Group Report

Financial Analysis
Hoa Binh Construction (HBC)
Group 1 – CF4
Lecturer: Dr. Tu Thi Kim Thoa & Dr. Vo Hong Duc

Presentation link: https://www.youtube.com/watch?v=SfAXH16VNPY

Calculation sheet link:
https://docs.google.com/spreadsheets/d/1rH03jDnyd5SsVLbzVbzlLQsrs6gjpplYF0sfaUwfVco/edit?usp=sharing

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 TABLE OF CONTENT
I. Introduction 1
II. Financial Analysis 2
2.1 Balance Sheet 2
2.1.1. Competitor Comparison 2-3
2.2 Analysis of profit/loss 4-5
2.2.1. Competitor Comparison 6
III. Ratio Analysis 9
3.1 Liquidity Ratios 9
3.1.1. Current ratio 9
3.1.2. Quick ratio 10
3.1.3. Cash ratio 10-11
4.1 Efficiency Ratios 11
4.1.1. Inventory turnover ratio 11
4.1.2. Receivable turnover ratio 11-12
4.1.3. Total assets turnover 12
4.1.4. Fixed assets turnover 12
5.1 Long-term Solvency Ratio 13
5.1.1. Total debt ratio 13

5.1.2. Debt-equity ratio 14

14-15
5.1.3. Equity multipliers
15
5.1.4. Times interest earned ratio
15
5.1.5. Cash coverage ratio
16
6.1 Profitability Ratio
16
6.1.1. Profit margin ratio
16
6.1.2. Return on Assets (ROA)
17
6.1.3. Return on Equity (ROE)
18
IV. Conclusion 19
V. Reference list 20
VI. Appendix

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 I. Introduction
The full name of the company is Hoa Binh Construction Group Joint Stock Company. This firm was established
in 1987 under the name Hoa Binh Construction Office, and on December 1, 2000, it changed its name to Hoa Binh
Construction and Real Estate Joint Stock Company. Finally, on its 30th anniversary, the firm formally changed its name
to Hoa Binh Construction Group Joint Stock Company in 2017. Currently, this company is located in Pax Sky building,
123 Nguyen Dinh Chieu, Ward 6, District 3, Ho Chi Minh city, and its internet address is https://hbcg.vn/. The firm is
operating in the construction industry, providing customers with services related to general contractions and design. In
the third quarter of 2021, Hoa Binh surpassed Coteccons to become the largest contractor in Vietnam with a market
capitalization of up to 5,902 billion VND. BDO was Hoa Binh's first audit firm in 2010. However, the company has
had long-term cooperation with Ernst & Young since 2011. The Ho Chi Minh City Stock Exchange (HOSE) listed and
traded Hoa Binh shares under stock exchange code HBC in 2006. This is the first construction company in the South to
list on the Vietnamese stock exchange.
Based on the Hoa Binh organization and operation Charter, the number of members on the Board of Directors
ranges from five to eleven. The total number of independent members on the Board of Directors must account for at
least one-third of the total number of board members. Currently, the firm is managed by an eight-person Board of
Directors, including Mr. Le Viet Hai, Chairman of the Board of Directors, Mr. Le Viet Hieu, CEO, and Mr. Le Quoc
Duy, Deputy CEO.
Organizations and people who own shares in a joint-stock corporation are entitled to earnings and may participate
in managing the business. Mr. Le Viet Hai is the current top shareholder of HBC, owning 16.05% of the company's
stock, or 38,913,741 shares. Hyundai Elevator Co., Ltd., Korea Investment Management Co., Ltd., and KIM Vietnam
Growth Equity Fund came in second, third, and fourth, with ratios of 10.31%, 4.87%, and 4.51%, respectively. These
are the four largest stockholders of HBC.
Hoa Binh has ten subsidiaries in the real estate and production-service industries. The following is a list of the firm's
four majority-owned subsidiaries, together with information on their ownership rate and authorized capital.

