Vietnam Electrical Equipment Corporation (Gelex, HoSE: GEX) has just bought nearly 18.6 million shares of Viglacera (HoSE: VGC), thereby increasing the total ownership of the group of investors to 50.2%. At this rate, Gelex is officially the parent company and will consolidate Viglacera’s financial statements from the second quarter.
With a corporation with a revenue of about VND 10,000 billion and a good financial index like Viglacera, the merger will bring many positive effects for Gelex.
Improve gross margins and financial ratios
Gelex’s gross profit margin ranges from 15-17% due to the expansion of operation scale and market share expansion. While Viglacera’s corresponding figure is 25%, the consolidation of financial statements will significantly improve the overall profit margin for Gelex.
The merger of Viglacera – a business with a low debt ratio also helps Gelex improve debt ratios, thereby increasing the ability to mobilize long-term capital, eventually reducing the cost of debt in the future.
The debt / total assets ratio in 2021 is expected to decrease to 0.35 times, equivalent to the period in 2018. In addition, if excluding about 4,500 billion VND of loan for investment in wind power projects and Song Da water 2, this ratio is only 0.28 times, which is a low debt ratio compared to large-scale listed companies.
Similar to the debt / equity ratio this year is expected to decrease to 1.15 times. If excluding the debt of wind power and Song Da Water, phase 2, about 4,500 billion dong, the coefficient will be 0.91 times. At the same time, Gelex’s ability to pay interest (EBITDA / interest expense) will also increase from 2.85 times in 2020 to an expected 3.34 times in 2021.
Also according to the enterprise’s calculations, net revenue after merging this year is expected to increase 59% to more than 28,500 billion VND. Profit before tax is expected to increase by 156% and especially the EPS will double that of 2020.
Large investment in industrial zones
The consolidation also provides the long-term growth engine for Gelex. Viglacera is a large and reputable enterprise in the industrial real estate and construction materials industry – two industries expected to benefit from the economic recovery after Covid-19.
The parties plan to jointly develop 10 new industrial parks with a total scale of 2,000-3,000 hectares, in order to realize the goal of having 20 industrial parks by 2025.
The general orientation is to expand 1.5 times -2 times the leasing area in the next 3-5 years, invest in special-use industrial parks near ports, invest in social housing development, utilities and infrastructure around the industrial park.
Gelex leaders have said that they will coordinate with Viglacera towards the goal of becoming the largest developer of industrial parks in Vietnam. Gelex is implementing legal procedures to expand the 100-hectare project in Tay Ninh to 600 hectares, purchased the 800-hectare Long Son industrial park in Ba Ria – Vung Tau. Particularly, Viglacera owns 12 industrial parks in the North with a total land fund of more than 5,000 hectares and has just been approved as an investor of Thuan Thanh Industrial Park of nearly 250 hectares.
The merger is expected to create great resonance value for the two corporations, most notably the strategy of developing industrial parks and associated utilities, affordable real estate development, and social housing that Viglacera has a wealth of experience and prestige in this field, and opens up opportunities to mobilize capital at optimal costs for the next investment plans of Gelex.
Source: ndh.vn – Translated by fintel.vn