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CHAPTER 1
STUDY METHODS OF ASSET MANAGEMENT
IN LISTED CONSTRUCTION JOINT STOCK COMPANIES IN VIETNAM
1.1. Qualitative study
The qualitative study in this thesis is used to find out the approaches of asset
management currently practiced in the companies under research, which cannot be
described in details or measured or quantified, such as models of cash flow forecast,
material needs, tracking of liabilities, inventory, fixed assets, etc In addition, it provides
more specific evidence to explain (or to find out the cause of) this situation, which involves
perception of the management board, appoaches of capital management, business structure,
mechanism and policy of the State, etc The data in the study came mainly from
businesses selected for research, including a system of files, reports, websites or opinions
given by the staff interviewed The collection of data was done in three ways: In-depth
interviews, direct observation and desk research. The participants consisted of 15
enterprises randomly selected by cluster.
1.2. Quantitative study
Through the quantitative variables clearly determined, the researcher could find out
general rules of asset structure, asset management, capital structure, etc of the listed
construction joint stock companies in Vietnam. Sequentially, the researcher produced
objective conclusion and assessment on achievements and drawbacks of asset management
in these companies. The main source of data included the audited financial reports of 104
listed construction joint stock companies from 2006 to 2010 and the data from the General
Statistics Office, Ministry of Construction and the State Securities Commission. When the
variables were sufficient, the reasercher was able to apply the analysing techniques of
descriptive statistics and correlative regression.
CHAPTER 2
THEORETICAL BASIS OF ASSET MANAGEMENT
IN CONSTRUCTION COMPANIES
2.1. Overview of asset in construction companies
In this thesis, asset management was analyzed with focus on forms of the existing

assessing financial outcome of investment decision, pricing, depreciating, replacing and
disposing fixed assets. As construction is a special industry, there should be close focus on
asset lease and machinery depreciation by capacity and productivity.
2.4. Criteria for evaluating asset management in construction companies
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Asset management in construction companies can be evaluated based on the a
number of key criteria as follows:
Current assets
Short-term solvency = (1.25)
Current liabilities
Current average receivables
Average period of collection = (1.27)
Average sales on credit /day
Current net revenue
Current inventory turnover = (1.30)
Currentl average inventory
Current net revenue
Current efficency ratio of fixed assets = (1.36)
Current average use of fixed assets

Current profitability ratio of fixed asset = Current net profit after tax (1.37)
________________________________
Current average use of fixed assets
Period efficiency of total assets = Current net revenue (1:38)
_____________________________________
Current average use of total assets

Period profitability ratio of total assets (ROA) = Profit after tax and interest (1.39)

Current average use of total assets

issueing company rules as prescribed in Decision No. 15/2007/QÐ-BBCVT - BTC;
complying with regulations of corporate governance promulgated in Decision No.
12/2007/QD-BTC; and publicizing information under the provisions of Circular No.
38/2007/TT-BTC.
Table 3.6: Average value of asset structure of listed construction joint stock companies
from 2006 to 2010
Unit:%
Year Cash/Total assets
Receivables/
Total assets
Inventory/ Total
assets
Fixed assets/
Total assets
2006 6,93 33,79 28,72 21,88
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2007 7,78 31,69 27,86 17,77
2008 5,70 27,59 32,55 17,37
2009 6,86 28,09 29,11 17,93
2010 6,08 32,07 26,63 17,53
Source: [31] and calculations by author
As we can see, in the asset structure of the companies under research, the accounts
receivable took the largest proportion (except in 2008), followed by inventory, fixed assets
and cash. Although it presented the particular features of the construction industry, the asset
structure above showed many potential risks of liquidity (e.g. failure to collect accounts
receivable despite business results recorded), preventing the companies from finishing work
on schedule or ensuring quality of work as agreed (due to shortage of capital).
3.2. Current situation of asset management of listed construction joint stock companies
3.2.1. Status of cash management
3.2.1.1. Forecast of cash flow

