Table of Contents

I. Introduction........................................................................................................................... 3
II. Financial Statement Analysis.................................................................................................5
1. Balance Sheet..................................................................................................................... 5
2. Income Statement..............................................................................................................6
3. Sources and Uses of Cash...................................................................................................8
4. Financial ratios................................................................................................................... 9
4.1. Liquidity Ratios............................................................................................................9
4.2. Long-term solvency ratio..........................................................................................10
4.3. Asset management or turnover ratios.....................................................................11
4.4. Profitability Measures...............................................................................................14
4.5. Market Value Measures............................................................................................16
5. DuPont ratio..................................................................................................................... 17
III. CONCLUSION.................................................................................................................... 18
IV. REFERENCE....................................................................................................................... 19

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Table of table.

Table 1. Balance Sheet in 2019, 2020, 2021..............................................................................5

Table 2. Common-size Balance Sheet in 2019, 2020, 2021........................................................5
Table 3. Income Statement in 2019, 2020, 2021......................................................................6
Table 4. Common Size Income Statement in 2019, 2020, 2021................................................7
Table 5. Sources and Uses of Cash in 2019, 2020, 2021...........................................................8
Table 6. Liquidity Ratios (2019-2021).......................................................................................9
Table 7. Long-term solvency ratios (2019-2021).....................................................................10
Table 8. Inventory Ratios (2019-2021)...................................................................................11
Table 9. Receivables ratio (2019-2021)...................................................................................11
Table 10. Total asset turnover ratio (2019-2021)....................................................................12
Table 11. Total asset turnover ratio (2019-2021)....................................................................14
Table 12. Market value measures (2019-2021).......................................................................15
Table 13. DuPont analysis (2019-2021)..................................................................................16

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 I. Introduction

Coteccons has earned its leading position in the industry, winning trust from investors and
bringing values to clients. Coteccons has delivered large-scale projects that require high
technical, engineering, safety and quality management standards. The Coteccons brand has
been enhanced by our professionalism, resources and staff capabilities.

Coteccons was founded in 2004 by equitizing a member company of Fico Corporation, with the
initial charter capital of VND 15.2 billion. About more than 50 first officers and staff members
have been building and developing Coteccons into a construction corporation with the annual
revenue increase of more than 50% and over 2,000 officers and staff members who have
bachelor’s degrees and higher degrees.

In 2010, Coteccons was listed on the Vietnam Stock Exchange with the charter capital
increasing to VND 307.5 billion. In 2014, the company developed into the Coteccons Group with
Unicons. In addition, Coteccons also has a representative office in Guangzhou, China.

Main areas of business activity:

 Construct, install civil and industrial Works, urban and industrial park infrastructures,
transportation and irrigation Works.
 Architectural activities and relevant technical consultancy: Design general layout plan of
Works; Architectural design of civil and industrial Works; Indoor and outdoor design;
Design of heating, ventilation, and air conditioning for civil and industrial Works; Design ME
part of Works; Design civil – industrial construction; Design of urban infrastructure
construction.
 Construct Works of water drainage and supply, environmental treatment.
 Trading, brokerage, real estate consultancy, land use rights of owner.
 Install MEP systems.
 Specialize in export and import business, export and import right of the following items:
iron, steel, building structures, materials and installation equipment, materials – machinery
– equipment – spare parts, technological line of construction industry and production of
construction materials, construction machinery and equipment.

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Information:

- Name of the company: COTECCONS CONSTRUCTION JOINT STOCK COMPANY

- Corporate tax code: 0303443233
- Establishment license No.: 1242/QD-BXD
- Issue date: 22/07/2004.
- Business license No.: 4103002611
- Issue date: 24/8/2004
- Main business sectors: Construction and building materials industry.
- Charter capital: 792.550.000.000 VND.
- Owners’ equity: 8.248.000.000.000 VND.
- Total assets: 13.925.000.000.0000 VND.

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 II. Financial Statement Analysis
1. Balance Sheet

Table 1. Balance Sheet in 2019, 2020, 2021.

Table 2. Common-size Balance Sheet in 2019, 2020, 2021.

In 2019, total liabilities and owners’ equity was more than 16,000 billion VND. As is obvious
from the table, total debt and total equity shared nearly the same proportion with 47.78% and
52.28% respectively. In 2020, total liabilities and owners’ equity declined to around 14,000
billion VND, which could be explained that Coteccons paid debt and due debts. Both long-term
debt and current liabilities underwent sharp decreases, making the company less dependent on
external capital compared to 2019. In other words, Coteccons had better financial
independence in 2020. In 2020 and 2021, the company has policies to collect accounts
receivable, so this figure was lower compared to 2019, which was considered as a positive sign
in debt management. The financial leverage saw a decrease in 2020 because of downsizing the
scale of production, which could be understood with negative impact of COVID-19.