Name Ownership rate Authorized capital

(%) (VND)

Hoa Binh House Joint Stock Company 94% 126,900,000,000

MATEC Construction Machinery One Member Joint Stock Company 100% 100,000,000,000

Hoa Binh Design Consulting Co., Ltd (HBA) 100% 7,946,000,000

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Hoa Binh Paint Company Limited (HBP) 100% 2,000,000,000

II. Financial Analysis

2.1. Balance Sheet

Hoa Binh construction group joint stock company

BALANCE SHEET
2018, 2019 and 2020

2018 2019 2020

Total Current Assets 13,522,627,868,006 14,422,884,191,144 13,608,268,570,855

Total Non-current Assets 2,377,875,221,206 2,298,412,717,468 1,943,981,370

Total Current Liabilities 12,313,166,533,374 12,043,995,711,928 10,747,646,462,610

Total Non-current Liabilities 664,509,006,514 717,537,473,325 656,578,892,084

Total Stock Equity 2,922,827,549,324 3,959,763,723,359 4,148,024,586,677

The given balance sheet table illustrates the figure of HBC in terms of 3 separate categories: current and non-
current assets, current and non-current liabilities, as well as the stock of equity over three years 2018, 2019, and 2020.

Overall, the consequences of the Covid 19 pandemic caused significant changes in the whole figure of HBC in
the balance sheet of 2020. This year witnessed a significant downward trend in the total assets compared with the
previous year, which fell by 18.6%. The figure remarkably decreased after a year. The long-term investments were
almost only 0.08% (2 billion VND) of approximately 2,300 billion of that of 2019 at the end of 2020. It is because the
high level of financial leverage negatively affected this construction firm in the situation of debt recovery activity slowly
during the pandemic (Vietstock, 2020).On the other hand, the total liabilities and equity of stockholders had a different
trend in the same year, which sharply dropped by 19% and climbed up by 4.8%, respectively. Even though the total
assets dramatically collapsed, positive trends can be seen in the other categories, which means HBC effectively
controlled its debt and maintained the value of stock equity in 2020.

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 In 2019, HBC reached the highest number in the total assets at 16,721 billion VND (mainly in the short-term
investment) among three years, which increased by 5% compared to that of 2018. Besides, the total liabilities figure
had a gradual decrease by 1.7%, while that of long-term debts accounted for the greatest one for three years with over
717 billion VND. This is due to the financial burden that many customers of HBC do not pay on the schedule committed
in construction contracts. Furthermore, the litigation between HBC and FLC has forced this firm to have a huge debt at
the end of 2019 (Chi, 2021). In terms of stockholder's equity, there was a considerable rise of more than 35% in 2018-
2019. This indicates the trust of foreign investors in HBC's long-term prospects.

Regarding the general view of HBC in 2018, this is a challenging year for HBC in the payment of debts, which
recorded the most outstanding amount of total liabilities of nearly 13,000 billion VND for three years. Still, HBC had
higher financial leverage since its total liabilities exceeded its whole equity. Despite a reduction in net profit due to
fierce competition in the construction market at the beginning of 2018, HBC was steady in its overall assets at 15,900
billion VND. As shown from the given balance sheet, HBC had increased significantly in the proportion of shareholder's
equity throughout the years, which is a positive sign for investors in the future.

2.1.1. Competitor Comparison

Coteccons Construction Joint Stock Company (CTD), established in 2004, is one of the leading construction units
in Vietnam with a series of large projects in the country with the role of the general contractor, design and construction,
E&C, EPC for civil and industrial projects: high-rise residential projects, large-scale projects of commerce, education,
hotels and resorts, industrial plants. Besides being the largest private construction enterprise in Vietnam, Coteccons was
ranked 56th in the Top 500 Largest Enterprises in Vietnam in 2020, which was organized by VNR500.

Current Asset

The first chart illustrates the current assets of HBC from

2018 to 2020 compared to CTD; both firms had different
trends from each other. The current assets trend of HBC had
a slight increase, from 85,05% to 87,50% throughout three
years. This could be explained by the fact that the inventory
rate of HBC has increased rapidly by 35.72% from 2018 to
2020. Meanwhile, CTD recorded a decrease from 91,09%
to 90,89% during the same period; however, it was still
higher than HBC by the end of 2020.

