CREDIT REPORT

- all amount in mil VND –

Summary:
- Borrower: Dabaco Group (DBC)
- Main industry: Animal feed, castle and poultry breeding and food processing, contracted
farms, investment and real estate.
- Facilities Borrower:
- Purpose: Participation in a term loan facility of up to TUSD 50.000 for…  Question 1: What
is the purpose of extending this term loan?
- Conditions:
- Amount: TUSD 50.000
- Tenor: 60 months from the first utilization date
- Collateral:  Question 2: What are the collaterals and their conditions & expected value?

Risks Mitigating Factors

Business risks:
- Input price: DBC relies on importing - DBC keeps a large amount of inventories and
materials and ingredients for their activities, also sell raw materials for their branches and
the increase in the input price impacts directly subsidiaries. This can help to reduce the risk
on their cost of sales. of price increase at a certain level.
- Market demand: as the price of goods - the company works on 3F patent (Feed –
increase, the demand decrease causing the fall Farm – Foodstuff) with high quality control
of sales. which helps for keep control the quality of the
- Diseases: the company operates in castle and output and to quickly respond to the
poultry breeding as well as food processing. unexpected events.
Any disease occurring will have impacts on - Managers and chairman of the company
the operations of the company. have long time experiences in the industry.
- Management: DBC operates in various
sectors and runs numerous of projects. Any
mistakes in managing may lead to damages of
the company.
Financial risks:
- Foreign exchange rates: Most of the inputs of - Besides the ordinary loan services provided
DBC are imported from overseas, therefore by banks and FIs, other financing solutions as
the fluctuation of the foreign currency is one IRS, CCS and so on might help to hedge those
of the risk that the company need to hedge. risks.
- Interest rates: total debt borrowed from
banks, FIs and leasing companies account for
60% of owners ‘equity and ~29% of total
assets. The rise in interest rates both in USD
 and VND like this time of this year is a big
issue for DBC.
- Liquidity: as DCB give advances for their
subsidiaries and the branches while the
inventories are also a large part of the current
assets. It will take time for the company to
make payment in case the subsidiaries and its
debtors don’t pay as schedule.

- Management:
 CEO: Mr Nguyen Khac Thao
 Chairman: Mr Nguyen Nhu So
- Market Position: top 10 biggest enterprises in animal feed nationwide.

About the industry:

- DBC operates mainly in animal feed and food processing. The company imports corn and
soybeans and additives for animal feed production and domestic sales.
- From 2015 to 2020, the price of animal feed ingredients is relatively stable. From October 2020
until now the price has been increasing continuously due to the impact of the recent Covid-19
epidemic and the conflict between Russia and Ukraine.
- In 2021, the price of finished animal feed in Vietnam has increased by around 18-22%.
Although the price of piglets has been reasonably lowered (from 2.6 million VND/head to 1.2
million VND/head), the increase in feed costs has made the profit of castle and poultry farm
plummet.
- From the late February 2022 until now, the price of animal feed ingredients on the international
market increase remarkably leading to difficulties and challenges for the livestock industry in
general and pig farming in particular.

Business Performance and Financial Conditions:

2021 2020 2021 compared to 2020

Income statement
(mil VND) (mil VND)
mil VND % change
Net revenue 8.739.708 6.677.098 2.062.610 30,89%
COGS -8.021.306 -6.032.320 -1.988.986 32,97%
Gross profit 718.401 644.777 73.624 11,42%
Financial Income 1.006.203 799.005 207.198 25,93%
EBIT 1.469.852 982.928 486.924 49,54%
Net profit 1.384.382 950.288 434.094 45,68%
Although 2021 was also a difficult year for the animal feed and food processing industry due to
the increase in the price of materials and ingredients as well as the impact of the pandemic, DBC
attempted to control their input factors while focusing on their main activities, the performance
of the company in 2021 marked an impressive result with the expanded revenue by 30% and the
increase in net profit by 45%.

Net revenue in 2021 increased by 30,89% and reached 8.739 billion VND while COGS increased
a little higher than that of net revenue. Thus, gross profit at the end of 2021 is 718 mil VND, rose
only 11,42% compared to that of 2020.

Breaking down the net revenue of the company, in 2021, 96% of the net revenue (equals to 8.393
billion VND) came from the main activities including animal feed processing and trading, the
rest came from real estate trading, building and others.

