Nguyen Kim remains firm on taking over LDP

This is Nguyen Kim's third offer in recent times

Nguyen Kim has just offered to buy 2.1 million shares, equivalent to 27.14 per cent of LDP’s outstanding shares, at the unit price of VND23,500 ($1.021) from State Capital Investment Corporation (SCIC).

The transaction will take place between November 30 and December 30. The predicted time to complete the transaction is January 1, 2019.

At the offered price, Nguyen Kim will spend about VND50 billion ($2.17 million) on this deal.

If successful, Nguyen Kim will raise its ownership above 4 million shares, equivalent to 51.14 per cent of Ladophar's charter capital, which will make Ladophar a subsidiary.

Since 2017, Nguyen Kim has been repeatedly registering offers to buy LDP shares. Its offer made in October 2017, also to SCIC, was VND32,000 ($1.39) per share for the same volume. However, the bid was unsuccessful.

Previously, Nguyen Kim also made an offer of VND30,000 ($1.3) for more than two million LDP shares and the offer was approved by the Ladophar board directors on August 7, 2018. However, Nguyen Kim has not announced further information about the deal since then.

As an educated guess, seeing that these two million shares would have boosted Nguyen Kim’s ownership above 51 per cent – effectively securing its investment objective and making further purchases unnecessary – it would be safe to say this deal fell through.

The reason for the lower price (VND23,500) offered this time around is the continuous decline of LDP’s ticker price. Specifically, in the past three months, LDP dropped by 33 per cent and closed the session on November 6 at VND18,200 ($0.79) per share.

It is expected that after completing the transaction, Nguyen Kim will continue to develop Ladophar’s business sectors, including producing oriental medicine, buying and selling medicines, operating pharmaceuticals, trading medical equipment, and importing drugs.

It is noteworthy that between 2010 and the end of 2017, LDP had been operating at a profit. However, for the three first quarters of 2018, it has been running in the red.

Specifically, in the second quarter, LDP’s sales and administrative expenses increased sharply, generating losses of VND4.7 billion ($204,347).

Total accumulated loss in the first half was VND6.2 billion ($269,565), while the company set the target of earning VND29 billion ($1.26 million) in pre-tax profit.

In the third quarter of 2018, LDP achieved a net revenue of VND119 billion ($5.17 million), down 27 per cent year-on-year. Also, financial expenses as well as business management and sales costs increased significantly.

As a result, the company saw a loss of over VND3 billion ($130,435) in after-tax profit, while last year it recorded an after-tax profit of nearly VND6 billion ($260,870). In the first nine months of 2018, LDP’s net revenue came to VND329 billion ($14.3 million), down 22 per cent compared to the same period, and after-tax loss increased to over VND9 billion ($391,304).

As of December 30, 2017, LDP’s total assets were valued at more than VND276 billion ($12 million), while total liabilities exceeded VND180 billion ($7.82 million) which was mainly short-term debt. Payables ratio was about 1.8x.

On the stock market, LDP also dropped sharply from VND31,000 ($1.35) to VND20,000 ($0.87), a decrease of 41 per cent. This is also the lowest LDP stood in the last two years.

At present, besides buying and selling drugs, pharmaceuticals, cosmetics, and medical equipment, LDP is also involved in many other business sectors, such as short-stay accommodation and real estate.

Specifically, in its mid-year 2018 financial statement, LDP recorded VND393.6 million ($17,113) of income from leasing investment property and VND44.76 million from its direct real estate investments.

LDP’s third quarter report stated that the company derives revenue from its fixed assets which are land plots in Hoa Ninh, Bao Lam, Duc Trong, Cat Tien, and Lam Ha. The value is based on land purchase and registration taxes.

Specifically, the value of LDP’s fixed assets is VND2.703 trillion ($117.52 million). The remaining value of fixed assets at the end of the accounting period was VND1.632 trillion.

It can be seen that Nguyen Kim's determination to not give up on Ladophar follows market trends, as other giant technology retailers like Mobile World, FPT, Digiworld, and even giant Vingroup are seeking opportunities in pharmaceuticals.

For instance, Mobile World acquired the Phuc An Khang drugstore chain, FPT Retail also invested in Long Chau pharmacy, and Digiworld has begun selling functional products.