2021 witnessed quite the same scenario with no considerable changes. Total assets was
approximately 14,000 billion VND, in which current assets accounted for 91.57% of the total.
Throughout 3 years, it can be clearly seen that current assets occupied more than 90% of total

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assets because of enormous accounts receivable. In 2021, accounts receivables was nearly
7,500 billion VND, most were receivables from customers signing construction contracts with
Coteccons. This is regarded as a typical feature of enterprises in the construction industry.

2. Income Statement

Table 3. Income Statement in 2019, 2020, 2021.

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 Table 4. Common Size Income Statement in 2019, 2020, 2021.

In 2020, Coteccons had a modest net income of more than 334 billion VND (a sharp decrease of
52.94% compared to 2019). There are some criterias that could be explained for this situation.
First, net sale significantly dropped in 2020 (38,66% in decline) because of the negatively severe
effects of COVID-19, which brought challenges to Coteccons when the investors stopped
implementing many projects. Second, financial income also underwent a decrease from nearly
264 billion VND to 228 billion VND. In addition to the company's significant reduction in cash to
supplement working capital for construction activities, the decrease in deposit interest rates in
2020 compared to 2019 was also the reason for the decrease in profit from bank deposits.
Third, administration expenses was approximately 656 billion VND, which saw an increasing
rate of 42,90% compared to 2019. The reason was that the company spent money reviewing
and re-assessing the risk of debt collection and made provision for bad debts in the year.

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In 2021, gross profit declined 581 billion VND – a decreasing rate of 67,87%. The main reason
came from net sales went down significantly with 5480 billion VND compared to 2020. Besides,
administration expenses saw positive changes when cutting down more than 139 billion VND
(21,28% compared to 2020). It is worth noting that Coteccons' income statement over the years
shows that the interest expenses in the years always approach 0 dong, except 2021 with more
than 1 billion VND. Coteccons has a rather conservative financial policy. Because of substantial
fall in revenues, net income of Coteccons in 2021 was only 24 billion VND, which was much
lower than the two previous years. It also led to a lower earning per share (323 VND only).

3. Sources and Uses of Cash

Table 5. Sources and Uses of Cash in 2019, 2020, 2021.

In 2020, on the one hand, most of sources of cash came from the decrease in accounts
receivable with approximately 1,150 billion VND. The ratio implies that Coteccons had collected
money from customers and other account receivables. A decrease in inventory (134 billion
VND) also pointed out that the company could sell more products in this year. It is also clear
that in that period, Coteccons downsized the production capacity, which may be explained by
the emergence of the severe pandemic COVID-19. On the other hand, most of uses of cash
came from the decrease in current liabilities, which were account payables (approximately
2,000 billion VND). It means the company is paying on its prior period obligations at a faster
rate than it is purchasing new items on credit.

Looking at the the table in 2021, most of sources of cash originated from a decrease in cash
(512 billion VND). It also affected the cash ratio with a decline in 2021 from 0.24 to 0.16;
however, it did not impact negatively on the current ratio and quick ratio, which were
considered quite good. This year also witnessed a rise in inventory, which implied that
Coteccons expanded the scale of production.

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 4. Financial ratios
4.1. Liquidity Ratios

Table 6. Liquidity Ratios (2019-2021)

The current ratio measures a company’s ability to pay short-term obligations or those due
within one year. It tells investors and analysts how a company can maximize the current assets
on its balance sheet to satisfy its current debt and other payables.

As we can see clearly from the table, both current ratio and quick ratio of Coteccons saw a
slight increase in the period from 2019 to 2021. Current ratios greater than 1.00 (1.91; 2.24;
2.25) indicate that the company has the financial resources to remain solvent in the short term.
Compared to the average current ratio of the industry, the current ratios are generally
considered acceptable in 2020 and 2021.

The Quick Ratio, also known as the Acid-test or Liquidity ratio, measures the ability of a
business to pay its short-term liabilities by having assets that are readily convertible into cash.
The quick ratio is different from the current ratio, as inventory and prepaid expense accounts
are not considered in quick ratio because inventories take longer to convert into cash and
prepaid expense funds cannot be used to pay current liabilities.

