The Pennies-to-the-Dollar Stock Picks

Ice tea is a humble drink, often associated with affordability. To be fair, let’s assume the price of a cup of ice tea, however temporary, is the lowest in the market at 3,000 VND. At this price, there are 27 stocks on the HOSE and HNX exchanges with market prices equal to or lower than this amount. Among them, the cheapest stock is priced at 1,200 VND, and the most expensive is only 3,000 VND per share.

Topping this unfortunate list is FID (Vietnam Enterprise Investment and Development Joint Stock Company). As of October 11, FID’s market price stood at only 1,200 VND per share, a 48% decrease compared to the beginning of the year. The second place goes to CTC (Tay Nguyen Hoang Kim Group Joint Stock Company), which has maintained a market price of 1,300 VND per share since the start of the year. The last on the list, or the most expensive, is NRC from the Danh Khoi Group, priced at 3,000 VND per share.

In terms of decline, the top two losers are AMV (Vietnam-America Pharmaceutical and Medical Equipment Production and Trading Joint Stock Company) and TKG (Tung Khanh Production and Trading Joint Stock Company), falling by 77% and 76% in value since the beginning of the year, with market prices of 2,100 VND and 2,400 VND per share, respectively. Additionally, there are other notable names such as KPF (Koji Asset Investment Joint Stock Company) priced at 1,820 VND per share, down 68%; ITA (Tan Tao Investment and Industry Corporation) at 2,350 VND per share, a decrease of 65%; and DAG (Dong A Plastic Joint Stock Company) at 1,430 VND, down 56%.

What led to this situation?

Stock prices depend on various factors, including a company’s fundamentals, business potential, industry outlook, and market supply and demand. However, most of the time, extremely low-priced stocks are accompanied by deeper stories or, simply put, internal issues.

For FID, the stock is currently facing a “combo” of warnings, surveillance, and trading restrictions. The company’s internals are not positive, with continuous losses, the heaviest being a loss of 4 billion VND in 2020. In 2023, despite a 2.2-fold increase in revenue over the previous year, reaching more than 84 billion VND, FID still incurred a net loss of nearly 3 billion VND (a profit of nearly 64 million VND in 2022).

In the first half of 2024, FID continued to lose 2.5 billion VND, with a cumulative loss of over 23 billion VND as of the end of June. The reviewed semi-annual financial statements for 2024 also received a series of qualified audit opinions, mainly related to provisions for personal advances – explained by FID as “advances for handling company affairs” – and loan contracts with several joint-stock commercial banks.

FID’s response to continued losses in the first half of 2024 and the qualified opinion from the auditor

DAG, on the other hand, is currently suspended from trading. Similar to FID, DAG is mired in a mess and is going through its most challenging phase in 20 years. According to the 2023 audited financial statements (released in July 2024), DAG incurred a net loss of up to 600 billion VND, mainly due to a provision for inventory devaluation of up to 404 billion VND, which caused a significant increase in cost of goods sold. This massive loss wiped out the company’s consistent profitability over the previous 16 years, resulting in a negative retained earnings of 588 billion VND at the end of 2023 (compared to a positive 19 billion VND at the beginning of the year). The report received three pages of comments from the auditor, emphasizing bad debts – including loan and tax debts – and expressing doubt about the company’s ability to continue as a going concern.

In the first half of 2024, DAG’s situation did not improve, with a loss of 67 billion VND and equity of just over 27 billion VND. The company generated only 55 billion VND in revenue, equivalent to 6% of the previous year. The trading suspension can even be considered fortunate for DAG, preventing the stock price from falling further.

ITA is another company that has been making headlines. The company, owned by Dang Thi Hoang Yen (or Maya Dangelas), was recently placed under a trading suspension at the end of September 2024 due to continued violations of information disclosure regulations.

In reality, ITA’s financial performance in recent times has not been disappointing. After a record loss of 260 billion VND in 2022, ITA bounced back with a net profit of over 202 billion VND in 2023. In the first half of 2024, ITA continued to make a profit of nearly 64 billion VND, a 66% increase over the same period last year, mainly due to the reversal of provisions for doubtful debts and reduced bank interest, along with cost savings in the second quarter.

Nevertheless, ITA’s stock price has continued to plummet due to various controversies surrounding the company. In 2022, the company was ordered by the Ho Chi Minh City People’s Court to initiate bankruptcy proceedings, relating to a debt of approximately 21 billion VND to Cong Ty TNHH Thuong Mai Dich Vu Xay Dung Quoc Linh – which Ms. Yen has consistently denied. This ruling also led to other lawsuits and continues to impact the company’s operations, according to ITA’s explanations in the Q2 2024 financial statements.

Additionally, ITA has often made shocking statements. Regarding the delay in publishing the 2023 audited financial statements and the reviewed semi-annual financial statements for 2024, Nguyen Thanh Phong – CEO of ITA, claimed that HOSE and the State Securities Commission of Vietnam (SSC) had acted unusually, creating difficulties for auditing firms and suspending the practice of auditors performing audits for ITA, leading to the departure of these firms. Ms. Yen asserted that ITA was being sabotaged by malicious forces aiming to acquire the company. In the face of potential delisting, ITA issued a statement implying that the SSC and HOSE would be held responsible.

Another notable mention is DDG (Indochina Import Export Industrial Investment Joint Stock Company). On the market, DDG stock is currently under warning and has recently been placed under surveillance due to violations of information disclosure regulations regarding the reviewed semi-annual financial statements for 2024. The market price on October 11 was only 2,800 VND per share, a 30% decrease compared to the beginning of the year. However, if we compare it to the peak in 2023 – just before the consecutive “floor price” sessions – the drop is as high as 93%.

The reason for DDG’s predicament is the challenges in its business operations. In 2023, the company suffered a record loss of nearly 206 billion VND (a profit of 44 billion VND in the previous year). In the first six months of 2024, the company achieved a revenue of more than 120 billion VND, just one-third of the same period last year. Although it made a net profit of approximately 6.6 billion VND (a loss of nearly 194 billion VND in the same period last year), this profit was mainly due to the disposal of fixed assets of the parent company.

Optimistic investors often say that every rain will eventually stop, and every falling stock will eventually rise. However, the rain that the shareholders of the above-mentioned companies are facing may still have a long way to go.

Chau An