On April 25, Coteccons Construction Joint Stock Company (HOSE: CTD) held the 2023 Annual General Meeting of Shareholders and announced the results of 2022 and the business plan for 2023.
Good Fortune to be a Great Company
Mr. Bolat Duisenov, Chairman of the Board, was touched when the General Meeting of Shareholders was held at Coteccons headquarters. Two years ago, when taking the leadership position, Mr. Bolat identified that the main mission was to stabilize the company’s situation for a better future.
“At that time, I felt everyone’s anxiety when skepticism was not only from our customers but also from internal staff. Today, I am proud to affirm that we are not afraid of what will come. We are looking forward to new things. We are doing better and better. In the past 2 years, what I am proudest of is the change in mindset within the company and the team. We now believe the future is in our hands, like the company’s “own it” culture,” said Mr. Bolat.
Mr. Bolat Duisenov also affirmed that the ESG activities that the company has carried out in recent years have brought Coteccons to a new position when working with partners. That is the way Coteccons can gain trust and respect from customers and also get on the path of sustainability.
4 Pillars of the Journey to Become a Great Company
“2022 is a difficult year for the economy and the construction industry. However, the company has reached its revenue target of VND 14,537 billion and a profit of VND 20 billion. Back at the time of the AGM 2022, the Board of Directors faced many challenging questions from shareholders when setting a modest goal. However, the company forecasted the plan quite closely to reality and the market situation.” shared by Mr. Vo Hoang Lam, CEO of Coteccons.
At Coteccons, one of the main strategies to deal with difficulty and reach the business goal is “repeat sales.”
With this strategy, many big customers that worked with Coteccons before continue to collaborate and provide more jobs. For instance, Vingroup has trusted Coteccons to assign projects for 10 years. “We make products, and customers then use our products forever”, Mr. Lam shared proudly.
One of the other typical projects of the company in 2022 is the Diamond Crown Hai Phong (Hai Phong City). This is a project with more complex design and construction than Landmark 81. Or the LEGO factory project (Binh Duong), which, according to Mr. Lam, “at that time, I did not even dream of the project being assigned to a Vietnamese contractor”.
In 2022, Coteccons have successfully restructured and built a profound culture. 2023 will be a year of strong transformation that will flourish in 2024 and sublime in 2025. To do that, Coteccons CEO reveals four main pillars:
– Commercial construction: focuses on civil works, high-rise buildings, and works with high output.
– Mega projects: large-scale, technically complex, low-competition projects, such as a LEGO factory.
– Infrastructure: airports, metros, highways, roads… This is an area into which Coteccons has started to take stronger steps, which the company planned in 2020–2021.
– New investment segment (Covestcons): including real estate investment, M&A, and affiliated companies.
In addition, Coteccons has promoted cooperation with major banks to further strengthen its financial capacity and create strong potential for implementing large-scale projects in the future.
Lead the Market – Create Trends
Working at the company for 16 years, Mr. Thien mentioned the Coteccons’ DNA, which is safety, quality, on-time delivery, and risk management. In the past two years, in the context of a volatile market, Coteccons has been very cautious about risks, strictly controlling cash flow. This is clearly demonstrated through the projects that Coteccons has been implementing, especially in 2022.
Currently, Coteccons is the general contractor for two projects at Ecopark, with a total value equivalent to about VND 7,000 billion. Initially, the investors were afraid that Coteccons did not have the capacity to complete it. However, Coteccons ensures safety, quaility and progress with all timelines, thereby convincing investors. The investor turned to trust and continued to deliver new projects.
In terms of quality, we take Vinhomes Smart City project and Vinhomes Grand Park project, for instance. Coteccons has been implementing 20 buildings in total, handed over 9 courts, and is currently building 11 courts at the same time. Partners also wondered if Coteccons could guarantee quality with such a large volume. In the end, partners and investors are highly appreciated. Thanks to that, investors continue to trust and assign new projects to the company.
In terms of progress, we take the two projects VinFast and Vinhomes Smart City, for instance. For the first time ever, Coteccons received a huge construction volume with the 1,300 low-rise apartments of Vinhomes Smart City. In particular, the company built a central park and wave pool in less than 3 months, while progress on conventional projects took more than 1 year. At the VinFast project, Coteccons built almost all of a series of warehouses and workshops and many construction items with a scale of 3-6ha in just 3–4 months. Many warehouses and workshops were built urgently, on a scale of 1-2 ha, in just 14 days
To do this, Coteccons itself has solved operational problems and built a skilled and professional team. In addition, in terms of finance, the company has a scenario to cope with risks, control cash flow, and promote construction sites to self-balance revenue and expenditure.
