FINANCIAL STATEMENT AND MANAGEMENT ANALYSIS OF VINHOMES JOINT STOCK COMPANY OVER THE PERIOD OF 2018 TO 2020

Vinhomes JSC Three-years Trend in ROA Figure 4.3: Vinhomes JSC Three-years Trend in Current Ratio Figure 4.4: Vinhomes JSC Three-years Trend in Quick Ratio Figure 4.5: Vinhomes JSC Three

FACULTY OF BUSINESS ENGLISH

-*** -FINANCIAL REPORT Major: Business English

FINANCIAL STATEMENT AND MANAGEMENT ANALYSIS OF VINHOMES JOINT STOCK COMPANY OVER THE PERIOD OF 2018 TO 2020

LIST OF FIGURES

LIST OF TABLES

INTRODUCTION 1

CHAPTER 1: GENERAL INFORMATION ABOUT VINHOMES JOINT STOCK COMPANY 2

1.1 An introduction to Vinhomes JSC 2

1.2 Shares and Shareholders information 4

1.3 Organizational structure: 6

1.4 Products and Services 8

CHAPTER 2: MARKET ANALYSIS 9

2.1 The market in general 9

2.1.1 Demand for real estate 9

2.1.2 Supply for real estate 9

2.1.3 Market growth rate 10

2.2 The industry 10

2.2.1 Strengths 10

2.2.2 Weaknesses 11

2.2.3 Opportunities 11

2.2.4 Threats 12

CHAPTER 3: CONSOLIDATED FINANCIAL STATEMENT 13

CHAPTER 4: TREND ANALYSIS AND INDUSTRY COMPARISION 14

CHAPTER 5: DEVELOPMENT STRATEGY 23

5.1 Finding new directions of profit optimization 23

5.2 Improving financial ratios 23

CONCLUSION 25

REFERENCES

APPENDIXES

Figure 1.1: Stock movement chart in 2020 of Vinhomes

Figure 1.2: Vinhomes JSC’s organizational structure

Figure 4.1: Vinhomes JSC Three-years Trend in ROE

Figure 4.2 Vinhomes JSC Three-years Trend in ROA

Figure 4.3: Vinhomes JSC Three-years Trend in Current Ratio

Figure 4.4: Vinhomes JSC Three-years Trend in Quick Ratio

Figure 4.5: Vinhomes JSC Three-years Trend in Debt to Total Asset Ratio Figure 4.6: Vinhomes JSC Three-years Trend in Debt to Total Equity Ratio Figure 4.7: Vinhomes JSC Three-years Trend in Inventory Turnover Ratio Figure 4.8: Vinhomes JSC Three-years Trend in Total Asset Turnover Ratio

LIST OF TABLES Table 4.1: Three-year Profitability Ratio Analysis for Vinhomes JSC

Table 4.2: Three-year Liquidity Ratio Analysis for Vinhomes JSC

Table 4.3: Three-year Debt Ratio Analysis for Vinhomes JSC

Table 4.4: Three-year Asset Activity Ratio Analysis for Vinhomes JSC

Real estate plays an important role in Vietnam’s economy through its spread

to other development of economic industries such as construction, manufacturing,tourism, finance & banking, construction materials, interior, and exterior furniture After

a slowdown stage (2011-2012), Vietnam’s real estate market has flourished inrecent years, with continued economic growth leading to a surge in property prices Thecountry’s real estate market proved resilient during the pandemic, with both the

industrial and residential sectors leading the pack On to Vietnam’s housing market,

which has also seen unprecedented growth in recent years While demand fromforeign investors is one of the factors pushing the market, the majority of the growthcomes from Vietnamese citizens (in any new apartment development, foreigners areonly allowed to own up to 30% of the total units) As such, the country’seconomic progress coupled with a rapidly expanding middle class is the primarydemand driver for the expanding housing market, with few signs pointing to aslowdown anytime soon

Vinhomes Joint Stock Company (Vinhomes JSC) is a dominant based company operating in the residential real estate industry The company isinvolved in the construction and management of residential, office, and commercialbuildings Its products include houses, apartments, villas, as well as offices for sale,