3.2.1.2. Determination of optimal budget
The subjective evaluation given by 15 people interviewed showed that none of the
listed construction joint stock companies in Vietnam fully applied the model above.
Normally, the chief accountant determines the minimum cash balance for each period based
on short-term spending plans of the business and as well as on management experience (this
factor is quite important and was agreed on by 100% of the respondents). That balance is
stored partly as cash in the safes of the company, partly as deposits at banks to meet regular
needs of payment such as salaries, service fees of electricity / water / telephone / office rent,
purchase of equipment / sub- materials, and partly as a reserve for unexpected incidents
arising in the construction progress. In 9 of the 15 companies under survey, cash in safes
and deposits at banks accounted for most of the cash balance (75%). In the remaining
companies, an equivalent amount, including escrow for trust funds management at the
financial company of the corporation or savings at banks, is used as collateral for loans and
guarantees.
3.2.1.3. Monitoring and maintaining optimal budget
- Changes in payment policies:
When funds is abundant, the listed construction joint-stock companies can allow party A to
reduce the rate of advance (this is also considered a major factor that increases business
opportunities for the companies – agreed by 70% of the respondents), to delay collection of
machinery rent, to offer extension on outstanding debts, to advance employee salaries, to
increase rate of payment at sight for raw materials, to make early repayment, and to do the
opposite in case of temporary shortage of funds.
- Covering budget deficit:
If long-term deficit occurs, the chief accountant proposes to the company director for deficit
covering plans. In theory, several methods can help, such as selling liquidity securities or
withdrawing savings, recovering investment trusts, etc However, most of the responses in
the interview were "bank loans", which causes the company to sink deeper in debts and
suffer from risk of losing ability of solvency.
- Investment of surplus funds:
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regulations on each type of contract (Under Articles 49, 50 of the Procurement Act 2005).
Second, billing period:
The contractor and investor make agreements based on specific plans of construction and
installation approved to ensure timely supply of capital for the construction companies. For
the projects with over 30% of the capital funded by the State, the payment term is agreed by
the parties, but no more than 14 working days from the date party A receives complete valid
application of payment as agreed in the contract (Article 18, Decree 48/2010/ND – CP).
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Third, changes in terms:
Possible changes in construction cost can be foreseen in all construction contracts signed
between the listed construction joint stock companies and investors, which requires advance
adjustments to payment terms.
Fourth, measures of payment security:
Typically, to protect the interests of investors and contractors, measures of payment security
are specified in the contract. As stated above, under the current regulations, the contractor
shall make the bid security, contract performance guarantee, and advance payment
guarantees to compensate investors for any losses caused by the contractor’s faults in the
construction process. Forms of payment guarantee are collateral or escrow or letters of
guarantee (usually issued by commercial banks), which are specified by the investor but do
not exceed 10% of the contract value.
Conversely, the contractor may request the investor to lease payment guarantees to
prevent such risks as investor’s disappearance, bankruptcy, breach of contract, and delay of
payment. However, the result through in-depth interviews showed that the construction
enterprises (including the listed construction joint stock companies) were not competent
enough to require the investor to secure payment. Consequently, they must depend on the
current law to protect their own interests when such situations arise.
3.2.2.3. Monitoring and collecting debts
According to Table 3.3, the accounts receivable account for 34.27% of the total assets, most
of which is "receivables from customers" (60.5% - except for Vietnam Electricity
Construction Corporation – VNECO and Song Da - Thang Long Construction Corporation).