This company has a liquidity ratio of 1.95 in 2021, which means that it can pay its current
liabilities 1.95 times over using its most liquid assets. A ratio above 1 indicates that a business
has enough cash or cash equivalents to cover its short-term financial obligations and sustain its
operations. The ratio is considered quite good because it is higher than the industry one (1.61).

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 4.2. Long-term solvency ratio

Table 7. Long-term solvency ratios (2019-2021)

The firm financed almost 41% of its assets with debt in 2020 and 2021. This is down from about
48% from the previous year (2019). A ratio below 1 means that a greater portion of a
company's assets was funded by equity. The lower the company’s reliance on debt for asset
formation, the less risky the company was. Compared to the industry ratio (0.71), Coteccons
had better financial health.

The debt-equity ratio saw the same downward trend from 0.92 in 2019 to 0.69 in 2020 and
2021. The reason for this decline was that compared to 2019, in 2021, total debt sharply went
down more than 2,000 billion VND while total equity only decreased 220 million VND. The debt
equity ratio was 0.69, which means that for every VND in equity, the firm had 0.69 VND in
leverage. This ratio was considered quite low, which indicated a firm less levered and closer to
being fully equity financed. This was understandable when Coteccons were struggling with its
substantial decrease in revenues.

The equity multiplier was 1.69 in 2021 after falling from 1.92 in 2019. A low equity multiplier
implies that the company has fewer debt-financed assets. That is usually seen as a positive sign
as its debt servicing costs are lower. But it could also signal that the company is unable to entice
lenders to loan it money on favorable terms, which is a problem. However, the latter case may
be not Coteccons’ case.

 Coteccons had a cautious financial policy: Whenever it needed to raise capital for
investment, Coteccons would issue individual shares instead of taking out debt. This debt
structure reflected that Coteccons always maintained a proactive financial position in its
business activities.

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 4.3. Asset management or turnover ratios
Table 8. Inventory Ratios (2019-2021)
4.3.1. Inventory Ratios

The table above illustrates the changes of inventory ratios throughout 3 years from 2019 to
2021 and compares with the industry ratio. Inventory turnover measures how efficiently a
company uses its inventory by dividing the cost of goods sold by the average inventory value
during the period.
As is seen from the 3 tables, Coteccons’s inventory turnover ratios gradually declined from
14.78 (2019) to 8.79 (2020) and 5.53 (2021). The higher the inventory turnover ratio, the more
it shows that the business sells quickly and the inventory is not stagnant in the business.
Therefore, in 2019, Coteccons had high sales and efficiently managed its inventory with ability
to consume inventory in a fast pace, only 24.70 days of a turn. However, in 2020, the ratio
decreased to 8.79, which led to a longer period of days’ sale in inventory (41.54 days). The
situation was worser when it was 5.53 in 2021, which was nearly a third of the industry ratio.
This showed a negative sign that Coteccons struggled with its business when facing up with
weak revenues. This could be explained by COVID 19 causing the shutdown of big constructions
in 2020 and other external factors.

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 4.3.2. Receivables Ratios

Table 9. Receivables ratio (2019-2021)

Table 9 compares and contrasts the changes in receivables turnover ratios of Coteccons from
2019 to 2021 and the industry ratio.

The accounts receivables turnover ratio measures the number of times a company collects its
average accounts receivable balance. It is a quantification of a company's effectiveness in
collecting outstanding balances from clients and managing its line of credit process.

In fact, for businesses in the construction industry, one of the biggest risks is receivables from
big customers. Coteccons is one of the biggest companies in this industry, having deal with big
corporations: Vin Group, Sun Group, Hoa Phat, Tan Hoang Minh… In 2019, receivables turnover
ratio was 2.70 and the number of days in receivables was 135 days. Among 3 years, 2019
witnessed the most positive ratios. The next two years 2020 and 2021, the ratios declined,
which means that days in receivables increased with the peak in 2021 (nearly 300 days). The
situation was getting worse. It could be explained that on the one hand, the period of social
distancing to prevent the COVID-19 epidemic was prolonged, leading to delayed construction
activities, large receivables, and a long debt collection time. In particular, with many projects
stalled, it will be difficult for businesses to ensure the ability to complete the schedule to
recover debts right this year. On the other hand, Coteccons needs to build a stricter mechanism
to manage receivables more efficiently.

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 4.3.3. Total Assets Turnover

Table 10. Total asset turnover ratio (2019-2021)

Total asset turnover

Total asset turnover ratio is also a key factor to assess a business, which measures the efficiency
of a company's assets in generating revenue or sales.

