A "debt deposit" deal of Tien Phong Securities

On April 19, Tien Phong Securities Joint Stock Company (TPS, HSX: ORS) successfully held the 2023 Annual General Meeting of Shareholders, approving many important contents, notably issuing 2,000 billion VND in bonds, increasing charter capital by 2,000 billion VND to 4,000 billion VND, or borrowing capital from Tien Phong Commercial Joint Stock Bank ( TPBank , HSX: TPB).

If these capital increase programs are implemented, TPS's internal resources will increase dramatically. Currently, TPS has a charter capital of VND 2,000 billion, total assets at the end of the first quarter of 2023 at VND 6,834 billion.

The increased resources also promise to help TPS's balance sheet become somewhat healthier.

As of March 31, 2023, TPS's cash and cash equivalents were only VND 13.7 billion, equivalent to...0.2% of assets, among the lowest in the system of securities companies, much lower than leading securities companies such as HCM (34%), TCBS (8%), VPS (4.4%) or VND (2%).

The majority of TPS's asset structure is loans (VND 863 billion), receivables from the sale of financial assets (VND 735 billion), receivables from services provided by securities companies (VND 3,012 billion) or financial assets recorded through FVTPL profit and loss (VND 2,079 billion).

TPS corporate bonds (Source: Financial report Q1/2023).

Of which, FVTPL assets increased by nearly VND300 billion in the first 3 months of the year, mainly due to the strong increase in unlisted bond investment balance to VND1,137 billion.

Corporate bonds were also TPS's main trading business in the first quarter, with a proprietary trading value of nearly VND47,000 billion, while stock proprietary trading was less than VND100 billion, compared to investor transactions (mainly stocks) of only VND5,650 billion. TPS did not specifically explain bond investments, but according to the audited financial statements for 2022, of the VND851 billion of bonds TPS held by the end of last year, most belonged to groups with many connections such as BCG and R&H Group. However, the largest balance was lot DGTH2224001, with a value of VND204.5 billion issued by Dong Nai Traffic Construction Joint Stock Company (UpCOM: DGT).

The deal will be executed in the fourth quarter of 2022, in the context of securities companies/issuing organizations under great pressure to buy back bonds before maturity.

Spend 1/10 of charter capital to buy a lot of bonds

Going deeper into DGT, it is clear that DGTH2224001 is certainly not just a simple bond investment deal, as the decision to spend 1/10 of the charter capital to buy this bond lot has raised many concerns for TPS shareholders, in terms of efficiency, safety and transparency.

DGT was previously a small enterprise with charter capital of less than 25 billion VND, operating mainly in the fields of construction and stone exploitation.

In the period of 2019-2020, a group of investors related to businessman Lai Minh Hau - Vo Diep Cam Van (daughter of former TTF Chairman Vo Truong Thanh) acquired DGT and continuously increased capital through private issuance, raising the charter capital to 790 billion VND currently, and once said it would increase to 2,000 billion VND to carry out a series of projects.

At that time, DGT shares caused a fever in the market when they increased from 20,000 VND/share to more than 100,000 VND/share in early 2020.

Also, the group of businessmen Lai Minh Hau - Vo Diep Cam Van, it should be emphasized, has carried out M&A and increased huge capital at Hoa Phat Textbook Printing JSC (HNX: HTP), and through this enterprise issued 2,000 billion VND in bonds.

However, the health of this group of businesses has deteriorated significantly over the past year. On February 2, 2023, HTP had not yet paid its due bond debt, including VND520.8 billion in principal and VND30.2 billion in interest to bondholders. Auditing firm Ernst & Young noted this issue in its 2022 audited financial statements.

For its part, DGT has not yet announced its audited financial statements for 2022, after many requests for extensions, the second of which (April 8, requesting an extension until April 30) was due to a server power outage and data loss.

Although DGT at that time had an overdue debt of 70 billion VND with an exception opinion from AASCS Auditing Company, TPS still arranged to issue 200 billion VND worth of bonds to DGT.

In the 2022 semi-annual audited financial statements, Moore Aisc Auditing Company emphasized doubts about DGT's ability to continue operating, with a loss of VND 18 billion in the first half of the year, an accumulated loss of VND 29.6 billion, and notably a negative net cash flow from operating activities of VND 909 billion.

The reason for the negative cash flow is the sudden increase in receivables, mainly from individuals related to businessman Lai Minh Hau.

This is not the first time the auditor has been concerned about DGT's operations, and this situation has been going on for many years.