be paid as commited. If the investor deliberately delays payment after repeated reminders or
goes bankrupt or flees, the contractor will stop construction until receiving enough money
or file a lawsuit to the enforcement agencies for settlement. Under Article 39, Decree
48/2010/ND - CP, the listed construction joint stock companies may temporarily stop the
work in the construction contract when the investor fails to make payment after more than
28 days from the due date.
In addition, under Article 44 of the Decree, the parties may hold negotiation and
make settlement on what have been signed in contract. Recently, negotiation has been the
most preferred solution applied by the listed constructions joint stock companies. Lawsuit is
applied only when negotiation does not work. Commercial arbitration is not taken in
consideration.
3.2.2.4. Seeking counterpart fundings for receivables
It is necessary, even urgent, for the listed construction joint stock companies to seek
counterpart fundings for receivables. This is because of the fact that although all of the 15
construction companies under survey gained profit (profit after tax> 0), their business result
was not yet transformed into cash. Except for PETROVIETNAM NGHE AN
CONSTRUCTION JOINT STOCK CORPORATION – PVNC, which had a larger net cash
flow than profit after tax, all of the remaining companies had smaller cash flow than profit
after tax. Particularly, the net cash flow of 8 of the 15 companies was under zero, suggesting
that the cash flow of these companies was not sufficient enough to cover the spending needs
even when the companies were making profit. Only after emplementing investment
activities could the net cash flow in 2010 of the companies be improved.
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In the short term, if Party A does not make sufficient and due payments, the chief
accountant or the director of the construction company may hold negotiation with the key
stakeholders such as employees, suppliers of raw materials, machinery-for-lease
companies for extension of the due debts until the company’s accounts receivable are
collected. In addition, the management staff can navigate the idle funds of other projects to
the projects in need. When the payment is delayed for longer than one month, the chief
accountant may decide to sell liquidity securities, to withdraw savings or to apply for short-

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like costs of raw materials, direct labor, overall production, machinery use, management and
other transactions Furthermore, the companies should carry out periodical accounting
work to determine the volume of completed items to figure out revenue and cost of goods
sold. Under Decree 112/2009/ND - CP on cost management of construction projects, the
Ministry of Construction gives guidelines on how to set and publicize construction norms,
and ways of identifying and managing price set for each project.
3.2.4. Status of asset management in listed construction joint stock companies
3.2.4.1. Selecting approach of forming fixed assets
Currently, the listed construction joint stock companies in Vietnam only own some
common device (required for all projects), which is of small value and easy for move,
including hoists (similar to lifts for transporting workers and materials to upper floors),
excavators, bulldozers, excavators, tamping machines, drilling machines, lathes, concrete
mixers, pumps, generators, transport vehicles, cranes and such tools as scaffolds, concrete
slabs, columns, panels arrays, instrumentation, etc These assests are formed by purchasing
from Japan (28% to 58%), Russia, Germany, China (5% to 17%) and Vietnam for they are
of good quality, low fuel consumption, and suitable for technical requirements of local
construction.
3.2.4.2. Assessing financial outcome of investment decision
Two key factors often taken in consideration before purchasing fixed assets in the
listed construction joint stock companies in Vietnam include the practical need (regular /
irregular) and the cost savings of the new equipment compared with that of rent. Then,
decision on which assets to buy (in terms of models, types, suppliers ) is based on several
factors such as advice of sales staff, company budget and even discount rate for the decision
maker. Regarding hiring sub-contractors, the economic efficiency is measured by the
difference between the rate of profitability achieved by self-performing the work and the
rate obtained from transferring work to the sub-contractors. The selection of sub-contractors
is primarily based on traditional relationship, cooperation, or affiliation between the units
(dependent or independent) in the same group or corporation, and the rate of commission
offered by the subcontractors.

