Paying high dividends causes the cash flow of Industrial Urban Development Corporation No. 2 to decrease

In early 2025, when many industrial real estate stocks tended to trade sideways or go backwards, shares of Industrial Urban Development Corporation No. 2 continuously increased, becoming a phenomenon on the HoSE floor.

Statistics from January 14 to March 28 show that D2D shares have increased by 35%, from VND 31,400 to VND 42,400/share and are trading at a P/B valuation of 1.71 times (industry average is 1.4 times). In particular, with continuous vertical increase and no adjustment since the second half of January until now, D2D shares have sent out a signal of prolonged overbought. With a history of attractive cash dividends for many years and a continued plan to pay 2024 dividends of up to 84%, corresponding to a yield on the current market price of up to 19.8%, this is the driving force supporting the price of this stock.

Industrial Urban Development Corporation No. 2 was established in 1992, operating mainly in the field of industrial real estate and implementing commercial real estate projects. In recent years, the Company has continuously maintained an attractive cash dividend policy: 35% in cash in 2020, 50% in cash in 2021, 30% in cash in 2022 and 87% in 2023.

In addition, with a dividend payment plan of 84% in 2024, the corresponding yield compared to the market price on March 28 is up to 19.8%, higher than the 12-month deposit interest rate at BIDV Bank, which is currently 4.7%.

With the continuation of the "huge" dividend policy, it is estimated that the Company will have to pay a total of VND 254.18 billion in the upcoming dividend payment. This dividend payment is even larger than the remaining cash at the end of 2024, which is VND 97 billion. At the same time, with the distribution of almost all accumulated profits for many years, the remaining accumulated profits transferred to 2025 will be only VND 2.5 billion.

In the long term, the accumulated profits of Industrial Urban Development Corporation No. 2 were mainly accumulated in 2020 and 2021, when the Company recorded record profits of VND 268 billion and VND 243 billion, respectively. However, in the past 3 years, the Company's profits have continuously remained low compared to the golden period, when in 2022 it recorded a profit of VND 17 billion, in 2023 it recorded a profit of VND 26 billion and in 2024 it recorded a profit of VND 88 billion.

The distribution of huge dividends, while profits have been modest in the past 3 years, has led to a decline in the financial health of Industrial Urban Development Corporation No. 2. From December 31, 2021 to December 31, 2024, the amount of cash decreased by 82% compared to the beginning of the period, equivalent to a decrease of VND 457.48 billion to VND 97.12 billion and accounting for 6.4% of total assets (at the beginning of the period, it was recorded at VND 554.6 billion, accounting for 31.1% of total assets); accumulated interest decreased by 59% compared to the beginning of the period, equivalent to a decrease of VND 369.89 billion to VND 256.71 billion, accounting for 16.9% of total capital (at the beginning of the period, it was recorded at VND 626.6 billion and accounting for 35.1% of total capital).

Thus, the sharp decrease in profit recorded compared to the golden period of 2020-2021, while continuously using previous "savings" to pay high dividends to shareholders, leads to a decrease in cash and if the dividend payment in 2024 is up to VND 254.18 billion, this dividend amount will exceed the amount of cash currently owned, so it will pose a challenge to the cash flow to reinvest in new projects in the future.

It is known that Industrial Urban Development Corporation No. 2 has developed Nhon Trach 2 Industrial Park Project with a commercial area of ​​281.72 hectares, achieving a 100% rental rate. Some other projects such as Loc An Residential Area Project, Loc An Social Housing Project, Thong Nhat Ward Residential Area Project... also achieved high liquidity.

However, from 2022-2024, Industrial Urban Development Joint Stock Company No. 2 lacks a back-end project to account for revenue, so the Company has developed a secondary industrial real estate project through the acquisition of land at Chau Duc Industrial Park Project of Sonadezi Chau Duc Joint Stock Company and continues to plan to develop Loc An Residential Area Project.

However, in order to continue developing secondary acquisition projects and putting them into business, the independent analysis unit also noted that the investment capital demand for the Loc An Social Housing Project is 967.32 billion VND, the Chau Duc Industrial Park Project is 760 billion VND, the Chau Duc Industrial Park Factory Project is 320 billion VND, the Thong Nhat Ward Residential Area Phase I is 1,000 billion VND (564 billion VND has been invested)...

As cash flow declines due to the huge dividend policy, Industrial Urban Development Corporation No. 2 is facing cash flow difficulties to invest in secondary projects.

Source: https://baodautu.vn/tra-co-tuc-cao-khien-luong-tien-mat-cua-ctcp-phat-trien-do-thi-cong-nghiep-so-2-suy-giam-d261113.html