As is obvious from the table, total asset turnover ratio in 2019 was 1.47 times, which indicates
that every 1,000 VND can generate 1,470 VND revenue. This was regarded as a good ratio,
however, it was getting worse in 2020 and 2021 with 1.03 and 0.65 respectively. In 2021, the
ratio was even lower than the industry’s, pointing out that a Coteccons was not using its assets
efficiently and may have internal problems. The reason was excessive current assets with high
accounts receivables, which was discussed in the previous part. Constructions industry is a
typical one with high current assets so total assets turnover ratio is lower than other industries,
however, in comparison with the average ratio, Coteccons needs to take it into more
consideration.

NWC Turnover

The working capital turnover ratio is used to analyze the relationship between the money used
to fund operations and the sales generated from these operations. In a general sense, the
higher the working capital turnover, the better because it means that the company is
generating a lot of sales compared to the money it uses to fund the sales.

As we can see from the table, NWC turnover was 3.38 times in 2019, but fell to 2.05 in 2020
and 1.28 in 2021, which were considered relatively low. It could be explained with slower
business growth with substantial decrease in revenues because NWC saw no considerable
changes in 3 years.

Net fixed assets turnover

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Fixed Asset Turnover (FAT) is an efficiency ratio that indicates how well or efficiently a business
uses fixed assets to generate sales. This ratio divides net sales by net fixed assets, calculated
over an annual period.

The figure clearly shows that FAT in 2019 was 16.13 times and decreased over times with 7.74
in 2021. It would be proved with the fact that sales of Coteccons underwent significant declines
due to COVID-19, while net fixed assets still remained unchanged.

4.4. Profitability Measures

Table 11. Total asset turnover ratio (2019-2021)

The long-term profitability of a company is essential for not only the company’s survivability but
also the shareholders’ benefit. Therefore, study of how well a company utilized its resources in
generating profit and shareholder value is an important step before investing in that company.
Hence, Profitability Measure is created to give users a good understanding of how efficiently a
company uses its assets and manages its operations.

Profit Margin

The net profit margin is perhaps the most important measure of a company's overall
profitability. It is the ratio of net profits to revenues for a company or business segment.
Expressed as a percentage, the net profit margin shows how much profit is generated from
every VND in sales, after accounting for all business expenses involved in earning those
revenues.

As is illustrated in the table, profit margin of Coteccons went down in 2020 and 2021 with
2.29% and 0.27%. This was explained by the negative impact of COVID-19 and the rise in
material prices. The prices of construction materials such as steel, cement, sand, gravel… on the

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market have increased sharply amid worries over shortages of materials and rising demand for
economic recovery after COVID-19. Net income in 2021 was only 24 billion VND, which
recorded a declining ratio of 92.79% compared to 2020, while revenues in 2021 underwent a
decreasing ratio of 37.78%.
Gross Profit margin

The sharp decrease in revenue and profit in 2021 of the company mainly came from the
Group's construction revenue, which dropped sharply by VND 5,480 billion, equivalent to a
decrease of 37.64% compared to the previous year. 2020. In addition, the high cost of raw
materials and labor, affected by the Covid-19 epidemic, the Board of Management proactively
made provisions for high-risk construction sites, leading to a decrease in the Group's gross
profit margin from 5.88% down to 3.03%. However, compared to the industry ratio, gross profit
margin of Coteccons in 2021 was still 1.5 times higher.

Return on assets

The term return on assets (ROA) refers to a financial ratio that indicates how profitable a
company is in relation to its total assets. Corporate management, analysts, and investors can
use ROA to determine how efficiently a company uses its assets to generate a profit.

ROA of Coteccons underwent a sharp decline from 4.39% in 2019 to 0.17% in 2021. It pointed
out that the company used its assets inefficiently because they could not generate high profit. A
falling ROA indicates the company might have over-invested in assets that have failed to
produce revenue growth, a sign the company may be in some trouble. In case of Coteccons,
they need to take accounts receivable into considerations because it accounted for a large
proportion of total assets.

ROE would be discussed in details in DuPont analysis.

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 4.5. Market Value Measures

Table 12. Market value measures (2019-2021)

P/E ratio

The P/E ratio shows how much growth investors expect from companies they invest in. A high
ratio indicates that investors are paying much more per share than the company is earning.

