs of business activities has led its deeply reduced rate of return in this year’s first quarter. Furthermore, its main products’ market shares are threatened by other competitors, making Hoa Sen raising debts to maintain the market shares. Specifically, its corrugated iron products’ market share reduced from 40.9 per cent (2012) to 33.1 per cent (2016).

The interest expenses increased to 70 per cent on-year, its short-term debt remains VND12.646 trillion ($557 million). Its liabilities soared from VND8.18 trillion ($360.3 million) in 2016 to VND16.268 trillion ($716.6 million) in 2017.

Halting one project in Nghe An province

On June 1, 2018, the Nghe An People’s Committee surprisingly issued a document No.2202/QD-UBND on halting Hoa Sen Group’s project of centre for distributing building materials (Vinh city’s Nghi Lien commune), which is granted a permit in 2015.

Nguyen Manh Hung, director of the Nghe An Department of Planning and Investment's Foreign Relations Department told VIR that halting project is the investor’s unilateral decision.

May be the recent difficulties make Hoa Sen Group calculating its budget to target improved main products’ market shares, leading to do not enough capital to develop its project in Nghe An.

To clarify this issue, VIR contacted with Hoa Sen Group and received an answer: “I do not know about the issue,” from a representative of the firm’s Investment Department.

Stock price has fallen down and its shareholders has fled

The HSG ticker has been fluctuating heavily during the first five months. Photo: zing.vn

In 2018’s first five months, Hoa Sen Group’s stock price reduced by 51.8 per cent, going from VND23,976 ($1.05) to VND11,550 ($0.5) per stock, scaring away shareholders. Thus, its market capitalisation was reduced by VND4.347 trillion ($191.4 million).

Many shareholders are planning to sell their stocks as HSG is hitting rock bottom. For instance, Tam Thien Tam One Member Ltd., managed by Hoang Thi Hoang Xuan, the wife of Hoa Sen Group’s chairman Le Phuoc Vu, has just sold five million stocks, reducing the firm’s ownership rate to 19.21 million shares, equaling 5.49 per cent. Xuan also plans to sell the rest of her HSG stocks in May 23-June 21.

In 2014, Vietnam Enterprise Investment Ltd., Hoa Sen’s biggest foreign investor, sold 300,000 HSG stocks. After the transaction, the firm retained 7.9 million HSG shares, equaling 2.25 per cent of Hoa Sen Group’s charter capital, officially leaving the group of the firm’s largest shareholders.

In this February, Amersham Industries Limited sold 600,000 HSG stocks. The foreign investor made quite a deal, as the divestment took place quickly and earned about VND14 billion ($616,740).