Vietnam-lease, and for rent Vinhomes has ranked the No 1 in Vietnam’s residential market

with a 46% market share, according to the Vinhomes JSC 1Q2019 financial report.This entire report has done based on the financial analysis of Vinhomes JSC tounderstand its financial position throughout the year 2018 to 2020 The fundamentalpurpose of this report is to gain some proficient knowledge about ratio analysisthrough which how the company is performing within the industry could beunderstood Data has been mainly collected through Vinhomes JSC’s datasource Concerning entire factors, this report is mainly supported byrecommendations, which could be helpful for stakeholders of this company

CHAPTER 1: GENERAL INFORMATION ABOUT VINHOMES JOINT STOCK COMPANY

Vinhomes is the No 1 real estate development, trading, and managementcompany in Vietnam, founded in 2002 and headquartered in Hanoi, Vietnam.Founded as a subsidiary of Vingroup, the company spun off in 2018 and 10% ofshares were sold in an IPO After the first day of trading, the company was alreadythe second-largest public company in Vietnam, behind parent company Vingroup

Vinhomes develops property in 40 cities across Vietnam and owns 16,000hectares of land in Vietnam, according to Vinhomes annual report 2020

1.1.1 History

In 2002, Vincom Joint-stock Company was established, formerly Vingroup

Joint-stock Company, the parent company of Vinhomes

In 2008, BIDV-PP Urban Joint-stock Company was established – the precursor

of Vinhomes – with an initial registered charter capital of VND 300 billion

In 2009, its name was changed to Hanoi Southern City Development

Joint-stock Company

In 2011, it became a publicly listed company and attained the Decision on

accepting registration for stock trading at the Hanoi Stock Exchange (UPCOM), withthe stock code NHN Commenced the construction of Vinhomes Times City – aluxury urban complex project (Hanoi) with more than 12,000 apartments

In 2013, Vinhomes Royal City (Hanoi) – a high-end urban complex with

more than 5,000 apartments was put into operation

In 2014, Vinhomes Riverside (Hanoi) – a 183,5-hectare luxury urban project

– was put into operation

In 2015, Vinhomes Times City was put into operation, adopting Singaporean

eco-friendly architectural style

In 2018, its name was changed to Vinhomes Joint-stock Company The

company introduced the world-class mega-city model and opened Vinhomes OceanPark and Vinhomes Smart City for sale

In 2019, it re-planned product lines into branded lines including Vinhomes

Diamond, Vinhomes Ruby, Vinhomes Sapphire, and upgraded VinCity projects intoVinhomes-branded smart projects

In 2020, the company launched the online real estate trading floor Vinhomes

Online and established Vinhomes Industrial Park Development Investment JointStock Company

1.1.2 Mission

By 2021, Vinhomes’s biggest vision is to be a world-class enterprise.Specifically, they are striving to become the No.1 real estate development andmanagement company in Vietnam, recognized for its superior scale, execution speed,and service quality, leading the market to sustainable growth

1.1.3 Vision

To meet its vision, Vinhomes has particular missions along the way It is topioneer an ideal living experience in Vietnam’s urban locations, featuringprofessionally planned residential complexes in harmony with nature, integratedfacilities and a green environment, together forming a new lifestyle for theVietnamese people Vinhomes also nurtures its communities and develops a modern,lively and gracious environment, so that its residents will enjoy an excellent quality

of life

1.1.4 Core Values

Vinhomes strives to uphold 6 core values:

CREDIBILITY: Vinhomes vigorously protects its Credibility as one would protect one’s honor The company is fully prepared to execute its plan andspares no effort in meeting its goal

INTEGRITY: As a foundation of our company, Integrity demands that we remain

in full compliance with all applicable laws and ethical standards It follows that

we must always put the interests of our customers first

CREATIVITY: Vinhomes’s management believes that Creativity is what enables the company to deliver its philosophy, which is expressed as “Dare To Think, Dare

To Do” This philosophy encourages all employees to learn new skills.

SPEED: The company considers Speed of execution and efficiency in operation

to be critical to our success Among the practices that follow our emphasis on speed are “Fast To Decide, Fast To Invest, Fast To Deploy, Fast To Sell, Fast To Change and Fast To Adapt.”

