Vietnam's HAGL suffers rating downgrade on low property sales

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Fitch Ratings has revised the outlook for Vietnam's top property developer HAGL to negative, but the company says the downgrade does not reflect the whole picture.

According to Fitch, the outlook revision from stable came as Hoang Anh Gia Lai JSC faced higher credit risks due to a sharp drop in property sales in Ho Chi Minh City.

"As a result, HAGL was saddled with completed, but unsold, inventory of VND3.5 trillion at end-2011," the agency said, adding that the company's net debt increased to VND8.7 trillion at end-2011 from VND2.3 trillion a year earlier.

HAGL has no plans to launch new property projects in the near term while some of its non-property related businesses have commenced operations and will likely improve cash flow from operations in 2012, Fitch said.

The company begun selling iron ore in 2011 and three of its planned 17 hydro power projects have begun generating power and more are likely to come onstream in 2012, the agency added.

Chairman Doan Nguyen Duc told the VnExpress newswire that he respected assessments made by international ratings agencies, but added Fitch did not take all operations of his company into consideration this time. 

The assessment was mainly made based on property projects, which are no longer the key business at HAGL, he said, noting that its rubber, electricity and mining projects have started to make money.


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The downgrade could affect the company's abilities to raise capital, Duc said. "But I believe investors will be confident when we achieve our business targets."

Fitch said the rating outlook may be revised to stable only when the company's property inventory has been "substantially liquidated" and the iron ore and hydro power businesses begin "contributing meaningfully to the company."

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