The reinvestment of corp's profit with Amazon as example is like business DD 101, nothing new here.
From investment POV, you read the balance sheet before you decide to invest in a company, short or long: to me there is no bad companies (all start with good intents), only good companies with bad balance sheets.
I guess this is a follow up to the last post. Let's dive in a bit from what I can gather:
"Tính đến hết tháng 6/2024, Zalo tiếp tục ghi nhận 77 triệu người dùng hoạt động hàng tháng (MAU), tăng 2% so với cùng kỳ năm trước, và 1,9 tỷ tin nhắn gửi đi mỗi ngày, tăng 7% YoY. "
Zalo's growth is saturated, 2% MAU is like almost flat. This is still very impressive though as VN has over 100M population, give or take and they don't go outside Vietnam's market.
Of course, who would use Zalo while they have (better and more secure) options like Signal, WhatApp, Messenger, Telegram. In short, Zalo is not Tiktok, period. And if they charge fee to make revenue, users will flee.
Game and Zalopay are 2 other sectors they provide numbers with double digit growth, very high, so (hopefully) good for them. But the wording is pretty vague for Zalopay, I couldn't tell if that is QoQ or YoY. I'm no gamer but I'm pretty sure Zalopay is trailing Momo last time I checked, with double digit % gap
In general, not a good Investor Relation report you usually see published by companies in the West. The average folks dont have much visibility into the financial picture of the company.
With the pending investigation that rallied more than 100 law enforcement officers, I don't want to waste my time into this document, but from first glance: their debt amount is close to 85% of their total asset: 8.5K B vs 10K B (in VND). I'm sure this is a good managed company by this ratio.
I'm not shocked if later they found out VNG cooked the books or sth along the line. It happens in US too, most recent case is SMCI. Short sellers made big bucks with this ticker just a couple weeks ago.
Thanks for the detailed analysis. Could it be that Zalo has become a cash engine for the rest of the company? That is, they use Zalo to generate cash to grow other initiatives. I saw them starting many new companies lately.
One additional point regards the debt/ assets ratio (owner's equity, essentially): they have both a net negative cash flow over the past few years, with liquid assets dwindling, and the debt/assets ratio massively increasing: in 2021 Q4, total assets minus total debt was 6000K B, then 5000K B in 2022, 3000K B in 2023 and only 1700K B last quarter. In fact, last quarter there short term liabilities already exceeded their liquid (current) assets: 6600K B vs 5000K B. They are not on a good track, financial-wise
As for the topic of their books, I will just quote straight up from their F1 filing again:
> In the course of auditing our consolidated financial statements as of and for 2020, 2021 and 2022, we and our independent registered public accounting firm identified three material weaknesses in our internal control over financial reporting as of 2020, 2021 and 2022. The material weaknesses identified related to:
>> ineffectively designed and implemented formal period-end financial reporting policies, procedures and controls to address complex technical accounting matters in accordance with IFRS;
>> an insufficient number of financial reporting and accounting personnel with appropriate knowledge, skills and experience in the application of IFRS and SEC rules to prepare consolidated financial statements and related disclosures completely and accurately; and
>> insufficient controls over IT general controls for information systems that are relevant to the preparation of financial statements.
I would be very wary of saying they are on a good growing track, with negative profit due to reinvestment. The numbers seem to suggest otherwise
Oh man, this indeed sounds bad. Thanks so much for sharing with me. I have to admit that I just assumed that they were growing well, given how many companies that they opened recently.
Did you happen to know why their F1 application was withdrawn? I saw the comment from Mr Le Hong Minh that everything is ready, but just waiting for the "trade winds", which I think, to be honest, is bullshit. Something was very wrong with their books.
I think Mr Minh’s statement has a lot of truth to it, actually.
The listing company (VNG Limited, which is NOT the VNG Corp in Vietnam) owns 49% of VNG corp. Mr Minh and Mr Khai also owns an additional 13% of VNG Corp. And since the listing company wants to IPO with a dual-class share, Mr Minh and Khai + existing big share holders will still have full control of VNG limited and VNG corp.
