Hoang Anh Gia Lai (HAG) is about to issue 130 million shares to pay off debt, will it fail?

Hoang Anh Gia Lai (HAG) continues to issue shares to raise an additional 1,300 billion VND

Hoang Anh Gia Lai (Code HAG) has approved a plan to issue 130 million shares privately at an offering price of VND 10,000/share. In the trading session on September 27, 2023, the code HAG is priced at VND 7,850/share. Thus, the offering price of Hoang Anh Gia Lai is about 27% higher than the market price.

If the issuance is successful, Hoang Anh Gia Lai is expected to collect 1,300 billion VND. Of which, HAG will use 323 billion VND to pay the principal and interest of the bond lot coded HAG2012.300 issued on June 18, 2012; 277 billion VND to restructure the debt of subsidiary Gia Cattle Lo Pang at TPBank; 700 billion VND to restructure debt and add capital to Hung Thang Loi Gia Lai.

Hoang Anh Gia Lai is about to issue 130 million shares to raise money to pay off debt. Will it fail? Image 1 — Hoang Anh Gia Lai continues to mobilize 1,300 billion VND from the stock issuance plan (Photo TL)

Offering shares at a price 27% higher than the market price has made many investors skeptical about the possibility of success in HAG's share issuance plan. Not to mention that this is not the first time HAG has failed due to offering shares at too high a price.

In April 2023, HAG failed once in a private issuance of 162 million shares with a par value of VND 10,500/share. The reason for the failure was that for many months before that, HAG shares could not reach the par value of VND 10,000/share, much lower than the offering price offered by Hoang Anh Gia Lai.

Continuously reporting hundreds of billions in profit every quarter, but HAG is still slow in paying bond interest

In the context of many economic difficulties, Hoang Anh Gia Lai is a rare unit that continues to report regular profits of hundreds of billions of VND each quarter. The last time HAG had to record a loss was from the first quarter of 2021 with a loss after tax of 68.8 billion VND.

In the first quarter of 2023, HAG recorded revenue of VND 1,697 billion, profit after tax of VND 303.4 billion. In the second quarter, although revenue dropped to VND 1,450 billion, net loss from business was VND 162.8 billion, HAG still recorded profit after tax of VND 101.6 billion.

Including the second quarter of 2023, Hoang Anh Gia Lai has entered the 9th consecutive quarter of recording profits. Despite continuously reporting profits, HAG has delayed interest payments for the second time for the bond lot with a total value of VND 5,271 billion.

In the first 6 months of the year alone, HAG has not paid interest for 2 periods for the bond lot coded HAGLBOND16.26. The first interest payment on March 30, 2023 is 177.9 billion VND, the second payment on June 30, 2023 is 177.9 billion VND.

The HAGLBOND16.26 bond lot was issued on June 30, 2016 with a term of 10 years, with a par value of VND 6,596 billion. The current outstanding bond amount is VND 5,271 billion.

Hoang Anh Gia Lai explained that the source of payment came from the debt of Hoang Anh Gia Lai International Agriculture JSC (HNG) and its subsidiaries. There is currently a 3-party debt repayment schedule agreement and some of HNG's assets are being liquidated to get money to pay the debt.

Despite large profits, HAG is still suspected by auditors of its ability to continue operations, with only 50 million VND left in cash.

Recently, HAG's auditor pointed out a number of issues in the 2023 semi-annual financial statements. In which, the auditor emphasized the accumulated loss of VND 2,959.5 billion on the financial statements.

In addition, the auditors also noted that the company's short-term debt exceeded its short-term assets by VND2,004 billion. With the above issues, the auditors expressed doubts about Hoang Anh Gia Lai's ability to continue operating.

In addition to the accumulated loss of nearly VND3,000 billion mentioned above, the auditor also emphasized that HAG is violating a number of commitments to the bond contract and has not yet paid a number of principal and interest debts due on bonds.

As of June 30, 2023, HAG's total assets reached VND 21,342.4 billion. Of which, cash recorded on HAG's semi-annual financial statements was only VND 50 million. The company's assets were up to VND 4,346.1 billion in the form of receivables, meaning that the money had not actually been received. Inventory accounted for VND 1,258.7 billion.

In HAG's capital structure, liabilities account for 15,954.4 billion VND, 3 times higher than equity. Of which, short-term debt accounts for 4,189.8 billion VND, long-term debt accounts for 3,895.1 billion VND.

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