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Non-Current Asset

Yet, the growth trend of HBC and CTD in the non-

current asset category contrasted to the current asset
category just noted above. In which the percentage of HBC
decreased gradually, the non-current asset of HBC
dropped from 14,95% to 12,50%. At the same time, CTD
recorded a slight increase in growth from 2018 to 2020. In
particular, HBC was still higher compared to CTD;
instead, it rose from 8,91% to 9,11%. So, it seems that
HBC is currently working its way to reduce its non-current
by possessing and its non-current asset decline is mainly
due to a significant decline in intangible assets as it reduced by 86,52%

Current Liabilities

In terms of current liability, the percentage of CTD

remained higher than HBC throughout the period, although
it had a minor reduction in 2019 by 0,15% and then rose
back to 99,90% in 2020. In three years, the proportion of
HBC current liabilities declined by 0,64%, from 94,88% to
94,24%. In conclusion, CTD's current liabilities,
accounting for approximately 100%, will put more pressure
on the firm's financial structure. At the same time, HBC stills may be spared some of its efforts and resources to its
activities as the current liability, which requires short-term payment, is accounted for only 95%. HBC's current liability
is lower than CTD's because they still have a long-term debt to pay.

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Non-Current Liabilities

There is a clear difference in the long-term liabilities

category of the two companies HBC and CTD. HBC
recorded a rise in non-liability from 5,12% to 5,76%, while
the percentage of CTD stayed at a minor of 0.10%. Unlike
HBC, which borrowed long-term debt, CTD's non-current
liabilities are minimal. They have a large gap with HBC
because CTD has not borrowed any long-term debt and its
non-current liability mainly comes from long-term
provisions.

Owner’s Equity

Both firms have had their percentage of owner

equity rise progressively throughout the period. Between
2018 and 2020, the proportion of HBC grew moderately
from 18,38% to 26,67%. At the end of 2020, the owner
equity rate of CTD recorded double that of HBC, with
59,32% and 26,67%, respectively. HBC's equity growth
mainly comes from the increase in share issuance, while
CTD still maintains a high proportion thanks to the
investment and development fund.

2.2. Analysis of profit/loss

Hoa Binh Construction Group (HBC)
INCOME STATEMENT
2018, 2019 and 2020

VND 2018 2019 2020

Total Revenue 18,299,333,668,495 18,609,736,913,753 11,224,652,702,542

COGS -16,612,292,699,871 -17,363,849,322,168 -10,488,433,463,113

Total Expenses -17,253,322,420,033 -17,930,647,265,157 -10,977,028,146,653

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Any non-operating gains and losses; -242,041,921,536 -139,330,086,219 -121,764,722,650

Earning per common share 2,875 1,717 340

As we can see from the income statement, the company's revenue slightly increased in 2019 from 2018, but it fell
dramatically in 2020 to 60% from the previous year. As a result, COGS directly related to total revenue increased lightly
in 2019 and dropped significantly in 2020 like the total revenue. However, during 2019, it seemed that COGS increased
more than what it was supposed to at 4.52% compared to the expected 1.7% like in revenue. The reason may be the
unexpected increase in material price without the appropriate adjustment in price left the COGS increased significantly
compared to its revenue.
The total expenses are the sum of COGS and other expenses incurred during the year. Because the company kept
its other expenses at a constant rate and COGS took the major proportion in total expenses, the COGS pattern played a
vital role in shaping the total expenses pattern. Therefore, the notable increase in COGS also made total expenses
increase moderately before both figures plummeted in 2020.
On the other hand, at first glance, the company is having trouble with non-operating activities as non-operating
gains were negative for the three years. The significant losses were due to the huge amount of interest expense while
interest income can not offset the cost. The interest expense number was constant for three years from the income
statement. Therefore, other income and interest income are the major players determining the non-operating losses or
gains. Due to the increase in other income and interest income, the company managed to reduce the losses by 40% from
figures in 2018 and 12% in 2019.
With the last figure, earning per common share pattern was different from other variable patterns considered until
now. Even though HBG's total revenue slightly increased in 2019, the earnings per common share lost up to 40% from
its previous number. In 2020, things were getting worse as the earning per share reduced dramatically from 1,717 to
only 340 (at a loss of 80%). The reason is that it is due to a significant amount of shares outstanding issued in HBC
during 2019 at 25,000,000 shares, while the pandemic affects the EPS in 2020 (Co phieu 68, n.d.).

