Big guys get stuck in huge investment deals

A lot of conglomerates have tasted bitterness from their big investment deals in which they once put high hopes.
As for the Vietnam Import-Export and Construction Corporation (Vinaconex), the Cam Pha cement project is a "pang.” The corporation once injected too much money in the cement project at the time when the construction and building material sectors faced big difficulties, thus facing the serious liquidity risk in late 2011.
The liquidity problem has been settled, but many other problems still exists, and, according to expert, would be removed only when Cam Pha cement project is "uncorked.”
As for the 584 Joint Stock Company (NTB), the finance reports of recent years showed that the company has the internal accounts receivable of hundreds of billions of dong a year, commencing from 2009.
The value of the accounts receivable had reached 385 billion dong by December 31, 2009, while the total assets were 1540 billion dong, the stockholder equity 229 billion dong and chartered capital 150 billion dong. The company explained that the accounts receivable, by the nature, is the investment value in the US in accordance with the outward investment license No. 80 dated November 6, 2007, granted by the Ministry of Planning and Investment.
By the end of 2010, the value of the investment deal had increased to 539 billion dong, entered in the accounts as the accounts receivable of NTB office in the US. By that time, the chartered capital of the company had increased to 360 billion dong, the stockholder equity to 558 billion dong and total assets reached 2104.8 billion dong.
This meant that the value of the investment deal in the US accounted for nearly 97 percent of the stockholder equity of NTB and more than 25 percent of the total assets.
The value of the investment deal had climbed to 592 billion dong by the end of the 2011 fiscal year. Especially, the 2011 finance report of NTB unexpectedly showed the accounts payable to the Dai Hung Real Estate Company, worth 527 bilion dong. These were the accounts payable relating to the NTB’s investment deal in the US.
In 2009-2011, the investment deal in the US has the big value if compared with the stockholder equity. However, the reports of the company showed that the company has not got any considerable benefits from the deal over the last three years.
The 2012 semi-annual finance report showed that the assets of the company are mostly inventories, long term accounts receivable, while the company took loss and faced liquidity problem.
The Thai Hoa Group (THV) and TNG Investment and Trade Joint Stock Company (TNG) are the two typical examples of the businesses incurring loss because of the business expansion projects.
THV, which incurred heavy loss, has to sell a part of its assets to pay debts, after it used short term working capital for the business expansion plan. The short term loans, the ambitious business expansion projects, plus the high bank loan interest rates all have sunk THV, a big coffee trade corporation.
TNG still has not incurred loss, but the short term asset value is now much lower than the short term accounts payable. Like THV, the company also used short term loans for its business expansion plan.