Strategy to Conquer Mega Projects
Mr. Chris Senekki, Deputy General Director of Coteccons, shared that with big projects, success and failure depend on risk anticipation. Coteccons has the leading BIM (building information model) team in the country to serve large projects while continuously applying technological advances. BIM 4D technology is being applied in the building of mega projects to schedule construction. Recently, the BIM team at Coteccons has implemented a 5D BIM model, which includes financial and cost-effectiveness calculations over time.
Mr. Chris also stated that with large projects, it is necessary to apply information technology, data collection, and AI technology to analyze and make the most suitable proposal and plan.
In particular, to conquer mega projects, Coteccons always attaches importance to compliance with regulations and continuously conducts training sessions on honesty and integrity for the team. Coteccons says no to negativity and child labor; builds a key team; makes a commitment to integrity and straightforward transparency; and does not tolerate any negative behavior.
ESOP: People are the Core
“At Coteccons, people are the core”. This is what Mr. Bolat, Chairman, repeated many times during the meeting. And once again, Mr. Pham Quang Vu, a member of the Board of Directors, affirmed this when talking about ESOP policy.
Mr. Pham Quang Vu told the two stories:
“The first story: In some evenings, I passed the building and saw that the office lights were still on. The team of Finance and Accounting, Tender, etc. worked until late at night. Thanks to that, in 2022, Coteccons will have many projects. This convinced me that the companies would definitely succeed with such dedicated people.
The second story was in a coffee shop. A guy was surfing information online and exclaiming, “Awesome!”. Coteccons had completed a project of tens of thousands of square meters in just a few days, and the partner was very happy because it did not cost more to rent the warehouse. Those were Coteccons people who had both professional capacity and responsibility for the job.
Those people have been with the company for a long time, endured hardships, were hesitant to move to another company, and they also took the chance.”
Therefore, in the path of sustainable development and a capitalization of 1 billion USD and revenue of 3 billion USD, people are an important and decisive factor. This is the reason why the Board of Directors proposed the ESOP program, which lasts for 5 years. The program is designed to retain talented people, play an important role in implementing strategy, and contribute to the growth of the company. Coteccons is committed to implementing the ESOP policy to ensure fairness between employees and shareholders and transparency in the distribution of ESOPs. The Board of Directors will closely consider the implementation, which shareholders will approve and vote on annually.
Unicons Aspiration
As a key member of the Coteccons ecosystem, Unicons is increasingly asserting its position in the market, with more than 30 construction projects spread across Vietnam. Together with Coteccons, Unicons is implementing the Diamond Crown project (Hai Phong), the first project in Vietnam designed and constructed according to Diagrid architecture (hammock-type architecture).
The project has now been constructed on the 33rd floor of the apartment tower and the 25th floor of the hotel tower. Construction progress is 3 days per floor, which is the record progress of construction of high-rise buildings in Vietnam at the time.
Mr. Lam Tran, General Director of Unicons, expressed his pride and excitement: “Construction is very enjoyable because we can do different things. To contractors like us, the big advantage is being assigned work, but the biggest benefit is that when working with customers, they see that Unicons and Coteccons people are decent, kind, humble, and demanding. Although the projects are many times more difficult, Coteccons still nailed it. Our mindset is not to be an ordinary construction company but a different and great one. We, Unicons and Coteccons, will go to the top. Only death can separate us.”
The Unicons General Director added that the aspirations of Unicons and Coteccons people can be described by the two phrases, which are “always being humble” and “always learning”. With the culture of “thinking for solutions”, no one is allowed to raise a problem without a solution. With the culture of “winning,”, not “losing,”, which means being able to do difficult projects and doing something different and challenging. With that mindset, Unicons and Coteccons will surely conquer great things.
Talking to Shareholders
- What helps Coteccons complete the plan set in 2023 while the human resources have changed significantly?
Mr. Bolat Duisenov: The basis comes from the basic philosophy; it doesn’t matter how key personnel change. We know what we’re doing, and we’re optimistic about the definite things and the opportunities ahead. We always return to build and strengthen the foundation. We have had positive signs and achievements. When working with international partners and organizations, Coteccons’ team capacity is not inferior. I think we are on the right track. If we are lucky, Coteccons will achieve great results. And if we are unlucky, we may face short-term difficulties, but we do not choose to take shortcuts.