Essentially, the IPO makes no material difference to the founders and current big owners. Everything stays the same, except they got a lot more liquidity in their networth. From this point of view, I think Mr Minh was honest with his intention: he wanted a big exit with cash, and seeing how Vinfast got comprehensively slapped on the stock market after their SPAC IPO…
I think their books are very wrong, too. But even without that factor, it was very unlikely they would attempt an IPO just to be dropped down to <100M USD evaluation.
Disclaimer: this is my opinion from public information, I really don’t know anything internally.
I think LHM probably watched too much Chamath Palihapitiya and think he could make it to NASDAQ thru SPAC or IPO. SPAC hype went to the drain post Covid, so he attempted with the F1 above.
Fun fact: This guy Chamath was literally considered 'the' SPAC king, he SPAC'ed quite many companies during Covid era, most of them not doing well after being de-SPAC'ed. But to me he is borderline scammy: e.g he touted CLOV as the next gen AI-based health care company while in reality they just selling Medicare Advantage policies in some states. But a company with Chelsea Clinton on the board should be legit, right?
The street is not stupid. A short seller launched an investigation and found out there was possible investigation by DOJ, shorted the stock to the ground. I think they later settled with DOJ.
Base on this article, look like LHM has a track record of not being honest:
TL;DR: Cụ thể, VNG đã không công bố Nghị quyết HĐQT hồi tháng 9/2022 về việc thế chấp tài sản VNG để đảm bảo nghĩa vụ nợ của CTCP Công nghệ BigV. Đây là cổ đông lớn của VNG, là bên liên quan và có người đại diện theo pháp luật là ông Lê Hồng Minh.
Basically: lấy mỡ nó rán nó in Vietnamese, aka fraud.
For the market to be irrational again. Over the past 15 years, there were period where company can get unreasonable IPO/SPAC (a lot of them even went bankrupt within a couple of years even). In the case of VNG, as the IPO has no effect on the operation of the company, it is purely about how much money the original investors/ founders can exit.
Yeah I also heard online gambling was *one* of the reasons. It sounds so strange. I wonder if they were coerced to launder illegal gambling money through their payment gateway, which is not unheard of.
Accounting profit is indeed a matter of opinion, but it is grounded in a comprehensive accounting standard system. While management has some discretion in reporting profit, their decisions are closely monitored by auditors, analysts, and short sellers. The opinion on accounting profit is far from being as arbitrary as that of a random person.
Secondly, profit tells much more insight into a business than cash does. This is why the accrual basis exists.
Lastly, cash can also be manipulated, though in more subtle ways.
The reinvestment of corp's profit with Amazon as example is like business DD 101, nothing new here.
From investment POV, you read the balance sheet before you decide to invest in a company, short or long: to me there is no bad companies (all start with good intents), only good companies with bad balance sheets.
I guess this is a follow up to the last post. Let's dive in a bit from what I can gather:
From VNG website: https://www.vng.com.vn/news/enterprise/vng-cong-bo-bao-cao-tai-chinh-6-thang-dau-nam-2024.html
"Tính đến hết tháng 6/2024, Zalo tiếp tục ghi nhận 77 triệu người dùng hoạt động hàng tháng (MAU), tăng 2% so với cùng kỳ năm trước, và 1,9 tỷ tin nhắn gửi đi mỗi ngày, tăng 7% YoY. "
Zalo's growth is saturated, 2% MAU is like almost flat. This is still very impressive though as VN has over 100M population, give or take and they don't go outside Vietnam's market.
Of course, who would use Zalo while they have (better and more secure) options like Signal, WhatApp, Messenger, Telegram. In short, Zalo is not Tiktok, period. And if they charge fee to make revenue, users will flee.
Game and Zalopay are 2 other sectors they provide numbers with double digit growth, very high, so (hopefully) good for them. But the wording is pretty vague for Zalopay, I couldn't tell if that is QoQ or YoY. I'm no gamer but I'm pretty sure Zalopay is trailing Momo last time I checked, with double digit % gap
In general, not a good Investor Relation report you usually see published by companies in the West. The average folks dont have much visibility into the financial picture of the company.
