Thaiholdings: explosive dynamism on threshold of stock exchange debut

Thaiholdings: explosive dynamism on threshold of stock exchange debut

Eight years after its birth, the equity of privately-held Thaiholdings only accounts for 35 per cent of the company’s charter capital. In only a short while early this year, the company’s assets, capital sources, revenue, and profit all rose sharply, just before the firm shifts to the public company format. Questions remain about Thaiholdings’ operation and finances as the company is nearing its debut on the stock exchange, pursuant to the plan approved at the company’s general shareholders' meeting early this year.

One of Thaiholdings' recent deals was buying a stake in Kim Lien Tourism, the owner of Kim Kien Hotel that occupies a prime location in Hanoi

Big changes in 2019

Founded in March 2011 under the name Kinh Thanh Investment and Development JSC, the company had changed its name to Thaiholdings JSC in September 2016. Its main business lines are goods transportation by specialised vehicles and several other businesses such as trading in materials and equipment for installation in construction, with VND389 billion ($16.9 million) in total registered capital.

Until 2019, the company’s equity of VND136.9 billion ($5.95 million) only made up 35 per cent of its total registered capital. The reason, as explained in Thaiholdings’ publicised brief, is “due to the company’s actual demand and shareholders' practical capital arrangement capacity.”

In 2019, however, the company’s equity nearly quadrupled after issuing stock to existing shareholders to fill up its charter capital needs of VND389 billion ($16.9 million) (a rise of $10.9 million), while simultaneously offering to sell stock to existing shareholders an additional VND150 billion ($6.5 million), scaling up its charter capital to VND539 billion ($23.43 million) in order to “supplement capital sources for trading, financial investment, and business co-operation”.

What drew investors’ attention through this capital hike was the short time the process took. Accordingly, right after the company’s extraordinary shareholders' meeting passed the resolution on April 18, 2019, the capital hike was finalised a week later on April 25.

Then, from April 24 to May 9, 2019, Thaiholdings forked out VND284 billion ($12.35 million) to buy 14.2 million stocks (19.52 per cent) of Ton Dan Hanoi JSC at VND20,000 (87 US cents) apiece – the unit that owns the office-for-lease building named Thaiholding Tower at 18 Tong Dan-210 Tran Quang Khai Street, which is home to Thaiholdings' headquarters.

At the same time, the company also spent VND365 billion ($15.87 million) on purchasing 17.2 per cent in Kim Lien Tourism JSC from four individuals at the price of VND305,100 ($13.27) per share. Kim Lien Tourism is the owner of Kim Lien Hotel, which occupies one of the top positions in Hanoi capital. These two deals were both closely related to Thaigroup JSC, formerly known as Xuan Thanh Group – once a renowned player in the local business scene.

Particularly, in the deal with Ton Dan Hanoi JSC, the seller was Thaigroup, while in the second deal Kim Lien Tourism JSC is a subsidiary of Thaigroup, in which it held 52.4 per cent at the end of 2019.

Raising capital and boosting financial investments quicky boosted Thaiholdings’ asset scale and capital sources.

By the end of last year, the company’s total asset value touched VND850.5 billion ($37 million), nearly 4.1 times the figure at the beginning of the year, in which long-term financial investment rose from zero Vietnam dong to VND637.5 billion ($27.7 million).

Thaiholdings had boosted its sources and then forked out a big sum to acquire stakes from units closely related to Thaigroup, but noticeably Thaigroup itself had divested Thaiholdings not long before the two deals.

Accordingly, Thaigroup used to be the parent company of Thaiholdings, holding up to 74 per cent by early 2019.

The second largest shareholder is Nguyen Duc Thuy (called Bau Thuy), chairman of the Board of Management and also chairman of Thaiholdings, who retained 24.7 per cent at the time.

After the capital hike in April 2019, Thaigroup had absolutely divested Thaiholdings and Nguyen Duc Thuy left his chairman seat at Thaiholdings.

Albeit big shareholders either divested or strongly sold down their interest in the company, no new major shareholders appeared at Thaiholdings. Until early 2020, Nguyen Duc Thuy remained the only big shareholder at the company, holding a 20 per cent stake.

According to the minutes of Thaiholdings’ 2020 general shareholders' meeting (AGM) on February 29, 2020, the company had a total of 122 shareholders, 11 of whom (holding 85.57 per cent) joined the meeting.

Besides the 20 per cent stake owned by one large shareholder, the 16 remaining shareholders at the meeting owned or represented 4.09 per cent each.

These shareholders, however, showed a high level of consensus at the company’s recent AGM, as all important content in the statement received unanimous approval, a rare happenstance at AGMs.

Ambitious 2020 targets

Thaiholdings’ 2020 AGM set out a string of important plans such as raising charter capital, making a debut on the stock market, as well as sharply increasing revenue and profit, all approved by the company’s shareholders.

The company plans to scale up its charter capital from the current VND539 billion ($23.43 million) to VND3.089 trillion ($134.3 million) through issuing 255 million stocks to existing shareholders at the face value of VND10,000 (43.48 US cents) apiece.

The statement notes that shareholders can contribute capital in the form of cash or assets and as the issuance targets existing shareholders, it is not subject to transfer restrictions.

The “proceeds would serve financial investments into up-and-coming businesses with buoyant revenue and profit growth perspectives.”

Also at the company’s 2020 AGM, the shareholders greenlit the statement on authorising the company’s Board of Management to decide on investment and asset sale ventures with value exceeding 35 per cent of the company’s total asset value.

This is claimed to be a necessary legal step to enable Thaiholdings’ management to conceive big investment ventures in the future.

The shareholders also passed the 2020 business plan with 4.5-fold increase in revenue and 7.5-fold increase in after-tax profit to VND3.5 trillion ($152 million) and VND450 billion ($19.57 million) compared to 2019.

Earlier, Thaiholdings reported exceptional business outcomes in 2019 with a 6.8-fold increase in revenue to VND780.9 billion ($33.95 million) and a 5.6-fold jump in pretax-profit to VND60.23 billion ($2.6 million) compared to the previous year.

Sharp growth in the revenue and profit targets is deemed a solid buffer for the company’s plan to go on the Hanoi Stock Exchange (HNX) in the second quarter this year.

The driver of this good growth, however, was not clarified in the company’s papers, while Thaiholdings’ main business lines such as hotel and tourism and real estate management (office leasing) fetched stable performance but showed limited growth potential.

It is also remarkable that the related parties contributed a large portion of Thaiholdings’ revenue stream. For instance, they contributed 99.9 per cent to the company’s revenue in 2018, mainly coming from Vinakanto Construction Consultant Co., Ltd.

Last year, the contributions of relevant parties to the company’s revenue stream dropped, but still accounted for over 17 per cent of the total revenue with VND128 billion ($5.57 million).

One highlight in Thaiholdings’ 2020 business plan is the company’s intention to continue engaging in M&A deals and later incorporating member companies into the company’s report, which aligns with its development orientation of business expansion through financial investment and business co-operation.

Scaling up its charter capital exponentially, eyeing a sharp jump in revenue and profit right before turning into a public company, and maintaining strong growth in this year’s business targets, investors need to take a good grip on Thaiholdings before the company makes its official debut on the stock market.

VIR