Construction stocks benefit from public investment drive

Stocks of infrastructure construction firms have outpaced Vietnam’s benchmark VN-Index amid accelerated public investment disbursement in the last months of the year.

According to the Ministry of Finance, disbursement of public investment capital as of October 31 had reached VND401.86 trillion ($16.56 billion), equivalent to 56.74% of the yearly plan assigned by the Prime Minister, representing an improvement from 51.34% recorded in the same period last year.

In October alone, the figure was VND56.17 trillion ($2.31 billion), much higher than the average figure of VND40 trillion over the 10 months.

Minister of Planning and Investment Nguyen Chi Dung said strong disbursement has actively supported economic growth and created jobs and output for many industries and fields. At the same time, it has also expanded production capacity, contributing to creating momentum for growth and development in the medium and long term.

However, this year's public investment disbursement target is VND711 trillion ($29.3 billion), of which about VND310 trillion ($12.77 billion) needs to be disbursed in the remaining two months. Many localities have reported low disbursement rates. Notably, Ho Chi Minh City, the country's economic locomotive, had disbursed only VND25.8 trillion ($1.06 billion) as of November 10, or 38% of the target.

Strong rebound

Benefiting from the acceleration of public investment disbursement at the year-end, tickers of infrastructure construction companies have recorded a significant recovery. In the past month, while the VN-Index, representing the Ho Chi Minh Stock Exchange (HoSE), recovered only 0.77%, LCG of Lizen JSC and CII of Ho Chi Minh City Infrastructure Investment JSC increased 9-10%, and HHV of Deo Ca Traffic Infrastructure Investment JSC and FCN of Fecon Corp. gained 5-6%.

LCG's rise came from recent bidding success. Specifically, on November 21, Lizen announced that it had been selected as one of the contractors for a VND2.05 trillion ($84.46 million) package to build the Tan Phuc - Vong Phan road project in the northern province of Hung Yen.

Previously, Lizen had won a VND1.25 trillion ($51.5 million) package to build a parallel road in Hung Yen province as part of the Ring Road 4 - Hanoi Capital Region project. In August, a consortium led by Lizen signed a contract for a VND1.41 trillion ($58.1 million) package to build a section of the Bien Hoa - Vung Tau expressway project.

Meanwhile, CII recently announced that its subsidiary - CII Bridges and Roads Investment JSC - had completed legal procedures to officially hold an 89% stake in BOT Trung Luong - My Thuan JSC, the operator of the Trung Luong - My Thuan expressway project, from 50% previously.

According to CII, the Trung Luong - My Thuan expressway project has a total investment of VND12.67 trillion ($522 million), the highest in CII's existing portfolio. The project has been in operation since the third quarter of 2022 with an average revenue of VND2.5 billion ($103,000) per day, equivalent to VND910 billion per year. With an estimated annual traffic growth rate of about 6.3% and a roadmap to increase toll fees as stipulated in the BOT contract, its total revenue during its lifecycle is expected to be about VND32 trillion ($1.32 billion).

In addition, CII is implementing a plan to issue VND2.84 trillion ($117 million) of convertible bonds for existing shareholders at a price of VND10,000 ($0.41) per share.

Similarly, HHV will offer 82.3 million shares to shareholders, at a ratio of 4:1 for VND10,000 per share to raise VND823 billion ($33.9 million) for its subsidiaries such as Deo Ca Investment and BOT Bac Giang - Lang Son, pay off short-term loans, purchase equipment, and supplement working capital.

Regarding business results, HHV recorded respective nine-month revenue and profit increases of 23.5% and 25.8% over the same period last year. In particular, it saw a skyrocketing revenue expansion of 87% in the construction segment.

Except for HHV, most infrastructure construction businesses reported a year-on-year decrease in profit in the nine months.

CII suffered a deep drop of 91% in profit to VND65 billion ($2.68 million) as it had no financial income from divestments it enjoyed during the same period last year. Vinaconex (HoSE: VCG) also saw profits plunge 72% due to falling financial revenue.