At the end of 2019, although DGT had an overdue debt of 70 billion VND with an exception from the AASCS Auditing Company, TPS still arranged to issue a 200 billion VND bond lot for DGT, with a term of 2 years and a maturity date of December 18, 2021. 2019, it should be remembered, was also the year that marked the change of ownership at DGT, when the Lai Minh Hau investor group bought a private issue, increasing the capital of this enterprise from 24.8 billion VND to 64.8 billion VND.

Returning to the DGTH2224001 bond lot mentioned at the beginning of the article, this lot is worth 350 billion VND, issued on February 22, 2022, completed on March 10, 2022, with a term of 2 years. The purpose is to increase the scale of working capital.

Collateral includes 12 million DGT shares owned by the company's shareholders, and land lease contracts, assets attached to the land of a 15,550m2 land lot in Trang Dai ward, Bien Hoa city, Dong Nai owned by the company.

In the same first half of 2022, DGT completed a private issuance to the Lai Minh Hau investor group to increase capital from VND 200 billion to VND 790 billion.

Information about bond lot DGTH2224001 (Source: CASC).

The proceeds from issuing bonds and increasing charter capital (940 billion VND) were quickly transferred by DGT... back to Mr. Lai Minh Hau's group, through investment cooperation contracts, mainly transferring 530 billion VND to Mr. Truong Vu Hien to seek investment opportunities, or 325 billion VND to Mr. Luong Van Quang to deposit for stock investment.

The close relationship between TPS and the above-mentioned group of investors is also demonstrated by the fact that at Duyen Hai Multimodal Transport JSC (HSX: TCO) - another legal entity closely related to Mr. Lai Minh Hau's group, the Chairwoman of the Audit Committee and Independent Member of the Board of Directors is Ms. Nguyen Thi Minh Hanh. Ms. Hanh has long held the role of Head of TPS's Bond Transaction Management Department, before moving to become Investment Director of Viet Cat Fund Management JSC - a legal entity in the same group as TPS.

With such a close relationship, it is not surprising that TPS bought back more than VND200 billion worth of DGT bonds in the context of the corporate bond market being under great pressure at the end of last year.

However, surprisingly, TPS was not the organization that arranged the issuance of lot DGTH2224001, but another unit - Capital Securities Corporation (CASC).

"Hyphen" CASC - TPS

CASC was established in 2006 and for a long time was known as a member of Gami Group. At the end of 2019, a group of investors related to TPS - BCG acquired CASC.

As of December 31, 2021, CASC's shareholder structure includes: Mr. Nguyen Dinh Ngon (26.59% of charter capital), Bamboo Financial Corp JSC (20% of charter capital), NCCT Investment JSC (17.51% of charter capital), Ms. Giap Thi Phuong (12.5% ​​of charter capital) and other shareholders (23.4% of charter capital).

In particular, Mr. Nguyen Dinh Ngon was the Director of TPS's investment banking division, before being elected to the Board of Directors of CASC in October 2021. NCCT Investment JSC is owned by Mr. Ngon and his wife.

Despite its insignificant size, with total assets of only VND379 billion at the end of last year, CASC is a notable "player" in the corporate bond market, similar to TPS. In 2022, the transaction value of investors at CASC was only VND40 billion, with margin lending of VND15 million, but this unit traded up to VND14,151 billion in corporate bonds.

CASC is a notable "player" in the corporate bond market, similar to TPS.

In the first half of 2021, CASC acted as the issuing agent for a series of bond deals advised by TPS, such as the VND 400 billion bond lot of Gia Dinh Star Company Limited or the VND 500 billion bond lot of Con Bap Ecological Tourism Company Limited - legal entities with many connections to BCG Group.

In mid-2021, CASC recorded a major shareholder, Mr. Nguyen Anh Khoa (16.18%). The businessman was born in 1996 and it should be emphasized that at that time he was a capital market specialist at TPS.

Notably, Mr. Khoa was at that time a major shareholder, holding 93 million shares, equivalent to 39% of the capital in Thanh Nguyen Energy Investment and Development Company Limited - a member of BCG. Mr. Khoa is also a shareholder with 255 billion VND in contributed capital in another member of BCG, An Khang Land Investment Trading Service Joint Stock Company - the investor of the Giga City project in Linh Tay ward, Thu Duc city, Ho Chi Minh city.

Unlike the DGT group which is limited to TPS, R&H Group, BCG, or many other private corporations that have played a significant role in arranging TPBank's resources over the years, will be mentioned in the following article.

Hualien

Source: https://www.nguoiduatin.vn/mot-thuong-vu-gui-no-cua-chung-khoan-tien-phong-a604663.html