QUALITY: The place of quality in Vinhomes’s operations is expressed as

“Best in People, Best in Products and Services, Best in Quality of Life, and Best inCommitment to Society.”

COMPASSION: The company respects the interests of all its stakeholders.Employees are Vinhomes’s most important resource The company will continue

to promote harmony among the interests of all stakeholders by emphasizingfairness, integrity, unity, and strength

1.2.1 Shares information

Vinhomes Joint-stock company was officially listed on Ho Chi Minh StockExchange (HOSE) on 17 May, 2018 Vinhomes stock (VHM) is a stock in the realestate industry group with the largest market capitalization in Vietnam's stock marketand is on the VN30 list of leading stocks in terms of market capitalization andliquidity

Market capitalization on December 31, 2020, is 294,412 The number ofshares redeemed on December 31, 2020, is 60,000,000 The number of sharesoutstanding on December 31, 2020, is 3,289,513,918 The number of shares freelytransferable is 3,289,513,918 The number of shares restricted from being transferred

is 0

Figure 1.1 is the stock movement chart in 2020 of Vinhomes:

Figure 1.1: Stock movement chart in 2020 of Vinhomes

(source: Vinhomes’s annual report)

In the first quarter of 2020, Vietnam's stock market witnessed the VN-Indexcontinuously decreasing due to the heavy influence of the global Covid-19 epidemic

Thanks to the timely and effective measures of the Government, Vietnam hassucceeded in controlling the epidemic In 2020, Vietnam is one of the countries withthe lowest number of infections and deaths from Covid-19 in the world and also one

of the rare economies with positive GDP growth This is positively reflected throughthe recovery of the stock market and Vinhomes shares from the second quarteronwards

As of December 31, 2020, VHM's share price reached VND 89,500/share, up 63% and 6% respectively compared to the end of March and December 31, 2019

1.2.2 Shareholders’ information

As of 2020, ownership of insiders are listed below:

Management Board:

+ Mrs Nguyen Dieu Linh – President

+ Mrs Pham Thieu Hoa – Member of MB cum General Director

+ Mr Varun Kapur – Independent Member

+ Mr Mueen Uddeen – Independent Member

+ Mr Hoang D Quan – Independent Member

+ Mrs Ashish Jaiprakash Shastry – Member

+ Mrs Pham Thieu Hoa – General Director

+ Mrs Nguyen Thu Hang – Permanent Deputy General Director

+ Mr Douglas John Farrell – Deputy General Director Board of Directors:+ Mr Nguyen Duc Quang – Deputy General Director

+ Mr Pham Van Khuong – Deputy General Director

+ Mr Nguyen Vu Hung – Deputy General Director

+ Mrs Mai Thu Thuy – Deputy General Director

+ Mr Pham Khoi Nguyen – Head of Supervisory Board Supervisory Board:+ Mrs Doan Thi Thu Mai – Member of Supervisory Board

+ Mrs Le Thi Duyen – Member of Supervisory Board

Vinhomes considers transparency and efficiency as the guidelines for itscorporate governance model The Board of Directors is also well aware of how thesecriteria ensure benefits for shareholders and sustainable development for theCompany

Figure 1.2 shows the organizational structure in Vinhomes JSC.

Figure 1.2: Vinhomes JSC’s organizational structure.

(source: Vinhomes JSC)

The Board of Directors of the Company consists of one General Director, onePermanent Deputy General Director, and five Deputy General Directors The GeneralDirector is appointed by the Board of Directors The Deputy General Directors areappointed by the Board of Directors at the proposal of the General Director

The Supervisory Board is a functional agency independent of the Managementand the Board of Directors The Supervisory Board is elected by the General Meeting

of Shareholders, on behalf of the General Meeting of Shareholders, supervises allproduction and business activities of the Company.

