Ho Chi Minh City Infrastructure Investment Joint Stock Company (Code CII) failed to hold its 2023 annual general meeting of shareholders due to insufficient number of voting shares attending in April 2023. It is worth mentioning that the company had a plan to give money to shareholders but only 45.76% of the total number of voting shares attended.

In addition, declining business results in the first half of 2023 and debts of up to thousands of billions of VND show instability in the company's capital structure.

Q2/2023 just escaped loss thanks to financial revenue

The business results of Ho Chi Minh City Infrastructure Investment in the second quarter recorded net revenue of VND843.4 billion, down 15.2% over the same period. Of which, the cost of goods sold accounted for a large amount of VND641.6 billion. The company's gross profit reached VND250.6 billion, down 55.4% over the same period. The company's gross profit margin decreased from 45.5% to only 23.9%.

The high cost of goods sold ratio and the decline in gross profit indicate that CII's business operations are having problems. In addition, financial revenue in the second quarter also increased sharply, from VND259.5 billion to VND461.9 billion, an increase of 128.2%.

The majority of this financial revenue comes from investment cooperation, capital support, deposits and bonds. This is also the main revenue that helps the company avoid losses in the second quarter.

Although financial revenue increased sharply, financial expenses also increased by 41.2% to VND454.8 billion. The expense, a large part of which is interest expense, is putting great pressure on CII's revenue.

Business management costs and sales costs both decreased in the second quarter, at VND35.8 billion and VND121.6 billion, respectively. Profit after tax in the second quarter reached VND83.3 billion, down 34.3% over the same period. If it weren't for the VND461.9 billion in financial revenue, CII would have certainly suffered a loss in the second quarter.

Debt of 13,000 billion and daily interest expense of up to 4 billion VND

As of the end of the second quarter, CII's total assets reached VND26,649.2 billion, down 6.7% compared to the beginning of the year. The company is holding VND954.6 billion in cash and cash equivalents. In addition, there is a small deposit of VND2.5 billion along with VND615.6 billion recorded in securities investments.

A notable point is that the debt structure in CII's assets is accounting for a relatively large proportion. Short-term debt has increased from VND 5,166.4 billion to VND 6,039.4 billion. This means that short-term loans have increased to VND 615.6 billion in just the first 6 months of the year.

Long-term debt currently accounts for VND 7,112.3 billion in CII's assets. If we calculate the total of short-term and long-term debt, CII is currently borrowing up to VND 13,151.7 billion. This huge debt is currently 62.2% higher than the company's equity, causing great risks to CII's capital management.

With such a large proportion of debt, the interest expense that CII has to pay is also a relatively large number. In the second quarter alone, the interest expense that CII has to pay has reached 363.6 billion VND, equivalent to CII having to pay 4.04 billion VND in interest every day.

As of June 30, 2023, the company also confirmed that the payment schedule for loans in 12 months amounted to VND 5,107.7 billion. The amount of debt payments for bonds in the next 12 months was also recorded at VND 2,004.7 billion.

Borrowing thousands of billions of dong, CII still plans to research 6 BOT projects with a total investment of 75,000 billion dong

In the document of the 2023 Extraordinary General Meeting of Shareholders scheduled to be held on September 19, 2023 in Ho Chi Minh City, CII announced the study of 6 BOT projects with a total investment of up to 75,000 billion VND.

The projects include: Ho Chi Minh City - Trung Luong - My Thuan Expressway Phase 2 with VND 22,000 billion; Improving traffic capacity in the Northwest area of ​​Ho Chi Minh City with VND 19,059 billion; Upgrading and expanding National Highway 1A from Tan Kien intersection to Long An border with VND 11,982 billion; Project to improve traffic capacity along Pham Van Dong - Nguyen Xi - Ung Van Khiem - Nguyen Huu Canh route with VND 10,108 billion; Upgrading and expanding North-South axis project from Nguyen Van Linh to Ben Luc Long Thanh Expressway with VND 6,625 billion; Upgrading and expanding the connecting route of Ho Chi Minh City - Trung Luong Expressway with VND 5,048 billion.

The study of BOT projects with a total investment capital of up to 75,000 billion VND has attracted investors' attention because currently, the debt structure accounts for a very large proportion of CII's total assets. Where will this unit get the resources to carry out large projects like this?