Shareholders needn’t worry?
On July 26, 2024, the Ho Chi Minh City Stock Exchange (HOSE) announced the forced delisting of HNG shares belonging to Hoang Anh Gia Lai International Agriculture Joint Stock Company (HAGL Agrico) due to the company’s negative after-tax profit in 2021, 2022, and 2023, amounting to 1.1 trillion VND, 3.5 trillion VND, and 1 trillion VND, respectively.
This outcome was mentioned by the HNG leadership during the 2023 Annual General Meeting of Shareholders, and they had even foreseen it long before it became a reality.
As Chairman of the HNG Board of Management, Mr. Tran Ba Duong candidly admitted, “There is no other way but to accept the losses. Whatever was previously kept in the books, moving things around to avoid losses, just let it go and take the loss, so that we can start afresh and come back stronger.”
At this year’s meeting, the dollar billionaire reassured shareholders that if HNG shares were delisted and moved to UPCoM, the disclosure of information and transparency would remain unchanged. He also emphasized that what matters is the company’s intrinsic value and potential, which would ensure an increase in share price even on UPCoM.
 Mr. Tran Ba Duong – Chairman of HNG
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HNG Chairman Tran Ba Duong: Accept the Losses and Start Afresh
HNG and Thaco Group officially joined forces six years ago after signing a strategic investment cooperation agreement in 2018. This was also when individuals from Mr. Tran Ba Duong’s company joined the HNG leadership.
At that time, Thaco committed to supporting the restructuring of HNG’s debt and raising capital for the care of existing fruit-bearing areas, as well as the expansion of fruit-bearing areas planned for 2019 and 2020.
In 2019, Thaco publicly became a major shareholder of HNG, holding 26.29% of its capital, after purchasing nearly 70 million shares and receiving nearly 222 million shares from convertible bonds. In the same year, Hoang Anh Gia Lai’s (HOSE: HAG) ownership in HNG decreased from 57.81% to 40.83%.
In 2021, HAGL further reduced its ownership to 16.07% of HNG; Mr. Tran Ba Duong officially took the position of Chairman of the HNG Board of Management. Currently, Mr. Duong holds 4.58%, while related parties, Thaco, and Tran Oanh Trading and Production Company hold 27.63% and 4.96%, respectively, with HAGL owning only 8.24%.
At the extraordinary General Meeting of Shareholders in early 2021, Mr. Tran Ba Duong shared that he became the Chairman of HNG reluctantly and only wished to help the company out of its predicament and for the country to have a large-scale agricultural company following an industrial production model.
| Tran Oanh Company was established in 2008, with Mrs. Vien Dieu Hoa, Mr. Duong’s wife, as General Director and legal representative. The enterprise currently has a charter capital of VND 6,860 billion, of which Mr. Duong holds 76.13% and Mrs. Hoa holds 23.87% of the capital. |
A Tough Nut to Crack?
Solving the HNG equation doesn’t seem easy for Thaco, as the company’s revenue has consistently declined over the past six years. In 2019, revenue reached VND 1.8 trillion, half of what it was in 2018, and only increased to VND 2.3 trillion in 2020 before gradually decreasing. By 2023, revenue stood at VND 605 billion, the lowest since 2012.
HNG has repeatedly changed its business targets since its inception in 2010 until it met Thaco. The company once relied on sugar product sales during 2013-2014. In 2015 and 2016, cattle breeding pushed revenue to a peak of over VND 4.7 trillion each year, but this figure has not returned since.
From 2017 onwards, fruit trees took the lead, followed by rubber trees, while other forms were mostly eliminated. In 2018, revenue from fruit trees peaked at over VND 2.3 trillion but could not be sustained and quickly declined to just VND 383 billion in 2023.
Meanwhile, rubber tree sales have been relatively stable for over a decade but have gradually decreased. HNG once recorded a high of VND 454 billion in 2017, more than double last year’s figure.
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Business performance of HNG from 2013 (Unit: VND billion)
Source: Author’s compilation
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Before Thaco’s involvement, HNG maintained a very high gross profit margin, ranging from 37-41% in 2017-2018, but this decreased to 12% and 6% in 2019 and 2020. For the past three years, the company has been operating at a loss.
For example, in 2022 and 2023, fruit sales revenue was VND 493 billion and VND 840 billion, respectively, while the cost of goods sold amounted to VND 1.4 trillion and VND 1.3 trillion.
In the past decade, HNG has been profitable in five periods, including 2013-2015 and 2017. Since Thaco’s involvement, 2020 was the only profitable year, with a modest VND 21 billion. The most significant loss was the record-high loss of VND 3.5 trillion in 2022.
In reality, the profits in 2017 and 2020 were mainly due to the liquidation of investments rather than business operations. For instance, in 2017, HNG earned VND 716 billion in profit from the sale of a group of sugar companies and Ban Me Rubber Joint Stock Company. Similarly, the figure for 2020 was VND 931 billion.
At the 2021 Extraordinary General Meeting of Shareholders, HNG’s leadership acknowledged that the handling of the transfer of a subsidiary at the end of 2020 was also just to make a profit and ensure that the shares were not delisted.
| Revenue from financial activities of HNG from 2012 – 2023 |
How Has Thaco Transformed HNG?