The Board of Supervisors of the Company consists of three members with aterm of 5 years The current term is from 2018 to 2023

The Management Board of the Company has nine members The maximumterm of each member is five years Chairman of the Board elected by the Board ofDirectors

Other than that, there are 8 other small divisions responsible for 8 activities,which are Project Development Division, Construction Division, Sales andMarketing Division, Industrial Real Estate Division, Customer Service Division,Operations Division, Inspection, Safety, Security, and Fire Prevention Division, andAdministrative & Support Division

Vinhomes is the largest enterprise in Vietnam in the field of residential realestate development and transfer The company is currently developing and sellingmid- and high-end real estate products in Vietnam Vinhomes' projects are large-scale urban areas with synchronously developed infrastructure with a diverse system

of utilities and services, making the most of the Vinhomes ecosystem

Moreover, the company provides synchronously high-quality services in allVinhomes urban areas such as 24/7 customer service center, reception, security, etc.Real estate management services also ensure to maintain the urban area according tofive-star quality standards, protect and increase the value of customers' properties.Vinhomes owns 27 urban areas in 7 provinces and cities across the country, morethan 84,000 apartments, villas, townhouses, serving more than 262,000 residents

In addition, Vinhomes also exploits and manages a system of servicedapartments and 5-star villas under the brand name Vinhomes Serviced Residences, aswell as exploits and manages a system of high-class offices for lease in urban areas,contributing helping customers exploit Vinhomes real estate in the best way throughparticipating in the Company's investment programs with higher profitability

CHAPTER 2: MARKET ANALYSIS

2.1 The market in general

2.1.1 Demand for real estate

The real estate market has fluctuated in the three-year time period The market hashad periods of decline, crisis, freezing, and then strong recovery in which demand forreal estate also follows certain fluctuations Specifically, in the 2017-2018 period,Vietnam was experiencing economic growth leading to the high demand for bothindustrial real estates and land plots with a "fever" of lands in these years However,since the outbreak of the pandemic in Vietnam in 2019, demand for real estate hasdropped sharply in some segments, especially the resort and hotel real estate segment.Although the demand for rent in the epidemic situation has decreased, the demand forpeople's housing is still growing Moreover, according to economic experts, Vietnam isone of the countries with a relatively fast urbanization rate If people's income level isincreasing, the demand for the real estate industry will be greater

In another aspect, the real estate market still recorded bright spots from thesegment of land for home gardens, farms, and suburban resorts, coming from thewave of "leaving the city to go home" when the epidemic appeared

2.1.2 Supply for real estate

In 2018, the real estate market experienced a sudden increase in supply.According to the Vietnam Real Estate Brokers Association, the number ofapartments successfully traded in 2018 in Hanoi reached 27,595 products, anincrease of 132.8% compared to 2017 (20,776 products) The number of real estateproducts transacted was 3.3 times higher than in 2017, reaching 3,106 products

In the first six months of 2019, there was a decrease in supply and number oftransactions in the real estate market, mainly in Hanoi and Ho Chi Minh In terms ofcondotel real estate products, in the second quarter of 2019, only more than 5,000new products were introduced to the market, successful transactions were only close

to 1,400 products The reason is that the new supply is limited, the implementation ofproject procedures is slow, the condotel products currently have relatively high

prices, which also affect the transaction volume and there are not many policies tofacilitate the development of these product lines.

In 2020, the real estate market has faced a shortage of supply The mainreason is due to the limited land fund for housing development in big cities, the highfinancial cost of land, and the long time for project licensing The market alsoshowed a decrease in the supply of housing projects and products, especially in thesocial and affordable housing segments

2.1.3 Market growth rate

With its growth, in 2019, the total amount of FDI registered in Vietnamreached 38 billion USD, up 7.2% compared to 2018 The processing andmanufacturing industry has the largest amount of registered capital, accounting for

64, 6%, second is the real estate business, accounting for 10.2% In 2020, the realestate industry grew by contributed 4.42% of the country's GDP in which thehighlight is the industrial real estate segment and the residential segment - the realestate in the provinces adjacent to big cities such as Hanoi and Ho Chi Minh Theoutlook for the Vietnamese residential real estate market is steady mainly due torapid urbanization growth, new development for the construction/projects and thefuture value of real estate although the Covid-19 pandemic has had negative effects

on the growth rate of the whole economy and the real estate industry as well

2.2 The industry

To have a big picture about the real estate industry in Vietnamese, the authorsuse the SWOT (strengths, weaknesses, opportunities and threats) model to analysisthe industry:

