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PVL: Business Operational Changes
On 28/10/2011, Petroleum Real Estate JSC (HNX: PVL) sent documents explaining the deliberate decrease in selling prices of apartments at Petro Vietnam Landmark as follows:
1. Decreasing price of apartments at Petro Vietnam Landmark:
- Number of apartments: 85
- Total area: 10,653.42 m2
- Pruchase price: VND21,360,000/m2 (VAT included)
- Selling price: not lower than VND15,500,000/m2
2. Reasons:
2.1. Market pressure:
- In 2011, the real estate market is stagnant, and enterprises are more cautious in inplementing housing projects. High interest expenses and input costs have caused difficulities to many construction and real estate companies, including Petroleum Real Estate JSC. Besides, macro policy is putting pressure on investors to decrease selling prices of apartments or find other more flexible payment method
- Petro Vietnam Landmark project belongs to mid-segment in the real estate market of Hochiminh City. Petroleum Real Estate JSC offered the average selling price of VND23.8 million/m2, a rather high price compared to other projects in the same segment. In this situation, this price is no longer appropriate and cannot attract interest of investors to similar projects
2.2. Company’s financial pressure:
- To invest into Petro Vietnam Landmark, Petroleum Real Estate JSC borrowed VND100 billion from Lien Viet Bank, due on 23/11/2011. When this loan is overdue, interest will be 25% per year and fine for over due is 150%, equalling an interest of 35% per year and Petroleum Real Estate JSC will have to pay compound interest of 40% per year. If the Company cannot find the financial source, Petroleum Real Estate JSC cannot pay loans on time and this problem will heavily affect the Company’s operation
3. Expected results:
- To ensure to continual operation of the Company, the Company summited the plan to the BOD and the BOD approved the plan on 06/09/2011
- When the new prices are applied and all apartments above have been sold, the loss from this project is about VND70 billion.
HNX
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