CIC Group (CKG) has debt exceeding equity, and its shares have been placed on the warning list.

CIC Group (CKG) has just been placed on the warning list by HoSE.

Kien Giang Construction Investment Consulting Group Joint Stock Company - CIC Group (HoSE code: CKG) is a company operating in the construction and real estate development sector.

Recently, the Ho Chi Minh City Stock Exchange (HoSE) issued a decision to place CKG shares under warning status from September 27, 2023, due to the company's failure to submit its audited semi-annual financial statements by more than 15 days compared to the regulations.

The placement of CKG shares under warning status has also had some impact on CIC Group's operations, as on September 11, 2023, CIC Group decided to implement a plan to issue shares privately to professional securities investors.

CIC Group CKG's stock price exceeded its capital limit and was put into a state of alert (Figure 1). — CIC Group's (CKG) shares were placed on the warning list immediately after announcing a plan to issue an additional 13.4 million shares (Photo: TL).

Specifically, the Board of Directors approved the private placement of 13,400,219 shares to professional securities investors. The offering price is VND 15,000 per share. With this plan, CIC expects to raise VND 201 billion.

The company will allocate the 201 billion VND collected as follows: 97.3 billion VND to pay off debts to contractors; 96.8 billion VND to pay off maturing loans; and 6.9 billion VND to purchase materials and pay salaries to employees.

Thus, it can be seen that the majority of the funds raised from this issuance will be used to repay debt.

Gross profit declined, CIC Group nearly failed to meet its annual plan.

CIC Group's share issuance plan comes amidst a decline in both revenue and profit. Specifically, revenue in the second quarter of 2023 reached VND 372.8 billion, a decrease of 7.2% compared to the same period last year. Gross profit was VND 113.2 billion, with the gross profit margin falling from 31.1% to just 30.4%.

A notable change during the period was financial expenses, which increased by 59%, accounting for VND 8.6 billion in revenue. Selling expenses and administrative expenses amounted to VND 3.9 billion and VND 34.8 billion respectively. CKG's after-tax profit was only VND 58.6 billion, a decrease of 16.5% compared to the first half of 2022.

As of the end of Q2/2023, CIC Group's cumulative revenue reached VND 623.9 billion, and cumulative after-tax profit reached VND 84 billion. Compared to the 2023 target plan of VND 1,234.9 billion in revenue and VND 175 billion in after-tax profit, CIC has currently only completed 47.1% of the revenue plan and 48% of the profit plan for the year.

Cash reserves have dwindled to one-third, with trillions in assets but the majority being debt.

CKG's total assets reached VND 4,729 billion at the end of Q2 2023, a slight decrease compared to the beginning of the year. Despite having billions in total assets, CKG's cash holdings are extremely low, only VND 20.5 billion. In addition, the company has VND 3.5 billion in bank deposits.

In terms of asset structure, CKG's total cash has decreased by nearly 70% compared to the beginning of the year. Bank deposits have fallen from 14.7 billion VND to only 3.5 billion VND, equivalent to a 76% decrease. Thus, the amount of cash held by CKG accounts for only 0.5% of total assets. This will increase the liquidity risk for the company.

In addition, inventory currently amounts to VND 2,839.6 billion, a slight increase compared to the beginning of the year. The majority of this consists of work-in-progress production costs. Goods and raw materials only account for VND 5 billion.

In CKG's capital structure, the majority of its capital is debt, amounting to VND 3,416.7 billion, equivalent to 72.2% of total available capital. The company has short-term debt of VND 664.9 billion, and long-term loans and financial lease liabilities of VND 891.2 billion. Total current debt amounts to VND 1,556.1 billion, exceeding current equity by more than 18.6%.

The asset structure is largely debt-driven, with high borrowings exceeding equity while cash reserves are very low. It's not surprising that CIC Group has to plan to issue additional shares to raise 201 billion VND in capital. The majority of this will be used to repay debt.

Source