- Coteccons recently signed cooperation agreements with three big banks. Why does Coteccons cooperate with these three banks?
Mr. Võ Hoàng Lâm: Coteccons’ cash flow is quite good. Cash is abundant. However, on the upcoming diversification path, one of the things we focus on is infrastructure projects and public investment, which are very large projects that need the support of banks to have strong financial strength. We also need the parties to accompany us in financial management.
During the relatively difficult period of the market, partners and big banks are joining Coteccons to sign cooperation agreements to prepare for the long road ahead. In the current period, businesses with potential are respected.
Mr. Bolat Duisenov: Our team is known to have very strong technical capacity. And now, with the support of the biggest banks in Vietnam, we will be ready for the challenges ahead.
- Is the company willing to publish quarterly and fully informed backlogs to the market?
Mr. Võ Hoàng Lâm: Coteccons’ backlog is usually determined very carefully, but the published information must also comply with the provisions of the law. The current disclosure method is still providing sufficient data to shareholders, and the company continues to organize sharing sessions to promptly inform shareholders.
- Based on Coteccons’ profit plan for 2023, how much is the provision?
Ms. Cao Thị Mai Lê: With an expected profit in 2023 of VND 233 billion, we planned to assume risky conditions for investors and market difficulties. The company made a provision in 2023 of VND 172 billion.
- What is the specific roadmap of Coteccons when setting a capitalization target of USD 1 billion?
Mr. Bolat Duisenov: First of all, with a market capitalization of 1 billion USD, we have no specific financial plan. We live in an unpredictable world; everything fluctuates. No one knows what projects we will have every month, every year, or how much revenue and profit we will make. However, what is certain is that Coteccons continues to build platforms, people, and transparent system. We commit to everyone that coming to Coteccons is not a waste of time.
- Many employees and engineers of the company have had their income reduced by 20–30%. Besides the ESOP plan, how does the company ensure income?
Mr. Bolat Duisenov: It is true that some engineers have had their income reduced. We all had a drop in income, including me. This reflects the market situation—not only for construction companies. We try to keep jobs for our employees, and fortunately, Coteccons has a large backlog.
Employee income is associated with the company’s business results. At Coteccons, we are a company with a compassionate heart, living very affectionately and always taking care of our employees. Therefore, the idea that we deliberately reduce the income of workers for other benefits in difficult times is incorrect.
Mr. Võ Hoàng Lâm: Most companies are currently facing difficulties and have to cut salaries or even have no job source. Currently, Coteccons is building a long-term strategy, including earnings and an ESOP.
- Receivables and inventories at Coteccons have increased recently. Negative cash flow causes cash to drop significantly, with large backlogs in progress and big project implementation plans in the future. Does the company plan to add new capital?
Ms. Cao Thị Mai Lê: The high debt and inventory levels of construction companies are a very unique feature of the industry. When the project is completed, it takes 2–3 months for the investor to make payment. This is an industry feature, and we cannot change it. I also understand this is a pretty big risk for the industry. The only way to minimize risk is evaluating real estate investors very carefully to avoid pushing inventory too high. Our strategy is to go with mega projects, which can bring in quite safe revenue because these are investors we have worked with for a long time.
In addition to ensuring technical safety and quality, we must also ensure financial safety. Behind us are subcontractors with weak finances; Coteccons itself must be their support. We ensure progress to meet the customer’s requirements. To do so, risk management must be good.
From 2021-2022, we started to accelerate revenue and push cash out. At the end of 2022, everyone was very intimidated because our cash flow was negative $600 billion, but when we had identified the good investors, we were willing to spend money. As a result, we had positive cash flow in early 2023. We are confident that we have chosen the safe and right path at this stage.
Mr. Võ Hoàng Lâm: At the moment, investors are facing difficulties. Coteccons follows transparent financial management. Financial health is clearly disclosed in the report. CTD is still facing very small problems; for example, this morning a group came to collect debt from a project 8–10 years ago. Coteccons’ behavior is to face it squarely and answer clearly.
- Why does the company use money to invest in securities while increasing loans to supplement capital for operations?
Mr. Bolat Duisenov: In 2022, we had cash in the company at first. We tried to keep good cash for future growth plans. Those are common practices in fund management, with cash in the bank, bonds, or other investments. No one keeps a large amount of cash in the company.
In the short term, that amount of money sometimes has no value. However, the company believes in its core fundamentals; we are a humble company and manage our risks well. The investment comes from that point of view.