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 2.2.1. Competitor Comparison
Revenue:

Overview, Hoa Binh Construction has lower

revenue compared with Coteccons during the period.
The most obvious inference from the chart is that the
gap between the two companies is getting smaller as
time progresses. HBG was improving slightly in
2019 while CTD fell miserably in the same period
before both companies suffered heavy losses in
revenue during 2020. The slight increase or
significant decrease in revenue during this period
reflected the construction market in the covid-19
pandemic where both companies could not attract any potential contracts, which resulted in an unchanged or decrease
in revenue. Specifically, CTD was in the middle of reconstruction of its structure. Therefore, it is understandable that
CTD's revenue dropped significantly during 2018-2020.
COGS

As said earlier, the COGS movement was reflected in the direction of total revenue. Therefore, as total revenue
increases or decreases, COGS will act in the same manner. There is an increase in COGS proportionate to the total
revenue rate from 2018 to 2020 in both companies. This may be explained by the fluctuation in material price that led
to an increase in COGS in these two companies. Furthermore, one of the most significant points here is that Hoa Binh

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Construction has a lower COGS over total revenue rate than CTD from 2018 to 2020. Thus, HBG was maybe more
efficient in utilizing its material and related working cost than CTD.

Total expenses

As explained above, the move of total expenses is also directly affected by the move of COGS and total revenue.
The pattern and extent of total revenue determine the shape and size of the total expenses, while COGS increased the
proportion of total expenditure to total revenue. It is intriguing that although HBC had a lower COGS proportion to
revenue, its total expenses proportion to total revenue was higher than CTD's numbers. Thus, the reason may lie in the
operating cost. It appears that although revenue decreased significantly in 2020, the selling and administrative expenses
in HBC just reduced slightly. As a result, HBC recorded its negative earnings in 2020 due to the inappropriate structure
cost. In conclusion, although having a smaller percentage of COGS in total revenue than CTD's figure, HBC's total
expenses percentage in revenue was higher than CTD's amount due to improper expenses of selling and administrative
expenses. Thus, HBC must be cautious in handling its costs.

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Non-operating gains or losses
Regarding non-operating income, HBC had a steady
growth from 2018 to 2020, while CTD decreased
significantly. HBC grew by 42.44% in 2019 and 12.61%
in 2020. Coteccons, on the other hand, declined by
33.576% and 14.41% within the same period. In particular,
in 2019, both companies experienced major changes.
While HBC gained from non-operating cost increased
from -242,041,921,536 VND to -139,330,086,219 VND,
CTD fell sharply from 447,561,020,947 VND to
297,287,683,241 VND. This can be explained by the sharp
increase by 586.41% in HBC net other income from
18,020,352,445 VND in 2018 to 123,693,937,042 VND in
2019 before declining to 85,736,215,661VND in 2020, whereas CTD continues to decrease in this period. Thus,
although HBC was doing better regarding non-operating gains, It was still lacking behind CTD in this aspect.

Earnings per common share

Earnings per share perform the function of the profitability

indicator of a firm; it reflects how much money a business
makes per share and can be used to measure the enterprise
value. In general, the earnings per share of CTD was higher
than that of HBC even though the proportion of both
companies was gradually decreasing from 2018 to 2020.
However, Coteccons's indices were constantly greater than
Hoa Binh's, with the highest distinction in 2020, when
Coteccons's proportion was 12.24 times higher than Hoa
Binh's. It is apparent that in 2020, Hoa Binh suffered a
significant reduction as earnings per share plummeted by
80.20% from 1,717 to 340, whilst Coteccons drop remained consistent between 2019 and 2020, with a decrease of 51.76
percent and 52.98 percent, respectively. The Covid-19 epidemic is one of the factors influencing company dividend
cuts. The pandemic hampered debt collection while the corporations still required a certain amount of money to sustain
manufacturing and business, impacting cash flow (Mai Phuong, 2020).

