Continuously paying high dividends to shareholders for many years, Industrial Urban Development Joint Stock Company No. 2 (D2D Company) is facing difficulties in capital sources to implement investment projects, as well as finding new growth drivers when existing projects are full.
The problem of finding new growth drivers
After Nhon Trach 2 Industrial Park Project was filled and Loc An Residential Area Project Phase I was handed over and accounted for most of the revenue and profit in 2021, D2D Company continuously recorded declining business results.
If in 2020, D2D Company recorded a profit of 268.1 billion VND, in 2021 a profit of 242.7 billion VND, then in 2022 a profit of only 17.18 billion VND, in 2023 a profit of 25.75 billion VND and in the first half of 2024, the Company reported a loss of up to 5.18 billion VND (same period profit of 7.02 billion VND).
In fact, Nhon Trach 2 Industrial Park Project has a scale of 331.42 hectares, the land area for lease is 281.72 hectares and the lease contract signing rate is 100%; Loc An Residential Area Project Phase I has been handed over and accounted for most of it in 2021, Phase II is being planned for implementation.
From January 1, 2021 to June 30, 2024, D2D Company's cash fund decreased by 95%, from VND 963.6 billion to VND 47.4 billion.
After large projects no longer had growth momentum due to handover or accounting for most of the profits, thanks to being in the same ecosystem with the parent company, Industrial Park Development Corporation, D2D Company cooperated with Sonadezi Chau Duc Joint Stock Company (code SZC) to deploy the re-leasing of an area of 57.88 hectares at Chau Duc Industrial Park Project, along with 28 shophouses and 54 townhouses at Sonadezi Huu Phuoc Residential Area.
Most recently, at the 2024 General Meeting of Shareholders, the leaders of D2D Company continued to adjust the investment capital of Loc An Residential Area Project by an additional VND 1,115.93 billion for the period 2024-2029, from VND 336.4 billion to VND 1,483.2 billion.
The Loc An Residential Area Project is behind schedule compared to the original investment plan (the original plan was expected to be implemented in 2016-2018), so the investment cost shows signs of increasing many times and the Company will also have to mobilize capital to have counterpart investment capital.
It is known that as of June 30, 2024, D2D Company only has 47.4 billion VND in cash, accounting for 3.04% of total assets. In addition, the cost of unfinished production and business being implemented at Loc An Residential Area Project is 85.66 billion VND, at Huu Phuoc Residential Area Project is 49.18 billion VND...
The cash fund is only 47.4 billion VND, while the total investment demand for the Loc An Residential Area Project alone is up to 1,115.93 billion VND. The problem is that D2D Company must find a way to mobilize capital to implement the project, as well as find new growth drivers.
Lack of investment capital reserve plan when maintaining high dividend rate for many consecutive years
In fact, D2D Company is an industrial and commercial real estate enterprise with a relatively attractive cash dividend distribution strategy for existing shareholders.
In 2020, the Company paid dividends at a rate of 35%, in 2021 it paid at a rate of 50%, in 2022 it paid at a rate of 30% and especially in 2023 it paid dividends at a rate of up to 87%.
It is known that in 2023, D2D Company only generated a profit of VND 25.75 billion, but paid dividends at a rate of 87%, equivalent to a total payment of VND 263.36 billion. Of which, the Company used accumulated profits from previous years to pay dividends, making up for the modest profit in 2023 of VND 25.75 billion.
Industrial Park Development Corporation owns up to 57.86%, so maintaining a continuously high cash dividend rate has helped the parent company earn large annual cash flow, improving the consolidated business operations of the parent company, but this has weakened the cash flow of the subsidiary.
Looking at it more broadly, from January 1, 2021 to June 30, 2024, D2D Company's cash fund decreased by 95% (equivalent to a decrease of VND 915.9 billion), from VND 963.6 billion to VND 47.4 billion.
D2D Company is in need of a huge amount of capital to invest in the next phase of Loc An Residential Area Project, as well as to cooperate in investment to find new growth drivers. However, the cash fund is very modest, to invest, the Company is forced to find ways to mobilize new capital.
In addition to the story of finding new growth drivers, the sharp increase in D2D shares in the early stages of 2024 has led to stock valuations that are no longer cheap compared to the industry. In particular, data on SSI Securities' iBoard shows that D2D shares are trading at a P/E (price per share earnings) of 93.19 times, while the industry average is 16.19 times; P/B valuation (market price compared to book value of a share) is 1.3 times, while the industry average is 1.21 times.
It is known that during the favorable business period (2017-2021), the P/E of D2D stock only fluctuated in the range of 4.3 - 9.1 times.
“After increasing by more than 92% at the beginning of the year, D2D stock price decreased by 18.3% from July 8 to August 16 and the sharp decline in the stock price in recent times was mainly due to high stock valuation, triggering investors to take profits in the context of loss-making businesses, lack of new growth drivers and especially, the increase in stock price at the beginning of the year mainly came from market factors, not from internal improvements in the business”, Mr. Lam Van Van, representative of ECI Capital Investment Fund shared about the valuation and price movements of D2D stock.
Source: https://baodautu.vn/cong-ty-d2d-loay-hoay-tim-dong-luc-moi-d223019.html
Comment (0)