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Các giải pháp nâng cao năng lực tài chính cho tập đoàn hoàng anh gia lai

In 2011 and early 2012, the macroeconomic conditions continue to be fairly bad to
businesses. The government had to face the problem of inflation, budget deficit, trade
deficit, and foreign exchange pressure ... The government decided to pursue a tight
monetary policy by tightening the money supply. The economy in general and the
commercial banks faced liquidity difficulties; the purchasing power in the market
reduced; production was delayed due to slow consumption when the capital costs are
high. In the international market, the credit rating of Vietnam was low. This affects the
ability to raise capital abroad and foreign investment into Vietnam. In the context of
difficulties, with the loss of a series of large corporations such as Vinashin, Vinalines ...
there are still some bright spots in Vietnam’s economy, among them, Hoang Anh Gia
Lai is an example.
The solutions to enhance financial capabilities of Hoang Anh Gia Lai joint
stock company – HAGL Goup.
Company’s Name: Hoang Anh Gia Lai Joint Stock Company.
Overseas Trading: HAGL Joint Stock Company.
Abbreviated Name: HAGL.
Address: 15 Truong Chinh, Phu Đong dis, Pleiku city, Gia Lai province.

Telephone: (84-59) 2222249 / Fax: (84-59) 2222247.
Website: www.hagl.com.vn.
Chartered Capital (til 31/12/2011): 4.672.805.900.000 VND.
Company’s logo :

Slogan: Unity is the strength.
HAGL Group’s Vision:
To become the leading diversified multi-sector group in Vietnam with sustainable
development operations in rubber, hydro-power, mining and real estates.
HAGL Group’s Mission:
To maintain the continuous creativity, and strive to produce quality products, and
provide good services at reasonable costs. To provide the good employee benefits, both
in terms of monetary remuneration and employee development in order to motivate the
employees to create values for shareholders and the general society.
Main goals of the Company:
* Fast and sustainable development. In 2012, rubber, hydro-power and mining
operations will be the core businesses of the Group.
* Become the leading real estate company in Vietnam.
Development History:
* Establishment: Initially, the private company Hoang Anh was established in
1993, as a small wood processing factory.

* Transformed into joint stock form: In 2006, the private enterprise was
converted to operate in the form of a joint-stock company named Hoang Anh Gia Lai
Joint Stock Company. So far, after 19 years of development and growth, Hoang Anh
Gia Lai has become the number one multi-fielded economic group in Vietnam with the
number of employees of 9842 til 2011, the charter capital of more than 4,600 billion
VND and total assets of nearly 16,000 billion VND.

Hoang Anh Gia Lai Group’s Headquarter in Pleiku city, Gia Lai
* Stock Listings:
- On 22/12/2008, the company officially listed shares in the HCM City Stock
Exchange (HOSE) with stock code HAG.
- On 23/3/2011, Hoang Anh Gia Lai became the first company in Vietnam listed
in the London Stock Exchange (UK).
* Summary of current operational status of the company Hoang Anh Gia

- The company is currently in the phase of restructuring with five main sectors:
rubber, minerals, hydropower, real estate, wood and granite manufacturing. Currently,
real estate business sector contributed the largest share in sales of HAGL.
- The company’s goal: Up to 2012, the rubber, hydropower, and mining industry
should have major roles. Continue to develop and become the No. 1 real estate
company in Vietnam with sales from real estate contributing up 75% of total revenue;
the company should own 26 major real estate projects in Vietnam, Laos, Thailand.
- The investment strategy of the company during the period 2010 - 2012:
 Rubber Sector: planting, harvesting and processing 51,000 ha of rubber. Of
which, 11,000 hectares in Highlands, 25,000 ha in Laos and 15,000 ha in Cambodia;

