On the morning of March 18, 2024, Hoa Sen Corporation (HSG) held its annual general meeting of shareholders.
The Board of Directors also presented to shareholders a plan to issue 5 million ESOP shares at a price of 10,000 dong/share to company executives, managers, and other key personnel. These shares will be subject to a one-year transfer restriction. The implementation period is expected to start from the date of the resolution by the general meeting of shareholders until the nearest upcoming annual general meeting of shareholders.
Chairman Le Phuoc Vu shared
: “The employees at Hoa Sen are under a lot of pressure and work hard. Their income is just their salary, so this ESOP is a compensation, a worthy reward. It is in accordance with the law and it is actually an investment for the future, to ensure that they can dedicate themselves to the corporation with peace of mind”.
During the discussion, when a shareholder suggested a higher dividend payout, Chairman Le Phuoc Vu defended the conservative approach despite the company’s strong cash flow.
“At the end of last year’s general meeting, I said that 1 billion profit for the 2022-2023 fiscal year is already a success, a deserving reward for the management board because we had a loss of over 800 billion in the first quarter. We are both an importer and a manufacturer, as well as a distributor and exporter, so our inventory must always be kept at least 4 months safe.”
The last three quarters of last year saw fluctuations in prices, particularly a decline in domestic and export demand. Making a profit of 30 billion last year was a tremendous effort, considering that we had no long-term debt, and depreciation was around 1,100 billion. The corresponding cash flow was positive.
If for some reason we had to close suddenly, we would still have money to pay the bank and have a surplus of 600-700 billion dong.
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HSG is not borrowing low-interest loans and then depositing them to earn a spread, because “we respect financial institutions”
It is known that HSG is currently borrowing from one of the top 5 global banks in Vietnamese dong, at an interest rate of 2.3% per year and a term of 4 months.
Chairman of HSG even revealed that the credit limit of the company is currently at around 17,000 – 18,000 billion dong, with an average interest rate of 2.1% per year. HSG respects financial institutions, so it does not borrow money and then deposit it with banks at an interest rate of 4-5% to earn a spread.
It is worth emphasizing that taking advantage of low-interest loans to invest, including depositing money to earn a spread, is not uncommon. In the market, many large listed corporations also use this “corporate finance” tool to generate financial income.
Photo: HSG’s general meeting of shareholders on the morning of March 18, 2024.
HSG wants to invest in many areas, including finance and banking.
Regarding HSG, Vu believes that the current political and economic situation is very complicated, and at present, the approach should be more defensive. There is still over 4,000 billion dong in retained profits, but stability must take precedence. Retained earnings should be reinvested for the future. If dividends were higher than 5%, equivalent to around 300 billion, it means using accumulated profits from previous years.
In the 2024-2029 strategy, HSG is considering expanding its business into various fields such as finance, banking, securities, insurance, real estate, precision mechanics and manufacturing, semiconductor technology, real estate (office buildings, housing, residential areas, urban areas), education and training, healthcare, ecological tourism, resorts, financial investment, M&A culture, arts, performance, event organizing…
The maximum total investment for these expanded sectors is not to exceed 5,000 billion dong. While the state is determined to cleanse the economy and foster the development of true entrepreneurs, Vu believes this is an opportunity for HSG and no sector should be overlooked.
Continuing with the IPO plan, moving towards listing the shares of Hoa Sen Plastic and Hoa Sen Steel Pipe.
In the core area, after the Hoa Sen Home building materials and furniture supermarket system and the plastic manufacturing and business sector operated independently and stably by Hoa Sen Plastics Joint Stock Company, the Group is planning to transfer the entire steel pipe manufacturing and business sector to Hoa Sen Steel Pipe Joint Stock Company (established on the basis of the transformation of a wholly-owned subsidiary owned by Hoa Sen) within the next 5 years.
Specifically, Hoa Sen Phu My Co., Ltd. will be considered for conversion into Hoa Sen Steel Pipe Joint Stock Company, of which the Group owns 99% of the charter capital. The detailed plan for the conversion of Hoa Sen Phu My Co., Ltd. into Hoa Sen Steel Pipe Joint Stock Company has been assigned to the Board of Directors to develop, finalize, and implement.
Hoa Sen Steel Pipe Joint Stock Company will inherit the entire infrastructure for steel pipe manufacturing and business activities (land, workshops, machinery and equipment, production lines…) and become the entity responsible for steel pipe manufacturing and business activities.
If conditions are favorable, HSG will develop an IPO plan and list the shares of Hoa Sen Plastics Joint Stock Company and Hoa Sen Steel Pipe Joint Stock Company.
