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Like many powerful companies, many small businesses pay tremendous dividends to shareholders and hand generous rewards to employees because they only focus on core businesses which usually require limited financial outlay.

 

Vietnam Dairy Products Joint Stock Company (Vinamilk) is considered a typical face on the stock market as it ended the third quarter of last year with revenue VND6,726.6 billion. Its net profit was VND1,395.4 billion in the quarter, up 31.33 per cent year on year. In its revenue structure, the domestic market played the most important role but export market also added over VND1,000 billion to its turnover in the first nine months of 2012.

 

At present, Vinamilk's equity reached VND13,776 billion, equity surplus was VND1,277 billion, and undistributed profits approximated VND5,100 billion.

 

Speaking of huge profit in 2012, Vinamilk CEO Mai Kieu Lien said, "We believe that people are the most precious property. Therefore, working for Vinamilk, you will receive an appropriate salary reflecting your ability and performance on the market. In addition, the employee stock ownership plan (ESOP) is considered a driving force not only for employees but also for shareholders to come to Vinamilk.” According to its filing to the market regulators, Vinamilk announced the record date on December 21 to issue bonus shares to its shareholders. The milk producer will issue 278,057,377 shares with the nominal value of VND2,780 billion.

 

According to corporate earnings ranking for listed companies on the Hochiminh Stock Exchange (HOSE), FPT Corporation was one of four companies with the biggest profit. In the first 11 months, the corporation raked in revenue of VND21,856 billion, and made a pre-tax profit of VND2,149 billion. The net profit of parent company was VND1,364 billion, equivalent to earnings per share (EPS) of VND5,019. Stable-growing service and software export remained FPT’s core sources of earnings. Telecom services, online services and information technology services expanded 30 per cent over the same period of 2011. Software export maintained growth of over 30 per cent.

In a meeting with investors, FPT announced growth-driven business fields where telecom investment into Southeast Asia and retailing play strategic roles.

 

PetroVietnam Gas Joint Stock Corporation (GAS, HOSE) boasted a tremendous profit of VND11,068 billion. The corporation announced to beat nearly all business targets set for 2012. Revenue was estimated at VND66,250 billion in 2012, about 20 per cent higher than the full-year plan, and profit before tax was forecast at VND11,068 billion, 72 per cent above the planned value.

 

In 2012, GAS completed its steel pipe manufacturing plant to supply pipes for oil and gas projects. On December 31, GAS paid 10 per cent interim cash dividend (VND1,000 per share) for the fiscal year 2012.

 

DHG Pharmaceutical Joint Stock Company (DHG, HOSE) also reported gigantic earnings. The firm raked in VND718 billion of revenue in the third quarter, up 25 per cent year on year, totalling VND2,039 billion in the first nine months. Net profit was VND99.6 billion in the third quarter and VND362,43 billion in the first three quarters, up 16 per cent against the same period in 2011. Cash and cash equivalents amounted at over VND600 billion, an increase of VND140 billion from the start of the year.

 

Many small companies are proving to be not inferior to big companies in terms of profitability. The Vietnam Securities Depository (VSD) made a notice that Tan Mai General Wood Joint Stock Company (TMW, UPCoM) paid a cash dividend payout ratio of 20 per cent to its shareholders on December 18, 2012 for the fiscal year. This was a very high rate when many companies were struggling to survive or stop losses. Many big companies like Vietnam Construction and Import-Export Joint Stock Corporation (Vinaconex, HNX), PetroVietnam Construction Joint Stock Corporation (PVX, HNX), and some banks planned not to pay dividends to shareholders for fiscal year 2012.

 

In the meantime, TMW share price was just VND3,800 each in December. Thus the price to earnings ratio was 52 per cent. In 2011, TMW also paid 20 per cent dividend when its share price was just VND4,500.

 

Investors were excited when Tay Ninh Cable Car Tour Joint Stock Company (TCT, HNX) announced to pay 90 per cent dividend in 2016. In 2012 and 2013, TCT will pay 70 per cent dividend. This rate will increase to 80 per cent in 2014 and 2015. Hanoi Construction Investment Joint Stock Company (HCI, UPCoM) will pay 60 per cent dividend in the fiscal year 2012. The Board of Directors of Dam Sen Water Park Corporation (DSN, HOSE) also approved the interim cash dividend payment of 30 per cent for the second tranche in 2012 (the first tranche was 6 per cent).

 

Rangdong Light Source and Vacuum Flask Joint Stock Company (RAL, HOSE) is expected to pay 30 per cent cash dividend for 2012 when its profit hit VND80 billion, exceeding its target of VND65 billion.

 

While the number of corporate bankruptcies is on the rise, small well-performing companies with high dividend payout rates are not rare.

 

Mr Nguyen Hai Binh, analyst at KPMG, said, "Through our audits, we find out that most companies with high cash dividend rates are small and medium in size and are not involved in non-core businesses like real estate or banking. And, most importantly, they use a few financial leverages like bank loans; hence, their financial expenses are very low. In the above examples, Tay Ninh Cable Car Tour Joint Stock Company (TCT), Dam Sen Water Park Corporation (DSN), Saigon Beer Transportation Joint Stock Company (SBC, HOSE), and Dinh Vu Port Investment & Development Joint Stock Company (DVP, HOSE) operate in services sector. Société De Bourbon Tay Ninh (SBT, HOSE), Gia Lai Cane Sugar Thermoelectricity Joint Stock Company (SEC, HOSE), and Ninh Hoa Sugar Joint Stock Company (NHS, HOSE) are engaged in the sugar industry. BenTre Aquaproduct Import and Export Joint Stock Company (ABT, HOSE) specialises in seafood industry, Haiha Confectionery Joint Stock Company (HHC, HNX) is involved in confectionery, CNG Viet Nam Joint Stock Company (CNG, HOSE) focuses on gas, Tan Mai General Wood Joint Stock Company (TMW) produces wooden furniture. Can Tho Sadico Joint Stock Company (SDG, HNX) and Hanoi Construction Investment Joint Stock Company (HCI) are involved in construction.

 

They are very good performers in the previous years and in the first nine months of 2012. Tay Ninh Cable Car Tour Joint Stock Company (TCT) reported earnings per share (EPS) of VND16,000. In the first three quarters of 2012, TCT earned pre-tax profit of VND62.5 billion, over VND5 billion more than the full-year plan. This was an extremely big value in relation with its registered capital of less than VND32 billion. TCT' revenue was relatively stable while financial costs were almost zero. Limited financial activities were the drive for hefty profits (20 per cent rise from a year ago). Likewise, DSN had a modest loan of VND13.6 billion on the registered capital of VND84 billion (planned to be raised to VND169 billion soon, partly from undistributed profit of nearly VND58 billion. In the near future, DSN will expand into other fields but they will be closely related to water park services.

 

Specifically, DSN plans to acquire a 30 per cent stake of a taxi project. Sugar companies like SBT, SEC, NHS and Kon Tum Sugar Joint Stock Company (KTS) also had solid steps and brought sweet fruits to shareholders in the face of economic difficulty. Although this industry is forecast to face difficulties in 2013, its development will be better than the general economy.

 

Though the aforementioned companies are small in scale, their capital use is much lower than big businesses. An economy living on small but healthy cells is much better than big companies facing bankruptcy.