Tasco still awaits a push for breakthrough

Tasco's significant expansion, established via massive M&A efforts, nonetheless needs a push to speed on the road ahead.

Glimmers from the Automotive Segment

Tasco's revenue in 1H2024 was VND 11,634 billion, with an after-tax profit of VND 93 billion, which is 18.6 times and 6.8 times the results from the first half of 2023, respectively. According to the plan approved by the General Shareholders' Meeting, Tasco expects a revenue of VND 24,750 billion and an after-tax profit of VND 660 billion in 2024, about 12 times the amount for 2023. According to the results of the first half of this year, the corporation has accomplished 47% of its sales objective but just 18% of its yearly profit plan.

Tasco's overall revenue in 2Q2024 was primarily driven by automotive sales by its subsidiaries, which accounted for 82.4% of the parent company's total Q2 2024 revenue, or VND 5,300 billion. This is a favorable indication in comparison to the absence of automobile sales income in the same time last year, as vehicle sales are a key component of Tasco's ecosystem, which includes infrastructure, automotive services, real estate, and insurance. This is also the area in which Tasco has made major investments through M&A transactions, with the goal of activating the ecosystem's closed-loop value during the vehicle trip across all service routes.

Through strong investments in recent years, including acquiring 100% ownership of SVC Holdings JSC (later renamed Tasco Auto LLC), which owns 54.07% of Savico (SVC), or earlier spending over VND 402 billion to acquire 100% of Groupama Vietnam and rename it Tasco Insurance, along with investing in Carpla, a platform for used car distribution with unique features from online to offline, and acquiring a controlling 94% stake in NVT Holdings, the parent company of Ninh Van Bay Travel Real Estate JSC through Tasco Land, Tasco’s ecosystem is expanding, positioning the company as a major player with high competitiveness in its goal to "provide lifetime vehicle services."

Naturally, with the total assets from these investments, Tasco could not avoid using financial leverage. As of June 30, 2024, Tasco’s total assets reached VND 27,256 billion, an increase of nearly 2% compared to the beginning of this year. More than half of the short-term assets, around VND 6 trillion, consist of receivables. Tasco also holds highly liquid assets such as cash, cash equivalents, and investments held to maturity, totaling VND 2.1 trillion, accounting for 20%.

According to the financial statement, Tasco's liabilities at the end of Q2 2024 were VND 15,658 billion, practically unchanged from the beginning of the year. More than half of this is made up of short- and long-term loans, totaling VND 8,659 billion, with bank loans accounting for the majority (VND 5,627). Notably, other short-term receivables climbed by about VND 1,000 billion, totaling VND 4.2 trillion, primarily from third parties but not disclosed further.

Tasco's financial costs climbed by 100% in Q2 2024 compared to the same time the previous year, with interest expenses accounting for more than 99%. Tasco also recorded losses from its subsidiaries and joint ventures, despite having 69 members.

Competition Ahead

Recently, Tasco made headlines with another M&A deal as Tasco Auto welcomed Mitsui & Co as a strategic shareholder and completed the first disbursement. According to the agreement, this Japanese company will partner with Tasco Auto to implement several development plans and strategies in the near future. The investment will be disbursed in stages, with the first phase completed on July 31, 2024.

Previously, according to Nikkei, Mitsui & Co announced an investment of around JPY 84 billion (USD 560 million) in the Block B - Ô Môn gas-to-power project in Vietnam. Therefore, the partnership with Mitsui & Co is not only expected to bring additional capital but also to enhance Tasco's strength in becoming the largest domestic car distributor and service provider, with 86 dealerships across the country, while also adding value from the energy segment to automotive services, as per their objective.

Tasco has the difficulty of continued low automobile consumer demand. Although SSI Research stated that the automobile sector's troubles have passed in 2024, the prediction for new sales growth in this area remains low (9% from a low base in 2023). Furthermore, the sector faces severe rivalry for market share, as well as competition from new automobile models and trends, as well as associated businesses in infrastructure, services, and payments. Furthermore, establishing the ecosystem to support the vehicle lifecycle on every voyage is not Tasco's sole "luxury," since other large automotive companies, such as Thành Công Group, which has a specific focus on PG Bank, are also pursuing this market.