Once upon a time… nostalgia of first stocks

BT6 - Unsuccessful acquisitions and haphazard restructuring

SGI

The present fate of Beton 6 Corporation (BT6)is extremely tragic, even though it was among the first 10 stocks listed on the stock market in Vietnam.

BT6 factory.

BT6 factory.

Currently, the stock of BT6 has limited trading and the price is barely hovering around VND 1,000 per share. This is the result of unsuccessful acquisitions and haphazard restructuring efforts in the last few years.

Bizarre decision

BT6 officially listed shares on HOSE on 18 April 2002, with reference price of VND 23,500/share. The golden age of BT6 was the year 2014, when its stock price increased to nearly VND 80,000/share, mainly because of extremely good business results at that time. However, by the end of 2015, BT6 suddenly announced that they had to delist to restructure production and business activities.

The delisting announcement by BT6 at the 2015 annual shareholders meeting surprised all the shareholders, because this company had been doing very effective business since it was set up.

On 6 March 2017, BT6 listed again on UPCoM with a reference price of VND 9,000/share. However, the recovery after delisting did not happen as per expectations and since then BT6 has been constantly falling and trading at VND 1,400/share. Not only did the company touch bottom, but BT6 was also continuously fined by the SSC, while HNX blacklisted the company for  information disclosure violations, and the stock was suspended from trading.

HNX also announced the decision to put 32.9 million BT6 shares into restricted trading from 7-10 October 2019 (trading on Friday only). The reason was because BT6 did not fix the cause of why the stocks were suspended from transactions as per Notice 1171/TB-SGDCKHN.

Enticing large corporations

Precursor of BT6 is Chau Thoi precast site, established in 1958 by the RMK Group from the US. BT6 main business is producing and installing precast concrete components; producing building materials; and repair of machines and mechanical tools.

In the field of concrete production, BT6 has the advantage of super-weight reinforced concrete array such as Super T beams. BT6 also joined in many large projects in the Southeast and the Mekong Delta, such as the Hai Van Tunnel, Phu My Bridge, Can Tho Bridge, Rach Mieu Bridge, and the Ho Chi Minh City-Trung Luong Highway.

BT6 owns a 27ha factory with capacity of up to 15,000 m3 of concrete components/month in Di An (Binh Duong) and Concrete Factory 6 in Long Hau (Long An), with an area of 7 ha and capacity of 7,000 m3 concrete components/month.

With this strength and the early listed shares, BT6 shareholder structure often had the presence of many domestic and international organizations, such as AM Fraser Securities, MayBank Kim Eng Securities, Golden Trinity Assets, Commerzbank (South East Asia), Mutual Fund Elite, Transport Engineering Corporation 6, Mascon Co., Ltd., HB Cement and Infrastructure Investment Co., HB Investment Construction JSC, and Tan Viet Investment and Development Limited Company.

However, the fate of BT6 was decided by a group of shareholders from the Kusto Group and Binh Thien An, which was represented by Mr. Trinh Thanh Huy. Huy is known as one of the founding shareholders of the Masan Group (MSN) from Russia, along with Mr. Nguyen Dang Quang and Mr. Ho Hung Anh.

In 2006, Huy participated in establishing Binh Thien An, an investor of the Diamond Island project in District 2 in Ho Chi Minh City, and the Kusto Group, which invested in many listed companies such as Coteccons Construction Joint Stock Company (CTD), and Gemadept Corporation (GMD).

Decamping when situation turns hot

One of Huy's decisions at BT6 was to cancel stock listing to restructure production and business activities, which was approved at the annual AGM of 2005. Despite opposition from smaller shareholders, but with an overwhelming holding ratio of the Binh Thien An/Kusto group (79% shares), the delisting report was approved.

Explaining to the shareholders about their decision, the Board of Directors of BT6 said that the purpose of delisting was to restructure the business, improve business efficiency, and focus on business development. The Board of BT6 even presented a plan to raise large capital until 2016.

In addition to BT6, Mr. Trinh Thanh Huy also acquired Descon Industrial Construction Joint Stock Company (DCC) after buying a 56.2% stake in it. Soon, DCC also fell into tragic situations when its shares were delisted and the company had to apply for bankruptcy.
Accordingly, BT6 would issue 40 million shares at a price not lower than the par value for existing shareholders or strategic investors. At the same time, BT6 planned to issue 4 million common bonds, or convertible bonds into shares with par value of VND 100,000. Each issuance was expected to bring VND 400 billion. At the same time, BT6 also borrowed VND 400 billion in medium and long-term loans, bringing the total amount of deposits in the 2014-2016 period to VND 1,200 billion. All this money would be used for working capital, procurement of machinery and equipment, and expansion of production facilities.

Contrary to expectations, the results obtained after the restructuring plan were long slumps in business performance of BT6 in the following years. According to the 2016 financial report, although revenue reached VND 955 bn, profit of BT6 was only VND 4.3 bn (VND 145 bn in 2015). In 2017, the revenue suddenly dropped to VND 520 bn (down by 46%) and profit was negative at VND 139.3 bn. Moreover, in 2018, BT6 continued to report a loss of nearly VND 323 bn, while revenue dropped to VND 134 bn. The financial situation was alarming when BT6 faced VND 394 bn worth of bad debts.

The reason for the loss, as explained by the Board of Directors of BT6, was due to the negative construction market, many projects being delayed or canceled, and a decrease in the number of orders. In particular, banks simultaneously reduced the credit limit, making BT6 unable to pay off creditors and suppliers. After contributing to pushing BT6 into distress, in the second half of 2018, Mr. Huy decided to flee by registering to sell most of BT6 CP, reducing the holding rate from approximately 14% to just 1%.

(To be continued)

Translated by Francis

Kim Giang

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