Phat Dat Real Estate Development (PDR) released its second quarter financial report which showed revenue was 167 times lower than in the same period last year to VND5 billion. 

However, the realtor reported post-tax profit of VND276 billion in the quarter, which allowed it make a profit of VND299.7 billion in the first half of the year.

The impressive profit was attributed to the transfer of an affiliated company. This was the major reason behind the sharp rise of financial revenue from VND829 million in the second quarter in 2022 to VND532 billion in the second quarter this year.

Regarding business performance, Phat Dat said the market was lackluster in general, which has affected business.

Similarly, Hoa Binh Construction (HBC), owned by president Le Viet Hai, in mid-June 2023 decided to sell 100 percent of its capital in Matec (which manages and uses the machines and equipment of HBC) to have more capital for business activities. 

One month before, HBC issued a resolution on transferring its contributed capital to Hoa Binh Innovation Center Co Ltd.

Thanks to the asset sale, HBC saw post-tax profit in the second quarter increase by 12 times, from VND45.2 billion to VND546.3 billion. This means that profit from the core business of the company was minus VND68 billion, which was offset by profit of VND653 billion from asset liquidation and transfer of fixed assets, materials and scrap.

Hoa Binh Construction and many other real estate firms are facing tough days as the real estate market has been gloomy for a long time, with very few new projects under execution. Disbursement of public investment has also been slow, while lending in the banking system has been growing slowly.

The liquidation of fixed assets helped Hoa Binh make a profit in the second quarter. However, its cash flow statement showed that receipts from fixed assets liquidation and sales during the period was zero. This means that cash flow from asset liquidation did not rise, or transactions were made with deferred payments, or debits and credits balanced one another.

Many other large enterprises have had to sell parts of their assets. Thanh Cong Textile and Garment has approved a plan to divest from Savimex. In the second quarter in 2023, CII, an infrastructure developer, transferred its capital in some subsidiaries amid sharp falls in revenue and profit. In the first quarter, CII achieved only 15 percent of the yearly plan in revenue and 2 percent in profit.

In March 2023, one of the largest real estate firms in Vietnam had to sell all of its contributed capital worth VND11.4 trillion to two companies established a short time ago.

The real estate market has been sliding since 2022, and analysts do not see signs of recovery. Both supply and demand remain weak.

A senior executive of Phat Dat said that, when it discovered embryonoic signs of crisis, the enterprise immediately made comprehensive assessments about the operation, trying to protect the enterprise’s platform and solve immediate problems (settling loans and bonds to maintain credibility in the eyes of bondholders, investors and shareholders).

Phat Dat chose optimal financial solutions, restructured investment portfolio, defined priority projects and products. It also carried out organization and operation reforms and planned to implement new projects when the market gets warmer. Currently it focuses on upgrading internal resources.

Vicente Nguyen, CIO of AFC Vietnam Fund, said that sale of assets is a vital step to exist. When difficulties are still piling up, the economy is weak, and the global economy has not fully recovered, businesses need to take defensive measures. Reducing debts, cutting costs, selling some projects and inefficient assets are the useful advices.

Manh Ha