Bright prospect for construction enterprises despite COVID-19

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Despite the impact of the COVID-19 pandemic in the first quarter, construction businesses still firmly believe bright growth lies ahead for the rest of the year.

“The COVID-19 disease has significantly affected the economy as well as the construction industry, especially the tourism and resort real estate, however the industrial real estate area still expects good growth,” said Pham Viet Khoa, Chairman of the Board of Directors of FECON Corporation (FCN).

FCN achieved contracted sales of 884 billion VND (37.9 million USD) in the first quarter. In March, contracted sales reached 234 billion VND. Q1 profit was estimated at around 60 billion VND.

For construction businesses, profits are often reported higher in the last quarter of the year than the other quarters because this is usually the acceleration time for the handover of projects.

“In 2020 as well as in the next five years, two out of the five key business areas of FCN are industrial infrastructure construction and climate change prevention,” Khoa said.

In March, FCN signed many projects, including two in which the company participating as contractors are Vinh Tan port project in Dong Nai province and Phuoc Dong Industrial Park Project in Long An province.

“Wind power, irrigation projects and landslide-prone projects are also the focused business of FCN over the next five years,” Khoa added.

“Profit is forecast to decrease in the first quarter of 2020 due to the impact of COVID-19, but the signing of new contracts is a bright spot, which creates motivation for construction enterprises in the next quarters,” he said.

In March 2020, the construction conglomerate Cotec Construction Joint Stock Company (CTD), signed two new high-class project contracts, raising the total value of contracted sales to more than 5 trillion VND in the first quarter.

The two projects are the Complex Building, covering an area of 8,320 square metres with 1,074 luxury apartments in District 1, HCM City and the Metropole Thu Thiem project in District 2, HCM City.

“This achievement was earned by concerted efforts of all leaders and employees, despite the common difficulties amid the COVID-19 pandemic,” said a leader of CTD.

Hoa Binh Construction Group JSC (HBC) had made efforts to expand the market despite difficulties caused by disease, participating in many projects including infrastructure projects abroad, with a total contract bidding value of more than 26 trillion VND so far, said Le Viet Hai, HBC Chairman of the Board of Directors.

According to HBC, in 2020 profit earned from civil construction and industrial construction will account for 60 – 65 percent, profit from infrastructure segment will gradually increase the proportion to 35 to 40 percent.

In order to participate in the field of infrastructure construction, HBC has purchased a 57-percent stake of the 479 Company - a unit separated from Cienco 4 Corporation, specialising in infrastructure construction, with experience in large-scale infrastructure projects throughout the country.

Xuan Mai Construction and Investment JSC (XMC) saw revenue and profit in the first quarter of 2020 decrease sharply compared to the same period in 2019, because many construction works had to be temporarily suspended due to the COVID-19 pandemic.

In Q1, the company’s revenue was estimated at 175 billion VND, a half decrease compared to the same period last year.

On the stock market, stocks of the construction industry have declined sharply recently. Price-earnings (P/E) ratio is still lower than that in the period of 2016, according to Dao Hong Duong, Director of Analysis at Petroleum Securities Company (PSI).

He added that the construction stock group would witness strong fluctuation in the months to come.

“This group is being negatively affected under pressure from foreign net selling,” Duong said.

“When the negative effects are over, construction stock group may recover stronger than the market average, especially when businesses begin to receive disbursed capital from public investment stimulus package,” he said.