GEX to sell entire stake in Đồng Nai Port JSC, no longer involved in logistics

May 19, 2020 - 10:14
The Board of Directors at Vietnam Electrical Equipment Joint Stock Corporation (Gelex or GEX) has approved the sale of their entire 20.25 per cent stake in Đồng Nai Port JSC (PDN).


An overview of Đồng Nai Port, managed by Đồng Nai Port JSC in the southern province of Đồng Nai. GEX is expected to collect VNĐ244 billion after the sale of its stake in Đồng Nai Port JSC. — Photo

HÀ NỘI — The Board of Directors at Vietnam Electrical Equipment Joint Stock Corporation (Gelex or GEX) has approved the sale of their entire 20.25 per cent stake in Đồng Nai Port JSC (PDN).

Đồng Nai Port JSC is currently the owner of the seaport in the southern province of Đồng Nai.

PDN closed Monday at VNĐ64,400 (US$2.76) per share. Temporarily calculated at this price, GEX is expected to collect VNĐ244 billion after the sale.

GEX closed Monday up 2.1 per cent to trade at VNĐ16,750 per share. It bought the stake in PDN in April last year for VNĐ247.5 billion.

Early last week, GEX also announced the divestment of its entire stake in its logistics arm Gelex Logistics Co Ltd. Expected divestment time is in the second and the third quarter.

These moves showed GEX’s definitive intention to withdraw from the logistics sector, one of the company’s key operations besides electrical equipment, energy infrastructure and real estate.

Gelex Logistics Co Ltd is directly in charge of transportation and warehousing services of GEX. Gelex Logistics has a charter capital of VNĐ1.2 trillion and is wholly-owned by GEX.

Last year, Gelex Logistics reported VNĐ1.64 trillion in net revenue, an increase of 4 per cent compared to the previous year, equivalent to 10.7 per cent of GEX’s consolidated revenue.

Gross profit reached VNĐ361 billion, up 17 per cent from 2018. However, post-tax profit decreased by 22 per cent to only VNĐ122 billion due to a decrease in financial revenue and a decrease in profit of associated companies.

According to GEX leaders, the company’s logistics segment focuses on two main areas including logistics operations (through its subsidiaries of Sotrans, Sowatco and Vietranstimex), and investment in logistics infrastructure.

However, in 2019, the operations of these subsidiaries all faced difficulties. In particular, Sotrans's revenue decreased by 68 per cent to VNĐ319 billion due to corporate restructuring. However, the company's after-tax profit still increased by 11 per cent compared to 2018, reaching VNĐ202 billion.

For Sowatco, the company recorded VNĐ346 billion in net revenue in 2019, up 38 per cent, but post-tax profit dropped by 36 per cent to VNĐ69 billion because of no longer financial income.

Vietranstimex recorded drops in both revenue and profit by more than 20 per cent compared to the previous year. Although the company successfully signed many contracts for large projects last year, its operation still faced difficulties due to fierce competition from transport companies in the same sector.

GEX's leaders also acknowledged that companies involved in logistics bear direct risks caused by several specific characteristics related to the value chain in the industry.

A professional logistics provider must be capable of integrating a series of import and export freight forwarding services into a continuous chain to ensure goods are shipped from manufacturers to consumers without interruptions.

However, it is hard for companies to do that in Vietnamese, they said, adding that the infrastructure for logistics services remained incomplete.

Due to the specific nature of the industry, service fees are often charged in foreign currencies, leaving companies facing the risk of losses due to exchange rate fluctuations, directly affecting their business results, they said.

GEX is also investing heavily in utility infrastructure including clean water. It is the owner of Sông Đà Water Investment Joint Stock Company (SDW), the enterprise involved in the contaminated tap water scandal in Hà Nội that took place at the end of 2019.

SDW has fixed the problems and got the green light from Hà Nội People's Committee to supply water back to the people. However, the company did not collect people's water bills for a month, causing sales and profits in 2019 to drop compared to 2018. — VNS