Construction firms race to buy back stocks

Wednesday, Mar 04, 2020 07:45

A BOT (build-operate-transfer) booth constructed by Cuong Thuan IDICO Development Investment JSC (CTI). CTI plans to buy back 30 per cent of its total shares listed on the stock market. — Photo

Two construction and real estate companies have announced plans to repurchase their own stocks to stabilise prices.

Cuong Thuan IDICO Development Investment JSC (CTI) plans to buy back 30 per cent of its total shares listed on the stock market.

CTI will carry out a public tender with a fixed buying price of VND22,100 (US$0.95) per share. The company is expected to spend VND418 billion to buy a total of 18.9 million shares.

VRC Real Estate and Investment Joint Stock Company (VRC) will also purchase back up to 20 per cent of its shares.

The company has registered to buy a maximum of 10 million shares, equivalent to a value of VND75 billion. VRC hit its ceiling prices in the last four trading sessions.

Investment and Construction Development Joint Stock Corporation (DIG) has recently approved the plan to buy back 15 million shares.

Although the company only plans to buy a maximum of 4.78 per cent of the outstanding shares, it will cost VND203 billion.

If those three companies manage to complete their plans, the total amount of money they will pour into the market will reach approximately VND700 billion.

Last year, the stock market witnessed a series of stock repurchasing deals worth up to VND 13 trillion. Among them, real estate-retail-technology giant Vingroup and its arms Vinhomes and Vincom Retail spent more than VND7.5 trillion. Vietjet poured in VND2.35 trillion.

Money from where?

CTI has never repurchased stocks before. Over the past five years, the company’s capital has grown fast, from VND330 billion to VND630 billion.

Currently, CTI’s major shareholders are mainly investment funds such as Victory Holding Investment Limited, Kingsmeard Vietnam and Indochina Growth master fund and its Deputy General Director Truong Hong Loan.

The capital CTI will use to repurchase stocks often originates from equity capital, undistributed after-tax profits or from funds. The narrowing of the remaining profits may affect the dividend payout plan for 2019.

CTI’s cash balance is only VND83 billion, decreasing in 2019 because the company focused on disbursing construction investment.

At VRC, the cash balance is only VND14 billion. Real estate inventories account for the largest amount of CTI’s total assets, which value VND1.13 trillion, of which the two residential projects of Nhon Duc and Phuoc Loc-Nha Be total approximately VND869 billion.

However, liquidity of these project inventories remain doubtful as in the fourth quarter of 2019, the figure only rose by about VND2 billion.

Along with plans to buy back shares, VRC has submitted a request to shareholders to allow Happy Land Investment JSC to buy to increase the ownership ratio to over 25 per cent, without having to undergo a public bid.

If approved, the number of shares VRC is able to repurchase could be sold to the new shareholder. — VNS

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