 Mineral Sector: Mining and processing 60 million tons of iron ore. In particular,
10 million tons in Highlands and Thanh Hoa, 20 million tons in Laos and 30 million
tons in Cambodia;
 Hydro Power Sector: Establish and implement 17 projects with total capacity of
420 MW; 310 MW in Vietnam and 110 MW in Laos;
 Real Estate Sector: Starting all real estate projects with a total of 2.5 million m2
of floor trading.
- Detailed Business Performance:
o Real Estate:
 Phu Hoang Anh project has completed Phase I in 2011 and brought the revenue
of about 1.000 billion, HAGL is trying to complete Phase 2 and offer it for sale in the
first half of 2012.
 An Tien – Golden House were sold 50% to the Investment Bank (BIDV) and
Saigon Mekong and revenue will be recorded in the third quarter of 2012.
 According to the plan in 2012, HAGL will start constructing and put on sales the
project Phuc Bao Minh and Minh Tuan in Tan Phu District and District 9. The sales and
payment collection of this project is expected to be delayed due to general market
o Iron Ore Extracting: Currently, HAGL has 3 iron ore mines in Vietnam and two
mines in Laos and Cambodia with the total volume up to 60 million tons. However, the
export of iron ore from the early 2012 of HAGL faced some difficulties due to the fact
that the Government had banned the export to limit exploitation of natural resources. In
addition, HAGL also had trouble in filing for the license of iron ore extracting in Laos
and Cambodia.
o Rubber Sector: Up to the present time, HAGL has sold 36.000 ha of rubber and
is expected to grow further 8.800 ha in Laos in May and June this year. In addition,
HAGL also owns 1.848 hectares of rubber in Attapeu - Laos and can be harvested in
the second quarter 2012.
o Hydropower: HAGL owns two hydroelectric power plants with the total
capacity of 42MW (Daksrong 2 and Daksrong 2A). In 2012, HAGL will complete the
activation of two more hydropower projects with the capacity of 99.5MW (Ba Thuoc 2
and Daksrong 3B).
o Furniture and Granite: Revenue from furniture and granite business has been
reduced along with the difficulties of real estate and construction fields, and is expected
to continue slow growth.

- Other Information: By the end of 2011, the Company was rated by S & P from
B to B-, with the negative outlook and forecast of business and liquidity of the
Company will be weak in the next 6 to 12 months due to general market situation.
However, analysis of assets and capital structure of the company showed that: the
proportion of long-term capital assets accounted for 73% in HAGL. While long-term
assets accounted for only 48%. Thus, the long-term fund used for short-term finance
assets is 25%. The long-term debt with a term consistent with the cash flow plan for
each investment project will not create significant liquidity risks.
* The Company’s Organization Structure:
Hoang Anh Gia Lai JSC is organized and operates with the parent - subsidiary
model with the following structure:
- The parent company with 5 branches and 1 representative office in Ho Chi Minh
- 50 subsidiary companies are companies in which, Hoang Anh Gia Lai Jsc has
dominating shares of above 50% and/or has the controlling rights.
- 03 affiliating companies are companies which Hoang Anh Gia Lai Jsc has from
20% to 50% in shares.
1. Some basic financial indicators in the financial statements audited in 2011 of
Hoang Anh Gia Lai Company are as followed:
Unit: million dong.



Short-term Assets:





Short-term financial investment:


Short-term receivables:






Other short-term assets:


Long-term assets:




Fixed assets:



Long-term financial investments:



Other long-term assets:



Commercial advantages:


Total assets:





Current liabilities:



Long-term liabilities






Owning equity:



Minority shareholders’ interest:
Total equity:

- Report the business results up to 31/12/2011:



Unit: million dong.


Sales of goods and services:

3.152.105 Notes


Gross profit on sales and services:



Operation profit:



Before tax profit:



Net profit of the year:


2. Financial performance analysis:
- Profitability:

+ In 2011, the ratio of profit after tax / turnover reached 42.07% with an amount
of 1325.3 billion. Although it is lower than in 2010, but this is fairly good in the
context of economic difficulties.
+ The ratio of Profit after tax / equity: 14,10%.
+ The ratio of Profit after tax / Total assets: 5,18%.
+ The ratio of Profit before tax / net sales: 54,02%.
- Business Capacity: The ratio of Net income / total assets reached 0.12.
The ratio of net income / total assets of Hoang Anh Gia Lai reduced because the
total assets of the corporation is growing very fast and most of the properties of the
group is being invested for future projects such as rubber , sugar, hydropower, mineral
and land of the real estate industry. Total assets at the end of 2011 rose to 25,577 billion
(the end of 2010 was 19,043 billion VND).
- Liquidity: Regarding liquidity, cash balance and total current assets increased
significantly and make the payment ratio increase. Short-term liquidity ratio (Mobile
assets / current liabilities) increased from 1.62 times to 1.96 times and the quick
liquidity ratio (mobile assets - inventory / current liabilities) increased from 1.04 times
to 1.31 times.
- Equity structure:
According to the balance sheet, the total liabilities of Hoang Anh Gia Lai are
15,493 billion by 31/12/2011. The total assets at that time are 25,576 billion. With the
ratio of total liabilities over total assets of 63%, HAGL recently faced a lot of bad
rumors about solvency and bankruptcy. About the debt ratio of 63%, many economists
considered it to be too high and alarming because it is higher than the average level
compared to that of the international standards and a listed company.
However, we need to distinguish and recognize that the debt of Hoang Anh Gia
Lai is different to the debt with credit institutions. In fact, the company only has to pay
interest for credit institutions of about 6,435 billion (25%). The remaining debt is
converted into corporate bonds such as the 2,300 billion sold to Temasek, the long-term
assets to exploit or delivery of future products without having to pay back in cash are
housing projects which the company is going to hand over to customers. The private
tax debt of 749 billion in 2011, was completely paid by 03/31/2012…

