International Dairy Products (IDP) issues 500 billion shares to pay debt, foreign funds still invest

International Dairy Products (IDP) growth momentum slows down, stocks still increase when foreign funds invest 1,370 billion VND

The news that Daytona Investments Pte. Ltd. announced the purchase of 5.3 million IDP shares of International Dairy Products Joint Stock Company (IDP) on April 12 caused the price of this stock to increase. In the trading session on April 12, 2023 alone, 6.5 million IDP shares were traded at an average price of VND 257,600/share.

Foreign capital has bought 5.3 million shares, equivalent to VND1,370 billion. After this transaction, foreign fund Daytona Investments Pte. Ltd from Singapore owned 8.99% of IDP's charter capital and became a major shareholder of the company.

IDP international must issue 500 billion shares to pay debt IDP price continues to rise as foreign exchange loss 1 — International Dairy Products (IDP) had to issue shares to raise nearly 500 billion VND to pay off debts and buy raw materials. However, the share price remained high, even skyrocketing when foreign funds poured in capital (Photo TL)

Previously, at the annual general meeting of shareholders of Viet Capital Securities (VCI), Mr. To Hai, General Director of VCI and Chairman of the Board of Directors of IDP, revealed that a Singaporean partner had bought shares in IDP at VND258,000/share. Meanwhile, the initial cost of VCI's investment in IDP was less than VND50,000/share. This transaction is expected to bring large profits to VCI.

As soon as the above information was available, IDP stock price increased sharply. It was recorded that in this trading session on April 14, 2023, IDP code was priced at VND 264,500/share.

It is worth mentioning that this price increase goes against the signals of financial health shown on the financial statements of International Milk.

Good revenue but growth momentum is slowing down, risks increase as short-term debt structure exceeds equity

In 2022, International Milk's net revenue from sales and service provision was recorded at VND 6,086.5 billion, an increase of 26.1% compared to 2021. The high cost of goods sold along with other expenses increased simultaneously, causing IDP's after-tax profit to decrease to only VND 810.5 billion.

The cost burden in 2022 can be mentioned as follows: Financial expenses increased from VND 27.5 billion to VND 57.3 billion, nearly doubling, with most of it being interest expenses. Selling expenses also increased from VND 989.2 billion to VND 1,281.9 billion, an increase of 29.6%. Business management expenses also increased from VND 102.6 billion to VND 134.3 billion, an increase of 30.9%.

Poorly managed costs have put pressure on revenue, causing IDP Milk to record increased revenue but the company's profits to decline.

Even considering the profit trend in the last 4 quarters, International Milk has shown signs of decline as revenue has continuously grown but profits have declined. Specifically, revenue in the first quarter of 2022 was only VND 1,245.7 billion, gradually increasing to VND 1,671.8 billion in the fourth quarter of 2022. Meanwhile, profits decreased from VND 236.5 billion in the first quarter to only VND 165.7 billion in the fourth quarter of 2022.

The company's instability is further demonstrated by its asset structure. In 2022, IDP International Milk's total assets increased sharply to VND 3,840.1 billion. Of which, equity accounted for about VND 1,807.2 billion and liabilities accounted for VND 2,033 billion.

It should be noted that in IDP's debt structure, short-term debt accounts for the majority and tends to increase rapidly, from VND 1,645.2 billion to VND 1,984.4 billion, equivalent to an increase of VND 300 billion in just 1 year. Short-term debt is higher than equity, indicating potential risks in the capital structure of this unit.

Recorded hundreds of billions of dong in profit but still had to issue shares to get 500 billion dong to pay off debt and buy raw materials

It can be seen that in 2022 alone, International Milk recorded a profit after tax of up to 810.5 billion VND. However, there is a paradox that according to the documents of the General Meeting of Shareholders, the company is planning to issue 2.4 million individual shares to raise nearly 500 billion VND to pay off debts and buy raw materials.

If we continue to analyze IDP's asset structure, we can clearly see the instability that has caused this paradox.

Specifically, although holding total assets of up to VND 3,840.1 billion, IDP's cash and cash equivalents are only VND 84.1 billion, although it is more than 4 times higher than the figure at the beginning of 2022, the cash ratio in IDP's asset structure is still very low, leading to liquidity difficulties.

In addition, short-term receivables also increased sharply from VND350.4 billion to VND954.1 billion, equivalent to a nearly three-fold increase in just one year. These are all receivable assets, meaning they are only recorded "on paper" and have not actually been transferred to the company. This has also increased the instability of IDP's asset structure.

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