Recently, many real estate companies have used high debt leverage, especially using borrowed money to invest in many projects, leading to reduced investment efficiency. This explains why many real estate companies have very large total assets, but equally large debts.
Hung Thinh Land Joint Stock Company (JSC) has just reported a loss after tax of more than VND 538 billion in the first half of 2024. Hung Thinh Land's business results have been gradually declining in recent years, most notably a loss of more than VND 967 billion in 2023. As of June 30, 2024, Hung Thinh Land's total assets recorded more than VND 80.8 trillion. Liabilities also increased by nearly 11%, to more than VND 62.5 trillion. In contrast, outstanding bonds decreased by VND 1 trillion to nearly VND 17.2 trillion.
Tien Phuoc Group Joint Stock Company (Tien Phuoc Group) has just reported its financial situation in the first 6 months of the year with a net loss of more than 181 billion VND. In the same period last year, this company also reported a loss of hundreds of billions of VND. Tien Phuoc's current liabilities far exceed its equity, reaching 4.1 times, equivalent to 8,507 billion VND. Of which, the company is carrying a bond debt worth nearly 300 billion VND.
The audited semi-annual consolidated financial report of Danh Khoi Group Corporation for the first 6 months of the year shows that this real estate company reported a loss after tax of more than 10 billion VND, a sharp decrease compared to the profit of 7 billion VND in the same period last year. Not only was Danh Khoi's business at a loss, it also owed taxes and overdue bonds.
As of June 30, the company had short-term financial debt of more than VND342 billion and long-term financial debt of more than VND46 billion. Of which, the company had more than VND256 billion in bond debt. However, the company has not yet paid VND139.5 billion in overdue bonds with interest of nearly VND24 billion.
Statistics from VietstockFinance from 116 real estate enterprises on the stock exchange (including HOSE, HNX and UPCoM) that have announced their financial reports for the second quarter of 2024 show that, as of June 30, 2024, the total outstanding loans of this group recorded more than 491,000 billion VND, an increase of 7% compared to the beginning of the year. Compared to the beginning of 2020, this outstanding loan level increased by nearly 60%.
Dr. Nguyen Duy Phuong, Investment Director of DG Capital, believes that the problem of real estate businesses is not entirely due to high financial leverage, but rather low capital absorption capacity. Expanding to other industries and fields, it is more a matter of business efficiency than access to capital/credit. The decline in orders causes revenue to decrease and profit margins to narrow, thereby reducing the need for working capital and investment capital.
The fulcrum for the improvement of the story of solving the debt burden of real estate enterprises is the expectation that the real estate market is changing after a series of support policies, most notably a sharp decrease in bank loan interest rates, a direction to remove project legal issues..., helping to strengthen the confidence of both sellers and buyers, while intermediary lenders are also more active.
Notably, with the 15% credit growth plan set for the whole year, the banking system will need to pump out more than VND1.1 million billion into the economy in the last 5 months of the year, or an average of VND227,000 billion per month to achieve the growth target. With the current positive developments, it is likely that real estate businesses will continue to be prioritized in the credit disbursement list from major commercial banks in the last months of the year.
However, not all businesses should increase their debt balance, because increased debt means increased interest expenses every day. If the business's operations are not effective, it will create a huge annual interest, causing profits to erode.