Now let's look at the actual document they provided to the stock exchange: https://static2.vietstock.vn/data/UPCOM/2024/BCTC/VN/QUY%202/VNZ_Baocaotaichinh_6T_2024_Soatxet_Hopnhat/2_vnz_2024_9_4_b46ff7f_000__vng__lr__signedconsolidation__v__30_6_2024da_nen.pdf
With the pending investigation that rallied more than 100 law enforcement officers, I don't want to waste my time into this document, but from first glance: their debt amount is close to 85% of their total asset: 8.5K B vs 10K B (in VND). I'm sure this is a good managed company by this ratio.
I'm not shocked if later they found out VNG cooked the books or sth along the line. It happens in US too, most recent case is SMCI. Short sellers made big bucks with this ticker just a couple weeks ago.
Thanks for the detailed analysis. Could it be that Zalo has become a cash engine for the rest of the company? That is, they use Zalo to generate cash to grow other initiatives. I saw them starting many new companies lately.
No, from their F1 filing: more than 80% of the revenue comes from Games, with Communication (presumably Zalo) to be less than 20% . You can check page 139 on here https://www.sec.gov/Archives/edgar/data/1930799/000119312523219130/d302962df1.htm
One additional point regards the debt/ assets ratio (owner's equity, essentially): they have both a net negative cash flow over the past few years, with liquid assets dwindling, and the debt/assets ratio massively increasing: in 2021 Q4, total assets minus total debt was 6000K B, then 5000K B in 2022, 3000K B in 2023 and only 1700K B last quarter. In fact, last quarter there short term liabilities already exceeded their liquid (current) assets: 6600K B vs 5000K B. They are not on a good track, financial-wise
As for the topic of their books, I will just quote straight up from their F1 filing again:
> In the course of auditing our consolidated financial statements as of and for 2020, 2021 and 2022, we and our independent registered public accounting firm identified three material weaknesses in our internal control over financial reporting as of 2020, 2021 and 2022. The material weaknesses identified related to:
>> ineffectively designed and implemented formal period-end financial reporting policies, procedures and controls to address complex technical accounting matters in accordance with IFRS;
>> an insufficient number of financial reporting and accounting personnel with appropriate knowledge, skills and experience in the application of IFRS and SEC rules to prepare consolidated financial statements and related disclosures completely and accurately; and
>> insufficient controls over IT general controls for information systems that are relevant to the preparation of financial statements.
I would be very wary of saying they are on a good growing track, with negative profit due to reinvestment. The numbers seem to suggest otherwise
Oh man, this indeed sounds bad. Thanks so much for sharing with me. I have to admit that I just assumed that they were growing well, given how many companies that they opened recently.
Did you happen to know why their F1 application was withdrawn? I saw the comment from Mr Le Hong Minh that everything is ready, but just waiting for the "trade winds", which I think, to be honest, is bullshit. Something was very wrong with their books.
I think Mr Minh’s statement has a lot of truth to it, actually.
The listing company (VNG Limited, which is NOT the VNG Corp in Vietnam) owns 49% of VNG corp. Mr Minh and Mr Khai also owns an additional 13% of VNG Corp. And since the listing company wants to IPO with a dual-class share, Mr Minh and Khai + existing big share holders will still have full control of VNG limited and VNG corp.
Essentially, the IPO makes no material difference to the founders and current big owners. Everything stays the same, except they got a lot more liquidity in their networth. From this point of view, I think Mr Minh was honest with his intention: he wanted a big exit with cash, and seeing how Vinfast got comprehensively slapped on the stock market after their SPAC IPO…
I think their books are very wrong, too. But even without that factor, it was very unlikely they would attempt an IPO just to be dropped down to <100M USD evaluation.
Disclaimer: this is my opinion from public information, I really don’t know anything internally.
>I think Mr Minh’s statement has a lot of truth to it, actually.
So what's he waiting for?
