Company reports

PHR [+29% - BUY] - New Exposure to Industrial Park Segment - AGM note PHR - 02 April 2019

02-04-2019 14:28:38

Phuoc Hoa Rubber JSC., company recently held the Annual General Meeting with following key points: 2018 Business Performance Review. In FY2018, revenue and net profit achieved VND 1,721bn and VND 519bn, exceeding 9% and 45% target plan, respectively. The average natural rubber price remained low, at VND 31.4 million per ton in 2018, decreasing by 22% YoY. 2019 earnings outlook. PHR’s parent company sets the VND 2,192bn revenue and VND 1,246bn net profit before tax targets for 2019.  In which, rubber segment will contribute VND 75bn to net profit before tax. Meanwhile, land transfer and rubber wood continue to be a key growth driver for the company. In 2019-2020, PHR will transfer 1,000 ha land for VSIP3 and NTC with total profit of VND 2,000bn. In 2020-2025, PHR will invest new industrial park company in Hoi Nghia (Nam Tan Uyen District, Binh Duong) with total land size of 650 ha. For the long term, PHR plans to transfer total rubber land of 4,500 ha for industrial park development in 2020-2025. In 2019, PHR will divest from Geruco Song Con Hydropower JSC.,, Nam Tan Uyen IP JSC., and Phuoc Hoa – DakLak Rubber Ltd., with total investment value of VND 130bn. PHR will use the divestment proceeds to acquire 20% VSIP II stake.

PHR [+32% - BUY] - Industrial Park Development is A Game Changer - Equity Update - 22 Feb 2019

22-02-2019 16:20:32

2018 Business Performance Review. Despite a fall in rubber price, PHR continued to deliver a strong growth thank to rising wood price, increasing rubber-tree liquidation area and land transfer value. In FY2018, revenue and net profit achieved VND 1,721bn and VND 519bn, exceeding 9% and 45% target plan, respectively. The average natural rubber price remained low, at VND 32.9 million per ton in 2018, decreasing by 18% YoY. 2019 earnings outlook. Amid a low rubber price, PHR sets 2019 plan with around VND 1,600bn in revenue and VND 1,300bn in profit before tax. Land transfer and rubber wood liquidation play key growth driver. The company plans to liquidate ~ 1,000ha rubber wood and transfer ~ 650ha land for industrial parks development. As rubber price remains low, rubber segment is expected to contribute a marginal portion for the company’s total income. In 2019, rubber exploitation and rubber consumption volume will amount 11,500 tons and 26,500 tons, respectively. We expect PHR’s revenue and net profit will achieve VND 1,562bn (+0% YoY) and VND 1,287bn (+107% YoY) in 2019.

PNJ [+28.1% - BUY] - Diamond & Gemstone Category as Key Growth Driver - Equity Update - 18 Feb 2019

18-02-2019 00:00:00

2018 snapshots: Diamond & Gemstone jewelry is key to SSSG & margin upswingPNJ ends 2018 with VND 14,680bn in sales (+33% YoY) and VND 960bn in NPAT (+32.5% YoY). The continuously breakneck growth is attributable to: 1) 20% SSSG of gold jewelry retail, 2) overall margin improved by 160 bps to 18.9%, and 3) 61 new stores, grossing 324 stores nationwide. Our research indicates the primary factors to SSSG & margin upswing are accelerated demand for jewelry products and the increasing proportion of diamond & gemstone jewelry in gold retail.2019F outlook: Key themes are Diamond & Gemstone jewelry, New collections & Data-driven customer approachWe estimate PNJ to achieve VND 18,145bn in sales (+23.6% YoY) and VND 1,249bn in NPAT (+30.1% YoY) in 2019F. Followings are our key assumptions:Diamond & Gemstone jewelry to continue rising its proportion in gold retail as company guidance, which consequentially allows PNJ to increase both ticket size and margin in long run. Silver retail to recover as PNJ plans to redesign its silver collections towards more bold and larger pieces. We estimate 5% SSSG and 65% GPM for this unit in 2019. Wholesales & gold bar to see 20% YoY growth in sales (same as 2018) while export sales to see 10% YoY growth (2018: +25.6% YoY). 50 new stores, including 44 PNJ Gold, 3 CAO Fine and 3 watches stores. SG&A expenses to sales ratio to remain stable at 10.5% (2018: 10.4%).

