Why has TMT stock fallen below its book value?

Although TMT's book value is VND 9,110 per share, the stock fell to VND 6,900 per share on November 26 after only 24,100 shares were exchanged. The precipitous dip comes after the company's financial report showed notable declines in post-tax profits and revenue. Operating below cost led to a significant quarterly loss for the second consecutive quarter, including a VND 93 billion loss in Q3. For the first nine months of 2024, the total net loss came to VND 192 billion.

TMT is going through one of its most difficult times. Shanghai Automotive Industry Corporation (SAIC, 50.1%), Guangxi Automobile Group (Wuling Motors, 5.9%), and General Motors (44% ownership) joined forces to restructure the company by expanding into the distribution of a small electric vehicle line under the Wuling brand. TMT has also restructured its supplier network as part of a number of other restructuring initiatives. In order to preserve liquidity with financial institutions, the corporation has agreed to a 2024 loss.

The main cause of TMT's losses is the general economic challenges that are affecting companies in all sectors. Despite ongoing price cuts by automakers and distributors to clear inventory, car sales have been severely reduced due to a frozen real estate market, substantial drops in governmental investment, and constrained consumer spending.

"In 2024, to ensure liquidity and reduce interest expenses, the company had to cut prices to clear inventory, resulting in negative gross profit. Additionally, TMT is restructuring its product lines, focusing on better offerings for the market," TMT leadership explained.

According to SSI Securities Corporation, automotive stocks have fallen by 4%, lagging 1,600 basis points behind the VN-Index. Despite demand-stimulating measures from both the government and distribution agencies, car sales remain low as consumers delay purchases amid economic challenges. While TMT was once seen as a promising stock in the automotive sector, its current losses have pushed it below book value.

TMT's semi-annual financial report, reviewed by UHY Auditing and Consulting Co., Ltd., highlighted doubts about the company's ability to continue operations. Short-term liabilities stand at 984 billion VND, significantly exceeding its 245 billion VND equity. These factors, along with notes in sections 38.2 and 38.3 of the financial report, have led auditors to question TMT's ongoing viability. Continuous losses may result in TMT being placed under control if losses persist for three consecutive quarters.

Notably, the State Securities Commission has suspended a number of UHY auditors for reasons unrelated to TMT, including Hoang Dinh Hai, Tran Hong Giang, Nguyen Minh Hung, and Pham Thi Ngoc Tho.

TMT intends to liquidate fixed assets, sell investments, and recover receivables in order to increase business capital and pay off past-due debts in order to address its financial issues and stay out of control. The business has high hopes of paying off its obligations and carrying on with business as usual in the upcoming fiscal year. TMT cut staff by about 200 workers in the first nine months of 2024, which is a 23.8% reduction.