CEO and wife divest all capital, CII stock plummets

After selling all 10 million shares, Mr. Le Quoc Binh, General Director of Ho Chi Minh City Infrastructure Investment JSC (Code CII) bought back the company's convertible bonds as promised.

Specifically, Mr. Binh previously sold more than 6 million CII shares, reducing his ownership ratio from 2.13% of charter capital to 0%. Ms. Hang, Mr. Binh's wife, sold 4 million CII shares, reducing her ownership ratio from 1.41% to 0%. Both transactions were conducted from October 10 to October 23.

At the recent extraordinary shareholders' meeting, Mr. Binh spoke up to reassure shareholders. According to Mr. Binh, the purpose of selling shares is to provide him with capital to buy convertible bonds that CII is about to issue. According to Mr. Binh, his position with the company has not changed after these transactions.

However, from October 10 to October 23, when Mr. Binh and his wife sold their shares, CII's price continuously decreased from VND18,400/share to only VND15,600/share. Thus, CII decreased by 15.2% during the time Mr. Binh withdrew his capital.

Thus, basically, during the period from October 10 to October 23, CII's public shareholders are suffering losses due to the decline in stock prices.

Buying convertible bonds, how does the position of CEO Binh and his wife with CII change?

Keeping his previous promise, Mr. Le Quoc Binh registered to buy 10 million convertible bond purchase rights coded CII42301. Ms. Hang, Mr. Binh's wife, also registered to buy 6 million convertible bond purchase rights CII42301. The transaction registration period is from October 26 to November 9.

Bond code CII42301 was issued by CII with a face value of VND100,000/bond. Thus, it is estimated that Mr. Binh and his wife will spend VND162 billion to buy this amount of convertible bonds.

After the transaction is completed, Mr. Binh and his wife will become bondholders, equivalent to the position of creditors of CII. In the case of converting bonds into shares, Mr. Binh and his wife will once again become shareholders of the company.

However, if the bonds are not converted into shares, as bondholders, Mr. Binh and his wife will be given priority to repay the debt before other shareholders if CII goes bankrupt. This is still something that many CII shareholders feel concerned about when Mr. Binh sold all his shares to buy convertible bonds.

CII escaped loss in Q2 thanks only to financial revenue

CII's Q2/2023 business results recorded net revenue of VND 843.4 billion, down about 15.2% year-on-year. Cost of goods sold accounted for the majority at VND 641.6 billion. The company's gross profit reached VND 250.6 billion, down 55.4% year-on-year. Gross profit margin dropped sharply, from 45.5% to only 23.9%.

Notably, financial revenue increased sharply from VND259.5 billion to VND461.9 billion, equivalent to an increase of 128.2%. Most of this financial revenue came from investment cooperation, capital support, deposits and bonds.

On the contrary, financial expenses also increased by 41.2%, to VND454.8 billion. Of which, interest expenses alone accounted for VND363.6 billion. Thus, CII has to pay up to VND4 billion per day for interest expenses alone.

Business administration expenses and sales expenses in the period were recorded 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. It can be seen that if it were not for the financial revenue of VND461.9 billion, CII would almost certainly have suffered a loss in the second quarter.

Another notable point is that in CII's asset structure, the company is borrowing short-term debt of VND 6,039.4 billion. This short-term debt has increased by VND 615.6 billion compared to the beginning of the year. Long-term debt also accounts for VND 7,112.3 billion. CII's total short-term and long-term debt is up to VND 13,151.7 billion, 62.2% higher than equity.

This is a relatively large risk and in the recent extraordinary General Meeting of Shareholders, CII also published meeting documents emphasizing the need to restructure capital sources to reduce the debt ratio in capital sources.