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VND100 capital can yield VND110 profit

VietNamNet Bridge - While thousands of businesses have had to struggle to survive the recession, many businesses have been prospering. With VND100 in capital, they can make VND110 in net profit. 
VietNamNet Bridge - While thousands of businesses have had to struggle to survive the recession, many businesses have been prospering. With VND100 in capital, they can make VND110 in net profit. 


Since its equitization, Vinacafe Bien Hoa (VCF) has never increased its charter capital. It still has VND266 billion only in charter capital, but the volume of cash and cash equivalents (mostly bank deposits which can bring stable interest) reached VND1.425 trillion by the end of 2015.

An analyst said that VCF’s operation model is just like the one applied by Warren Buffet. It does not raise charter capital, but accumulates profits. And it does not pay high  dividends, just VND1,200 per share, or 12 percent of share face value per annum.

VCF keeps cash because this allows it to take initiative in business and it does not have to borrow much money from banks. It can also prepare for merger & acquisition (M&A) opportunities which allow it to expand the market.

While thousands of businesses have had to struggle to survive the recession, many businesses have been prospering. With VND100 in capital, they can make VND110 in net profit. 
Cotec (CTD) is another rich company. The Q4 financial report showed that it had VND1.441 trillion in cash by the end of 2015 and VND1.316 trillion in short-term financial investments, which are mostly bank deposits.

Cotec is a construction company which usually participates in bids for contracts, therefore, the high volume of cash is a strong advantage.

The list of companies rich in cash includes Binh Minh Plastics (BMP) which had VND1.04 trillion in cash by the end of 2015 and the Noi Bai Cargo Services JSC (NCT) which had VND292 billion in cash, though the charter capital was VND262 billion only. 

The Son La Sugar Company (SLS) had VND88 billion in cash, higher than its charter capital of VND68 billion.

The common characteristic of theseventerprises is the high balance of undistributed post-tax profits and funds for investment & development. VCF had VND1.26 trillion worth of undistributed post-tax profit. The figure was VND639 billion for CTD and VND497.4 billion for BMP.

The VND11,000 club

The other common characteristic of the companies is high profitability. Their EPS (earning per share) is higher than VND11,000.

Cotec was the contractor in nearly all important construction projects in Hanoi and HCM City. Meanwhile, the post-tax profit of CTD increased by 103.7 percent compared with 2014, though the management cost soared by 69 percent.

The most impressive net-profit growth rate belonged to SLS with 364.7 percent. The increase of the sugar price has helped SLS clear stocks and make significant profit. With BMP and NCT, the figures were 32.6 percent and 13 percent, respectively.

CTD is leading the ‘VND11,000 club’ with EPS at VND14,230 per share. Cotec plans to obtain profit growth rate of 20 percent this year, which isvfar below its capability.




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