asset to pay short term debts. Compared with that of the joint stock companies of other
sectors, this target is almost the same in value (see table 3.10). The quick solvency ranging
from 0.7 times to 0.8 times on the yearly basis demonstrated that the construction
companies did not depend much on inventory. Without selling stocks, they were still able to
settle up to 80% of their total liabilities.
Average ROA of 4.67% proved that every 100 VND rationally invested in total
assets by the construction companies resulted in 4.67 VND (as profit after tax and interest).
In 2010, this ratio was higher than that of other listed joint stock companies in the industrial
sector, public services, finance and telecommunications.
The average ROE of 16.5% (in 5 years) meant that every 100 VND properly invested
in the listed construction joint stock companies in Vietnam resulted in 16.5 VND in profit
(or dividends) after one year. In 2010, the ROE of these construction companies was 13.8%,
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higher than that of the companies in the industrial sector, public services, consumer services
and telecommunications.
3.3.2. Drawbacks
Table 3.16: Average value of targets for assessing asset management in listed
construction joint stock companies in Vietnam
Target
2006 2007 2008 2009 2010
Immediate solvency (times) 0,13 0,14 0,14 0,18 0,15
Average period of collection (days) 136,3 166,4 163,9 170,7 187,9
Efficiency ratio of fixed assets (times) 8,91 9,91 8,31 7,13 6,18
Profitability ratio of fixed assets (times) 0,39 0,58 0,42 0,41 0,41
Source: [31] and author's calculations
First, liquidity tended to decrease and was weaker that that of the listed joint stock
companies of other sectors. Especially, the immediate liquidity was much weaker than the
quick solvency, averaged at only 0.15 times in 5 years. That is, without debts recovery, the
money available was only enough to pay 15% of the short-term debts, and when the investor
failed to pay debts on time, the liquidity of the construction companies would be threatened.

(difference between years only ranged from 1% to 2% - except in 2006) with a debt ratio of
at least 66% of the total capital. Particularly, some companies like Song Da - Thang Long
Corporation, Song Da Construction and Investment Corporation, Construction Company No.
21 and Song Da 27 had regular debt of approximately 90% of the total capital. The short-
term debt ratio of the companies surveyed was approximately 60% of the total debt.
Table 3.19: Fundings structure of listed construction joint stock companies in Vietnam
Unit:%
Year 2006 2007 2008 2009 2010
Debt / total capital 77,84 66,92 67,32 69,41 66,70
Short-term debt / total debt 64,96 58,22 58,20 58,88 54,62
Source: [31] and calculations by author
Theoretically, through the financial leverage mechanism, the use of debt helps create
tax savings and gain income for the business owners. But, as a result of this, the need of
payment of the business will increases (both the short term and long term), creating pressure
on (even change the behavior of) the management staff in the decision-making process. Not
only the way of maintaining capital structure is of many disadvantages, but also the method
of raising capital is not reasonable. The capital is raised from trade credit, bank credit, initial
contribution (the first time issuance of shares) and undistributed profits (funds formed with
profit after tax to supplement the equity). These are the traditional approaches commonly
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applied in 75% of the enterprises in Vietnam (regardless State- owned companies, limited
liability or joint-stock).
3.3.3.2. Objective causes
In addition to the subjective causes mentioned above, there remain objective reasons
for the drawbacks in the asset management of the construction companies in general, and
the listed construction joint stock companies in particular. The most outstanding reason is
the support services of debt management in the construction enterprises have not yet
developed.
Currently, there are about 7,000 lawyers [40] working for the bar associations, law
offices and law firms, primarily located in large cities, providing advice or protecting

to participate in the bidding and reduces business opportunities of the enterprises. In the
bidding process, there remain frauds committed by investors and contractors such as bid-
agreement (that is, the investors or the bidders agree to help a pre-appointed bidder to win
the bid); transforming bid packages into too bid packages (which makes smaller companies
unable to enter for the bidding), or into too small packages for the method of bid
appointment to be applied; releasing no bidding information to the public as regulated by
the State; falsifying bidding information; taking advantage of the corporation or group’s
capacity and reputation to win the bid, then sub-contracting to the subsidiaries; offering an
excessive price to win the bid, then faking reasons to apply for capital supplementation;
offering a high rate of commission (from 15% to 30% of the contract value) to the investor’s
representative and the bidding assembly [45]
Also, the inconsistent overall plan of regional and territorial construction has
increased the debt of many listed construction joint stock companies.
CHAPTER 4
SOLUTIONS FOR ENHANCING IN ASSET MANAGEMENT
IN LISTED CONSTRUCTION JOINT STOCK COMPANIES IN VIETNAM
4.2. Direct solutions for improving asset management in listed construction joint stock
companies in Vietnam
4.2.1. Assessment on impact of asset management on ROA, ROE and Z index in listed
construction joint stock companies in Vietnam
Table 4.1: Impact of asset management and debt coefficient on ROA, ROE and Z
index in listed construction joint stock companies in Vietnam
Target
Coefficient
affecting ROA
Coefficient
affecting ROE
Coefficient
affecting Z
Short-term solvency 0,171 0,268 0,490

