Each employee brings in VND 8 billion in profits per year
TDM Water Corporation (TDM Water, stock symbol: TDM) has just announced the audited financial statements for 2023 with revenue of VND 532.5 billion, an increase of 11.2% compared to the previous year. Of which, the company’s revenue from its core business activities, which is providing clean water, was VND 466.4 billion. The gross profit margin reached 45%, a decrease compared to the 52% of last year.
Despite the decrease in the gross profit margin, after deducting expenses, the leading water company in Vietnam earned a net profit of VND 283.5 billion, a growth of 29% compared to 2022. From 2018 until now, TDM Water has consistently brought in hundreds of billions of dong in profits, despite having only 25 employees.
The fat investment named Biwase
According to the explanation from TDM Water, one reason that contributed to the strong increase in the company’s profits comes from financial activities with revenue of nearly VND 124 billion, 5.2 times higher than the same period last year, thanks to dividends received from Binh Duong Environment and Water Joint Stock Company (Biwase, stock symbol: BWE) and VND 400 million from Water Supply and Environment Consulting Joint Stock Company.
As of the end of 2023, TDM Water owns 72.2 million shares of BWE, equivalent to 37.42% of the capital and is also the largest shareholder of the company. In the financial statements of TDM Water, Biwase is recognized as an associated company, and its business results are accounted for using the original cost method.
Specifically, the original cost of investment in Biwase is VND 1,061 billion, accounting for 40% of total assets. However, the fair value of this investment is as high as VND 2,974 billion.
As of December 29, 2023, the closing price of BWE shares was VND 41,200, equivalent to a market capitalization of nearly VND 7,950 billion for Biwase.
TDM Water became a strategic shareholder of Biwase when the company went public in 2016. This was a relationship that attracted special attention in the past. Firstly, in terms of scale, Biwase has thousands of employees and total assets worth tens of trillion dong, many times larger than TDM Water.
In addition, Biwase was previously one of the founding shareholders of TDM Water. Before going public, Biwase divested from TDM Water, which helped TDM Water meet the conditions to become a strategic shareholder under Decree 59/2011/ND-CP.
To explain the fact that TDM Water invested just over VND 1,000 billion but the reasonable value is nearly VND 3,000 billion, this can only come from the “eating and doing” of Biwase. Accordingly, Biwase still brings in billions of dong in profits every year, even surpassing TDM Water.
Thanks to its large profits and still having room for growth after a series of M&A deals in the industry, Biwase also regularly pays cash dividends to shareholders. Therefore, TDM Water can still benefit from its investment in Biwase.
TDM Water was established in 2013 with its main business being clean water supply, wastewater treatment, and water industry supplies. The current charter capital is VND 1,000 billion.
At the end of 2014, after more than 1 year of establishment, TDM Water completed the construction of the expanded Nam Thủ Dầu Một Water Plant with a capacity of 45,000 m3/day and night to increase the total capacity to about 100,000 m3/day and night. In addition, the company is also the investor of the Bàu Bàng Water Plant project in Bàu Bàng district, Binh Duong province, with a total investment of about VND 350 billion.
The business activities of TDM Water can be said to be very favorable with signed contracts to supply clean water through master meters for familiar customers, including Biwase, so the output and selling price are stable, and the founding shareholders consume the output of the plants.
In January 2024, TDM Water recorded total revenue of VND 29 billion and after-tax profit of over VND 8.3 billion, an increase of 5% and 4% respectively compared to the same period last year. This year, the company targets total revenue of VND 564 billion and after-tax profit of nearly VND 198 billion.