As of the first quarter of 2024, HNG’s total assets amounted to approximately VND 14.2 trillion, a decrease of more than half compared to VND 30.5 trillion in 2018 when Thaco first appeared. Consecutive years of losses have resulted in negative retained earnings of over VND 8 trillion, with shareholder equity standing at VND 2.5 trillion, a decline of VND 8 trillion in six years.
| Financial situation of HNG from 2012 – 2023 |
In reality, the total area of rubber and fruit tree plantations of HNG has continuously shrunk, from a peak of 64,000 ha in 2018 to nearly 20,000 ha in 2023, due to various reasons, mainly the company’s divestment from subsidiaries to reduce debt burden.
In 2019, HNG transferred a number of subsidiaries, including Dong Duong Investment and Development Joint Stock Company, Dong Penh Joint Stock Company, and Trung Nguyen Rubber One-Member Limited Company, to Thadi Agricultural Production and Processing Joint Stock Company, a member of Thaco, resulting in a decrease in fruit tree sales revenue.
In the following two years, the harvest area of rubber and fruit trees of HNG decreased due to the company’s sale of its entire capital contribution in An Dong Mia One-Member Limited Company, Hoang Anh Quang Minh Rubber Joint Stock Company, Tay Nguyen Dairy Cow Joint Stock Company, and Hoang Anh Dak Lak Joint Stock Company to Thaco Agricultural Company (Thaco Agri).
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Development of HNG’s planting area from 2015 to the present (Unit: ha)
Source: Author’s compilation
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According to statistics from VietstockFinance, in the period of 2016-2023, the company recorded at least VND 5.6 trillion in expenses, including costs such as write-offs of inefficient assets, garden write-offs, garden development costs, costs of changing the purpose of assets, and losses from re-evaluating inefficient assets. This amount accounts for approximately 50% of the current charter capital.
Notably, the significant loss in 2022 was due to the removal of a portion of the garden area at subsidiaries based in Laos and Cambodia, valued at over VND 2.1 trillion, from the books, and the write-off of VND 159 billion in inefficient assets.
The year 2019 also saw considerable expenses of over VND 1.3 trillion in garden development costs, including the evaluation of inefficient assets and the change of purpose to fruit tree planting. This amount stood at VND 542 billion in 2018.
Pouring Money into HNG
Additionally, Thaco’s ecosystem has also incurred significant costs in the “restructuring” of HNG, starting in 2018. Initially, this took the form of convertible bonds worth over VND 2.1 trillion on a credit basis but without interest, to invest in new fruit tree planting and financial restructuring.
Companies associated with Mr. Tran Ba Duong have continuously provided short-term and long-term loans to HNG; in 2018, they lent VND 746 billion to finance working capital. This amount increased to nearly VND 2.6 trillion in 2019, along with a long-term loan of VND 805 billion.
In 2020, Thaco Agri lent HNG VND 5.1 trillion on a short-term unsecured basis at an interest rate of 7-10.5%/year to supplement working capital. In 2022, Thaco Agri provided a long-term loan of VND 2.8 trillion at an interest rate of 7.5-14%/year.
At the beginning of last year, Thaco Agri committed to purchasing agricultural products from HNG and continued to provide financial support in the form of a long-term loan of over VND 5.1 trillion at an interest rate of 9-14.5%/year. The repayment period is from May 2024 to the end of 2025.
According to Mr. Duong’s sharing at the 2021 Extraordinary General Meeting of Shareholders of HNG, the amount of capital that Thaco has invested in HNG has reached VND 40,000 billion.
| Borrowing and repayment flow of HNG from 2012 – 2023 |
Twentyfold Revenue Increase by 2028?
HNG is expected to continue making a pre-tax loss of VND 120 billion this year but has set a target to increase revenue by nearly 15%, reaching VND 694 billion. Nevertheless, Chairman Tran Ba Duong assessed that HNG has emerged with a new model and expressed optimism that the company will turn a profit by 2025.
In the next phase, HNG will return to cattle breeding by investing in seven breeding farms, a cluster of bedding and compost workshops, a cluster of raw material warehouses for feed and livestock supplies, the import of 5,800 female cows for organized farming, the planting of 468ha of grazing grass, and 127ha of concentrated grass.
Additionally, the large-scale fruit tree and cattle breeding project of the company in Attapeu and Sekong provinces has been approved by the Lao government in principle. The project covers an area of over 27,000 ha, with an estimated investment of VND 18 trillion, spanning from 2024 to 2028. HNG’s leadership estimates that revenue from 2028 will reach approximately VND 13.5 trillion, equivalent to a twentyfold increase from the present; after deducting expenses, it is expected to earn a profit of VND 2.4 trillion.
Will HNG succeed in returning to cattle breeding?
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Will There Be a Second “Hung Vuong Seafood”?
HNG’s share price, which was already low, plummeted to the floor price of VND 4,340/share (equivalent to a market capitalization of VND 4.8 trillion) on July 29, following the delisting announcement.
Since its listing on HOSE in 2015, HNG shares once traded at nearly VND 35,000/share when it debuted (equivalent to a market capitalization of approximately VND 24 trillion), which was also the highest price ever enjoyed by a long-term shareholder of HNG. However, less than a year later, the price quickly plummeted below par value.
The involvement of Mr. Tran Ba Duong sparked a glimmer of hope and pushed the price back to its highest level of around VND 20,000/share during 2019-2020. Since then, the price has not only failed to increase but has continued to decline, now equating to the price of a cup of iced tea.
“Unprofitable business, plummeting share price, Thaco’s entry and deployment of their personnel, share price recovery, but then delisting, continued unprofitable business, Thaco’s divestment, and share price
