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Top property developers struggle with debt burdens
Real estate developers have become burdened with debt due to the frozen state of the market and high lending interest rates.
Le Tham Duong, head of the business administration department of the HCM City University of Banking, said many businesses would face bankruptcy if the Government did not take measures to jumpstart the real estate market.
During the 2008-09 financial crisis, many real estate companies were able to survive by relying on their accrued profits from 2006-07, but such profits were exhausted now, he said.
In a worst-case scenario, if companies defaulted on debts, banks would have to sell property assets pledged as collateral. This would send real estates prices plunging and cause more property firms to go bankrupt, said Duong.
Among 58 listed real estate firms posting first-quarter financial reports, the liabilities of Vincom were the highest, topping VND17.13 trillion (US$831.6 million), pushing its debt-to-equity ratio to 1.63 – doubling the average ratio of the entire sector during the period, according to the financial website vietstock.vn.
Vincom's earnings from its business operations in the first three months rose to VND202.6 trillion ($9.83 billion), 13.8 per cent more than in the same period a year ago. However, its financing costs also doubled those of last year, reaching VND295.65 trillion ($14.35 billion).
The company's net profit during the period was VND96.6 billion ($4.7 million).
Kinh Bac Urban Development Company (KBC) ranked second in total liabilities in the first quarter, with liabilities reaching almost VND6.23 trillion ($302.4 million). Its DER at the end of the period was 1.18.
KBC's interest costs in the first quarter were VND67.7 billion ($3.3 million), outstripping those of other companies operating in the sector.
Debt burdens of leading real estate developers in Q1
|
Company |
Liabilities |
Debt/Equity ratio |
Interest expense |
|
(USD/million) |
(USD/million) |
|
Vincom (VIC) |
831.6 |
1.63 |
N/A |
|
Kinh Bac Urban Development (KBC) |
305.2 |
1.18 |
3.3 |
|
Sacombank Real Estate (SCR) |
260.7 |
2.36 |
2.5 |
|
Hoang Anh Gia Lai (HAG) |
178.6 |
0.37 |
2.1 |
|
Tan Tao Investment Industry (ITA) |
167.0 |
0.59 |
0.4 |
|
Ocean Group (OGC) |
149.2 |
0.82 |
1.8 |
|
Quoc Cuong Gia Lai (QCG) |
131.0 |
1.01 |
0.3 |
|
Phat Dat Real Estate (PDR) |
128.3 |
1.87 |
0.4 |
|
Hoang Quan Real Estate (HQC) |
105.6 |
2.07 |
0.5 |
|
Binh Chanh Construction Investment(BCI) |
90.70 |
0.96 |
0.8 |
|
Source: Vietstock Finance |
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vietnamnet, vns
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