scientific estimates, we can confirm that when the asset is strictly and scientifically
controlled, ROA, ROE and Z will all increase, improving profitability while the company’s
operation is still in safety with no risk of bankruptcy. The impact of short-term liquidity and
average collection period were quite serious, so management staff should prioritize the
management of cash flow and debts. Although the debt ratio can amplify ROE, it reduces
ROA value and increases Z index, meaning that financial leverage gives business owners a
higher profit but hides many potential risks of liquidity since it does not originate from real
power of the enterprise.
4.2.2. Application of model Miller - Orr in funds management - research conducted at
Song Da-Thang Long joint-stock company
- Step 1: Determine minimum budget balance: based on account balance of cash and cash
equivalents at the end of the most recent 12 quarters and the comments of the accounting
staff interviewed, the minimum budget balance that keeps safety for the company is
determined at 73.177 billion VND.
- Step 2: Determine budget range d
3 Cb x Vb 1/3
d = 3 x x ( 4.13 )
4 i
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As Song Da-Thang Long only had term deposits at the bank and it did not hold liquid
securities, “i” is determined as interest on savings with term of 12 months. Based on the
data published by the State Bank and the author's calculations, the average savings interest
rate in 3 years from 2009 to 2011 was 12.33% / year.
Cb is determined as the interest rate on savings lost when the company makes early
withdrawal. With interest rate on non-term deposits of 3% / year, if withdrawal is made
before maturity, opportunity cost shall be 9.33% / year. In addition, there remain some other
costs on withdrawal such as travel expenses and fee of withdrawal made with other banks.
But the management staff in the interview commented that those expenses were
insignificant.
Variance of revenue and expenditure budget (Vb) was determined as 14527.04


1,0788 1,0827 0,0040
Debt ratio 95,24% 95,10% -0,13%
Profit 3,90% 4,01% 0,11%
ROA 1,46% 1,53% 0,07%
ROE 30,60% 31,18% 0,58%
Again, it is confirmed that the application of model Miller - Orr in the fund
management of Song Da-Thang Long has brought positive effects. For instance, it has
helped increase the liquidity and profitability and reduced the debt ratio. That is, the proper
approaches for fund handling, on the one hand, helps strengthen liquidity, and on the other
hand, increases profitability. In other words, strict and scientific management of budgets
helps achieve the objective of maximizing asset value while keeping safety (no increase in
debt pressure) for enterprises.
4.2.3. Using combined software for management of debt accounts, inventory and fixed
assets in listed construction joint stock companies
Besides its common features such as tagging, tracking, classifying, conducting
inventory, managing transactions and documents in a scientific way, the software helps
management staff to produce plans, annual reports, and corresponding estimates when the
input parameters change (specially effective for selecting approaches of depreciation,
investment or funding). Modern software can have additional functions such as automatic
dispatch of notice (on default schedule) to the electronic mailbox of the management staff to
remind or give warnings about construction progress, incurred liabilities, risk of material
shortage or date of machinery maintenance With efficient support of the modern
management means, productivity and efficiency of the management staff’s work will be
improved significantly.
Currently, it is very easy to find the software with such features. For large companies
owning a wide network and envolving in multi-business such as VINACONEX,
PETROLVIETNAM CONSTRUCTION JOINT STOCK COMPANY (PVC), Song Da -
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Thang Long, Tasco, etc., it is advisable to apply ERP solution (Enterprise Resource

