Posted on 31 Jan 2013
Shareholders of steelmaker Huu Lien Asia Corporation (HLA) have approved the company's plan of issuing VND300 billion (US$14.4 million) worth of shares to its existing shareholders at the par value of VND10,000 each.
However, it has been questioned whether there are any investors who will accept this price while HLA shares are being traded for around VND6,000 on the stock market?
The expense of high interest has piled pressure on HLA's profit growth and this has driven the company to raise capital from its shareholders.
Last year, financial costs (mainly interest expenses) ate away a large proportion of HLA's profit. With around VND235 billion ($11.2 million) paying for loan interests, HLA's net profit reached just VND15.75 billion ($753,600) while its revenue totalled nearly VND5 trillion ($239.2 million).
According to Phan Van Dung, a company director, the current share price is lower than its book value of VND14,000 and some organisations are ready to pay a higher price to hold a large volume of shares and participate in management of the company.
However Dung declined to disclose further information as they are currently in negotiations with interested parties.
HLA also planned to issue shares to raise capital last year but it was unable to successfully do so due to the prolonged bear market.
Responding to questions about what a repeat failure would mean for the company, Dung said HLA would continue to borrow money to finance its production operations but would promote export activity to generate more money to offset cost.
Exports last year brought the company $25 million, a year-on-year increase of 100 per cent and accounted for 30 per cent of the company's revenue. Steel tubs are currently the company's main product and it is occupying 15 per cent of the domestic market share.
This year, HLA projects a revenue of just VND3.52 trillion ($168.4 million), down 41 per cent from a year ago, and a total pre-tax profit of VND46 billion ($2.2 million). Dividend payment is planned at 9 per cent in cash.
