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Financial investments: the boot is on the other foot
The recovery of the stock market helped turn the losses listed companies had been incurring with their financial investments into profit in July 2008.
The Refrigeration Electrical Engineering Enterprise (REE) has reported the profit of VND28.06bil in July, which has helped reduce the accumulative loss of the company from VND162.9bil in the first six months of the year to VND134.57bil.
REE said that if the VN Index stayed firmly at 500 points, REE would be able to take back the sum of VND50-60bil worth of provision funds. In the first half of the year, REE set aside a provision of VND268bil for financial investments, while the sum was VND48.5bil in 2007. If REE gets the profit of VND30bil every month from production, and get back VND50bil from financial provisioning, it could get the profit of VND140bil in the third quarter of the year.
REE has announced it will sell 3.6mil of 27mil STB shares it holds, and if the price is VND27,000 (as it was on August 20), REE would make profit.
As for SAM, a cable and telecommunication materials company, its biggest financial investment is 4mil HPG shares. At the time of provisioning, HPG was priced at VND40,000/share, while it is now over VND70,000/share.
The VND280bil investment by SAM in SSI Vision Fund, according to Trac, is not worrying, as the fund has not disbursed much yet. Moreover, SAM still has the sum of VND700bil in cash deposited at ACB, Vietcombank, BIDV and VIB Bank. “SAM expects to have the dividend of 20% to shareholders in 2008,” Do Van Trac, SAM Director, said.
SSI securities company said that when the stock market gains in points, the financial provision volume of the company decreases sharply. SSI is now selling some investments to calculate profit, including several hundred thousand PVD shares.
Bao Viet Securities Company announced the loss of VND300bil in Q2 due to financial provisioning. However, the provisioning was made in anticipation of the worst to come, when the VN Index was 366 points. Meanwhile, the market has become much better, and it is not likely that the market will deteriorate again.
In the last week, as investors realised the trend of ‘turning loss into profit’, they began purchasing losses. Even on August 20, when the VN Index decreased with 100 losers, including a lot of big names like VPL, VIC, PVD, ITA, DPM, the prices of SSI, REE and SAM still increased in price.
More satisfactory business results are expected from the group of companies that announced losses due to financial provisioning.
VNN
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