Phuong Nam Cultural Joint Stock Corporation has proposed a plan to shareholders to sell its stakes in CJ CGV Vietnam Co Ltd, which operates Viet Nam’s largest multiplex cinema, CGV.
The decision to sell its stakes comes in the wake of financial distress faced by the corporation.
Phuong Nam plans to sell 12.5 per cent stakes in CJ CGV Vietnam to Black Diamond Investment Joint Stock Company. If implemented, the move will reduce Phuong Nam’s holding in the cinema operator from the current 20 per cent to 7.5 per cent.
The divesture, expected to bring in VND160 billion (US$7 million), will be used to repay its debt to the CJI Group, which includes $7 million in principal and VND18.5 billion in interest, and is due on June 30 without debt extension.
According to the management board, the company is forced to sell investment to mitigate the risk of insolvency. In May, it sought shareholders’ approval to raise the charter capital but was rejected.
The company could not borrow from the bank due to the lack of collateral and was unable to get loans from other organisations and individuals under the agreement with the CJI Group.
Shareholders are requested to reply in writing by June 27.
In 2017, Phuong Nam earned VND606 billion in revenue, up by 12 per cent year-on-year. However, it reported a loss of VND67 billion after paying taxes, raising the two-year loss to VND106 billion.
In the first quarter of this year, the cultural company’s revenue grew by 28 per cent over the same period last year, but it still recorded a loss of VND1.8 billion against a profit of VND3.4 billion in the first quarter of 2017.
Its shares, which are trading on the Ho Chi Minh Stock Exchange with the code PNC, are currently under special control for reporting losses for two consecutive years. It will probably be forced to delist if losses exceed the owner’s equity.
Its short-term debt as of March 31, 2018, exceeded the short-term assets by VND195 billion. Its total liabilities amounted to VND321 billion as of May 18.
Meanwhile, CJ CGV Vietnam reported positive business results, with total sales reaching VND1.46 trillion in 2017, making up more than 45 per cent of the total sales of films in Viet Nam and exceeding the combined sales of four other major cinema operators, including Lotte, Galaxy, BHD and National Film Centre.
CGV’s film distribution also makes up 60 per cent of the market.
The Viet Nam Film Distribution Association has petitioned to the Competition Authority under the Ministry of Industry and Trade for possible violation of the competition law. They fear that the Vietnamese film market is being aggressively taken over by foreign companies. — VNS