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Subsidiaries of construction giant DIC set to lack fund for projects
Development Investment Construction Joint Stock Corporation is among the construction giant DIC Group’s subsidiaries that achieved healthy earning results this year, but experts doubt the firm will overcome this year’s challenges.
The property firm, which lists on the Ho Chi Minh Stock Exchange with the trading name of DIG, announced in its financial report that it earned a net profit of VND513.4 billion (US$25.7 million) from a sales of VND1.1 trillion in 2010.
The after-tax profit is 3 percent higher than the targeted amount and the revenue makes 56 percent out of the goal, the Ba Ria-Vung Tau Province-based company reported.
DIG this year set a cautious target, expecting to make a revenue of VND1.6 trillion ($80 million) with an after-tax profit of VND500 billion.
The property company expects to make a revenue of VND400 billion that is lower than last year’s figure and a net profit equal to 2010’s amount.
DIG also noticed in its financial report that its property construction projects would likely to cope with many difficulties in 2011, including the surging lending rates that will raise the interest expense.
The company this year is set to invest VND137 billion ($6.85 million) in the project on the ecotourism residential zone Dai Phuoc in the southern province of Dong Nai and VND148 billion in the urban zone Nam Vinh Yen in Vinh Phuc Province.
DIG expected to make a revenue of VND387 billion from the former and VND253 billion from the latter.
According to the firm’s report, its short-term and long-term debts last year were worth around VND170 billion and over VND390 billion respectively, which are not much compared to the equity of VND2.43 billion, expert said.
At the annual general meeting, DIG shareholders approved the plan on a three-year bond issue worth VND1.5 trillion. The firm also expected to raise its registered capital to VND1.3 trillion from VND1 trillion by offering shareholders bonus shares at preferential price.
“The share issue will enable DIG to raise more funds for its production. However, it will reduce the liquidity of the firm’s share. The firm’s share price has lost nearly 50 percent so far this year. Thus it is expected to decline further if the stock is diluted,” said a broker in HCMC.
The firm partnered up with the building material trader DIC-Intraco to build an industrial and residential zone Xuan Thoi Thuong in Hoc Mon District, with the latter being the main contractor.
The construction project has a total area of 380 hectares with the total investment of VND3 trillion ($150 million), of which VND696 billion is loaned from banks.
“What if the loan has a lending rate of 16 percent per annum, DIC will have to repay about VND111 billion per year. The HCMC-based firm’s net profit increase 33 percent year-on-year to VND27.75 billion thanks to good sales of steel, clinker, cement and wood,” a broker told Dau Tu Tai Chinh Newspaper.
“Despite positive financial results and potential projects, many investors still worry that the government’s limit on credit to property projects will leave DIC grappling to raise enough capitals for their projects”.
Thai Ca - Dong Phong - Vu Minh
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