Logistics heavyweight Gemadept eyes 2024 pre-tax profit of $66 mln

Gemadept Corporation, a leading port and logistics firm in Vietnam, is targeting revenues of VND4 trillion ($157 million) and pre-tax profits of VND1.69 trillion ($66.22 million) in 2024, up 4% but down 46% year-on-year, respectively.

The lower pre-tax profit target is based on the forecast that transfers of stakes in subsidiaries will plunge from VND1.84 trillion ($72.38 million) to VND336 billion ($13.22 million), said chairman Do Van Nhan at the company’s 2024 AGM on Tuesday.

Last year, the seaport giant, listed on the Ho Chi Minh Stock Exchange as GMD, posted VND3.85 trillion ($151.22 million) in revenue and VND3.15 trillion in pre-tax profit, including VND1.8 trillion ($70.82 million) from divestment from Nam Hai Dinh Vu Port in the northern city of Hai Phong.

With this result, the board of directors presented a plan to pay a dividend of 22% in cash, equivalent to VND2,200 per share.

Recognizing excess supply in Hai Phong, Gemadept divested from Nam Hai and Nam Hai Dinh Vu ports, the chairman said, adding that the firm will focus on developing Nam Dinh Vu Port into the largest river port in the northern region, capable of accommodating ships of up to 48,000 DWT.

“This is the right step, shifting from small-scale to large-scale operations, thereby saving costs and time, and increasing efficiency in the context of excess supply and high competition in Hai Phong,” he noted.

Regarding the southern market, most of the company's ports such as Phuoc Long, Binh Duong and Gemalink are operating relatively well. Nhan added that Gemadept will continue to look for investment opportunities and improve its competitiveness in the coming period.

The firm also plans to issue 103.5 million shares to existing shareholders at VND29,000 ($1.14) apiece to raise VND3 trillion ($118 million).

Proceeds from the 3:1 (three existing shares for one) share issuance will be used to buy fixed assets, pay bank debts and contribute capital to Nam Dinh Vu Port.

The price offered to existing shareholders is just one-third of the current market price and a little higher than the company's book value as of December 31, 2023 (VND28,050).

Gemadept is speeding up investment in two large projects, Gemalink Port - phase 2 and Nam Dinh Vu Port - phase 3. The company is completing related procedures and arranging capital to begin construction of Gemalink 2 this November so that it can be put into operation in December 2025.

With a total investment of about $300 million, once completed, the port will handle 3 million TEUs – outdoing several major competitors in Southeast Asia.

The Nam Dinh Vu Port project is being implemented in three phases, with phase one going into operation in 2018 and phase two in mid-2023. Construction on the third phase will start in July this year with a total investment of VND2.5 trillion ($98.36 million).

When the third phase is completed, the port’s total capacity will reach 2 million TEUs, up 67% from the current level.

In addition, the company has been assigned by the Ministry of Transport to carry out the Nam Ha canal dredging project, expected to be completed this year.

GMD closed Tuesday at VND83,000 ($3.26) per share.

Gemadept leaders took turns to respond to shareholders' questions:

Does Gemadept benefit from Singapore port congestion?

Port congestion will have a negative impact and cause difficulties in arranging wharves and goods. However, this brings an opportunity to Gemadept. A number of ships from large corporations have anchored at Gemalink, the nation’s largest deep-water port, helping the corporation increase its output.

In the long term, if the congestion lasts, the goods transit hub will move from Singapore to other places, including Ba Ria-Vung Tau province in southern Vietnam. At the same time, the Hai Phong area also benefits from being a center of goods transshipment to China.

What is the impact of the sharp increase in freight rates?

During the Covid-19 period, freight rates skyrocketed and then cooled when the epidemic was under control. Since end-2023, they have gradually increased again. The current rates have soared about 300% compared to the same period in 2023 and over 30% from May. The rates will continue to climb until end-2024 due to the Red Sea trnsions, political conflicts, and lack of ships and equipment.

What about the increase in port loading and unloading fees under the Ministry of Transport’s Circular 39/2023?

Currently, port loading and unloading fees in Vietnam are about 80% lower than the world average and 50% lower than those in the region, even though the equipment is sound. The increased fees reflect an effort by the Ministry of Transport to help port operators improve revenue.

However, depending on the region and port conditions, there are different increases. In the South, where competition is still low, Gemalink has the opportunity to increase the fees, even to levels higher than those set in Circular 39. In the Hai Phong city area, competition is high so fee hikes must be based on many factors.

When will the Ha Nam canal dredging project be completed and what benefits will it bring?

This is a special project. It is the first time the state has assigned a private enterprise to implement such a project. Dredging the canal will help increase the depth for large-tonnage ships to pass through. The project will benefit the entire port business community in Hai Phong. For Gemadept alone, its Nam Dinh Vu Port will accommodate an additional 300,000 TEUs from the canal dredging.

What is the strategy for developing inland waterway transport?

Vietnam's river and canal system is favorable for inland waterway development. Gemadept has proposed the Ministry of Transport develop a model route from the Mekong Delta to Cai Mep in Ba Ria-Vung Tau province to help save a lot of time, increase loads, and reduce logistics costs by up to 30%.

Does the corporation have a plan to divest from Nam Hai inland container deport (ICD)?

Nam Hai ICD plays an important role in the port system connecting Nam Dinh Vu. Gemadept this year plans to enter into joint ventures and partnerships with shipping lines to optimize the ecosystem and has no intention to divest from Nam Hai ICD.

Why has the corporation chosen a share issuance when it could borrow money at lower costs?

Gemadept needs reciprocal equity capital to participate in projects. On the other hand, the company must actively prepare capital sources for M&As because the credit quota for M&A projects is very low and most securities companies have already taken it all.

Could you share the preliminary business results for the second quarter?

The group's business activities have been very positive since the beginning of the year. Gemalink has welcomed many large ships, while Nam Dinh Vu has also operated well.

After the first half, the company has achieved 53% of its profit plan thanks to its main businesses, not to mention the divestment from Nam Hai Port. In addition, the increase in port service fees under Circular 39 has also contributed to these positive business results.