Local securities company SSI seems to be steadily divesting from Elcom due to a plunge in the investment's value.
|SSI has been selling down its ELC stocks for the past half a year |
Over the last days of August and early days of September, SSI has sold nearly 1.5 million stocks of Electronics Communications Technology Investment Development JSC (Elcom, HSX: ELC), following the sale of 1.9 million ELC stocks six months ago.
According to SSI, after nine years of pouring capital to Elcom, the investment lost up to three-fourth of its value. Specifically, ELC has been trading near its bottom valuation, at about VND7,000 (30 US cents), down more than 70 per cent against the peak in 2016 when the stock fetched VND25,000 ($1.09).
SSI has pumped investment in the local tech company since September 2011 with the initial ownership of 8 per cent. In 2012-2014, SSI increased its ownership to more than 20 per cent. Since its recent divestments, this dropped to 9.8 per cent.
According to nhipsongkinhte.com, in 2016 alone, the market value of SSI’s investment in Elcom was larger than the initial price it poured into the local tech company. As of the end of 2019, the market value was equal to 28 per cent of the sum. These could be the reason behind SSI putting millions of ELC stocks on sale.
Additionally, the steady reduction in ELC stock value talks of a steady fall in performance.
According to data published by cafef.vn, in 2010-2014 the company saw decreases in both revenue and profit, then rallied in 2015-2016 to nosedive later on.
Elcom’s saw about VND1.3 trillion ($56.5 million) in peak revenue in 2016 and only VND94 billion ($4.1 million) in profit, only half of the figure from 2010. Its gross margin also dropped from 40 to 20 per cent.
On the other hand, Elcom has been showing signs of recovery in the past year. In the early half of 2020, its net revenue was VND347.7 billion ($15.1 million), up 86 per cent on-year, while its after-tax profit was VND14 billion ($608,700).
At the latest shareholder meeting, Elcom’s management board admitted that its focus on telecommunications and inability to adapt to the sector reaching saturation have had a negative impact on its operations. As a result, the company has not shared any dividends since 2018.
In 2010, Elcom paid a dividend of 55 per cent, including 30 per cent in cash and 25 per cent in shares.
Along with SSI, other funds are also cornered about their investments in Elcom. Specifically, Samarang UCITS purchased 8 per cent in November 2017 when the stock fluctuated at VND15,000-17,000 (65-74 US cents). Pyn Elite Fund owns 6.5 per cent since January 2018. At the time, the stock fetched VND14,000-VND15,000 (60-65 US cents).