Ministry of Finance raises questions about Hancorp's investments

By Minh Anh - Dec 27, 2017 | 06:16 AM GMT+7

TheLEADERAccording to the Ministry of Finance (MoF), Hanoi Construction Corporation – JSC (Hancorp)’s outsourcing investment is not effective and potentially in risk of capital loss.

Ministry of Finance raises questions about Hancorp's investments
Hanoi Construction Corporation – JSC.

These sentiments were expressed in a MoF letter to the Ministry of Construction (MoC) regarding Hancorp’s financial status and business performance in 2016.

In 2016, Hancorp had revenue of VND2,776 billion (US$122.4 million), of which real estate and construction sectors accounted for 94 per cent. Hancorp's profit in 2016 reached VND128 billion (US$5.6 million). According to MoF, Hancorp’s total outsourcing investment is VND1.28 trillion (US$56.4 million).

However, MoF expressed displeasure with the results, especially the high debt to equity ratios of some Hancorp subsidiaries including Hanoi Construction Investment JSC No. 01, Hantech One Member LCC, Tay Ho Construction and Housing Investment JSC.

According to MoF, in 2016, Hancorp received a dividend of VND33.8 billion (US$1.5 million) of which some associate companies and two subsidiaries accounted for over VND28 billion (US$1.2 million) and VND5.8 billion (US$255,788), respectively.

Hancorp’s outsourcing investment, according to MoF, is not profitable due to the low dividend yield (2.6 per cent/total outsourcing investment). Hancorp’s investment capital is focused mainly on associate companies and other long-term investments which Hancorp is not entitled to control, potentially leading to capital loss.

Regarding assets and receivable debts, as of December 31, 2016, Hancorp’s total assets was VND6.56 trillion (US$289 million) of which receivables amount to VND3,341 billion, equaling 51 per cent and 2.2 times higher than the Hancorp’s equity (US$147.3 million).

Some companies have debts overdue more than a year such as Investment and Construction Development JSC (US$44.9 million), Deo Ca Investment JSC (US$157.5 million), Phu My Construction Investment JSC (US$285.5 million).

However, the balance of provision for bad debts of Hancorp is only VND157 million (US$6,923). As of December 31, 2016, the current ratio was 1.45 and the quick ratio was 0.07.

MoF stated: "Although Hancorp’s short-term debt-paying ability is guaranteed; however, the thing that the receivable debts account for a large proportion in the structure of assets and liquidity ratio is low will make Hancorp difficult to pay due debts in case the investor makes late payment or Hancorp’s business is unfavorable."

As a result, MoF requested that MoC should inspect and review Hancorp’s outsourcing investments to reduce the ineffective investments.

In particular, pursuant to Prime Minister’s Decision No. 58 dated December 28, 2016 on the criteria to classify state-owned companies, companies with state ownership, and the list of state-owned companies that will be restructured in 2016-2020, Hancorp is not eligible to be held by the State. Therefore, MoF asked MoC to speed up the divestment in this company.