> So what's he waiting for?
I think LHM probably watched too much Chamath Palihapitiya and think he could make it to NASDAQ thru SPAC or IPO. SPAC hype went to the drain post Covid, so he attempted with the F1 above.
Fun fact: This guy Chamath was literally considered 'the' SPAC king, he SPAC'ed quite many companies during Covid era, most of them not doing well after being de-SPAC'ed. But to me he is borderline scammy: e.g he touted CLOV as the next gen AI-based health care company while in reality they just selling Medicare Advantage policies in some states. But a company with Chelsea Clinton on the board should be legit, right?
http://openinsider.com/screener?s=CLOV&o=&pl=&ph=&ll=&lh=&fd=0&fdr=&td=0&tdr=&fdlyl=&fdlyh=&daysago=&xp=1&vl=&vh=&ocl=&och=&sic1=-1&sicl=100&sich=9999&grp=0&nfl=&nfh=&nil=&nih=&nol=&noh=&v2l=&v2h=&oc2l=&oc2h=&sortcol=0&cnt=100&page=1
The street is not stupid. A short seller launched an investigation and found out there was possible investigation by DOJ, shorted the stock to the ground. I think they later settled with DOJ.
Base on this article, look like LHM has a track record of not being honest:
https://vietnamnet.vn/tay-choi-lieu-linh-le-hong-minh-nghiep-choi-lam-game-dinh-cao-den-roi-ghe-ceo-2319752.html
TL;DR: Cụ thể, VNG đã không công bố Nghị quyết HĐQT hồi tháng 9/2022 về việc thế chấp tài sản VNG để đảm bảo nghĩa vụ nợ của CTCP Công nghệ BigV. Đây là cổ đông lớn của VNG, là bên liên quan và có người đại diện theo pháp luật là ông Lê Hồng Minh.
Basically: lấy mỡ nó rán nó in Vietnamese, aka fraud.
For the market to be irrational again. Over the past 15 years, there were period where company can get unreasonable IPO/SPAC (a lot of them even went bankrupt within a couple of years even). In the case of VNG, as the IPO has no effect on the operation of the company, it is purely about how much money the original investors/ founders can exit.
The first word "No" in the comment was meant to be a reply to Thai's comment on here: https://open.substack.com/pub/vnhacker/p/cash-is-a-fact-profit-is-an-opinion?r=tzykn&utm_campaign=comment-list-share-cta&utm_medium=web&comments=true&commentId=68311397 .
Apparently the substack login messed up the reply :)
Hay quá anh Thái, học từ anh rất nhiều
I am afraid we will never know the truth. They will make sure newspapers post the information they want us to believe, not the whole and pure truth.
Thái, I know you favor vinagame and I know they are making good money, but they are under investigation for illegal gambling operation.
Yeah I also heard online gambling was *one* of the reasons. It sounds so strange. I wonder if they were coerced to launder illegal gambling money through their payment gateway, which is not unheard of.
The whole gambling thing might be a red herring, due to an unfortunate coincidence: there is a company with stock code being "VNG" that was fired due to gambling related machine. https://thanhtravietnam.vn/thuc-tien-va-chinh-sach/xay-dung-thi-truong-chung-khoan-viet-nam-minh-bach-phat-trien/xu-ly-vng-kinh-doanh-tro-choi-dien-tu-co-thuong-sai-phep-210133.html
You may mistaken the two different companies. Thai is talking about VNG (stock quote: VNZ), and you gave a link about a TTC company (stock quote: VNG)
I am not mistaken. That was my point: rumour about vng corp engaging in online gambling stuffs might be some confusion with TTC
Great piece em!
Accounting profit is indeed a matter of opinion, but it is grounded in a comprehensive accounting standard system. While management has some discretion in reporting profit, their decisions are closely monitored by auditors, analysts, and short sellers. The opinion on accounting profit is far from being as arbitrary as that of a random person.
Secondly, profit tells much more insight into a business than cash does. This is why the accrual basis exists.
Lastly, cash can also be manipulated, though in more subtle ways.