Stock price has nearly halved after only 1 year, Hodeco (HDC) still decides to issue shares to pay dividends for the 6th consecutive year
On April 24, 2023, Ba Ria - Vung Tau Housing Development Joint Stock Company - Hodeco (HDC) approved the plan to pay dividends in 2022 in shares with an issuance rate of 25%. Accordingly, each shareholder owning 100 shares will receive 25 new shares.
Currently, there are 108.09 million HDC shares in circulation on the market. If this issuance plan is successfully implemented, the number of shares will increase to 135.11 million shares, equivalent to a charter capital of VND 1,351.1 billion.
Continuously reporting profit growth, Hodeco (HDC) has not paid a single cash dividend for 6 consecutive years (Photo TL)
If this year's stock issuance plan is included, this will be the 6th consecutive year that Hodeco has not paid cash dividends. Since 2017, Hodeco has only implemented the plan to issue additional shares to pay dividends with the rate increasing gradually each year, from 12% in 2017 to the highest of 25% in 2021.
Regarding the price movement of HDC shares, in the trading session on April 25, 2023, HDC had a price of VND 33,200/share, down nearly half compared to the price of VND 59,022/share achieved 1 year ago.
Profits still report growth but continuously do not pay cash dividends to shareholders
At the time when the stock market was booming, stock prices tended to fluctuate well, so issuing shares to pay dividends was relatively understandable. However, at the present time when the market is quiet, the liquidity of the stock market has decreased, Hodeco's determination not to pay cash dividends but to issue additional shares to pay dividends really makes shareholders worry.
In fact, in terms of business results, Hodeco still continuously records profit growth.
Specifically, in the 2022 financial statements, Hodeco recorded net revenue from sales and service provision at VND 1,298 billion, a slight decrease compared to the previous year. Financial revenue skyrocketed to VND 260 billion thanks to profits from stock transfers rather than from business activities.
Meanwhile, financial expenses also increased from 42.3 billion VND to 123.8 billion VND, most of which was interest expenses, accounting for 82.3 billion VND, showing that the company is having to increase its debt. Business results at the affiliated company also recorded a loss of 7.4 billion VND. Sales expenses remained stable at 23 billion VND while business management expenses also increased by nearly 7 billion VND, accounting for 47.4 billion VND.
In summary, Hodeco's operating profit in 2022 reached VND 537.7 billion, an increase of 38.9% compared to 2021. The company's after-tax profit was recorded at VND 420.6 billion, an increase of 35.2% over the same period.
Since 2017, when Hodeco began a streak of 6 consecutive years of not paying cash dividends, the company has continuously reported increasing profits. However, the company's shares have remained "sluggish" around the par value of VND 10,000/share, only starting to improve from the beginning of 2021, peaking in mid-2022 and since then have decreased by nearly 2/3 of their value.
Hodeco still plans to raise an additional VND1,300 billion in stocks and bonds.
At the 2023 Annual General Meeting of Shareholders, Hodeco canceled the private share offering plan that was approved in 2022 on the grounds that the plan was no longer suitable for the current situation.
Previously, at the 2022 General Meeting of Shareholders, Hodeco approved a plan to issue 8.6 million individual shares at an issue price of VND100,000/share, with a transfer restriction of 1 year. Currently, HDC's share price is only fluctuating around VND33,000/share, so it is not too difficult to understand why the company had to cancel this plan.
Instead, Hodeco approved a new mobilization plan with the offering of 20 million shares to existing shareholders, equivalent to 20% at a price of VND15,000/share to mobilize VND300 billion. The offering plan is expected to be implemented in the fourth quarter of 2023.
The company will use the VND300 billion to pay principal and interest on short-term loans, long-term loans, and maturing bonds.
In addition, Hodeco also plans to issue nearly 1,000 billion VND in additional bonds. Of which, 800 billion VND are 2-year convertible bonds, expected to be issued in 2023 to raise money to invest in unfinished projects. The remaining 200 billion VND are individual bonds to raise capital for business operations.
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