topic financial analysis write up report to evaluate a company financial position and performance

Recently, due to the negative impacts of the COVID-19 pandemic, the real estate market has been heavily affected, business activities of businesses have encountered many difficulties, an

Fundamentals of Corporate Finance (FIN202)

Lecturer: Hoang Van Tuong

Topic: Financial analysis - Write up report to evaluate a company financial position and performance

L ecturer: Hoang Van Tuong

Student and code student:

Nguyen Phuong Uyen - HS171405

Do Hong Tai - HS173466

Ta Thi Hai Linh - HS180200

Nguyen Vinh Quang - HS171194

Pham Bao Ngoc - HS171346 Đinh Thị Thanh Trúc – HS163139

Class: IB1804

TABLE OF CONTENTS:

I. Introduction:

……… 3

1 Aviation Industry Overview: ……… 3

2 Vinhomes’s Overview: ……… 6

a Position: ……… 6

b Market share: ……… 7

c Primary business: ………8

d Main competitors: ……… 8

II. Evaluate the financial health of Vinhomes: ……… 8

1 Balance Sheet: ……… 9

2 Income Statement: ……….………… 12

3 Financial Ratio: ……….13

4 Dupont system:……….19

5 Cash flow:……… 20

III. Conclusion and recommendations: ……… 22

IV. References: ……….23

I Introduction 1.Aviation industry overview

According to ministry of finance, real estate is one of the markets with an important position and role in the national economy, having a direct relationship with other financial markets such as the currency market, labor market, etc Real estate investment and business activities are one of the key economic sectors, contributing to increasing budget revenue and accounting for a significant proportion of a country's gross domestic product However, the real estate market development in Vietnam today still has many limitations and obstacles, requiring improved solutions to help the market develop stably and sustainably in the coming time.

Source:VNR

Recently, due to the negative impacts of the COVID-19 pandemic, the real estate market has been heavily affected, business activities of businesses have encountered many difficulties, and a series of projects have had to temporarily suspend construction However, in 2021 and the first quarter of 2022, the real estate market still achieved certain results:

- Regarding real estate supply: In 2021, newly licensed real estate projects continue to decrease compared to 2020, causing the supply of real estate and housing, especially housing for low-income people, to remain limited In particular, for commercial housing development projects, the whole country has 252 projects with 99,958 licensed apartments (about 34% compared to 2020); There are 1,046 projects with 299,075 apartments under construction

(about 88.5% compared to 2020); There are 172 projects with 24,027 apartments completed construction (about 59.7% compared to 2020) For social housing projects, across the country there are 09 newly licensed projects with a scale of 5,763 apartments; There are 16 projects with 3,046 apartments completed construction; There are 09 projects with 2,127 apartments eligible to sell houses formed in the future according to the announcement of the Department

of Construction

From the end of 2022 until now, the real estate market has almost frozen Vietnamese real estate is witnessing a quiet period and transactions are almost stagnant Deals are scarce The real estate market is almost immobile According to market research data, from the beginning of the year until now, the demand for real estate has decreased by 34% and the number of postings has decreased by 42% compared to the same period in 2022 Real estate businesses dissolved increased by 30,4% Let's find out the current status of the real estate market in Vietnam.

According to financial statement of many big bank in Viet Nam, in the beginning of

2022, Techcombank is the bank leasing many firms in real easate industry After that is Vpbank with around 40,000 million VND.

Source: Financial statement of banking industry

According to Vndirect, in the same period, real estate is also a industry that having firm release bonds to market highest, Real estate corporate bonds accounted for 40% of the total

issued value in the first quarter of 2022, with growth of up to 73.1% and 25.2% over the same period in 2021 and the first quarter of 2022.

Source: VNDIRECT RESEARCH

Moreover, The level of financial leverage has increased significantly compared to the beginning of the year when the ratio of outstanding loans/Equity of businesses increased to 57% as of June 30, 2022 and is equivalent to period affected by the Covid epidemic.

According to statistics on 65 residential real estate businesses on 3 stock exchanges (excluding Vingroup because results from Vinhomes have been calculated), total revenue and profit after tax after the first 6 months of 2022 reached 51.22 thousand respectively billion (down 40% over the same period) and 11.65 trillion (down 50% over the same period).

This decrease is mainly due to less positive results from industry-leading enterprises such as Vinhomes (VHM) (first half NPAT decreased by 67%) and Novaland (NVL) (down 10%) It is also important to note that quarterly profits may not fully reflect the business situation of a real estate enterprise because the recognition takes place upon product handover (usually in the second half of the year).

