Developer expecting high returns from real estate and renewable energy in future.
After making intensive investments in its core areas of operation, including real estate and renewable energy, Bamboo Capital (BCG) is now expecting abnormal returns generated by recognizing parts of those projects’ revenues and profits starting from 2019.
According to the 2018 audited consolidated financial statements of the Bamboo Capital JSC (Stock code: BCG), revenue from sales of goods and services reached about $48 million - down 44 per cent compared to 2017. Gross profit also fell over the year, though not by much, but the company managed a significant increase in gross profit margin, from 11.7 per cent to approximately 21 per cent.
After deducting selling costs, administration expenses, and taxes, BCG recorded an after-tax profit of more than $474,000, of which the after-tax profit for shareholders of the parent company was negative $647,000, offset by after-tax profit for the minority’s interest of nearly $1.2 million.
BCG’s Board of Directors has clearly stated that there are two main reasons for the company’s performance slowdown in 2018. Firstly, it has divested from underperforming businesses such as Phu Thuan and 1-5 Auto in order to fully focus on the company’s key activities. And second, most real estate and renewable energy projects are capital intensive, so additional costs are incurred and have an adverse impact on the company’s profit margin.
Millions of dollars have been injected into BCG’s real estate pipeline, including Malibu Hoi An Condotels & Villas, King Crown Village, and Long An utility-scale solar farms. This brought the company’s total assets to $229.3 million by the end of 2018, increasing more than $76.3 million compared to the beginning of the year. Its assets have been structured in a favorable way, in which most are long-term investments, such as real estate investments and financial investments in joint ventures and affiliates with growth potential.
“We projected this type of result and presented it to our shareholders at the annual general meeting last year,” said Mr. Nguyen Ho Nam, Chairman of Bamboo Capital. “However, in order to recover our growth momentum, we have decided to cut down on R&D time by cooperating with reputable foreign partners such as Hanwha, Daewon, and Woomi Construction.”
BCG also forecasts that Vietnam’s real estate market will continue declining in terms of supply and the company will therefore expand its project pipeline to generate stable cash flows. Specifically, Phase 1 of Casa Marina Resort in Quy Nhon, south-central Binh Dinh province, has netted annual revenue of $388,000 with occupancy rates of up to 70 per cent on weekdays and 100 per cent on holidays.
Phase 2 will be implemented this year with an additional 160 villas being built, which should bring the resort’s revenue to $776,000. Regarding infrastructure, the Interstate 830 project in the Mekong Delta’s Long An province started commissioning in June 2018, contributing a stable and long-term source of revenue to BCG.
Having said that, BCG expects 2019 revenue will exceed $128 million and after-tax profit will reach $13.4 million. Among its four core businesses, real estate and renewable energy will play the leading role and contribute 60-90 per cent of the company’s total revenue.