The Uncertain Future: A Series on Businesses Under Audit Scrutiny

LDG Investments

HoSE-listed LDG Investment JSC (coded LDG) has just released its audited financial statement for the first six months of 2024, reporting a negative revenue of VND149 billion.

After deducting taxes and fees, the company posted a net loss of VND396.16 billion, compared to a loss of VND296.11 billion in the self-prepared report.

LDG attributed the increased loss to additional provisions for doubtful accounts receivable and financial investments made by the current auditor, compared to the company’s Q2/2024 separate financial statements.

Regarding the auditor’s emphasis on the Tan Thinh Residential Project, with a balance of VND516.86 billion as of June 30, 2024, LDG committed to completing the necessary procedures in accordance with land, real estate business, and construction laws, based on the inspection conclusion dated March 23, 2023, to continue implementing and completing the project.

In relation to the same project, Mr. Nguyen Khanh Hung, former Chairman of LDG Investment, has been arrested and detained for investigation into “deceiving consumers” charges. On April 11, 2024, Dong Nai Provincial Police also initiated legal proceedings against Mr. Nguyen Quoc Vy Liêm, former Deputy General Director of LDG, for the same offense.

The auditing firm emphasized that as of the date of the consolidated financial statements, LDG Investment was still awaiting the conclusion of the competent authorities and had no basis to assess the potential impact (if any) of this matter on the company’s business operations.

However, LDG asserted that this issue would not alter or affect the company’s plans, strategies, business, and investment activities. LDG pledged to make every effort to stabilize all business operations and safeguard the rights and interests of customers, shareholders, and partners.

In the recently published audited financial statements, the auditing firm also noted the existence of a material uncertainty that may cast significant doubt on LDG Investment’s ability to continue as a going concern.

LDG stated that it has been and is continuing to implement various solutions and plans to address cash flow issues.

Hoa Binh Construction Group

Hoa Binh Construction Group Joint Stock Company (coded HBC) has released its reviewed consolidated financial statements for the first six months of 2024, reporting revenue of VND3,812 billion, a 10% increase compared to the same period last year.

After tax and fees, HBC recorded a post-tax profit of VND830 billion, while in the same period last year, it suffered a loss of VND713 billion. The post-tax profit in the reviewed consolidated financial statements is higher than the VND741 billion reported in the self-prepared report.

Despite significant profits in the first half of the year, as of June 30, 2024, Hoa Binh Construction Group still had accumulated losses of VND2,403 billion. Along with some overdue debts, the auditors from AFC Vietnam Audit & Consulting Co., Ltd. expressed their opinion: “These signs indicate the existence of material uncertainties that may cast significant doubt on Hoa Binh Construction Group’s ability to continue as a going concern.”

Notably, according to a decision by the Ho Chi Minh City Stock Exchange (HoSE), HBC shares will be forcibly delisted from September 6, 2024. More than 347.2 million HBC shares will be registered for trading on the UPCoM market from September 10, 2024.

The reason for the compulsory delisting is that Hoa Binh Construction Group’s total accumulated losses as of the end of 2023 exceeded its actual paid-up charter capital, falling under the category of securities subject to compulsory delisting as per regulations.

HAGL

Recently, Hoang Anh Gia Lai Joint Stock Company (HAGL, coded HAG) published its reviewed consolidated financial statements for the first six months of 2024.

According to the auditing firm Ernst & Young Vietnam, the accumulated loss of VND957 billion as of June 30, 2024, and the company’s short-term debt exceeding its current assets by over VND350 billion are matters of concern.

As of June 30, 2024, HAGL’s total liabilities were VND12,750 billion, a decrease of VND1,475 billion compared to the beginning of the year. Short-term debt amounted to more than VND9,058 billion, which is higher than the current assets of VND8,707 billion. The debt structure includes short-term financial lease liabilities of VND3,951 billion and long-term liabilities of VND2,981 billion, totaling nearly VND7,000 billion.

In addition, HAGL is also in violation of certain commitments regarding bond contracts and has not repaid the principal and interest of bond loans that have become due. As of June 30, the company had not repaid VND789 billion in principal, VND7.7 billion in loan interest, and approximately VND3,277 billion in bond interest, as it had not received the receivables from HNG.

Therefore, the auditors emphasized “the existence of a material uncertainty that may cast significant doubt on the Group’s ability to continue as a going concern.”

In its explanation of the issues highlighted by the auditors, HAGL stated that it had prepared a 12-month business plan.

This plan includes projected cash flows from the partial disposal of financial investments, asset disposals, recovery of loans from partners, bank borrowings, and cash flows from ongoing projects. HAGL expects these measures to enable the company to repay its debts as they become due and continue operating for the next 12 months.

“The hog and banana businesses are expected to continue generating significant cash flows in 2024,” the company stated.