- I want to be a great person. Having experience in managing large projects in Japan, I want to return to Vietnam to work and have followed Coteccons and decided to become a shareholder. According to the 5-year ESOP policy, how can a newcomer like me have the same opportunity as the staff who have been working for more than 10 years?
Mr. Phạm Quang Vũ: In the company’s orientation, we really want talented people to accompany the company. Therefore, in our strategy, people are the core, and we urgently need talented people at the company and elsewhere to work in new fields.
First of all, thank you very much for your willingness to work in Vietnam. As for the ESOP program, we aim at the company’s employees and talented people. However, in ESOP’s regulations, we have many criteria, including criteria for talented people in the company and new people. We have our own rules. If you return to Vietnam, you can visit the company to discuss more.
Mr. Bolat Duisenov: We currently have about 8,000 shareholders, 2,000 of whom are our employees. Today, we have shared with shareholders and would like you to share with everyone that Coteccons focuses on developing people, taking people as the core, and inviting the best people. We are committed to building the best environment and culture for talented people to develop.
- The Lego project now has a building permit. Does the company intend to adjust its business plan for 2023 accordingly?
Mr. Võ Hoàng Lâm: We make business plans at the beginning of the year or the middle of the year, and adjust them in a certain quarter. Once we make a business plan, we consider all factors, not just the LEGO project or any new winning project. When all factors are sensible, we will adjust accordingly to the right schedule.
- Why is Q1/2023’s gross profit margin so low?
Mr. Võ Hoàng Lâm: Not only gross profit margin but also revenue is so low. The revenue of the first quarter, compared to the other four quarters, is always the lowest. Revenue usually comes in a lot in Q3 and Q4. Revenue and profit in the first quarter of 2023 still correspond to the forecasted plan.
Ms. Cao Thị Mai Lê: The difficulties of the real estate industry and the construction industry can be seen clearly. Coteccons experienced 2-3 years of difficulties related to the input price assigned by the investor. These results were forecast before. We are still maintaining transparency and are committed to what we do. The figures are true to the committed reality, and hopefully they can be more positive after getting out of the difficult period.
- Does the company issue new shares on its own or use it to buy shares on the exchange and then distribute them to employees? Does it mean that the current 2.5% ESOP will add another $100 billion to company costs?
Mr. Phạm Quang Vũ: For the approved ESOP program of 2022, we extract from the company’s treasury stock. With the 5-year ESOP program, we issue new shares and reward employees from salary and bonus sources. The company’s costs will change but will boost the motivation of talented people, contributing to the company’s growth.
Mr. Bolat Duisenov: I suggest considering it an investment for the company instead of an expense.
- • What is the goal of bonus shares? If it is to increase charter capital for bidding on mega projects, I think we should increase capital with a larger value, for example, by dividing by 1:1 or 2:1 instead of 3:1 as it is now?
Mr. Phạm Quang Vũ: Because CTD is a highly concentrated stock code. Therefore, bonus shares are a way to support not only existing shareholders but also facilitate many investment institutions’ access to liquidity criteria. The more shares you own in a growth company; the more surplus value shareholders will receive. This is the biggest and most important goal, not raising capital for bidding.
Mr. Bolat Duisenov: We consider this an investment in the people of Coteccons towards strategic goals. Bonus shares are rewards for shareholders who have held CTD shares for a long time, increasing liquidity. I received many messages and calls from shareholders. I want to be transparent, but the more transparent I am, the more messages and calls I receive. We have heard of shareholders’ recommendations; bonus shares also come from shareholders’ recommendations.
- In 2020–2021, due to changes in the superstructure, many senior personnel who had been with Coteccons for a long time chose to leave. Currently, Coteccons has stabilized and developed further. Will any of them, after leaving, want to come back? Is the company willing to welcome them? The beneficiaries of the ESOP are mainly leaders and potential personnel. What about the personnel who are not on that list? Can it be understood as their disadvantage?
Mr. Võ Hoàng Lâm: When there was a change, many people left, and now many people want to come back. Moreover, many other employees in the market want to join Coteccons. The company is always open to welcoming all qualified personnel who dedicate themselves to Coteccons and their profession.
With regards to ESOPs, all ESOP programs are pretty clear. If an ESOP is for everyone, it will be an additional salary. The ESOP program itself creates stimulation and talent retention. That is the main purpose. All officers and employees who want to make an impact and have long-term companionship with Coteccons can be on the list.
