Hoa Phat group is a leading industrial production group in Vietnam Starting from a company specializing in trading construction machines since August 1992, Hoa Phat, in turn, expanded into other field.
Hoa Phat group is a leading industrial production group in Vietnam Starting from a company specializing in trading construction machines since August 1992, Hoa Phat, in turn, expanded into other fields such as Furniture, steel pipes, construction steel, refrigeration, real estate, and agriculture Karma On November 15, 2007, Hoa Phat officially listed shares on the Vietnam stock market with the stock code HPG Trading name: Hoa Phat Group Joint Stock Company Stock ticker: HPG Listing exchange: HOSE Listing start date: 11/15/2007 Par value: 10,000 VND/share Number of shares outstanding: 3,313,282,659 shares Financial Activities: Despite many challenges, revenue in 2020 exceeded 6% of the plan and increased by 41% compared to 2019 The revenue scale increased 6.3 times after 10 years (since 2010) In terms of profit, the Group exceeded 50% of the year plan and increased 78% over the same period in 2019 The Group's profit after tax exceeded 50% of the plan, up 78% over the same period in 2019 when reaching VND 13,506 billion, setting the highest record ever The ratio of profit after tax to net sales in 2020 will reach 15% In the context of a difficult market, high ore prices, this profit margin shows the efficiency in cost management of the Group as well as the advantage of a closed production process from upstream Expected 2021 business goals are as follows: ● Revenue: 120,000 billion VND ● Profit after tax: VND 18,000 billion Financial decision: Hoa Phat Group (stock code: HPG) decided to vote to pay the dividend in 2020 at 40%; in which, 5% was paid in cash and 35% in shares Section A: The 2020 dividend decision is 40% (35% shares, 5% cash) Previously, Hoa Phat Group had expected to pay a dividend in 2020 at 35%, with 5% in cash and 30% in shares At the 2021 Annual General Meeting of Shareholders on April 22 in Hanoi, Hoa Phat Group decided to vote to pay the 2020 dividend at 40%; in which, 5% is paid in cash and 35% in shares Financial results in 2020, Hoa Phat group achieved revenue of 91,279 billion VND and posttax profit of 13,506 billion VND; an increase of 41% and 78% respectively compared to the previous year, also far exceeded the set plan The source of dividend payment in 2020 comes from undistributed after-tax profit, made in the second and third quarters of 2021 Shares issued from the 2020 dividend by shares will be listed the day after the implementation present Detailed implementation of dividend payment plan in 2020: The company will issue nearly 1.16 billion new shares, equivalent to nearly 11.6 trillion VND to pay a 35% stock dividend (shareholders owning 20 shares will receive additional shares) Hoa Phat's charter capital is expected to increase to VND 44,726 billion The source of stock issuance is based on undistributed after-tax profits according to the 2020 audited financial statements Enterprises pay cash dividends at the rate of 5%, each share receives 500 VND The total cash value expected to be spent by Hoa Phat is VND 1,657 billion The source of cash payment is based on the undistributed after-tax profit according to the audited financial statements of 2020 The implementation period is from May to July of 2021, after being approved by the State Securities Commission Section B: Why did Hoa Phat issue more shares to use as dividends and raise the dividend rate from 35% to 40%? What financial principles are used in this financial decision? Under current tax regulations, we see that stock dividends not increase the value or cash volume of the company Shareholders' assets remain the same, the number of shares that are increasing is adjusted down, and when selling those shares, they are taxed more However, the issue of shares to pay dividends increases the charter capital of the company and shows the commitment of shareholders to long-term activities Charter capital is almost impossible to withdraw, and undistributed profit after tax can be paid out at any time When wanting to a big project, the State and banks both require equity, which means the commitment of the investor's reciprocal capital Therefore, for a large corporation like Hoa Phat Group, if the company wants to grow, it must increase its charter capital It can be seen that large corporations like Apple or Tesla have also split shares to reduce the price per share When the number of shares increases times, the price decreases to only 1/5 which makes the stock cheaper and attracts more shareholders Currently, a share of HPG has a market price of about 56,000 VND If investors want to buy a large quantity of at least 100 units, they will need to spend about 5.6 million VND (not including transaction fees) After the stock dividend, the price per unit will decrease, and more investors can buy HPG From there we can also see the dividend distribution of Hoa Phat Group based on financial principles to make decisions such as: Value Maximization: Most investors and businesses want to have unlimited investment opportunities and bring profits beyond their hurdles Dividend policy represents the decision between distributing profits to shareholders versus reinvesting profits in the company itself So when a company makes a dividend decision, the focus is often on the goal of maximizing the value of the business, which stock owners like Currently, the number of HPG shares outstanding is 3.31 billion units Under the old plan, Hoa Phat will need to spend about VND 1,655 billion in cash and approximately billion new shares to pay dividends However, under the new plan, Hoa Phat