IP developer Kinh Bac backs out of plans to buy fund shares, pay dividends

Leading industrial park developer Kinh Bac will propose canceling plans to buy fund shares and paying a 20% cash dividend at an upcoming extraordinary general meeting (EGM) of shareholders.

In the second half of 2022, the stock market plummeted amid tight market liquidity, and many businesses struggled to find ways to mobilize capital to repay bond debts. Kinh Bac was not an exception. Its stock, KBC, fell sharply to its bottom of VND14,000-15,000 ($0.61) per share at the end of November, losing two thirds of its value compared to the beginning of 2022.

In that context, tycoon Dang Thanh Tam's company continuously delivered the message of having large cash flows. The firm organized a second EGM in 2022 to announce that it had signed contracts and attracted investors who would pour large sums into Kinh Bac in 2023.

The company confidently said it would settle bond debt of VND3.9 trillion ($158 million). At the same time, it claimed it was willing to spend more than VND1.5 trillion ($60.96 million) paying cash dividends at a rate of 20% and VND8-9 trillion ($365.74 million) buying back 100 million KBC shares at a maximum price of VND34,000 ($1.38) each to increase their value in the context of a struggling stock market.

The board of directors then presented an ambitious profit plan of VND4 trillion ($162.55 million) for 2023 without waiting for the annual shareholders' meeting. Amid positive information and the general recovery of the stock market, KBC shares increased sharply from VND15,000 to VND26,000 ($1.06) per share within three months, from November 2022 to January 2023.

According to the recent first EGM 2024 documents, the company's leadership said it had purchased on time and ahead of schedule the entire bond principal balance of VND3.9 trillion ($158.59 million). Therefore, short-term loans decreased sharply from VND3,951 billion to VND337 billion ($13.7 million), while long-term loans went down from VND3,687 billion to VND3,322 billion. The debt to equity ratio stood at 0.12%. Thanks to that, from the beginning of 2024, many organizations and investment funds have asked to sponsor the corporation's current projects.

However, the plans to pay 2022 dividends in cash at a rate of 20% and use surplus capital to buy back shares were not implemented last year. In addition, the board of directors proposed cancelling the plans.

It explained that priority must be given to repaying bonds and arranging capital to expand existing projects or resume many postponed projects. On the other hand, the price of KBC shares has now rebounded to over VND30,000 ($1.22) apiece, nearly reaching the threshold set by the board regarding the issue of buying back shares.

Ambitious plan but implementation rate at around 50%

This year, Kinh Bac continues to set ambitious plans with total consolidated revenue of VND9 trillion ($365.74 million), consolidated after-tax profit of VND4 trillion ($162.55 million), year-on-year increases of 53% and 80%, respectively.

The business plans are based on its industrial park land lease area in 2024 estimated to reach 150 hectares from Nam Son Hap Linh, Quang Chau,Tan Phu Trung, and Trang Due 3 industrial parks, and the industrial clusters in Hung Yen and Long An provinces. In addition, the board of directors said that some of the company's urban area projects are expected to bring in revenue and profits this year.

According to KBC, since the end of 2023, many private corporations and big multinational companies in the world have showed their interest in investing in the company’s industrial parks. Its projects with unfinished legal procedures are expected to be completed and approved from the second quarter of this year such as Trang Due 3 and Loc Giang IPs, and Phuc Ninh and Trang Cat urban areas.

In addition, the company is also making efforts to carry out the necessary legal procedures to get approval for its projects in other localities such as Bac Ninh, Thai Nguyen, Hau Giang, Can Tho and Ba Ria-Vung Tau with up to 3,500 hectares of industrial park land and 650 hectares of urban land.

However, in recent years, Kinh Bac has set lofty business plans but the actual realization rate has been only 50%. For example, in 2023, the business set an after-tax profit target of VND4 trillion but reached only VND2.22 trillion ($90.2 million). In 2022, it fulfilled only 35% of the set after-tax profit target of VND4.5 trillion ($182.87 million). The realization rates in 2021 and 2020 were 49% and 47%, respectively.

The company explained this was because it had signed in-principal land lease agreements but they had not been recorded revenue and profit immediately because foreign investors had not been licensed to invest in or received the land in the year.

The company expects that the government's drastic policies and flexible mechanisms issued by local authorities will remove legal obstacles to promote the operations of real estate businesses in general and Kinh Bac in particular, it added.

Although the set plan was not fulfilled, the 2023 business results were the best in recent years for Kinh Bac. Net revenue reached VND5.65 billion ($229.6 million), nearly 6 times higher the previous year, while profit was VND2.2 trillion, up 32% year-on-year.