Quoc Cuong Gia Lai sells two hydropower plants to restructure investment portfolio

The loss-making Quoc Cuong Gia Lai JSC (QCG) has sold two hydropower plants to restructure its investment portfolio despite this being its only profitable segment.

Stock hits floor price following CEO arrest

On Friday, QCG hit its floor price of VND9,070 ($0.36) per share with more than 2.7 million units offered for sale at this price, following the arrest of CEO Nguyen Thi Nhu Loan.

QCG's downward trend started after Loan failed to attend the company's 2024 AGM on June 30 due to "health reasons". Within one month, the stock lost 35.2% of its value, causing the company's capitalization to decrease by VND1.3 trillion ($51.33 million).

Quoc Cuong Gia Lai has a condensed shareholder structure, with Loan and her daughter Nguyen Ngoc Huyen My accounting for 51.3%. Loan's absence from the AGM was therefore notable.

In a Friday announcement, the Ministry of Public Security's investigative agency (C03) said the arrest of Loan was the result of an expanded investigation into violations at state-controlled Vietnam Rubber Group (VRG), Dong Nai Rubber Company, Ba Ria Rubber Company, the Ministry of Natural Resources and Environment, and other units related to the 39-39B Ben Van Don real estate project in Ward 12, District 4, Ho Chi Minh City.

Quoc Cuong Gia Lai once responded that it was not involved in the VRG case. The company bought out Phu Viet Tin company – the investor of Project 39 - 39B Ben Van Don for VND464.2 billion ($18.33 million), but had never worked or negotiated directly with VRG, Dong Nai Rubber Company, or Ba Ria Rubber Company.

Hydroelectric plant sales

Quoc Cuong Gia Lai was initially a wood processing and exploitation facility in Gia Lai. In 2005, the company ventured into real estate development in HCMC. Currently, it focuses on three key areas, namely real estate, rubber growing in Vietnam and Cambodia, and small- and medium-sized hydropower plants.

Its profit has declined in the last three years from VND65 billion ($2.57 million) to VND7.5 billion due to the quiet real estate market.

Real estate revenue in 2023 reached only VND209 billion ($8.25 million), equal to one fifth of that in 2022. In Q1 of this year, the figure plunged to VND6.6 billion ($260,600).

Rubber recorded revenue of VND60-70 billion ($2.76 million) in 2022-2023, but the company still suffered losses of over tens of billions of VND (VND1 billion = $39,483) each year.

Hydroelectricity is the only profitable segment, with annual revenue of over VND150 billion ($5.92 million) in the last two years, and a gross profit margin of 50%. In Q1/2024, the figure reached VND23 billion, with a gross profit margin of 27%.

However, the company recently decided to transfer the 7.5-megawatt IAGRAI 2 and 13-megawatt Ayun Trung hydroelectric plant projects for VND615 billion ($24.28 million) to restructure its investment portfolio.

At end-Q1, Quoc Cuong Gia Lai had total assets of VND9,516 billion ($375.72 million), of which inventory accounted for 74%, and nearly VND30 billion ($1.18 million) in cash.

Unfinished real estate projects amounted to VND6,525 billion ($257.6 million), accounting for 69% of total assets, including the Phuoc Kien residential area, Lavida, Central Premium, and Marina Da Nang.

The most notable is the 93.3-hectare Phuoc Kien residential area - a key project QCG has pursued since 2007. By end-2017, the firm had poured VND5,200 billion ($205.3 million) into this project, or 46% of its total assets. Work on the project has not been started due to compensation problems.

By end-Q1, the company recorded liabilities of VND5,161 billion ($203.77 million), with only VND600 billion in loans. Among VND4,300 billion in short-term payables, VND2,883 billion came from Sunny Island, a subsidiary of Van Thinh Phat Group, for the Phuoc Kien project.

In a verdict on the first phase of the case that occurred at Van Thinh Phat Group and private lender Saigon Commercial Bank (SCB) issued by the Ho Chi Minh City People’s Court on April 11, Quoc Cuong Gia Lai was ordered to return VND2,882 billion ($115.1 million) it received from Van Thinh Phat chairwoman Truong My Lan to regain land use rights certificates previously held by Sunny Island.

Quoc Cuong Gia Lai objected to the verdict and proposed to pay only VND1,441 billion ($56.86 million), with the remaining to come from the amounts previously given to Van Thinh Phat.