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 III. Ratio Analysis
3.1. Liquidity Ratio
3.1.1. Current ratio

The current ratio would show how well the corporation

pays its debt to creditors. In this chart, the current ratio of
HBC was just above one, which means they still have the
ability to pay debt; as long as they made assets, most of
their assets would pay for their liabilities. Although they
still can repay, its high fixed asset ratio shows that HBC has
difficulty paying off its debt. This ratio has slightly
increased its ability to pay debt from 1,098 to 1,266.

Compared to CTD, they had a higher current ratio than HBC, so their debt payment ability was more favorable than
HBC, which recorded a double number in 2020, 2,24 compared to 1,27.

3.1.2. Quick ratio

Similar to the current ratio, HBC's quick ratio is still

weaker than CTD. Quick ratio shows a company's short-
term liquidity and measures its ability to meet its short-term
obligations with the most liquid assets. In 2018, the quick
ratio HBC was 0.95, which was below one, representing
the stagnation of capital in cash. And in the next two years,
HBC's quick ratio increased slightly from 0.94 to 1.03,
which shows that HBC has done a good job in maintaining
liquidity at approximately 1. Besides that, the quick ratio
of CTD remained higher than HBC throughout three years, from 1.57 to 1.98. However, this index is too high than
normal. Recording in 2020 was approximately equal to 2. This was not good because too much cash capital would lead
to low working capital turnover, resulting in decreased efficiency in capital use. After all, HBC has better short-term
liquidity than CTD.

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 3.1.3. Cash ratio

There is a different trend from the current ratio and the

quick ratio above with the cash ratio. The cash ratio shows
a company's liquidity, namely the ratio of its total cash and
cash equivalents to its current liabilities. During 2018 and
2019, HBC recorded a higher cash ratio than CTD, from
0,02 to 0,05. Meanwhile, the ratio of CTD fell
insignificantly from 0.017 to 0.015. HBC cash ratio peaked
at 0.05 in 2019, which was four times higher than CTD.
However, CTD had surpassed HBC when it recorded a cash
ratio at 0.04 in 2020, while HBC has dropped to 0.02.
HBC's cash ratio peaked in 2019 compared to the general average in 3 years at 0.02, which can be explained by the fact
that in 2019 HBC did not invest much when the short-term investment dropped sharply by 17%. from 2018 to 2019. In
2020, CTD surpassed HBC because of better debt settlement when CTD short-term debt plummeted by 25%, a sharper
decrease than HBC's 11% decrease.

4.1 Efficiency Ratios

4.1.1. Inventory turnover ratio

Inventory turnover ratio is described as a financial metric

that reflects the percentage of times a company's inventory
is purchased and restored in a certain period. Looking at
the given figure, although HBC had a slight increase by
0.07% in the inventory turnover ratio from 2018 to 2019, it
cannot be an offset against the significant drop by over a
half of the previous amount at the end of 2020. This is a
pessimistic tendency of HBC in inventory management as
the firm has faced the destructive impacts of the Covid 19
pandemic during the year 2020.

In terms of its opponent – Coteccons, a negative trend can be witnessed in its inventory turnover ratio during three
respective years, which hit bottom at -18.52 in 2018. Although data of CTD in the Inventory turnover ratio is still in
negative numbers, it revealed a gradual upward trend throughout the years. This indicates that CTD made all its efforts
to revive the sales as well as inventory stock during the period. Generally speaking, the highlighted contrast of both

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companies in Inventory Turnover ratio indicates how effectively they manage their inventories over the period 2018-
2020.