2.2.1 Strengths

2.2.1.1 Value Multiplies Overtime

A real estate investment is an example of an asset where the value of acustomer's investment grows over time If the property is connected to a new housingsociety, a major road, or a railway line, its value increases dramatically In addition,

when the real estate industry grows, it not only benefits itself but also creates

spillover effects on the national economy

2.2.1.2 Less Risky Investment

Unlike other investments such as bonds and stocks, investors can risk losingpractically all of their money if the stock does not rise in value On the other hand,because real estate is one of the safest investments, many individuals opt to invest in

it Its value does not appear out of nowhere, and the buyer would lose everything if itdid Even if its value decreases, the owner can still use the property for other reasonssuch as rents, crops, structures, and so on Investors probably might not become

bankrupt in this circumstance, as is the case with bond and stock investments.

2.2.2 Weaknesses

2.2.2.1 High land prices

Land prices in some localities have been pushed up too high This is fasterthan the rate of economic development and urban infrastructure has created virtualprices This phenomenon led to consequences: state agencies adjusted the land tax,people demanded an increase in compensation for site clearance, leading to a decline

in urban development investment activities Virtual prices cause investors to leavethe market, depleting local economic development and the real estate market

2.2.2.2 Not Liquid Asset

While cash is a liquid asset that may be used to purchase anything fromanybody and anyplace, the real estate property isn't a liquid asset when it’s usuallyhard to sell it to make it liquid in order to make the desired purchases When it comes

to liquidating the real estate asset, the market may not always offer it at the desiredrate Therefore, in the event of an emergency, the real estate owners must sell assets

at a lesser price

2.2.3 Opportunities

2.2.3.1 Vietnamese’s high need for real estate

The Vietnamese need for residential apartments of the Vietnamese people isliterally high The first opportunity for businesses is the needs of the Vietnamese

people It is the fact that Vietnam always shows the need for housing in its cities,especially the big cities like Da Nang, Ha Noi, or Ho Chi Minh.

Besides, Vietnam's urbanization process is also taking place at a high speed.According to the Vietnamese government, the rapid increase of the urban population

in the country leads to Vietnam having to build about 100 million m2 of new housing

to meet the needs of urban residents every month

2.2.3.2 The increase in Foreign Direct Investment (FDI)

Foreign Direct Investment (FDI) inflows to the real estate sector continued toincreases sharply and substantially The attention of the state and the private sector ininvesting in new infrastructure is also expected to create momentum for the market

to develop stability According to a report from the Ministry of Planning andInvestment, the real estate business market production accounted for more than 10%

of total registered investment capital (nearly $4 billion US) This may indicate thatinvestors, especially foreign investors, are promoting long-term investment activities

in the real estate market in recent years

2.2.4 Threats

2.2.4.1 Cumbersome legal process

Legal documents related to the real estate market have not been synchronized.The legal adjustments in the real estate market, from construction investment,transactions to management, and use of real estate are completed very slowly andoverlapping Besides, there are many problems arising from self-sufficiency orinadequacies in the policy mechanism that have not been timely added This can beconsidered as one of the reasons for the delayed housing papers and directly affectedthe effectiveness of real estate projects

2.2.4.2 A shortage of capital

Real estate businesses face difficulties for real estate in accessing capital.From 1/1/2020, the bank's credit activities for real estate business in Vietnam havebeen tightened through 22/2019 / TT-NHNN, replacing Circular 36 Specifically, realestate loans will be tightened (short-term and medium-term loans will be reduced

from 45% to 40%), interest rates will continue to rise (mobilizing interest rates will

be nearly 9 %) and the risk factor for real estate loans increased from 150% to 200%.This not only affects the real estate market in Vietnam but also directly influencesreal estate investors and businesses

CHAPTER 3: CONSOLIDATED FINANCIAL STATEMENT

(Note: The purpose of this part is for readers verifying the accuracy of Vinhomes JSC’s financial statements in three years from 2018 to 2020 and making a comparison to the ratios analyzed in the next part However, in order to avoid making a lengthy report and ensure the purpose, the authors move the consolidated financial statements to the Appendix to follow.)