P/E ratio increased substantially over the period from 2019 to 2021. In 2019, it was only 5.51
times, but, in 2021 the ratio was 338.76 times, which was 26 times as high as the industry ratio
(12.7). The reason was that EPS saw such a significant decrease from 8,859 VND in 2019 to 323
VND in 2021, with a rate of change -96%. Though EPS declined over times, the market price per
share increased fast through the period. Compared to 2019, market price per share more
doubled. This can be explained that the stock market recovered very quickly during this period,
which positively affected the investors. The very high P/E ratio in 2021 also indicated that the
investors were expecting much potential growth of the company in the future. They accepted
to buy at high price now in exchange for a high expectation in the future on business activities.
High P/E ratio is good, but when it reaches too high point means too high expectation, leading
to higher risks.
P/B ratio

Price-to-book value (P/B) is the ratio of the market value of a company's shares (share price)
over its book value of equity. P/B ratio underwent consecutive increases in the period of 3
years, however they were all lower than 1. These indicate that the market value per share was
cheaper than the book value per share. Coteccons is one of the biggest companies in
constructions industry, receiving high expections from the investors: in the upcoming years,

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there would be huge projects of Coteccons. Therefore, when P/B was lower than 1, it was so
attractive to the investors.

5. DuPont ratio

Table 13. DuPont analysis (2019-2021)

DuPont identity is a popular expression breaking ROE into three parts: operating efficiency,
asset use efficiency and financial leverage.

ROE = Net income/Total equity

ROE = Net income/Sales x Sales/Assets x Assets/ Total equity

= Profit margin x Total asset turnover x Equity multiplier

A decrease in ROE could be explained by three main criteria. First, profit margin is a measure of
the firm’s operating efficiency – how well it control costs. Coteccons’ PM declined from 2.96%
in 2019 to 0.26% in 2021 due to the negative impact of COVID-19 and the rise in material prices.
The increase in expenses such as administration and general one also contributed to the decline
of PM. Second, total assets turnover illustrates how well the company manages its assets.
Coteccons’ TATO underwent a downward trend because of excessive current assets with high
accounts receivables. Coteccons was not using its assets efficiently to generate more revenues.
The last component is equity multiplier – an indicator to measure the firm’s financial leverage.
It also fell from 1.92 to 1.69. This indicates that the company has fewer debt-financed assets.

Therefore, the decline in ROE in the period from 2019 to 2021 was attributed to three things.
The lower the ROE, the worse a company is at converting its equity financing into profits.
Compared to the industry ratio, Coteccons’ ROE was much lower with only 0.29% in 2021. It
was considered as a negative sign for the investors when they took consideration to buy shares
because every VND in equity, they only receive 0.29 VND in profit.

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 III. CONCLUSION

After analyzing Coteccons financial statements in the period from 2019 to 2020, on the one
hand, this report points out some strengths of the company. The company's asset structure
shows safety and high liquidity. The capital structure remained stable with the criterion of
financial autonomy. Coteccons has a cautious financial policy: Whenever it needs to raise
capital for investment, Coteccons would issue individual shares instead of taking out debt. This
debt structure reflects that Coteccons always maintains a proactive financial position in its
business activities. Especially, the proportion of current liabilities and equity maintained at a
safe level. The liquidity ratios are also good because Coteccons has enough cash or cash
equivalents to cover its short-term financial obligations and sustain its operations. High P/E
ratio indicates that Coteccons received high expections from the investors: in the upcoming
years, there would be huge projects of Coteccons. P/B was lower than 1, it was so attractive to
the investors.

On the other hand, there are some key weaknesses in Coteccons’ financial statement. Net sale
significantly dropped in this period because of the negatively severe effects of COVID-19, which
brought challenges to Coteccons when the investors stopped implementing many projects.
Besides, along with increases in expenses, net revenue substantially went down. Inventory
turnover is also an alarming ratio because it is much lower than the industry ratio. Moreover,
Coteccons has not diversified funding sources; Accounts receivable from customers account for
a high proportion of short-term assets. Receivables turnover ratio is also a bad indicator, which
leads to longer time of sales in receivables. The period of social distancing to prevent the
COVID-19 epidemic was prolonged, leading to delayed construction activities, large receivables,
and a long debt collection time. Most accounts receivables come from big corporations with
huge construction projects. Coteccons was not using its assets efficiently with low total asset
turnover. The reason was excessive current assets with high accounts receivables. Some
profitablility measures are not quite good when Coteccons witnessed sharp decline in revenues
because of COVID-19 and other external factors such as the rise in price of materials.

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