TT

Name Initial Initial
anticipated
ROE
Initial DFL

anticipated
DFL
Initial Z

anticipated
Z
21
debt
ratio
ROE 1 Song Đa – Thang Long 95,4% 30,0%

4,6% 1,99 1,58 0,14 0,27
2 Construction No 21 90,9% 27,4%

8,2% 1,75 1,49 0,79 0,95
3 Join Stock 482 80,8% 17,1%

10,9%

1,74 1,59 0,70 0,77

As the capabilities of asset management did not change, debt rate in the capital
structure was reduced, equity ratio increased, and financial leverage decreased (within the
range of 1.1 to 2.2 times ), ROE of the companies listed was amplified compared with the
original, but reduced to less than the average level of the group (13.8%). However, as a
resutl of this, the threat of bankruptcy reduced. Particularly, thanks to this, Construction
Joint Stock Company No 21 was able to move into safe state (Z> 0.862). The Zs of the
remaining companies (except Song Da - Thang Long) all stayed at 0.7 or more.
If EBIT in 2010 increased 1.5 times compared with the original and the debt capital
structure of debt and credit accounted for 70%, the situation of 10 listed construction joint
stock companies would change significantly.
Table 4.12: Value of ROE, Z and DFL of some listed construction joint stock
companies with assumed debt ratio remaning at 70% of total capital and EBIT
increasing by 1.5 times compared with that of 2010
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TT

Name
Initial
debt
ratio
Initial
ROE

anticipated
ROE

Initial DFL

anticipated
DFL


12,7%

1,79 1,30 0,62 1,04
5
Lilama 18
84,7% 16,4%

18,7%

2,09 1,40 0,58 1,25
6
Song Đa Construction
and Investment
92,1% 15,9%

12,6%

3,03 1,51 0,49 1,55
7
Song Đa207
81,9% 15,3%

19,6%

1,97 1,39 0,70 1,42
8
Construction 565
87.4% 14,8%


total debt, and increase short-term liquidity by 1.5 to 2 times.
Table 4.14: Debt structure in 2010 of some listed construction joint stock companies
with assumed quick solvency as 1
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TT

Name
Initial short
term debt
in total
debt
anticipated
short term
debt in
total debt
Initial
short
term
solvency
Initial
quick
solvency
anticipated
short term
solvency
1
Song Đa – Thang
Long
52,5% 33,0% 0,73 0,63 1,17

99,1% 57,39% 1,01 0,58 1,74
Source: [31] and calculations by author
4.4. Support for deploying solutions of improving asset management efficiency in listed
construction joint stock companies in Vietnam
Ministry of Finance and Ministry of Construction should coordinate with Vietnam
Construction Association, professional associations and Economic Research Institute to
carry out workshops, in-depth research or issue detailed guidelines on asset management for
construction companies. At the same time, there should be adjustment to the regulations on
asset depreciation, enabling construction businesses to accelerate depreciation for
technology renovation.
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In addition, the Government and relevant agencies should facilitate development of
legal services with focus on compiling contracts and settling disputes through commercial
arbitration in the construction sector. It is also advisable to establish more companies
specializing in selling and purchasing debts, and promote debt collection service. Bidding
and construction planning should also be improved towards perfection.

CONCLUSION
The fact that asset management fails to achieve the intended goals in 57% of the
listed construction joint stock companies has raised an urgent need to practice appropriate
groups of solutions, focusing on such issues as human resources, capital management,
facilities for management and management deployment. The groups of solutions above
should be implemented in the order of importance and urgency of each group. It is
recommended that solutions for human resource be chosen first, paving the way for
successful application of the remaining measures. Solutions for capital management also
should be carried out as soon as possible to improve short-term liquidity, which, together
with strict and scientific management of asset, will help create a foundation for sustainable
development. Solutions for management facilities and management deployment will help
increase management efficiency, so the companies should base on their actual ability and
need to build their own roadmap for implementation.