4.1.2. Receivable turnover ratio

The receivable turnover ratio is a measurement of how

rapidly a firm collects credit-based sales. The ratio also
determines how frequently a firm's receivables are
converted to cash over time. As can be seen from the chart,
HBC outnumbered CTD almost two times in the receivable
turnover ratio over time. Notwithstanding, although HBC
presented a slight drop in the period of 2018-2019, the ratio
significantly climbed up by over 50% at the end of 2020,
revealing that this construction corporation did efficiently
in the receivable collection and had a high number of
reliable customers that pay their debts on time.

Coteccons seems to not have high receivable turnover ratios as its competitor; however, this company had a ceiling
tendency in this figure throughout the years. To be more specific, there was a moderate change in the amount of CTD’s
receivable turnover from 2018-2019. After a year, this firm's number of accounts turnover ratio experienced a
considerable improvement by 0.16%. Both corporations generally show an uplifting trend in the receivable turnover
ratio over time, yet, the greater the receivable turnover ratio a firm has, the safer investment.

4.1.3. Total assets turnover

The total asset turnover ratio illustrates how effectively a

company's assets are used to generate income by
comparing the value of its sales or revenues to the value of
its assets. The chart reveals that both firms' total assets
turnover has a descending trend from 2018 to 2020. CTD
keeps the ratio higher than HBS, although it also decreases
over time. The Coteccons ratios are approximately 1.4
times higher than the HBC indexes. The asset turnover
ratio of Hoa Binh went below 1 in 2020, which is a negative sign for the firm since it signifies that total assets cannot
produce enough income at the end of the year. Sales are the most influential component in this ratio. According to the

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statistics, assets declined marginally, while revenues for both enterprises fell by roughly 40%. Covid-19 has had a
considerable influence on the construction business in 2020, with more than 30% of company projects were postponed
and delayed, resulting in a higher drop in sales than previous years (Construction+, 2020).

4.1.4. Fixed assets turnover

The performance of a company to generate net

revenue from its fixed asset investments, meaning
property, plant, and equipment, is measured in fixed
asset turnover ratio by comparing sales to fixed
assets. The higher the fixed asset turnover ratio of a
corporation, the more likely it is to generate revenue
through the effective use of fixed asset investments.
It is explicitly observed that both corporations saw a continuous reduction during a three-year period from 2018 to 2020.
The fixed asset turnover ratio of Coteccons was around two times greater than Hoa Binh's, namely 2.9, 2.44, and 2.49
times, respectively. The preceding figures show how efficiently Coteccons compares to Hoa Binh in generating money
for the organization by utilizing the fixed assets.

5.1 Long-term Solvency Ratio

5.1.1. Total debt ratio
The total debt ratio quantifies a company's leverage or the
proportion of a company's assets that are funded by debt. In
both firms, this ratio has been declining during the last three
years. The total debt ratio of Hoa Binh is roughly 1.5 times
that of Coteccons in 2018 and 2019, precisely 1.54 times in
2018 and 1.58 times in 2019; however, this disparity widens
to 1.7 times in 2020. This shift can be explained by the
decline in the total debt ratio of Coteccons, which fell by
14.58% from 0.48 to 0.41 in 2020. Both firms have a ratio
smaller than one, indicating that the majority of the company's assets are funded by equity. When interest rates abruptly
rise, Hoa Binh has a more significant likelihood of default than Coteccons.