will need to issue about 1.16 billion shares of HPG, which is nearly 170 million shares more than expected Therefore, after issuing shares, Hoa Phat's charter capital is expected to increase to over 44,725 billion VND Besides, when the stock split will cause the stock price to decrease, many investors will choose to invest in HPG shares Tax Consideration: Personal income tax is often taxed according to a progressive tax schedule or there is a difference in tax rates between dividends and capital gains, so many companies base on that difference to determine the dividend payment Cash dividends and stock dividends are both forms of using the after-tax profit expressed in the form of cash/shares that the company currently pays According to previous regulations, investors who sell shares only have to pay a tax rate of 0.1% of the transaction value But according to the new tax regulations applied from December 2020, when selling shares like dividends, investors will be taxed income at the rate of 5% of the transaction value For shares purchased by investors on the market, not received as dividends or bonus shares, the sale tax is still 0.1% as before With cash: How much money investors receive per share, the price will be adjusted down exactly Suppose an Investor holds 100 shares at the price of 10,000 VND/share, the total asset value is million VND When adjusting income tax, the share price will be adjusted down to the price of the dividend (1,000 VND/dividend) ie 1,000 VND as a dividend, the remaining 9,000 VND/share With stocks: As the number of shares increases, the share price decreases, the total value of the investor's assets remains the same For example, when the company pays a stock dividend of 50%, i.e the number of shares after dividing is equal to 1.5 times the number of old shares, the new price will be 1.5 times slower than the old price In the case of Hoa Phat's 40% dividend, if the investor has 1,000 HPG shares, there will be a total of 1,400 shares after the division Return and Risk Trade-off: When making a financial decision, it is necessary to consider the extent of certain risks Investors and businesses all want to make a profit from an investment decision, but often receive less or can accept no return at all However, they are willing to take risks in the hope of achieving something else worthy Hoa Phat Group agrees and accepts that the issue of shares to pay dividends will not increase the amount of money of the company and besides, the share distribution will also cause the share price to decrease Shareholders' assets cannot be increased even if the company is profitable and of course, shares sold will be taxed more heavily when increasing the number of shares to pay dividends from 30% to 35% However, the company still accepted the decision because it increased the charter capital of the company, gained more shareholders in long-term activities, and attracted new investors Section C: Alternative financing decisions: The 2020 dividend decision is 40% (25% stock, 15% cash) Issuing too many shares to pay dividends will cause the rising shares to fall in price, causing the price of each share to be diluted so that the investor's assets will remain the same increase not decrease However, with the new tax regulations issued and effective in December 2020, investors will be taxed more personal income Although this stock dividend can help businesses increase charter capital However, in essence, equity and total assets not change, and above all, there is no new arising cash flow into the business The cash dividend payment reduces the amount of money of the company, but it creates real income for shareholders and shows the abundant cash flow of the business This is also a safe method for shareholders and investors Therefore, instead of paying too many shares for dividends, it is possible to consider dividing the payment into cash, which can create reliability and peace of mind for shareholders References: Phương Thảo (2021), “Hòa Phát (HPG) nâng mức trả cổ tức năm 2020 lên 40%”, Available from: https://kinhtechungkhoan.vn/hoa-phat-hpg-nang-muc-tra-co-tuc-nam-2020-len-4092295.html Tường Như (2021), “HPG: Hòa Phát phát hành tỷ cổ phiếu để trả cổ tức, thay CEO”, Available from: https://www.bsc.com.vn/tin-tuc/tin-chi-tiet/783952 Đức Quyền (2021), “Hòa Phát dự kiến trả cổ tức 35%, mục tiêu lợi nhuận tăng 33%”, Available from: https://vietnambiz.vn/hoa-phat-du-kien-tra-co-tuc-35-muc-tieu-loi-nhuantang-33-20210325171226214.htm Tập đồn Hịa Phát báo cáo thường niên 2020 Tối ưu hệ sinh thái, Available from: https://file.hoaphat.com.vn/hoaphat-com-vn/2021/04/bctn-2020-online.pdf Công bố thông tin cổng thông tin điện tử ủy ban chứng khốn nhà nước, Availble from: https://file.hoaphat.com.vn/hoaphat-com-vn/2021/04/2021042602-hpg-cbtt-nqhdqtthong-qua-phuong-an-chi-tiet-tra-co-tuc-nam-2020.pdf Cơng bố thơng tin thay đổi lượng cổ phiếu có quyền biểu quyết, Available from: https://static2.vietstock.vn/vietstock/2021/6/7/20210607_20210607%20-%20HPG%20%20%20Cong%20bo%20thong%20tin%20thay%20doi%20luong%20co%20phieu%20co %20quyen%20bieu%20quyet.pdf ... revenue of 91,279 billion VND and posttax profit of 13,506 billion VND; an increase of 41% and 78% respectively compared to the previous year, also far exceeded the set plan The source of dividend... distributing profits to shareholders versus reinvesting profits in the company itself So when a company makes a dividend decision, the focus is often on the goal of maximizing the value of the business,... billion The source of cash payment is based on the undistributed after-tax profit according to the audited financial statements of 2020 The implementation period is from May to July of 2021, after