Mr. Phạm Quang Vũ: This is an ambitious program that stimulates the company’s growth and increases its market capitalization. Our goal is not to discriminate between new old people but to prefer talented people with a vision to accompany the company, who are key leaders, and those employees who fulfill their KPIs as well.
- In 2022, there was a time when CTD stock fell to a record low. Many shareholders defaulted, lost assets, and left the market. At that time, there was no timely encouragement from the company, not even a message to reassure shareholders. I hope the company takes care of this so that shareholders can feel secure when the market is bad.
Mr. Bolat Duisenov: At the end of 2022, a lot of stocks bottomed out. We discussed this with shareholders. You might want us to text each shareholder. We still work and manage well. I am still willing to encourage and share my feelings with shareholders, but I am also very busy with work and must do my duty well. Next time when the stock goes down, you should buy more, not sell.
- The construction industry is too weak and fragile, too passive to the fluctuations of the economy. To stand firmly in the market until now, what has CTD done to overcome the difficult times? Is it luck, or does CTD have any proactive strategies and solutions? Could Mr. Bolat please give advice to those in the construction industry not to rush into the race to the bottom?
Mr. Bolat Duisenov: I think you’ve noticed that, unfortunately, the construction industry lacks trust. If members of the industry do not trust each other and do not respect each other enough, it will create a disaster for the whole industry. That’s not my personal advice; it’s a fact.
If we can trust each other, then we can be better in the eyes of investors and customers. We must assure the implementation of projects and have a position when negotiating with customers. Investors’ way is not necessarily the best way; we can give them a faster, better solution. The fact that the construction industry does not have consensus and cohesion is not beneficial for either party.
Mr. Võ Hoàng Lâm: Many people say Coteccons is lucky. I hope that luck will continue with Coteccons. We have a direction, a mission, and a specific path. We believe that the way we go, with analysis, cohesion, companionship, experience, and knowledge, ensuring the company’s sustainable development.
Mr. Bolat Duisenov: We are lucky to have many customers who love us.
- Mr. Bolat and members of the BOD said that in 2017, the company’s market capitalization nearly reached 1 billion USD, along with the company’s favorable ESOP policy. However, at that time, Mr. Bolat and his colleagues used the right of major shareholders to intervene, asking the management to protect the interests of major shareholders. However, after six years, Mr. Bolat says that people are the most important factor in issuing ESOP shares. What made you change your mind?
Mr. Bolat Duisenov: This is why I am working so hard to build transparency in this company. I’m not the chairman of the Human Resources and Compensation Committee, and I don’t decide who gets how many bonus shares, nor do I have the right to favor any employee. I am someone who wants to establish the foundation and operating model for the company.
Mr. Vu is the Chairman of the Human Resources and Compensation Committee and an independent member of the Board of Directors. We have a system that is monitored by the company supervisory board. The questions and challenges that I posed 6-7 years ago were about the implementation process. Positive results will come if we comply with the process and regulations. My point of view is to be always transparent so that I can look in the mirror, face myself, be comfortable with my conscience, and be ready to answer all questions.
Mr. Phạm Quang Vũ: We aim for long-term development. With a responsibility to shareholders, we consider things very carefully and meticulously. We review the ESOP programs and regulations of the past years and identify what works and what doesn’t. We also look at how other companies are doing. It’s prudence and science.
And in fact, today we have a 5-year ESOP program, but besides that, we have scientific, meticulous, and precise regulations to keep talented people. At the same time, that regulation does not reduce the of shareholders’ income through the growth target of company capitalization. The Human Resources and Compensation Subcommittee has carefully considered and will certainly submit specific regulations at the next meeting.
- Although it was a very long time ago, shareholders still remember so clearly and in detail about the ESOP program. 2017 and now—two different times, different circumstances, and different purposes The past is over, and the comparison is somewhat lame.
Mr. Bolat Duisenov: This sharing is almost the same as my conclusion. Let’s stop looking at the past. We can’t change the past. Let’s focus on what lies ahead. This is much more exciting than the past. We have a young, dynamic team with a bright future. We are optimistic about the definite and the undefined, including the uncertain.
Two years ago, many people were skeptical. In the past 2 years, we have worked hard to be transparent and ask for your cooperation. We don’t want shareholders to leave the company’s stock. In the next 5 years, we will definitely achieve extremely impressive achievements.
Again, please change your mindset from the short term to the long term. I don’t know what else to do for shareholders other than to continue to be transparent. With these efforts, we hope our shareholders will appreciate them.