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 5.1.2. Debt-equity ratio
The debt-equity ratio is a financial leverage metric that
is computed by dividing the company's total liabilities
by the shareholder's equity. The debt-equity ratio of
both companies had a downward tendency during the
three years period. However, this ratio of Hoa Binh is
consistently 3.5 times greater than Coteccons,
particularly four times in 2018, 3.5 times in 2019, and
3.9 times in 2020. Hoa Binh fell by 27.48% in 2019,
from 4.44 to 4.44, while Coteccons declined
dramatically in 2020, from 0.91 to 0.69. Overall, Hoa
Binh's stock is riskier for shareholders than Coteccons'
since the greater this ratio, the riskier the firm's stock is.
5.1.3. Equity multipliers
As can be seen from the chart, HBC possessed a
higher equity multiplier than CTD ones. Although both
companies had nearly the same number in total assets, the
big differences in total equity between CTD and HBC
eventually led to the wide gap in equity multiplier between
the two companies. CTD's equity multiplier is lower than
HBC because the company is strongly financed by equity,
while HBC preferred more on the debt aspects. Because the
total assets of both companies remained the same or with
slight fluctuation, the changes in equity multiplier largely
contributed to total equity. Thus, the decrease in equity multiplier in HBC is due to the moderate increase in total equity
in this period, especially in 2019. With Ctd, due to no significant change in total equity, its equity multiplier remained
stable from 2018 to 2020. Different finance structures in each company will be more transparent in these two following
ratios.

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 5.1.4. Times interest earned ratio

Year 2018 2019 2020

Times interest earned ratio (HBC) 5.51 3.86 2.32
Times interest earned ratio (CTD) 7,146.02 112,133.67 2,007.54

Times interest earned ratio is an indicator to identify whether the earnings before interest and taxes (EBIT) allow
the company to cover its interest cost. With the latest figure, it is still appropriate to assume that HBC can cover that
cost without any problems. However, due to the unsuccessful 2020 business year and new debt issued in 2019, HBC's
EBIT fell while the interest remained constant during the year, which left the company a huge burden to carry. As a
result, the time interest earned ratio has been steadily decreasing in 3 years. This is an alert signal for HBC and every
company that prefers using debt to leverage that if the income falls terribly while the interest expenses remain constant
during some unexpected outcome, the company is likely near the verge of bankruptcy. Thus, companies must take
precautionary steps and possess some reserved resources that can pay off the interest in the short-term in some
unforeseen circumstances.
On the other hand, CTD possessed an admirable number that the figures even reached their peak in 2019. The
most obvious reason is that the company has hardly resolved to use debt to finance its operation. The significant increase
in time interest earned ratio during 2019 was because the company resorted some of the debt and left the interest
expenses at the lowest number compared to 2018 and 2020. However, on the other hand, in 2020, CTD's time interest
earned ratio is the lowest in the period. The reason is that during 2020, CTD was issuing more debt and incurred more
interest expenses.
5.1.5. Cash coverage ratio
Year 2018 2019 2020

Cash coverage ratio (HBC) 7.59 6.25 5.16

Cash coverage ratio (CTD) 8,710.11 161,259.15 3,236.32

The cash coverage ratio is the time interest earned ratio but does include depreciation and amortization into EBIT.
Due to the increase in EBIT from depreciation and amortization, the same pattern was observed in both companies, with
figures higher than the time interest earned ratio.
With HBC, the number was decreasing during the period; however, the decrease amount is less than the time interest
ratio. Thus, with depreciation and amortization included in the equation, HBC is more likely to pay off its short-term

19
obligation. With CTD, it seems that the cash coverage ratio is not really different from the time interest earned ratio.
Therefore, the amount of depreciation and amortization in CTD is lower than compared with HBC.
6.1 Profitability Ratio
6.1.1. Profit margin ratio
Profit margin is defined as the proportion of sales that
has been converted into profit, and it is used to
determine how well a company or corporation is
doing financially. In general, the profit margin of
both companies was on a three-year declining trend.
CTD has the greatest decline in 2019 at 43.48%, from
5.29% to 2.99%. However, in 2020, HBC's profit
margin fell 2.84 times as compared to the same
period in CTD, from 2.18% to 0.75%. The reason for
this issue is a rise in the cost of goods sold in both
firms, although CTD has a lower cost of goods sold
than HBC. Large amounts of interest expenses and unsuitable operating costs left HBC with a low-profit margin
compared to CTD.
Suppose both firms maintain the same decrease in the future. In that case, this is a negative signal since if this ratio is
closer to zero, it implies that the company is having difficulty controlling expenses or did not generate good sales. Profit
margin ratios are also essential to investors. Therefore raising these ratios is a priority for both organizations.
6.1.2. Return on Assets (ROA)