2.Vinhomes’s overviews

Vinhomes is the largest commercial real estate developer in Vietnam Established as a subsidiary of Vingroup, the company was spun off in 2018 and a 10% stake was sold in an IPO After the first trading day, Vinhomes has become the second largest public company in Vietnam after parent company Vingroup.

Vinhomes develops real estate in 40 cities across Vietnam and owns 16,000 hectares (62

sq mi) of land in Vietnam The company is also one of the owners of the tallest building in Vietnam, Landmark 81 Vinhomes is the number 1 real estate investment, business and management company in Vietnam with scale, development speed and class service quality, leading the Vietnamese real estate market to develop sustainably and progress to reach international level.

a.Position

Vinhomes is the largest commercial real estate in Viet Nam VHM stock code was listed

on the HOSE stock exchange from May 17, 2018 Vinhomes operates mainly in the fields of investment, development and trading of residential real estate, offices and related items Arrange premises, install equipment and complete construction works Renting machinery and construction equipment, providing hotel and restaurant services, entertainment services.

As a subsidiary of Vingroup, Vinhome has many advantages in participating in implementing large real estate projects nationwide, and has close relationships with customers and partners in the business field real estate of the parent company as well as enjoy advantages from the ecosystem of Vingroup.

b.Market share

According to VCBS (Vietcombank secutities), in the half of beginning 2020, Vinhomes

has owned the market share is 22%, highest in the Vietnamese market about real estate industry The land that is owned and used by this firm is around 16.400 ha in Viet Nam, very large when compared with the second company (Novaland – 1,235 ha)

Source: CafeF

According to VCBS, the outbreak of the Covid-19 pandemic causes the real estate market to continue to face many difficulties in liquidity However, the lack of new primary supply has kept the selling price level from decreasing, even increasing compared to the beginning of the year With a leading brand position and confirmed quality standards, products brought to market from Vinhomes in not many projects still receive very positive feedback.

Specifically, 1,063 products of buildings S1.07 and S1.08 at Vinhomes Ocean Park have absorbed more than 95% after 1 month of opening for sale since May 2020 In addition, 550 villas and shophouses at Vinhomes Grand Park Manhattan opened for sale in June 2020 were almost sold out in early July 2020 Construction progress is being accelerated by the Group to compensate for interruptions due to social distancing Sales in the second half of 2020 are also

expected to be guaranteed after the new Vinhomes Wonder Park project in Dan Phuong

(about 1,100 low-rise apartments) is launched in the fourth quarter of 2020.

c Primary business

The main business of Vinhomes is operating in the field of development, transfer and operation of complex residential real estate in the middle and high-end segments Vinhomes' projects all have prime locations in key provinces and cities nationwide Some main brand

that was and are existing in our life and can be indicated like Vinhomes (Vinhomes ocean park 1,2,3), Vincom (Vincom Nguyen Chi Thanh, Vincom Tran Duy Hung, Vincom Ba Trieu, ) and

Vinpearl (Vinpearl Nha Trang, Vinpearl Phu Quoc,…) Indeed, having many successful that was

be achived by this company like :

World Records Organization awarded the title "World's largest urban area and

artificial freshwater lake with white sand" to the Vinhomes Ocean Park project

The Vietnam Record Organization awarded 2 Vietnamese records to the Vinhomes

Ocean Park Lake City project: - "The largest saltwater lake in Vietnam" with a 6.1ha

saltwater lake project - Record for "water lake" "Vietnam's largest artificial white sand spread" with the 24.5 hectare Pearl Lake project.

Vinhomes Smart City won the Best Township Development award at the Japan

International Property Award ceremony held in Tokyo (Japan).

d.Competitors

With the biggest real estate company like Vinhomes, also having many rivals that are competing directly in the market We can indicate many firms like:

Nova group: the second biggest real estate firm in Viet Nam, this firm almost operate

in middle and southside of Viet Nam

Sun group: the firm famous with many projects like Ba Na hills, Sun world,…

FLC group: the firm with the strength about apartment, golf, resort,

TTC group

Khang Dien group

Hung Thing land

Inventories 64,362,407 17.79% 28,578,815 12.40% 42,983,662 19.96%

Total current asset 196,535,229 54.32% 94,437,005 40.97% 102,312,109 47.51%

Look at the table above, we can realize that total current asset of Vinhomes

decrease from over 102 trillion VND to 94 trillion VND in 2021 but increase sharply to

over 196 trillion VND in 2022 Indeed, having many obvious changes in some small

accounts Particularly:

