Brian Jeffrey
A rising trend among publicly listed companies in Vietnam is the accumulation of large cash reserves, with some firms reporting idle funds worth billions. This raises the question: Is this a prudent financial approach or a precursor to significant acquisitions?
Recent 2024 financial disclosures indicate that numerous non-banking entities in the Vietnam stock market (VN-Index) have experienced exceptional increases in cash and short-term financial assets.
A noteworthy development is the emergence of a new “cash king.” Vingroup (VIC), under billionaire Pham Nhat Vuong’s leadership, has surpassed PetroVietnam Gas (PV GAS – GAS), which had long held the top position.
In the current year, Vingroup’s cash and liquid assets surged from 34 trillion VND (around $1.3 billion) at the end of 2023 to nearly 49 trillion VND ($1.9 billion), a remarkable increase that has pushed PV GAS down the rankings.
Additionally, Vinhomes (VHM), another property giant linked to Vuong, has seen its cash reserves double to over 32 trillion VND ($1.3 billion).
Meanwhile, Binh Son Refining and Petrochemical (BSR) retains second place with cash holdings growing by 13% to over 43 trillion VND ($1.7 billion).
Other notable companies with considerable cash reserves include:
FPT Corporation (31 trillion VND)
Hoa Phat Group (HPG) (nearly 26 trillion VND)
Mobile World Group (MWG) (24.6 trillion VND)
Airports Corporation of Vietnam (ACV) (26.5 trillion VND)
Various others like VEAM, Duc Giang Chemicals, Vinamilk, Sabeco, Masan, PNJ, BVH, among others.
Some firms have recorded significant cash balance growth, such as:
FPT (+28% YoY)
MWG (+16% YoY)
Conversely, certain companies are not increasing their cash. HPG’s reserves plummeted nearly 25% due to investments in the Dung Quat 2 project, while ACV also saw a decrease as funds were redirected to the Long Thanh International Airport development.
Strong cash reserves often indicate effective financial management and robust cash flow. However, it can also suggest that companies are:
Being cautious in times of economic unpredictability.
Setting aside funds for large investments or acquisitions.
While Vingroup, MWG, and FPT are enhancing their cash flow, HPG and ACV are utilizing funds for significant infrastructure initiatives.
For example, ACV’s cash reserves fell from 28.8 trillion VND in 2023 to 26.5 trillion VND in 2024 as it ramped up investments in the Long Thanh International Airport.
The implications of maintaining large cash reserves depend on a company’s size and strategy. While ample cash can facilitate investments, debt repayment, or navigating market volatility, excessive cash retention may hinder capital efficiency.
For instance:
Hoa Phat (HPG) utilized its strong cash reserves to endure economic challenges in 2022-2023.
Vinhomes (VHM) can quickly initiate real estate projects, even amidst market downturns.
HPG and ACV’s cash reserves guarantee stable financing for ongoing mega projects.
High cash reserves can also enhance corporate reputation, drawing in investors, partners, and creditors.
Nonetheless, stashing away too much inactive cash without a strategic plan can lead to missed high-yield investment openings.
For example, Vingroup currently maintains 42 trillion VND ($1.6 billion) in bank deposits at interest rates between 1.9% and 7.1%, generating substantial passive income.
While cash is often viewed as a safety net during uncertain periods, companies must find a balance between liquidity and investment effectiveness.
Many large corporations, such as Vingroup, HPG, and MWG, also carry significant debt. In some scenarios, bank deposits could face risks, particularly for firms impacted by the restructuring of financially struggling banks.
Additionally, some companies might inflate their cash reserves artificially by:
Increasing short-term loans before reporting deadlines.
Reclassifying short-term investments as cash equivalents.
Recording revenues prior to actual cash collection.
Engaging in asset sales followed by leasing them back.
Consequently, high cash reserves do not always imply financial health. A better indicator of a company’s liquidity is the cash-to-total-assets ratio:
High ratios: GAS, BSR, SAB, FPT, PNJ, MWG, REE.
Low ratios: VIC, VHM, NVL, MSN, VRE.
Some companies may experience declining cash reserves while still showing strong growth potential, whereas others stockpile cash to expedite their investments, like HPG, VHM, and BSR.
While cash is often dubbed “king,” its true value is in strategic application. Accumulating excessive idle funds can result in lost opportunities if not utilized for growth, innovation, or high-return projects.