Return on assets (ROA) is defined as a

measure of the efficiency that a firm uses
its assets in terms of profitability. In
general, both corporations have had the
same downward trend in the amount of
ROA throughout the years. As can be seen
from the chart, CTD has the highest figure
of ROA at 8.98%, which is twofold that of
HBC at the beginning of the period.
Afterward, 2019 witnessed noticeable
changes of the firms in the percentage of
ROA, especially in the figure of CTD when it dropped by more than half of the previous one. Meanwhile, HBC had a

20
slight decline in the proportion of ROA in the period of 2018-2019. The figure then dramatically reduced by almost
80% of 2019 (from 2.43% to 0.54%). Overall, the lower percentage of ROA of HBC compared with CTD revealed that
the company perhaps had over-invested in assets that led to a failure in generating revenue growth. This showed a "red
flag" for HBC that the firm will possibly be in financial jeopardy in the future.

6.1.3. Return on Equity (ROE)

Return of Equity (ROE) represents the profitability of

the business by measuring the rate of return on the
initial investment. The higher the ROE, the more
efficient the company's capital is. However, both firms
showed a negative trend when HBC and CTD sank
dramatically from 2018 to 2020. The ROE rate of HBC
remained higher than CTD in 2018 with 21,22%
compared to 18,07%. For the next two years, HBC's
rate dropped tremendously by nearly 19%, to only
2,02% in 2020, even lower than its rival, which was
3,98%. This is an alarming sign for both companies; when letting this ratio drop like that, it is necessary to have specific
strategies and actions to pull this ratio up again.

IV. Conclusion

In conclusion, on the balance sheet, it is clear to understand that CTD possessed more resources and power than
HBC and that CTD's value was still regarded higher than HBC. On the other hand, about business activities illustrated
on three-year income statements, it is easy to judge that HBC was doing better than CTD. It can be said that HBC did
work effectively in controlling its assets, reducing the liabilities, and maintaining the value of stock equity even when
the company has faced some financial problems with FLC and the negative effects of the Covid 19 pandemic during
the period. However, cost control in HBC must be managed with strict requirements. One of the standout differences
between the two companies is that they are leveraged differently. HBC preferred debt to finance its operation, while
CTD likely used its own equity. With different leverage, it is clear that some compared ratios are not really reliable or
valid. Lastly, as we have known that if taxes are present and there is a sufficient amount of debt in a levered company,
a levered company will be better than an unlevered one. Therefore, with its equity leverage, CTD will have more
potential to grow than HBC.

21
 V. References

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HBCG. (2019). Hoa Binh Construction Group Joint Stock Company - Consolidated financial statements 2018.
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Mai Phương. (2020). Doanh nghiệp hoãn trả cổ tức do dịch Covid-19. Retrieved from https://thanhnien.vn/doanh-
nghiep-hoan-tra-co-tuc-do-dich-covid-19-post952331.html

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dựng. Retrieved from Vietstock: Góc nhìn đầu tư 2020: Ngành xây dựng

Chi, M. (2021, March 13). Tranh chấp FLC và Xây dựng Hòa Bình: Bất ngờ lớn trên sàn chứng khoán! Retrieved from:
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 VI. Appendix

FORMULA

Current ratio Current assets/ Current liabilities

Quick ratio (Current assets - Inventory)/ Current liabilities

Cash ratio Cash/ Current liabilities

Inventory turnover COGS/ Inventory

Receivable turnover Account receivables/ Sales

Total assets turnover Sales/ Total assets

Fixed assets turnover Sales/ Fixed assets

Total debt ratio (Total asset - Total equity)/Total asset

Debt-equity ratio Total equity/Total liabilities

Equity multiplier Total asset/Total liabilities

Time interest earned ratio EBIT/ Interest expenses (CTD: Finance expenses)

Cash coverage ratio EBITDA/ Interest expenses (CTD: Finance expenses)

Profit margin Net income/Sales

Return on assets (ROA) Net income/Total assets

Return on equity (ROE) Net income/Total equity

24