Admirable Small Businesses in 2012

In 2012, while large-scale corporations in Vietnam struggled with difficulties and challenges arising from negative macro indicators, not a few small companies with limited registered capital did much better. It seems that the maxim “Plus on scale” is not always true; a small-scale enterprise may shelter from the storm much better than huge and bulky ones.

 

According to statistics, smallest listed companies with highest EPS (earnings per share) are operating in different industries, so it is quite clear that their positive business achievements do not rely on industry advantages. Two of the top companies belong to the construction industry which has been hit hard in the past two years on the slump of the real estate market.

 

Among 10 listed companies with highest EPS, only Ha Giang Mineral Mechanics Joint Stock Company, (HGM) with the highest EPS of VND22,000 per share, has a registered capital of VND63 billion, while the registered capital of the other nine companies is below VND40 billion, a third of the minimum required capital for a public company.

 

With this amount of humble capital, running a business well illustrates the talent of its leadership, particularly in the current difficult context. These small companies not only got through the storm but also reaped admirable successes in 2012.

 

Notably, the gross profit margin of these companies is relatively high, averaging at 24 per cent. Thus, low prime cost helped create profit for them.

 

Tay Ninh Cable Car Tour Joint Stock Company (TCT) has a record gross profit margin of 97.5 per cent. Its annual profit growth averaged 27.4 per cent from 2007 to 2012. In 2011, the rate was 1.5 times higher than in 2010. This result was attributed to the company’s strict focus on operating its services and activities in Nui Ba. It did not borrow money for unfocused investment in other fields.

 

In fact, "not borrowing money" is not the key to the success of most enterprises. Among 10 companies with best EPS, only three had debt value lower than owner’s equity capital. On average, they had a debt to equity ratio of 2.24 times.

 

Operating on a small scale, borrowing capital to invest in business is a must. Using this leverage properly helps them increase profitability and generate marvellous EPS.

 

Retained profit is another indicator that catches the attention of investors. Companies have different ways to use their profits like investing for business expansion for future income or simply paying dividends to shareholders.

 

According to statistics, undistributed profit of these companies exceeds their registered capital as of end-2012. HGM’s undistributed profit is outstandingly 2.1 times of registered capital, totalling VND134 billion.

 

With impressive financial indicators, share prices of these companies are very high on the market. HGM is currently traded at VND97,000 per share. Shares of Yen Bai Joint Stock Forest Agricultural Products and Foodstuff Company (CAP) and Kon Tum Sugar Joint Stock Company (KTS) are now being traded at very low values, estimated at P/E of over 2 times.