HA NOI — Sai Gon Cable (CSG) may reduce its charter capital as part of a move to downsize its scope of business and focus on its main product lines, but analysts are seeing the measure as a way for the company to substantially scale back its operations and defend itself from creditors.
"Meeting earnings targets this year is hardly feasible due to the declining telecommunications cable market," CSG said. If the company fell into further difficulties with creditors, meanwhile, assets could easily be threatened."
The proposed decrease in charter capital suggested that survival was the company's top target, said independent financial expert Bui Dinh Nhu.
"I think this decision is no longer a rare case but signals a new trend of defense when the business environment throws up unpredictable risks," Nhu said.
The plan would include two steps, CSG revealed. From June 28 to July 10, it would reduce its holdings of treasury stocks by a total of VND30.6 billion (US$1.4 million), reducing capital to VND266.8 billion ($12.7 million). In the subsequent step, from June 29 to August 17, the company would require all of its shareholders to sell back 80 per cent of the shares they held at a price of VND13,000 per share, reducing the company's charter capital to VND53.4 billion ($2.5 million).
At its general shareholders meeting in April, CSG had asked shareholders to dissolve the company. While nearly 65 per cent of the shareholders agreed to the proposal, the proposal required a supermajority of least 75 per cent.
By buying back shares, the company said it would ensure fairness to all shareholders. "Furthermore, a reduction in capital would limit the downsides of outright dissolution," the company said.
Nguyen Thanh Binh, an investor in Ha Noi, also commented that this plan was preferable for both small and large shareholders. "The offer price of VND13,000 per share is quite reasonable," Binh noted. — VNS