Table: sales from activities

2021 2020 Change between 2021-2020

Sales/
Sales/ Total
Number Total Number Number % (↓/↑)
Sales
Sales
Sales from
selling
4.244.541 48,57% 3.348.547 50,15% 895.994 26,76%
finished
animal feed
Sales from
selling goods
4.166.219 47,67% 3.129.008 46,86% 1.037.211 33,15%
(gas/oil and
ingredients)
Sales from
real estate 328.948 3,76% 199.542 2,99% 129.406 64,85%
trading
Total 8.739.708 100,00% 6.677.097 100,00% 2.062.611 30,89%

Among the main activities, net sales from selling finished animal feed is 4.244 bil VND,
accounting for 48,6% of total net sales and increased 26,7% in comparison with the same period
last year. Sales from selling gas/oil and ingredients for animal feed is also a large part of the and
increased by 33,15% during the period of 2021.

The cost of goods sold in 2021 is VND 8.021 billion, an increase of VND 1.988 billion, equivalent
to an increase of 32.97% compared to 2020 which is higher than the increase in net revenue of
30.89%. Leading to gross profit margin decreased, but this is still a positive result when the price
of raw materials increases rapidly.
In particular, the cost of animal feed production in 2021 is VND 3.742 billion, accounting for
88.18% of net revenue higher than the proportion of 2020 mainly due to the sharp increase in the
price of raw materials.

The cost of the sale of other goods in 2021 is VND 4.090 billion, equals to 98.19% of the net
revenue.

The cost of real estate trading and construction services is VND 187 billion which is 57.08% of net
revenue.

The financial income in 2021 was VND 1,006,203 million, an increase of VND 207,198 million
compared to 2020, mainly because of profit transferring from subsidiaries. Financial income
includes profits of 981 billion VND from subsidiaries; interest from deposits of VND 22,9 billion
and other financial activities are VND 2 billion.

2021 compared to
Q1/2022 2021 2020 2020
Proporti Proportio %
mil VND mil VND on mil VND n mil VND change
A.CURRENT
ASSETS 5.121.932 5.198.143 54,2% 3.955.178 47,6% 1.242.965 31,43%

III. Short term 938.941 47,55%

receivables 2.982.044 2.913.674 30,4% 1.974.733 23,8%

269.417 20,44%
IV. Inventories 1.431.401 1.587.494 16,6% 1.318.077 15,9%

B.LONG TERM 39.082 0,90%

ASSETS 4.677.710 4.387.438 45,8% 4.348.357 52,4%

I.Long term (198.555) -16,32%

receivables 1.082.534 1.018.417 10,6% 1.216.972 14,7%

303.128 20,75%
II.Fixed assets 1.721.152 1.764.057 18,4% 1.460.928 17,6%

V.Long term 227.839 23,21%

invesments 1.213.207 1.209.484 12,6% 981.645 11,8%

1.282.047 15,44%
TOTAL ASSETS 9.799.642 9.585.582 100,0% 8.303.535 100,0%

Total assets expanded to VND 1.282 billion at the end of 2021, upside 15,44%. Like others
companies in the industry, short term receivables and inventories are the two largest accounts of
the total assets. Short-term receivables on December 31, 2021 are VND 2.913 billion, accounting
for 30.4% of total assets and show an increase of VND 938 billion compared to the end of 2020.

The inventories at December 31, 2021 are VND 1.587 billion, an increase of VND 269 billion,
equivalent to an increase of 20.4% compared to December 31, 2020, accounting for 16.6% of the
total asset. The two most increase sub-accounts in inventories are raw materials inventory
(increases by VND 221,957 billion) and unfinished production and business expenses (increases
by VND 133 billion).

As a parent company and working on both commercial and manufacture sectors, DBC is
investing in a number of projects to support the activities of the company. The fixed assets is also
an important part of the company with total value at the end of 2021 is VND 1.721 billion (↑ 20,7%
compared to the end of 2020), accounting for 18,4% of total assets.

