Coteccons shares hit three-year low as construction market slows down

The closing session of June 18 has seen CTD price fall to $4.2 from its peak of VND231,389 ($10.06) a share recorded on November 14, 2017. 

The share price has in fact plummeted by 2.3 per cent from the prior day. 

The company’s market capitalisation has now gone down to VND7.45 trillion ($324.13 million).

Regardless of the sharp drop in CTD stock price, traders have not seemed to be so keen on buying the ticker, evident in the low trading volume of just over 50,000 shares being traded on a single day on average in June.

In the first quarter of 2019, CTD’s revenue reached VND4.25 trillion ($184.72 million). Its post-tax profit recorded at VND188.8 billion ($8.2 million), a drop of nearly 35 per cent on-year. The first quarter was the second one in the row that CTD has experienced a decrease in its post-tax profit.

As the real estate market in Vietnam has hit its saturation point, the construction sector is going into a slower pace of growth. 

Profit of construction firms has dropped as a result of the delays seen across a number of projects.

In its annual general meeting held earlier on during the year, CTD also failed to get approval for its plan to merge with Ricons Construction and Investment JSC, an affiliated company of CTD, through a share swap arrangement.

CTD, as at March 31, 2019, owned 14.87 per cent of Ricons, with the total investment value of VND290.18 billion ($12.61 million).

CTD’s largest institutional shareholder Kustocem (owning 17.75 per cent of CTD as at December 31, 2018), in particular, announced prior to the AGM that they would not support the proposed merger with Ricons, citing the rationale behind and the benefits of M&A strategy between Coteccons and Ricons were unclear. 

Kustocem, on the other hand, has requested Coteccons to focus on its core business.

“The proposed merger with Ricons would not bring additional technical or operational capabilities that our company does already have. Kustocem believes that Coteccons shareholders will benefit from the management focusing the company’s resources on developing our own platform instead of going down the M&A path,” read the statement issued by Singapore-headquartered Kustocem on April 8.

“Using the company’s shares to pay for M&A transactions does not make sense until the financial performance of Coteccons improves and the share price reaches the level that it deserves.”

By the end of 2018, CTD had a total of 352 foreign shareholders, accounting for 47.13 per cent of its chartered capital. Apart from Kustocem, its major foreign shareholders include Korea Investment Management Co., Ltd. who held 7.31 per cent of CTD, VinaCapital 7.1 per cent and Thanh Cong Trade and Investment Co., Ltd. 14.28 per cent.