Listed companies’ profit: either increase sharply or drop dramatically

Tuesday, May 20, 2008
The business plans for 2008 released recently by listed and public companies showed two clear tendencies: either the companies will see considerable profit increases, or sharp profit decreases.

The companies which will see profit drop compared to last year are the companies operating in the field of securities or that have financial investments. Two leading securities companies, Saigon Securities Incorporated (SSI) and Bao Viet Securities, have reduced profit goals.

SSI has the targeted profit in 2008 equal to a half of 2007’s level, while Bao Viet has set the modest profit of VND158bil, lower than 2007’s profit of VND240bil. Some other securities companies are considering lowering profit targets to adapt to the current circumstances.

A lot of companies which made financial investments have been suffering from the falls of the stock market. The Refrigerator Engineering Enterprises (REE), for example, got profit in the last three months of the year from its traditional business. However, as it had to make provisions for financial investments, its finance report said that it incurred the loss of over VND100bil.

Savico Company, which has financial and real estate investments, had to lower its targeted profit from VND120bil to VND80bil in 2008. SAM, the share name of Sacom, a cable and telecom equipment company, has fallen out of favour with investors, as the company reportedly has big investments in other companies. If considering the market prices of these shares, most of the financial investment proves to be unprofitable, including the investment in Alphanam.

While these companies which have financial investments are expected to suffer losses from the falling stock prices, manufacturing companies are expected to gain big profit this year.

According to the Analysis Division under VP Bank’s Securities Company, companies operating in fields which have seen both input and output price increases earned high profit in the first quarter of 2008. These include Phu My Fertiliser and Dong Phu Rubber.

The group of real estate shares can be divided into two sub-groups. The first one, the construction and accommodation development companies, will suffer due to the higher prices of construction materials and the frozen real estate market. Meanwhile, industrial park developers will have stable turnover and profit thanks to increased foreign investment.

Analysts say that companies making products which are input materials for other industries will have very high profit growth.

The Thu Duc Import Export Trade Company, specialising in distributing steel, got the fat profit of VND11bil in Q1, an increase of 42.9% over the fourth quarter of 2007, fulfilling 64% of 2008’s plan, thanks to the sharp steel price increases.

Similarly, DIC Trade and Investment Company had the turnover of VND170bil for the first four months of the year and pre-tax profit of VND9.5bil, up by 288% over the same period of 2007.

According to Dau tu chung khoan newspaper, specialising in stock analysis, in the first quarter of 2008 most of the companies that maintained stable profit have chartered capital of under VND50bil.

Most of the companies that issued shares to increase chartered capital in 2006 and 2007 have made financial investments, since their production has not absorbed all their mobilised capital. Some cautious companies did not inject money in stocks, but chose a safer investment way by making deposits at banks. (DTCK)