IDI: Opportunity in the Tough Time

11:08:33 AM | 1/18/2022

Being one of the three largest pangasius exporters in Vietnam and a major property developer, the market price of IDI shares underperformed its peers in the fisheries sector.

In addition to aquatic processing, IDI is active in real estate.

Profit slumps on pandemic and rising shipping costs

The 2021 third-quarter financial statement of I.D.I International Development and Investment Corporation (IDI) showed its less optimistic business picture due to pandemic-caused business slowdown.

Specifically, in the third quarter of 2021, IDI's consolidated net revenue fell by 26.64% year on year to VND1,110.9 billion, with the two largest items - pangasius products and fishmeal and fish fat - sinking 31.64% and 35.5%, respectively. Animal feed was the only grower that rose by 11.87% but it was not enough to compensate for the decline of the two largest segments.

IDI General Director Le Van Chung said, in the third quarter of 2021, when the Covid-19 epidemic broke out most seriously, especially in southern provinces which had to adopt strict social distancing for a long time, IDI managed to maintain only 30-40% of capacity.

Its business was even more difficult when China, IDI's main export market, tightened regulations on imported seafood amid concerns about virus contagion via imported products.

On the other hand, optimistically, the gross profit margin of all three main businesses improved to 8.97% in the third quarter of 2021, 1.46 percentage points higher than a year earlier (the service business plummeted but its share was small). This helped the margin drop only 12.4%, less than half of the decrease in revenue.

Notably, the animal feed business rose to have the highest gross profit margin at 14%, compared to just 1.5% in the same period of 2020.

Besides the Covid-19 epidemic, IDI also faced a galloping increase in international sea freight rates, causing its shipping expenses to jump by 75.3%, thereby erasing its profit despite a considerable decrease in administrative and financial expenses from a year earlier.

As a result, IDI earned a mere pretax profit of VND15.3 billion, down 56.7% year on year. The net profit plunged 69.1% year on year to VND9.9 billion on increased corporate income tax expenses.

In the first nine months of 2021, IDI recorded an accumulated consolidated net revenue of VND4,311 billion, down 3.1% year on year, and a net profit of VND57.98 billion, down 20.2%.

At the 2021 Annual General Meeting of Shareholders, the Board of Directors of IDI put forth a targeted revenue of VND6,900 billion and a net profit of VND162 billion for the year. Hence, the prospect of reaching the target is very challenging when the company fulfilled just 62.5% of the full-year revenue target and 35.8% of the profit plan after two-thirds of the time.

Brighter prospects

IDI currently manages a nearly 30-ha Sao Mai Industrial Park, which is planned to include export fishmeal and fish fat processors, Sao Mai fish feed processors and fish cooking oil manufacturing factories. Particularly for fish processing, IDI has two factories with three processing workshops with a total capacity of 450 tons of raw fish a day and two frozen storage warehouses of thousands of tons.

According to the third-quarter financial statement, advantageously having cold storage, IDI stockpiled VND1,400 billion worth of cheap pangasius (VND17,000 - 18,000 per kilogram, which currently rises to nearly VND24,000.) In the fourth quarter of 2021, IDI's business prospects may be brighter when the epidemic is controlled, social distancing is eased, and the export market demand and prices grow strongly.

According to the Vietnam Association of Seafood Exporters and Producers (VASEP), the South American market sent a positive signal for pangasius exports from the end of 2021.

The most remarkable markets are Mexico and Brazil. From early October to mid-November 2021, the total value of pangasius exports to Brazil increased by more than 1.5 times from a year earlier to US$47.44 million. Brazil's food import demand was forecasted to surge in the last month of 2021 and the whole of 2022. Vietnam is currently a key supplier of pangasius in Brazil. The Mexican market also has a similar or even better growth for Vietnam.

IDI has a large market share there. In 2020, its export value to Mexico accounted for more than 22% of its total exports. According to General Director Chung, IDI's signed export orders will provide enough work for IDI till the end of the second quarter of 2022. For the South American market, the export pangasius price is currently approximately US$4 per kilo, nearly doubling that a year ago.

VASEP estimated that the price of Vietnamese pangasius will continue to increase in the first six months of 2022 due to a possible shortage of raw materials on a large scale.

The Covid-19 pandemic continues to create bottlenecks in the pangasius export industry in Vietnam and in the world as a whole. Therefore, companies with abundant supplies and active input sources will have a great advantage, especially in the rise in fish prices in short supply. Vietnam's November pangasius exports grew strongly again, regaining what was lost in the previous three months of social distancing.

With a 400-ha owned and associated fish farming area where farmers are provided with good seeds, feeds and biological products and have their products purchased by the company, IDI can manage its input supply for its factories.

This development will certainly bring in a higher profit margin for the company in the coming time thanks to the faster increase in output selling prices than that of input prices.

IDI's operating cash flow had a surplus of VND280.5 billion after the first nine months, reversing from negative VND633 billion in the same period of 2020. This surplus significantly fulfilled the company's investment needs while reducing its debts.

Specifically, in the first nine months of 2021, IDI's loan balance decreased by VND284 billion. Its major loans largely financed its working capital needs, mostly focused on receivables and inventories. As of September 30, 2021, the company's cash and cash equivalents reached VND520.7 billion and its bank deposits and bonds valued VND1,076 billion.

IDI's Annual Report said that the company spent more than VND400 billion to carry out site clearance for 130-ha Binh Long real estate project in Chau Phu district, An Giang province. As planned, in 2021, the company completed all legal procedures to start construction on it in early 2022 and offer its products for sale in 2022.

According to Mr. Chung, in addition to the project in An Giang, IDI is carrying out site clearance procedures for Sao Mai New Urban Area in Thoi Thuan ward, Thot Not district and Vinh Trinh commune, Vinh Thanh district, Can Tho City.

The 180-ha project has a total investment fund of nearly VND2,470 billion. In addition, the company is carrying out legal procedures for a 100-ha residential area project in Lap Vo (Dong Thap province).

IDI shares unexpectedly advanced from VND10,000 to VND25,000 before falling down after the President of the company registered to sell 12.5 million shares.

Although Mr. Le Thanh Thuan entered a put-through transaction right after the announcement at the price of VND19,000 per share, the sharp fall and rise of IDI stock fanned concerns for its stability among the investor community.

By Hong Anh, Vietnam Business Forum