Hoang Anh Gia Lai is a multi-industry corporation which invests in many fields
and many places, especially in Southeast Asia regions. Due to investment spreading
out, the company should focus on improving financial capability with some solutions as
- Hoang Anh Gia Lai’s board of director also found that the economy still have
difficulties in short term so the company should focus on risk management, and should
not be too focused on current profit results; instead, it needs to implement well
investment activities and project implementation for sustainable growth in the future.
- Due to economic difficulties in the future the company should take measures to
limit risks in the areas:
+ Financial risks: The Company needs to closely manage cash flows and build up
an appropriate capital structure between long and short term investments. For projects
with long payback period, the company should raise needed fund through long-term
loans with banks, bonds and shares, respectively.
+ Exchange rate risks: Business activities of companies comprise of both export
and import, therefore, the increase or decrease in exchange rates will affect profitability
and cash flow. The Company needs to balance their foreign currency needs to be active
in import.
+ Interest rate risks: The Company needs to actively build the appropriate
structure of debt and equity which is consistent with each period of economic and
business operations. Aside from raising from loans and common bonds, the Company
needs to raise capital from domestic and foreign investors through issuing shares,
convertible bonds at low interest rates; trying to take advantage of the deposit and
advance payment from the apartment buyers of the company's projects. The capital cost
of these items are usually lower, predetermined and not influenced by interest rate
+ Market risks: Before investing in real estate projects, the Company should focus
on market research, only decides to invest in projects with high profitability and
serving the real needs of customers. Utilizing materials from the members, the
Company should organize to build a closed model, reducing production costs.
+ Legal risks: The Company should have qualified and experienced legal staff. It
should regularly update the legal changes and their impact (if any) to advise the
company’s Board of Directors.

- The company should not continue to spreading investment, instead, it needs to
complete the unfinished projects to put into use, bringing economic efficiency, taking
back capital investment, such as:
+ Real estate projects: Phu Hoang Anh project, Hoang Anh gold house project,
HAGL-Bangkok project (Thailand), economic trade center project …
+ Hydropower project: Dak Srong 2A, Dak Srong 3B in Highlands, Ba Thuoc 2 in
Thanh Hoa…
+ Projects in mineral exploitation, rubber planting, wood and stone manufacturing

- Even though real estate is the industry which gives the company the highest sales
(about 56% of total revenue). However, the current situation of the real estate market is
still difficult, so the Company should not be too focused in this area and need to invest
more for other areas.
- As an economic group with 50 member units, Hoang Anh Gia Lai needs to
continue restructuring the corporate units, reorganization business units in each branch
to help management activities more professional and effective, and the projects to be
faster and more active.
- Implementing arrangements and management procedures and internal controls
towards modernization, investing in new information technology infrastructure. After
investing in human resources management software SAP, the Company needs the rapid
and effective training for this software.

Part 2:
Implement the project called: “Buying, selling or holding the stocks of Hoang Anh
Gia Lai Group”.
Hoang Anh Gia Lai Joint Stock Company (Security Code – HAG; Listed: HOSE)
 Key indicators:

Closing price of 11/5/2012
Price period: 52 weeks
10-day average trading volume
Number of exising shares
The value of market capitalization

: 30.600 VND
: 15.040-37.300 VND
: 14.299 billion VND


Share holders’ structure:
o Đoan Nguyen Đuc

: 48,1%

o Foreign Investors

: 33,1%

o Domestic Investors

: 18,8%

 Price valuation information:
Price evaluation indicators
Basic EPS
EPS Growth Rate (%)
Dividend yield (%)
P/E (times)
Book Value Per Share (BVPS)
P/B (times)
ROE (%)
ROA (%)
ROIC (%)
Debt/Equity (%)





 Share price’s changes in 1 year (Performance) – Source: VCBS.

