Vietnam property developers in race to raise capital

Construction and real estate businesses in Vietnam are mobilizing capital from bonds and stocks with the realty market forecast to gradually warm up in the last months of the year and start of 2024.

After a quiet period waiting for policy relaxations as well as signs of a market recovery, a series of construction and real estate companies have resumed capital mobilization plans by offering stocks and bonds for sale.

In 2022, Becamex IDC, listed on the Ho Chi Minh Stock Exchange (HoSE) as BCM, decided not to issue bonds and instead prioritized mobilizing capital from banks because the bond market was engulfed in unfavorable information. In early June, the company planned to offer VND1 trillion ($41.15 million) in bonds but then canceled the plan because it had managed to source capital.

However, Becamex IDC exhausted this revenue stream, and announced that it had successfully raised VND2 trillion ($82.3 million) from private placements of 5-year bonds. The bond issuance began on July 5 and was completed on September 20. In addition, the board of directors has approved a plan to issue private placement bonds in 2023 with a maximum total value of VND760 billion ($31.27 million).

At this year's general shareholder meeting, Becamex IDC's board of directors revealed five major goals for the 2023-2028 period, including developing industrial parks in nine more provinces and cities, bringing the total to 20; social housing; new-generation industrial parks; urban-services centers; and transport infrastructure.

To achieve these goals, Becamex IDC said the company needs to increase its charter capital by VND20-30 trillion ($1.23 billion). The current figure is VND10.35 trillion ($425.84 million).

Nam Long Investment Corporation (HoSE: NLG) has also announced a plan to offer VND500 billion ($20.57 million) in bonds via private placement. The bonds have a five-year term, with a coupon rate of 9.6% per year in the first six months. The capital will be used to invest in the Nam Long 2 residential area in Nam Can Tho urban complex in Hung Thanh ward, Cai Rang district, Can Tho city.

According to the Vietnam Bond Market Association (VBMA), there were 22 private corporate bond placements with a total value of over VND25.05 trillion ($1.03 billion) in August, many times higher than in July and accounting for nearly 20% of the value since the beginning of the year.

Besides banks, many real estate businesses have successfully mobilized a large amount of capital from bonds such as Lan Viet Real Estate Company Limited (VND4.1 trillion or $168.69 million), Lien Tap Real Estate Business Investment Company Limited (VND1.47 trillion), and Capitaland Tower Company Limited (VND7.24 trillion).

Not only the bond market, the stock market also recorded many businesses offering shares to existing shareholders amid the market recovery from the end of last year.

Hung Thinh Incons Joint Stock Company (HoSE: HTN) has revealed a plan to offer 89.1 million shares to existing shareholders, with a 1:1 ratio (one existing share for a new one). Its charter capital is expected to double to VND1.78 trillion ($73.24 million) after the share issuance, which is scheduled for Q4/2023 after the State Securities Commission's (SSC) approval.

The offering price is VND10,000 ($0.41) per share, lower than the market price of VND16,200 ($0.67). Hung Thinh Incons plans to use VND400 billion ($16.46 million) to buy part of the Amata commercial area project in Long Binh ward, Bien Hoa town, Dong Nai province; VND34.3 billion ($1.41 million) to buy shares in Kim Lan Trading JSC; and VND457 billion ($18.8 million) for construction activities at its projects.

Ba Ria-Vung Tau Housing Development JSC (HoSE: HDC) is implementing a plan to issue 20 million shares at a price of VND15,000 ($0.62) per share (half the market price), at a ratio of 1,000:148 (1,000 existing shares for 148 new ones). The share issuance is scheduled for Q4/2023 and Q1/2024, after the SSC gives the nod.

The company wants to mobilize VND300 billion ($12.34 million) from this share issuance to pay off some loans at credit institutions.

Recently, CEO Group, listed on the Hanoi Stock Exchange (HNX) as CEO, announced that it had successfully sold 242.7 million shares out of 252.2 million to existing shareholders at a price of VND10,000 ($0.41) each. The remaining 9.5 million shares that shareholders did not buy will be sold to five other investors.

In addition, the group also finished distributing 5 million ESOP (employee stock ownership plan) shares at the same price, collecting nearly VND2.6 trillion ($106.97 million) to invest in the Sonasea Residences high-end villa project, increase capital for subsidiaries, and supplement working capital.

Despite difficulties, the real estate market has shown signs of a recovery. The situation in Q2 was less difficult than Q1. Data from the Vietnam Association of Real Estate Brokers showed that Q2 saw about 3,704 products traded, an increase of 30% compared to Q1, but still down 40% compared to the same period in 2022.

At a mid-September conference, Minister of Construction Nguyen Thanh Nghi predicted that the real estate market will gradually warm up in the last months of the year and develop again in 2024, leading to increasing demand in the construction materials and labor markets.

The market’s driving force comes from falling lending interest rates, a more vibrant bond market and removal of legal obstacles to the real estate market. Hanoi removed legal barriers for 419 projects while the figure in Ho Chi Minh City was 67 projects. The remaining localities are making every effort to step up this work.