Selling the business one year after purchase

Vinahud Housing and Urban Development Investment Joint Stock Company (Upcom: VHD) has just announced documents for the extraordinary general meeting of shareholders (AGM), scheduled to take place on September 5, including some notable contents. Notably, the plan to transfer 100% of the charter capital of Me Linh Thinh Vuong Company Limited, with a price not lower than VND980 billion.

Vinahud's Board of Directors (BOD) will also submit to the extraordinary shareholders' meeting for approval to use the proceeds from the transfer of capital contributions at Me Linh Thinh Vuong Company Limited to pay off part of the company's loan in advance at Tien Phong Commercial Joint Stock Bank - TPBank (TPB).

The expected partner that Vinahud will sell 100% of the capital of Me Linh Thinh Vuong Company Limited to is VNC Construction JSC.

Thus, if sold, Vinahud will be able to pay off part of its debt. According to the financial report, by the end of the second quarter of 2024, Vinahud has a total of short-term and long-term loans of more than VND 2,629 billion. Of which, long-term debt to TPBank is nearly VND 1,986 billion.

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In the coming period, VHD will focus on completing and operating the Grand Mercure Hoi An project.

More than a year ago, Vinahud purchased Me Linh Thinh Vuong Company Limited from R&H Group.

Specifically, in April 2023, after the resolution of the 2023 Annual General Meeting of Shareholders, Vinahud received a transfer from R&H Group of 83% of the capital at Friends Investment and Construction Company Limited for VND 987.5 billion and 100% of Me Linh Thinh Vuong Company Limited for VND 950 billion.

The total value of the two deals is 1,937.5 billion VND. Of which, 80% of the capital, equivalent to 1,550 billion VND, was arranged by TPBank. This is a very large number because as of early 2023, Vinahud had total assets of less than 589 billion VND and equity of just over 411 billion VND.

After the deal, Vinahud's assets increased sharply, reaching nearly VND 4,670 billion (as of mid-2023). Of course, total liabilities also skyrocketed, from more than VND 177 billion at the beginning of 2023 to nearly VND 4,315 billion at the end of June 2023; of which, long-term loans and financial leases were nearly VND 1,749 billion, short-term loans and financial leases were more than VND 187 billion.

In early 2023, Vinahud only had short-term loans and financial leasing debt, with more than 77 billion VND.

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By the end of the second quarter of 2024, Vinahud had a total of short-term and long-term loans of more than VND 2,629 billion. Of which, TPBank's long-term debt was nearly VND 1,986 billion.

Most likely, Vinahud used the above-mentioned purchased assets and assets belonging to these two companies to secure its bank loan obligations.

Thus, from a business whose predecessor was Vinaconex Housing Development Construction Investment Project Management Board (established in 2000) with a fairly small scale, Vinahud recorded a surge in assets after the two above deals.

However, these two deals also caused a stir. Because Vinahud carried out two M&A deals just before the maturity of 3 bonds with a total value of 2,500 billion VND at par value of R&H Group (from April 14 to May 4, 2023).

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R&H Group has many bond lots, including 3 bond lots with a total par value of VND 2,500 billion maturing from April 14 to May 4, 2023.

The three-way relationship between Vinahud, R&H Group and VNC Construction

Many investors are asking: did Vinahud conduct two M&A deals to help R&H Group have money to pay off bonds?

At the 2024 Annual General Meeting of Shareholders held on June 25, shareholders questioned the relationship between Vinahud and R&H Group.

Unlike Vinahud - a small but quite famous enterprise in Hanoi with many key projects such as Trung Hoa Nhan Chinh New Urban Area, Bac An Khanh Urban Area project,... R&H Group has a larger scale but is a lesser known name.

In fact, before Vinahud carried out the two M&A deals mentioned above, R&H Group had a much larger scale, assets and debts than Vinahud.

According to the report of R&H Group Corporation (R&H Group), as of mid-2023, this company has total assets of more than 10,000 billion VND, but total liabilities are nearly 8,947 billion VND. Of which, debt from private bond issuance is 5,000 billion VND.

Looking at R&H Group's report, it can be seen that this business has poor financial health. In the first 6 months of 2023, R&H Group lost more than 296 billion VND, bringing the total accumulated loss to nearly 690 billion VND. The debt to equity ratio is up to nearly 7.8 times. The total outstanding bond debt ratio is 4.36 times.

With such financial health, the brand is not famous, borrowing capital from the bank is very difficult.

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R&H Group's financial health is weak.

Responding to shareholders' questions about the relationship with R&H Group, a Vinahud representative said that this is one of the partners that has co-developed projects with Vinahud for many years. However, the operations and ownership structures of the two companies are completely independent, with different major shareholders.

R&H Group is a large-value bond issuer in late 2021 and early 2022, with Tien Phong Securities JSC (TPS) acting as the arranger.

R&H Group and Vinahud are two independent legal entities but have many similarities. Both have Mr. Nguyen Minh Tuan as their general director.

As for VNC Construction - the entity expected to receive the transfer of 100% of Me Linh Thinh Vuong's charter capital from Vinahud - this is also a business that has had a close relationship with Vinahud before.

In early 2023, Vinahud had a Board of Directors resolution approving the issuance of commitments, guarantees and use of assets to secure VNC Construction's credit obligations at TPBank.

According to Mekong Asean, Vinahud directly and indirectly (through Friends Investment and Construction Company Limited) holds nearly 100% of shares of Xuan Phu Hai Investment and Construction Joint Stock Company - the investor of the Grand Mercure Quang Nam project.

Meanwhile, Me Linh Thinh Vuong Company Limited holds 40% of Prime Land Real Estate Investment JSC - the investor of the 40-hectare Tien Phong Flower Village Housing Project in Me Linh District, Hanoi. This project has been delayed for many years.

Vinahud's financial situation is also quite bad. In the first 6 months of the year, VHD lost more than 105 billion VND and has lost for 5 consecutive quarters. Revenue shows signs of decreasing while interest rates are high. By the end of the second quarter of 2024, Vinahud only has more than 4.9 billion VND in cash and cash equivalents, while total liabilities are more than 4,912 billion VND.

At the 2024 Annual General Meeting of Shareholders, VHD said that the company is still focusing all its efforts on completing and putting into operation the Grand Mercure Hoi An project, thereby helping the company improve its business results in the 2024-2026 period.