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CII remains unpromising this year, brokers say
Shareholders of the construction firm CII were concerned about the business plans of the firm this year in spite of the relatively calm atmosphere of the annual general meeting (AGM).
Ho Chi Minh City Infrastructure Investment Joint Stock Company (HoSE: CII) sold convertible bonds worth US$40 million to its strategic partner Goldman Sachs, the firm announced at the AGM this year.
The bond will mature in five years and carries an interest rate of 4 percent per year.
Despite the maturity time of five years, the US-based investment fund Goldman Sachs can convert the bonds into shares after two years and can ask the HCMC-based construction firm to buy back the shares in the next three years, according to the agreement between the two firms.
The Vietnamese firm listing on the HCMC bourse with the code name of CII also announced it will pay a dividend rate of 18 percent at maximum on the chartered capital to existing shareholders.
“What if CII earns a very impressive earnings-per-share ratio (EPS), the dividend rate will only be VND1,800 per share at maximum,” a broker of a HCMC-based brokerage told Dau Tu Tai Chinh Newspaper.
The agreement was not submitted for discussion at the AGM and the builder did not seek shareholders’ approval.
Analysts said the dividend rate of 18 percent was not reasonable for existing shareholders compared with the current share price of VND37,000 per share on the market.
“What if Goldman Sachs asks CII to buy back the amount of shares converted from the bonds after three years, the firm will have to pay the foreign partner more than VND800 billion ($40 million),” said a financial expert.
The construction company targeted an after-tax profit of around VND397 billion ($19.85 million), compared to the amount of VND377 billion in 2010.
However, experts worried that the goal could be even too high as the firm failed to meet the targeted net profit of VND450 billion last year, earning VND377 billion only.
“If CII meets the target this year, with EPS of around VND5,300 per share and share price of VND37,000 per share, the price-on-earning ratio (P/E) of the company will be 7x, which obviously shows CII is not a good stock to buy,” said a broker.
The firm is the builders of many big public construction projects including the Hanoi Highway toll station and Binh Trieu 2 Bridge, which require huge amount of capitals, he said.
Therefore, it kept raising capital through additional share and convertible bond issues, which will likely to prompt to a share dilution, the broker noticed.
“Property investment projects of CII are not lucrative. For example, the construction of the apartment building at 155 Nguyen Chi Thanh Street was finished, but the sales remain very slow due to a frozen real estate market,” he said.
CII declined 3.6 percent to close at VND34,800 per share on the Ho Chi Minh Stock Exchange last Friday. The builder lost 3.3 percent so far this year.
Luc Ton - Ngoc Son
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