2021 compared to
Q1/2022 2021 2020 2020
Proporti Proportio %
mil VND mil VND on mil VND n mil VND change

1.282.047 15,44%
C. LIABILITIES 5.139.832 4.944.386 51,6% 4.696.127 56,6%

I. Short term 248.259 5,29%

liabilities 4.017.284 4.038.400 42,1% 3.189.238 38,4%

Short term 849.161 26,63%

payables 803.827 1.037.861 10,8% 726.515 8,7%
Short term
advances to 311.346 42,85%
suppliers 470.847 453.945 4,7% 519.540 6,3%
Short term
borrowing and
finance lease (65.595) -12,63%
liabilities 2.392.362 2.114.233 22,1% 1.631.900 19,7%

II. Long term 482.332 29,56%

liabilities 1.122.548 905.987 9,5% 1.506.889 18,1%
Long term
borrowings and
finance lease (600.902) -39,88%
liabilities 874.277 656.877 6,9% 1.178.438 14,2%

D.OWNERS’ (521.562) -44,26%

EQUITY 4.659.810 4.641.195 48,4% 3.607.408 43,4%

1.033.787 28,66%
I. Owners’ capital 4.659.810 4.641.195 48,4% 3.607.408 43,4%

1.033.787 28,66%
Owners’ shares 1.152.394 1.152.394 12,0% 1.047.639 12,6%

Undistributed 104.755 10,00%

earnings 572.103 550.941 5,7% 643.827 7,8%

TOTAL (92.886) -14,43%

RESOURCES 9.799.642 9.585.582 100,0% 8.303.535 100,0%
Regarding the liabilities side, total debts of the company increased by 15,44% with total value of
VND 4.944 billion at the end 2021. Short term payables and Short term borrowing and finance
lease liabilities are the two biggest firm’s liabilities. Short term payables show an increase of
26,63% where in details the payables for offshore suppliers at the end of 2021 nearly double as
end of 2020. Both short term and long term borrowing and finance lease liabilities decreased in
2021, the decrease are 12,63% and 39,88% respectively. Total liabilities of DBC to banks and
leasing companies account of ~66% of total short term and long term borrowing and leasing
liabilities. According to the CIC report at September 2021, all of those debts are standard debts.

Financial Ratios:

Liquidity ratios 2021 2020

1. Current ratio 1.28 1.24
2. Quick ratio 0.75 0.66
Efficiency ratios
3. Working capital turnover 1.90 1.52
4. Inventory turnover 5.52 4.80
5. Receivable turnover 3.57 2.73
Leverage ratios
6. Equity/Total resources 48.41 43.44
7. Long term liabilities/Owners' equity 19.52 41.77
Profitability ratios
8. Gross profit/net revenue 8.21 9.65
9. ROA 14.44 11.44
10. ROE 33.56 29.31
Liquidity ratios has been improved over the years and the current ratio is over 1 proving the
capability of repayment debt.

Efficiency ratios are increasing showing the improvement of selling goods and collecting debt of
DBC.

The rise in ratios of equity/total resources and the fall of long term liabilities/Owners’ equity ratio
imply the ability to fund debts by using internal sources because of the sharp increase of profits.

Term loan facility evaluation:

- Amount requested: USD 50 mil.
- Tenor: 5 year.
- Approval opinion: Not approve for the whole USD 50 mil. A consideration of a smaller
financing amount or a syndication loan of USD 50 mil where BNP acts as Mandated Lead
Arranger Bank (MLAB) & Book Runners is suggested.
- Explanation:
 As of June 30, 2022, total borrowing and leasing from banks and FIs (both long term and
short term) equals to USD 146 mil whereas long term borrowing is USD 27 mil while total
assets are USD 458 mil.  Borrowing value accounts for 31,8% of total assets.
 On the other hand, the business performance this year is not in favorable conditions due
to the sharp increase in input prices from animal feed ingredients and materials, the rise
of the USD and interest rates. On top of that, the profit on 2021 increase partly because the
transferred profits from subsidiaries. Net profit as of June 30, 2021 is only USD 7.6 mil,
equivalent to 16,7% of net profit on June 30, 2020.
 Addition requirements: credit insurance for this term loan. If this loan is for a project
investment, the company is suggested to settle a separate legal unit to manage the project.
 Further questions:
Question 3: Please provide the repayment schedule and cash flow of the project or
business plan of this year.
Question 4: How to repay the loans? (from business profits or other sources? The certainty
and stability of those sources?)
Question 5: How does the company manage its receivables and payables to be paid on
schedule?