Due to financial difficulties, Phuong Nam Cultural Joint Stock Company will sell the remaining 7.5 per cent stake in CJ CGV Vietnam Company Limited, the largest film distributor and cinema operator in Vietnam, at the expected price of VND101 billion, equivalent to $4.34 million.
Phuong Nam Culture JSC (PNC) has just announced the resolutions of the General Meeting of Shareholders on the transfer of the remaining 7.5 per cent in CGV Vietnam.
The cost of this investment is VND11.5 billion (roughly $494,000) and the transfer value is expected at VND101 billion ($4.34 million). The proceeds will be prioritized for debt payment, working capital increase for business performance and dividends payment in 2018.
Previously, in June, PNC transferred a 12.5 per cent stake in CGV Vietnam with a total value of VND160 billion ($6.87 million) to Black Diamond Investment Joint Stock Company, which has just been established since late April 2018 with charter capital of VND120 billion ($5.16 million).
PNC’s move was unexpected because the company's leaders said in the shareholders’ annual meeting that the company would not divest from CGV Vietnam. It is “the goose that lays the golden egg", which yields several tens of billions of VND each year to PNC.
However, also in that meeting, PNC failed to approve to either raise its charter capital or borrow loans from the bank since the company had no collateral and was not allowed to mobilize capital from other organizations and individuals under the loan agreement entered with its partner CJI.
PNC has faced many difficulties in operating and managing financial resources due to disagreement among its leaders. After changing the entire management team at the end of 2017, PNC’s business performance has improved.
Its revenue in the first quarter of 2018 reached VND156.6 billion ($6.87 million), an increase of 28 per cent year on year. However, the company still suffered an accumulated loss of nearly VND110 billion ($4.83 million).
CGV Vietnam, formerly known as Megastar, was established in 2005, where Phuong Nam held 20 per cent of the charter capital. In 2011, Korea-based CJ Group spent $74 million to purchase an 80-per cent in Megastar and subsequently renamed it CGV Vietnam.
As of 2017, CGV Vietnam has become the largest cinema chain in the country, accounting for 47 per cent of the market share with 53 cinemas and 324 screens, mainly located in Hanoi and Ho Chi Minh City.
In the last three years, the revenue of CGV Vietnam cineplex has risen continuously. Its revenue reached $118 million in 2017, an increase of 42 per cent compared to 2015.
CGV Vietnam has tripled its revenue since 2015. In 2017, CGV reported a profit of $6 million meanwhile in 2015, its profit was only $2.3 million. The growth in CGV’s revenue and profit mainly comes from the sales of movie tickets, popcorn and drinks due to the increasing preference for the cinemas, especially in the big cities like Hanoi and Ho Chi Minh city.
In the next four years, CJ CGV is planning to spend over $200 million to open 12 to 15 cinemas each year in Vietnam.
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