Cash and cash equivalent decrease sharply from over 13 trillion VND to 4 trillion

VND in 2021 and increased again to 10 trillion VND in 2022

Account receivables increase lightly from 34 trillion VND in 2020 to 37 trillion VND

in 2021 and continously increased sharply to over 96 trillion VND in 2022

Inventories of this firm decrease from over 42 trillion VND in 2020 to under 29

trillion VND in 2021 and increased again to 64 trillion VND in 2022

Current asset of Vinhomes was reach the trough in 2021 – the peak of Covid-19 In

this time, the current asset of a firm is low are very risky because the activity of firm is delayed, and they will need the asset that having high liquid to reserve During 2021,

this was a risk time with Vinhomes

About long term asset, in generally, the long term asset increased from over 113

trillion VND to over 136 trillion VND in 2021 and increased to over 165 trillion VND in

2022 In this, non-current property in progress contributed to this rising the most (32

trillion VND->45 trillion VND->50 trillion VND) In overall, after pandemic, almost

firms have to meet many difficult to develop and maintain their business, but Vinhomes still do this goods because they controled their financial very well

b.Liabilities

Short-term account payablé 25,088,744 11.76% 16,360,513 16.51% 13,912,784 11.02%

Other short-term payments 51,461,949 24.13% 31,905,317 32.19% 34,032,822 26.97%

Short-term borrowing and

finance lease liabilities 20,876,302 9.79% 19,667,987 19.84% 13,957,735 11.06%

Provision for non-current

Total liabilities 213,290,804 100% 99,109,060 100% 126,196,462 100%

In liabilities, we can see that Vinhomes always maintain the density of current debt is

larger than the density of long term debt Through 2020-2022, on average, the density of

short term debt is around 80% of total debt of this firm

About current liabilites, many accounts have increased like

Short-term prepayment by customer ( over 26 trillion VND to over 61 trillion VND – 2020-2022)

Taxes and other payables to government budger increased from over 5 trillion VND

in 2020 to over 18 trillion VND in 2022

Short-term account payables increased from over 13 trillion VND to 16 trillion VND

in 2021 and continously increased to over 25 trillion VND in 2022

Short-term loans also decreased sharply from 10 trillion VND in 2020 to 250 billion VND in 2021 but increased sharply again to over 15 trillion VND

After analysis, we can realize that almost current debt of Vinhomes had the tendency to decrease in 2021 (over 75 trillion VND) In our view, this is a action that Vinhomes tried to manage and maintain their working capital was high Because in 2021 is the peak of Covid-19, government was trigger “lock down” that make everyone can not go out and go to work and made the economic went to “freeze” So that, Vinhomes maintained their debt was low in this time is reasonable and correctly In contrast, in the next year- 2022, the curent liabilities of Vinhomes rised sharply ( 187 trillion VND) This show that the net working capital of Vinhomes is low This show that after pandemic, government allow people to work again and boost the economic again, so that make Vinhomes have motivation to invest in new projects, that make their current liabilities of them increase.

About long term debt Vinhomes is a rare firm that maintain their density of this type debt is low (around 20 % on total debt) This show that the Vinhomes is a firm that has low risk The density of Long term debt low can make this firm feel relax in finishing obligation about debt It can decrease the pressure of debt That make the DPO of Vinhomes higher than average industry

Undistributed profit after

over 33 trillion VND in 2020 to over 43 trillion VND in 2021 and the value was kept stable

in 2022 Moreover, capital surplus has increased from 295 billion VND to over 1 trillion

VND in 2021 and has been kept stable in 2022 In special, we can see that the treasury

shares has been decreased to 0 in 2021 and 2022, before that, this value of account is -5

trillion VND It show that before going to Covid-19, the capital of Vinhomes was very well, the cash flow of them was very high and that made this firm had the ability to repurchase their stock But during Covid-19, the capital were decreased, this was the time that they

use treasury stock to sell their shares to market to gain their equity.

decreased to 62 trillion VND in 2022 The density of Vinhomes ‘s income increased from

38% to 45% in 2021 and the number is 46% in 2022 Indeed, the particular number of

income is over 27 trillion VND in 2020, 38 trillion VND in 2021 and 28 trillion VND in

2022.

We can see that the component that deduct the sales of Vinhomes the most is cost of goods sold (COGS) The density of this expense in total revenue is around 50% To explain for this, we have to know that Vinhomes is a firm that has business about real estate, not like others business like produce or sevices, the density of real estate in revenue structure are very high and do not difficult to know why this component are having high rate in

sales.