CHAPTER 4: TREND ANALYSIS AND INDUSTRY COMPARISION

This chapter shows a complete ratio analysis of Vinhomes JSC which

combines both trend analysis and industry comparisons It shows all the key financial

ratios for Vinhomes from 2018 to 2012, along with the industry averages for those

ratios (The industry averages are labeled IND in the table.)

The first category is profitability ratio which measures how the firm’s

returns compare with its sales, asset investments, and equity Stockholders and

managers will be the person who have a special interest in the ratio

Table 4.1 shows five ratios in profitability of Vinhomes from 2018 to 2020:

Table 4.1: Three-year Profitability Ratio Analysis for Vinhomes JSC

(unit: %)

(source: calculated by the authors)

Firstly, in 2018 and 2019, Vinhomes JSC had positive net income This gave

a positive value to the net profit margin, return on assets, and return on equity each

of these years (because net income is the numerator for each ratio)

Vinhomes JSC had a lower gross profit margin than the industry norm for that three-year time period except for 2019 It also had a higher net profit margin

than the industry norm for that three-year time period though it itself had a slight

decrease from 2019 to 2020 In terms of operating profit margin, there is a strong

growth between 2018 and 2019 but it decreases by 15.54% in 2020 On the otherhand, it's much higher than the industry norm During 2020, management through itsordinary activities produced 13.26c in profit before tax for every dollar invested inresources, compared with 13.72c in 2019 and 16.71c in 2018 The decrease in rates issignificant and results from decreased profit with an increased investment base

The return on equity (ROE) figures paints a telling story over this three-year

period From 2018 to 2020, Vinhomes JSC had a much higher return on equity thanthe average firm in its industry A business with a stable ROE at a high level can beseen as a sign that capital is being used efficiently

Figure 4.1 show the trend of return on equity in three years:

Figure 4.1: Vinhomes JSC Three-years Trend in ROE

(source: compiled by the authors)

A company's assets are made up of borrowed capital and equity Both thesesources of capital are used to finance the operations of the company The efficiency

of converting investment capital into profit is shown by Return on Assets (ROA).

The higher ROA, the better because company makes more money on less investment

Figure 4.2 shows the trend of return on assets in three years:

Figure 4.2 Vinhomes JSC Three-years Trend in ROA

(source: compiled by the authors)

Generally, Vinhomes JSC takes the large market share, as a result, the ratios(ROA, ROE) decrease, though, it has higher ratios than the average firm Therefore,company need to bring out the proper policies to improve those Table 4.2 showliquidity ratios of Vinhomes JSC in 2018-2020:

Table 4.2: Three-year Liquidity Ratio Analysis for Vinhomes JSC

(unit: %)

Next, we examine the liquidity ratios In general, the current ratio, 2.13 in

2018, has been falling each year through 2019 and 2020, when it is 1.15 and 0.99.The ratio result shows that Vinhomes has $0.99 of current assets for every dollar ofcurrent liabilities, indicating that Vinhomes could pay all its short-term debts byliquidating a current asset The industry norm for the current ratio was below thevalue of Vinhomes JSC but going on through the years, it is necessary for Vinhomes

to make a change to highlight its current ratios The higher this ratio, the greater thedebt repayment capacity of the business If this coefficient is less than 1, theenterprise may not be able to fulfill its debt repayment obligation when it is due.Figure 4.3 shows the trend of current ratio in three years:

Figure 4.3: Vinhomes JSC Three-years Trend in Current Ratio

(source: compiled by the authors)

The quick ratio stayed near the industry norm throughout this period This

means that when inventory is subtracted from total current assets, Vinhomes JSC’s

liquidity goes down This lower ratio may indicate that, in an emergency, the entitywould be unable to meet its immediate obligations Again, however, 2020’svalue (0.57 for Vinhomes versus 0.78 for the industry norm) suggests that

Figure 4.4 shows the trend of quick ratio in three years from 2018 to 2020:

Figure 4.4: Vinhomes JSC Three-years Trend in Quick Ratio

(source: compiled by the authors)