 Analyzing the risks faced by investors when investing in HAGL shares:
- Visible risks of future income flows. In history, real estate activities provide the
main income for HAGL. Currently, the prediction activities of income from real estate

become more difficult due to the freezing of the market and unclear prospects for
recovery in the future. Meanwhile, the iron ore mining are faced with an export ban and
a list of potential customers in countries narrowed by the constraints of steel from the
blast furnace steel in recent times. There are still 2 years to go until the rubber
plantations can achieve considerable yields. The hydropower plant is expected to
contribute only about 200 billion in gross profit of the Company.
- Imbalance of cash flows. The decline in cash flow from operations in real estate
combined with large amounts of investment inflows into the hydro plant and rubber
plantation project (while these projects may not create inflow immediately) will create
liquidity pressure for HAGL.
- The increasing ratio of Liabilities /Equity might be a significant difficulty.
Generally, in order to solve the situation of shortage in money, a company can issue
more shares or borrow more debt markets. HAGL has tried to raise funds both
domestically and internationally but still not able to satisfy its "thirst" of capital.
Meanwhile, the amount of investment of fixed assets that the Company has committed
is large, the terms of the bond contract do not allow the Company to be able to borrow
more. Accumulated debt on balance sheet increased makes the Company face many
difficulties and makes it more costly to continue raising funds. From the owner
perspective, the current stock price and the terms of conversion together with the
current debt will be the major obstacle to HAGL in issuing more shares. Therefore, to
improve liquidity, the Company might rely more on uncertain sources such as the sale
of assets.
 HAGL Shares’ price evaluation and investment decision:
HAGL shares’ value can be priced in different ways such as: Discounted cash flow
(Discounted Cash Flow), namely FCFE, FCFF, DDM; or based on P / E, P / B etc…
- For the dividend discount method: although throughout its history, HAGL paid
dividends very timely over the years (in cash from 10% -15% and bonus shares at 2:1
ratio). However, with the difficulties encountered and expected in the coming years in
terms of liquidity shortage, it is unrealistic to assume that the Company will continue to
pay dividends as it did in the past with a given dividend growth rate.
- For the method using P/E; P/B ratios: The Company currently hasn’t had
consolidated financial statements of the first quarter of 2012 yet. Therefore there are no

data to calculate P / E and book value at the end of quarter I/2012. Data on earnings and
book value is assumed based on those of the end of 2011. Accordingly, HAGL share
price will be calculated by the following formula:
P = EPS (HAG) * P/E (industry average)
P = BVPS (HAG) * P/B (industry average)
The analysis used the industry combined data of Vndirect Securities Company.
HAGL is categorized into the financial industry, real estate industry with industry’s
average P/E of 27.75; P/B of 1.8
 Based on P/E, the share price is P = 2,421*27.75 = 67,182 VND/share
 Based on P/B the share price is P = 20,113*1.8 = 36,203 VND/share
So, the share price of HAGL is calculated to be within the range of 36,203 VND/
share - 67,182 VND/ share.
This method has the drawback that although HAGL is categorized into the real
estate industry but other than that field (bringing the largest percentage of sales),
HAGL also trades in other areas. At the same time, the company also plans to redirect
activities to minerals, hydropower, and rubber which led to the fact that calculation is
no longer accurate just based on the real estate industry. In addition, this method is to
use EPS as accounting data. Therefore, in the same industry, companies use different
accounting methods also lead to false when using industry averages.
- Due to the lack of actual data to build pricing models by the method of
discounted cash flow (FCFE, FCFF), and within the scope of this analysis, our group
has used the reference sources and some recommendations of some securities company
and chose the report of VietCapital on 09/04/2012 as a basis to calculate prices, thereby
making investment decisions.
According to the report, VietCapital decided the targeted price to be
30,500VND/share with the suggestion of long-term investment. The main assumption
is that HAGL can balance its cash flows in 2012; Rubber industry contributed 1/2 cash
flows of HAGL in the prediction period. The result is that the price of HAGL’s share is
29,322VND/share (based on FCFE) and 31,712VND/share (based on FCFF).

Investment decision:

The current trading price in the market is 30,600 VND/share.


The targeted price which VietCapital calculated is 30,500VND/share;

- And the share prices calculated based on P/E and P/B are 36,203 VND/share –
67,182 VND/share;

Consider the risks which can be faced;

- The risk acceptance level, investment time, and expected profits from investing
in HAGL shares,
In the current time, our Group has decided to give the investment decision to be:
Despite facing many difficulties in recent times, due to accumulated experience in
dealing with the economic crisis in 2008, HAGL had identified its prioritized target to
be risk management and investment for sustainable development in the long term, the
company remains profitable with nearly 2,000 billion VND in 2011. With the projects
nearly complete, they will bring significant revenue to HAGL, ensure competitiveness
and sustainable development, aims to build HAGL into a powerful economic group in
Vietnam in particular and in the area, generally.

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