In its recently published audited financial report, One Capital Hospitality JSC (OCH) posted a loss of over VND 70 billion in the first six months of the year. The parent company recorded a loss of VND 26.6 billion, bringing its cumulative loss to nearly VND 655 billion.
One Capital Hospitality, the parent company of the Trang Tien ice cream chain (Photo: Internet)
Specifically, while OCH’s net revenue reached VND 269.1 billion, a slight decrease of 2.6% compared to the same period last year, its gross profit remained at VND 83 billion. However, the company’s financial situation became more complex as financial revenue plummeted by 69.4% to VND 12.9 billion, while financial expenses surged by 5.5 times to VND 53.1 billion. Other expenses, such as selling and management expenses, also witnessed slight fluctuations, recording VND 46 billion and VND 52.4 billion, respectively.
Consequently, in the first half of 2024, OCH reported a post-tax loss of VND 70.1 billion, an increase of VND 2.2 billion compared to the previously self-established report.
It is worth recalling that in 2014, a dark milestone marked a significant turning point in OCH’s history when Ha Van Tham, the head of OCH and Ocean Group, became entangled in legal troubles. The company recorded a record loss of VND 867 billion that year. This event had severe consequences for OCH, plunging it into prolonged difficulties.
The challenges did not end in 2014, as OCH continued to face bleak business conditions in the following years. The consecutive losses in 2016, 2017, 2021, and the first half of 2024 have pushed the company’s total cumulative loss to nearly VND 655 billion.
Despite owning well-known brands and prime real estate, OCH’s primary profit-generating business is in the food industry, including Trang Tien ice cream and Givral cakes. However, with the increasingly competitive market and shifting consumer demands, maintaining stable growth in this sector has become more challenging. In addition to the food business, OCH also owns the Sunrise Nha Trang, Sunrise Hoi An, and Starcity Nha Trang resort chains. Nevertheless, the Covid-19 pandemic has negatively impacted the tourism industry, hindering the operations of these hotels.
Facing these current challenges, the management team identified that the best growth driver in the coming period would be through mergers and acquisitions (M&A). OCH’s leadership added that with their current brands and products, the company could achieve stable revenue of over VND 1,000 billion and consolidated profits ranging from VND 180 to 200 billion. However, there is no significant growth momentum, and achieving a breakthrough increase would be challenging.
As of June 30, OCH’s total assets amounted to VND 4,047.7 billion, of which only VND 506.2 billion was in short-term assets. The company holds VND 4.1 billion in cash and VND 109.2 billion in bank deposits. The ratio of short-term assets to total assets is relatively low, indicating OCH’s limited ability to meet short-term financial obligations. This implies that the company may struggle to fulfill its regular financial commitments, such as salary payments and settling accounts payable.
Questions arise regarding OCH’s ability to recover accounts receivable and manage inventory. While short-term receivables grew by 35%, the establishment of a VND 173.7 billion allowance indicates uncertainty in collecting these amounts. Notably, OCH has VND 46.24 billion in receivables from individuals at Viptour – Togi JSC, with a full allowance of VND 46.24 billion, and VND 53.2 billion in receivables from Ms. Nguyen Thi Dung, with an allowance of VND 53.2 billion.
Additionally, the high inventory value of VND 337.4 billion, mainly in real estate projects like Starcity Airport (VND 218.3 billion, with an allowance of VND 102.3 billion) and Tan Phu Trung Factory (VND 74.8 billion), is concerning. The allowances for these projects suggest OCH’s slow inventory turnover and challenges in converting inventory into cash. However, OCH has decided to halt investment and construction in the Tan Phu Trung Factory project and is working on transferring ownership of this project.
As of the end of the second quarter of 2024, OCH’s financial borrowings stood at VND 1,687.5 billion. Notably, a substantial loan from Vietinbank, with outstanding debt of VND 1,500 billion, accounts for a significant proportion of the company’s total debt. This loan, with a term extending to 2030 and an interest rate of 7%/year, imposes a considerable financial burden on the company, affecting its cash flow and profitability in the future. The loan is secured by all shares and related rights of Binh Hung Production and Trading Co., Ltd. in IDS Equity Holdings JSC, OCH’s term deposits, and all assets attached to the land lot at 72-74 Tran Phu Street, Loc Tho Ward, Nha Trang City, Khanh Hoa Province, owned by Nha Trang Evening Star One-Member Limited Liability Company.
According to OCH’s Board of Directors’ report at the 2024 Annual General Meeting of Shareholders, the company is actively implementing plans to divest from multiple investment projects: divesting all 5.14 million shares in Tan Viet JSC, divesting all over 16 million shares in Viptour Togi JSC (the investor of the Starcity Westlake project), and divesting all capital in Nha Trang Evening Star One-Member Limited Liability Company (the investor of the Starcity Nha Trang Hotel project). Notably, the expected transferee of these divestment deals is Ocean Group, OCH’s parent company.
This decision comes amid the company’s challenges, particularly legal issues related to the Starcity Airport project. In OCH’s audited semi-annual financial statements for the first half of 2024, the auditing unit highlighted the production and business costs incurred of VND 218.3 billion for this project. The Starcity Airport project is a joint development with Green Ocean Consulting and Service Company Limited, now known as Pegasus Thang Long Company Limited. As of June 30, 2024, the amount OCH received from Pegasus Thang Long as capital contribution for the project was VND 116 billion.
However, the entire project’s incurred costs, including the value of land use rights and unfinished construction costs, have been mortgaged at a bank to secure Pegasus Thang Long’s loans. Notably, this collateral has been subject to a decision to enforce payment to recover Pegasus Thang Long’s debt. This situation poses a financial risk to OCH, as the company has determined a potential loss of VND 218.3 billion, the total cost of the project.
To address this issue, OCH has made a provision of VND 102.3 billion, equivalent to the loss after offsetting VND 116 billion from the business cooperation funds received from Pegasus Thang Long. The Company’s management assessed that there are no further liabilities arising related to Pegasus Thang Long and the Starcity Airport project.
Moving forward, OCH will continue to take necessary actions to safeguard its legitimate interests.
In the stock market, during the trading session on September 11, OCH shares were priced at VND 5,700 per share. Currently, the stock is under warning status and will be delisted from margin trading from September 12 due to the company’s negative post-tax profit in the first six months of 2024, as per the audited consolidated financial statements.