The next ratio is debt ratio – an important ratio when analyzing the financial

position of the firm to assess the relative size of a firm’s debt load and the

firm’s ability to pay off the debt with three primary ratios: the debt to total assets,

debt to equity, and times interest earned ratios Table 4.3 show debt ratios of

Vinhomes JSC in 2018-2020:

Table 4.3: Three-year Debt Ratio Analysis for Vinhomes JSC

(unit: %)

(source: calculated by the authors)

Vinhomes had a low debt load in three years The debt to total asset ratio

was consistently above 12 percent, whereas the industry norm for this ratio was 24percent in the period A low debt reduces the changes in the return on equity ratiovalues On the other hand, a low debt also implied the ability to raise capital for thecompany was limited, it seems to be difficult to collect capital for the future project.Figure 4.5 shows the trend of debt to total asset ratio in three –years:

Figure 4.5: Vinhomes JSC Three-years Trend in Debt to Total Asset Ratio

(source: compiled by the authors)

Next, we see the debt-to-equity ratio helps investors have an overview of the

financial strength and financial structure of the business Normally, if this ratio isgreater than 1, it means that the assets of the business are financed mainly by debt,otherwise, the assets of the business are financed mainly by equity

Figure 4.6 shows the trend of debt to to equity ratio from 2018 to 2020:

Figure 4.6: Vinhomes JSC Three-years Trend in Debt to Total Equity Ratio

(source: compiled by the authors)

In principle, the smaller this ratio, which means that liabilities account for asmall percentage of total assets or total capital, the less difficult the business will be

in finance The larger this coefficient, the greater the probability that the businesswill have difficulty paying debts or go bankrupt when the bank interest rates arehigh However, the use of debt also has an advantage, that is, the interest expensewill be deducted from corporate income tax Table 4.4 show asset activity ratios ofVinhomes JSC in 2018-2020:

Table 4.4: Three-year Assets Activity Ratio Analysis for Vinhomes JSC

(unit: %)

Inventories are in the group of projects with legal problems, being stoppedfrom implementation, unable to produce products, increasing the cost burden,increasing loan interest From a more positive perspective, when the investor'scapacity is reformed, the financial situation of the enterprise is improved, the legalproblems are removed along with the new government coming into operation, whichwill accelerate the speed of investment projects Figure 4.7 shows the trend ofinventory turnover ratio in three years from 2018 to 2020:

Figure 4.7: Vinhomes JSC Three-years Trend in Inventory Turnover Ratio

(source: compiled by the authors)

The inventory turnover ratio is inversely proportional to the company's

inventory The fluctuations suggest that Vinhomes did not match its inventory to its

demand for products The numbers suggest that Vinhomes’ managers should have

studied its inventory control policies to look for ways to match demand and inventorymore closely The increased inventory of real estate will become a burden for

businesses in particular and for the economy in general That’s because the low and

decreasing coefficient over the years shows that the inventory increases over theyears, leading to an increase in the risk of the business

Next, we see the trend of inventory turnover ratio in three years from 2018 to

2020 in Figure 4.8:

Figure 4.8: Vinhomes JSC Three-years Trend in Total Asset Turnover Ratio

(source: compiled by the authors)

The total asset turnover ratio was consistently just above the industry norm.

This helped the return on assets ratio during the years when net income was positive,

as described earlier Although this ratio from 2018 to 2019 was decreased by 12%, ithad a slight increase in 2020, which implied the good management of Vinhomes

In conclusion, from trend analysis and industry comparison above, we see thatVinhomes Joint Stock Company has had a great financial capacity with theinterpretation from profitability ratios, liquidity ratios, debt ratios and asset activitiesratios However, there are still ratios showing negative signals for the company’sfinancial health such as ROA, ROE, liquidity ratio and inventory turnover that need

to develop plans to improve in the next chapter

CHAPTER 5: DEVELOPMENT STRATEGY

In this chapter, the authors will make some recommendations based on theabove analyses, mainly on limited ratios at Vinhomes JSC to help the company keepits good financial position

5.1 Finding new directions of profit optimization

Vinhomes has had a great financial health in general and profitability ratio inparticular when it hold the largest market share in the real estate However, because

