Construction ministry to auction 49% stake in Song Hong Corporation

Xuan Thinh Friday | 12/08/2023 14:00

Photo: Song Hong Corporation

The Ministry of Construction plans to auction 13.2 million shares in Song Hong Corporation, equivalent to 49.04% of capital, according to the Hanoi Stock Exchange's filing.

The starting price is VND10,500 per share, which is 4.7 times more than the closing market price of SHG on December 7. The auction is scheduled to take place on December 22 at the Hanoi Stock Exchange. From November 30 to December 15, investors can register for the auction and make deposits.

In the past 6 months, SHG shares traded around VND2,000 per share and had almost no transactions for many consecutive sessions. Closing the session on December 7, this stock stopped at VND2,200 per share. 

This is not the first time the Ministry of Construction has auctioned SHG shares. In 2020, the Ministry of Construction organized an auction for all SHG shares owned by the Ministry with a starting price of VND10,000 per share, while the price of SHG shares at that time was only about VND2,000 per share.

However, the Hanoi Stock Exchange announced a temporary suspension to ensure compliance with the government's regulations at that time and wait for instructions from the competent authority. 

Song Hong Corporation is one of the first member units of the Ministry of Construction, established in August 1958 with the name Viet Tri Architecture Company. In August 2006, this enterprise was converted to a parent-subsidiary company model and named Song Hong Corporation. The current charter capital is VND270 billion.

Song Hong Corporation launched its initial public offering (IPO) in 2009 with a starting price of VND14,000 per share. In April 2015, Song Hong Corporation was listed on UPCoM with a starting price of VND9,600 per share.

Since equitization, and especially after being listed on UPCoM, the company's business situation has regressed and continuously suffered losses. Especially in 2018, the corporation had a record loss of nearly VND388 billion.

Capital recovery at construction projects has resulted in a sizable capital backlog, which Song Hong Corporation raised at the Annual General Meeting of Shareholders every year. This affects the corporation's reputation with credit institutions as well as incurring capital costs.

The poor financial situation and serious imbalance also make it difficult to access new projects and jobs because Song Hong Corporation is unable to win bids.

In the first six months of 2023, the corporation had no revenue from construction activities and only recorded nearly VND4 billion from providing services, down 82% over the same period.

Interest expenses of more than VND36 billion are the main reason why the company lost nearly 27 billion VND in the first half of the year, increasing the accumulated loss by the end of the second quarter of 2023 to VND1,293 billion.

In the review report, CPA Vietnam Auditing Company Limited made a series of exclusionary conclusions when it was not possible to collect records of the reconciliation of receivables, and at the same time, it was not possible to collect sufficient appropriate evidence about the estimated amount. The receivable room needs to be appropriated.

CPA Vietnam also cannot express an opinion on the completeness of liabilities and the impact of this issue on the financial statements.

The audit also emphasized that, as of June 30, the corporation had short-term debt exceeding short-term assets by nearly VND987 billion. The accumulated loss is VND1,293 billion, and the negative equity is VND987 billion.

The company's ability to operate depends on the recovery of debts, improving the efficiency of the rental business, and capital support from shareholders. These conditions make CPA Vietnam doubt the corporation's ability to continue operating.

As of June 30, total assets were more than VND985 billion. Short-term receivables are nearly VND381 billion, of which customers' receivables are VND169 billion. The company recorded bad debt of more than VND381 billion with a recovery value of about VND118 billion.

Inventories are at VND405 billion, mainly the unfinished production and business costs of the Vung Ang 1 Thermal Power Plant and other projects.

The amount of cash and cash equivalents is more than VND4 billion, while outstanding financial debt is more than VND313 billion. In addition, the company also recorded approximately VND913 billion in other payable expenses such as loan interest, and accrual of the cost of construction projects,...

The company's real estate asset portfolio includes two plots of property at 70 An Duong, Tay Ho District, Hanoi, which serves as the corporation's headquarters, and one piece of land at the Lao Cai branch.

There is also the Royal Song Hong Hotel project (Vinh Phuc), which has received approval from the Ministry of Construction to allow the company to look for partners to transfer the project.

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