The Hoang Anh Gia Lai Group JSC. (HAG), has been on the stock exchange since early days, and was once a blue-chip company on HOSE. However, now it is but a shadow of its past self. Despite receiving support of a huge cash flow from strategic investors, HAG still faces an uncertain future as a result of past mismanagement.
Glorious past
HAG officially listed shares on HOSE on 22 December 2008 at a reference price of VND 40,000/share. Although the stock market was in a period of sharp decline at that time, HAG still received special attention from investors and increased at an average amplitude in the first trading session to VND 48,000. Attraction from leading real estate stocks at that time helped HAG quickly surpass VND 60,000/share in the next five sessions, an increase of 50%.
With the rise of HAG, Doan Nguyen Duc, Chairman of HAG Board of Directors, quickly became the richest man in the stock market in 2008, with a total holding stock value of VND 6,160 bn. Especially, at the closing price on 31 December 2008, the market capitalization of HAG amounted to VND 11,328 bn, equivalent to 2.5% of the total stock market.
In the session on 22 September 2009, HAG set a peak price of VND 132,000/share. After that, HAG corrected at below VND 100,000/share, but “impresario” Duc was still the richest man in the stock market in 2009 with VND 11,500 bn. In 2010, with the strong rise of Vingroup (VIC), Duc at VND 11,900 bn fell to No. 2 spot after Pham Nhat Vuong rose with VND 15,800 bn in the stock market.
After reigning at peak, in 2011 HAG began to encounter difficulties in the field of real estate, and stocks plummeted with a decline of up to 70% compared to the end of 2010. Duc’s assets also ‘evaporated’ significantly, reducing to VND 4,348 bn. By 2016, with holding stock value of only VND 1,860 bn, Duc was no longer among the top 10 richest persons on the stock market.
Also in 2016, HAG's financial statements recorded a negative profit for the first time of more than VND 1,400 bn. Notably, HAG's financial situation was extremely volatile with VND 36,100 bn of liabilities, of which VND 27,400 bn was bank/bond debt, an increase of VND 300 bn compared to the end of 2015. At that time, the creditor banks had to hold many meetings to find a solution to rescue HAG.
Bad luck pursued
HAG's debt started to increase sharply in 2007-2008, this made “impresario” Duc decide to abandon real estate and turned to rubber. At that time, the price of rubber in the world market peaked at USD 5,000/ton. But soon after HAG turned to agriculture by establishing a subsidiary called the Hoang Anh Gia Lai International Agricultural Joint Stock Company (HNG), the price of rubber suddenly plummeted, and the company fell into extremely difficult circumstances. The situation was even more tragic when HAG's new investment segments such as sugarcane and cattle breeding also continued to collapse.
“Impresario” Duc expected the decision to shift to livestock production would help HAG turn the fortune around. The first plan was to cooperate in producing fresh milk with Nutifood Nutrition Food Joint Stock Company (Nutifood) in 2014. Accordingly, HAG would import about 100,000 cows from Australia (50% of which would be dairy cows) and organize animal husbandry in Laos, Cambodia and Vietnam.
As part of the plan to import 100,000 cows, HAG actively cooperated with Vietnam Animal Industry Joint Stock Company (Vissan) to manage the output. According to the plan, Vissan would build a cluster of food processing plants in Long An with a capacity of 100,000 tons per year, and at the same time commit to completely consuming the amount of beef provided by HAG.
However, just like the "handshake" with Nutifood, the deal with Vissan quickly broke up after the Lunar New Year in 2015. According to Vissan, HAG provided beef that did not have enough volume for economic gain.
Uncertain future
In 2018, when HAG was in a tragic crisis situation, Mr. Duc suddenly received support from Truong Hai Auto JSC (Thaco). According to the agreement signed on August 8, THACO would spend VND 7,800 bn to own 35% and 51% of the capital of HAG's two subsidiaries, HNG and HAGL Myanmar, respectively.
Moreover, this was only the initial phase. According to the roadmap, Thaco committed to helping HAG restructure its debt of VND 14,000 bn. Thus, the total amount of capital which Thaco invested in HAG would exceed VND 22,000 bn (equivalent to USD 1 bn).
Thaco's decision to pour investment capital into HNG surprised many investors, because agriculture was not the strength of this automobile manufacturing group. Frankly speaking, even HAG leaders were also surprised about this investment decision.
Vo Truong Son, General Director of HAG, said that Thaco was “very brave” in committing to investing in HAG convertible bonds, with a conversion price of VND 10,000/share. Especially, that was a time when HAG and HNG were facing difficulties in liquidity, not being able to pay both principal and interest. The market price of HAG convertible bonds at that time was only VND 6,520/share.
Up to now, after one year of cooperation, although HAG's financial situation has gradually stabilized, its business performance is still sluggish. On 30 August, HOSE announced the decision to maintain an alert on HAG because the undistributed after-tax profit of the group on 30 June was negative. The auditing company also provided a qualified opinon that the company has not yet overcome the fact on why the stock was warned.
According to the six month audited financial report of 2019, the after-tax profit of the parent company is negative at VND 516.52 bn, and the undistributed after-tax profit on 30 June is also negative at VND 728.17 bn. At the same time, the auditing firm continued to provide qualified opinon for short-term and long-term receivables (existing from 2017 audited consolidated financial statements), and added qualified opinon related to corporate income tax. The financial statements also emphasized audit opinion regarding that the group of companies had violated some terms of loans and bonds.
(To be continued)