2020 is a particularly difficult year for the world economy in general and Vietnam'seconomy in particular due to the negative impact of the Covid-19 epidemic,Vinhomes Joint Stock Company should quickly implement new business plans toboost its profit unless the company want to be stuck in the economic recession

Firstly, Vinhomes can carry out real estate project handover and servicedapartment for rent and office for rent in Hanoi and Ho Chi Minh Some real estatesprovides apartment for resident to both support government and boost revenue in thepandemic

Besides, Vinhomes can participate in investment cooperation and businessdevelopment of real estate projects with the parent company Vingroup or itssubsidiaries to take shared profits It is a good way to keep stable growth Vinhomesalso should find a direction to diversify business activities such as secondarybusiness activities and interaction channels to reach more customer groups to shortenthe gap between buyer and seller as middlemen

In addition, the company can consider accelerating the implementation ofindustrial real estate projects – a new project of Vinhomes which has the first projectlaunched in Hai Phong to take advantage of opportunities from favorablemacroeconomic conditions and the growing trend of foreign direct investment (FDI)

in Vietnam in general and industrial production in particular

5.2 Improving financial ratios

Through the analysis in the Chapter 4, we see that though the ratios show a

positive outlook about the company’s financial health, it remains ratios that needs to

be improved in the near future to ensure financial position of the company and alsoextend credibility to investors, common stakeholders when they use it to determinethe capital investment.

The first ratio is return on equity Generally, investors prefer the companythat have steadily high ROE because it indicates that the company can do good thingswith the cash and assets it holds but Vinhomes’s trend in three-years hasdecreased In order to improve the ratio, the company should change either one oftwo part in ROE which is net income and shareholders’equity Vinhomes canraise profits by implementing new ways in the previous part while not necessarilyhaving to sell more houses, especially when the demand is low in this pandemic

Other typical way to raise ROE and also help improve the ROA and inventoryturnover ratio is to reduce inventory Vinhomes should avoid hold more inventorythan it tend to use because it need to have additional maintenance expenses whichreduce net income and make shareholders’ equity higher For ROA, inventorycounts as an asset for ROA calculations The company reduces inventory cost bymanaging the levels of inventory to reflect sales expectations Excessive inventorycan raise assets cost without producing more income

The next ratios is liquidity ratio which includes current ratio and quick ratio.Vinhome’s two ratio is low (less than 1) in 2019-2020 so it might affect to decision

of banks and other financial institutions to extend loans to the company The currentratio depends on both current assets and current liability Vinhomes should pay offcurrent liabilities as often and as early as possible to decrease the level of currentliabilities and therefore, improve the current ratio Besides, Vinhomes should listunproductive fixed assets and sell off to increase cash level The two ways also applyfor improving quick ratio as the quick ratio is quite similar to the current ratio Also,when the quick ratio relates to the inventory, Vinhomes should make a fasterconversion of inventory into debtors and cash because the quick assets would riseresulting in an improvement in the quick ratio

Thanks to professional operating and financial management and appropriatestrategies, Vinhomes has witnessed satisfying growth which can be seen in itspublished financial statements In the last 3 years, financial ratios of Vinhomes haverecorded positive figures which assured itself to have good financial health Thoughthere were ups and downs, it cannot be denied that Vinhomes has fixed the situations

so well to bring more optimistic results

In response to our financial analysis of Vinhomes in this report, somedevelopment strategies for Vinhomes are recommended, that is focusing onmaintaining stable revenue as the economy as the whole is affected by Covid 19pandemic All industries are more or less affected and real estate in Vietnam is noexception Some other possible plans for Vinhomes might be participating ininvestment cooperation and real estate project business development with the parentfirm Vingroup or its subsidiaries in order to share earnings or diversify businessactivities like secondary business activities and interaction channels in order to closethe gap between buyer and seller as middlemen In this particularly sensitivepandemic situation, one of the most vital financial management tasks is to extendcredit, which investors, lenders, and other stakeholders can use to determine andimprove their capital investment capacity With strong financial management,Vinhomes is believed to stand a high chance of overcoming this difficult socialcontext