OIL [NOT-RATED] - Delayed Divestment Schedule Hinders Upside Potential - Flash Notes - 04 Sept 2018

04-09-2018 13:07:20

PetroVietnam Oil Corporation (PVOil), the second largest gas and oil distributor, recently hold the 1H2018 Analyst Meeting and 2018 AGM. There are some following highlights: 6M2018 earnings result – Stronger performance thanks to higher oil prices and increasing consumption ·         Revenue and Net profit (reviewed and audited) reached VND 32,324bn (+14.35% YoY) and VND 331bn (+62% YoY). Sales volume was 1.64 mn tons, increasing by 8% YoY. The company delivered the better performance thanks to the recovery of oil prices and an increase in retail consumption. Of which a VND330bn profit, the company recorded the VND120bn from 2017 tax refund and VND50bn from subsidiaries’ dividend, leaving the core earnings of VND 160bn. ·         PVOIL completed an initial public offering (IPO) in Jan, 2018 and listed on UpCOM with OIL ticker in March, 2018. The company also continued seeking strategic investors to divest the state-owned stake. OIL revealed that there were four strategic investors having an interest in the company. The divestment process, however, was stuck due to government’s bureaucracy, and as the result, the process will extend to 2019. The company plans to divest state-owned stake through direct transaction or put-through transaction. Since August, 2018, the company transformed its business model to Join stock company and will remain its foreign investor room at 6.69%. ·         In April, 2018 PVOil launched PV Oil Easy, which is a cashless payment app for drivers and petrol stations. This application is used for smartphones and tablets that help users to buy and manage their petrol purchase via a QR code. Viettel Post was one of the first customers to sign up and use the app. Petrolimex, OIL’s competitor, launched non-cash payment (ATM card) service since 2017.

FW: PMG [NOT-RATED] - Aggressive Southward Expansion as Main Catalysts - AGM Notes - 26 April 2018

26-04-2018 11:52:04

We attended PMG’s AGM with the following key points: 2017 Performance: Strong Growth after M&A with V-Gas. ·         PMG posted strong growth in 2017. Revenue achieved VND 886bn (+98% YoY) and net profit after tax reached VND 49bn (+119% YoY). The top-line and bottom–line both exceeded 61% and 49% of the 2017 plan, respectively. ·         Maintaining dominant position in Central region. PMG’s current market covers from Hue province to South-West, locating in Vietnam Central region, in which Hue province accounts for 90% market share, followed Quang Nam - Binh Dinh province (>75%), Highland (>50%), Dong Nai province and Ba Ria province (>45%), Ho Chi Minh city and South-West region (20-30%). ·         Higher new entry barrier from Decree 19-2017/NQ-CP. Ministry of Finance (MoF) implemented the new requirements for gas distribution sector. In particular, MoF required gas distributors must have at least 100,000 gas cylinders, and 300m3 storage. ·         Stock dividend payment: The company will pay 15% of stock dividend. 2018 – 2020 onwards Plan – M&A and market share expansion are the main catalysts. ·         In 2018, the company sets a revenue of VND 1,062bn (+20% YoY), NPAT of VND 58bn (+15% YoY) and dividend payment of 15-20%. ·         Southward expansion after M&A with V-GAS. It aims to gain more Southern market share and develop its brand name through horizontal merger with V-Gas. The region is a promising market due to high population density compared with Central and Highland regions. ·         High demand due to low gas consumption per capita. Vietnam has lowest gas consumption per capita (116 m3) compared with region such as Malaysia (1,300 m3) and Thailand (778 m3). This creates more room for growth for gas distribution business in Vietnam. ·         In 2020, the company’s revenue is projected to achieve VND 2,000bn, with a CAGR of 46.78%.

MWG [BUY - 38.9%] - BHX We Will Get There - Equity Update - 29 March 2018

30-03-2018 09:38:12

We reiterate BUY rating for MWG with a revised 12M TP of VND 158,500 (previously VND 162,500) – a 38.9% upside including 2018F DPS of VND 1,200. This revision is primarily due to the longer-than-expected BHX’s breakeven period 1 year. Below are key investment highlights:   § MWG – We are still convinced by the long-term success of BHX. MWG reported net sales of VND 66.3trn (+49% YoY) and NPAT of VND 2,206bn (+40% YoY), beating our sales forecast by 3%. BHX – assumed as MWG’s growth engine after 2018F – was still making loss. We expect this grocery chain would turn profitable no earlier than 2020F, which is 1 year longer than our prior estimate due to difficulties in acquiring new customers and optimizing operations. That said, we are still convinced by the long-term success of BHX though mid-term challenges and their unfavorable impact on MWG are inevitable.   § BHX: “We will get there” – A statement by Mr. Robert Alan Willett (MWG’s board member & BestBuy International’s ex-CEO) when being asked in the AGM whether BHX can survive and become the No.1 grocery retailer in Vietnam has confirmed the Company’s confidence and commitment to replicate the success of TGDD & DMX in their “younger brother” BHX. Still, BHX is facing unsolved operating issues especially in fresh stock management, resulted in net loss of VND 161bn last year. We estimate 2018F revenue to be VND 4.5trn and net loss to be VND 338bn (-20% and +275% vs. prior estimates). GPM of fresh foods and packaged foods would extend 400bps and 100bps to 16% and 12% respectively. We expect BHX to turn profitable no earlier than 2020F with net sales of VND 27trn and NPAT of VND 297bn. Our estimated new BHX stores and SSSG in 2018/19/20F are 500/1500/1500 and 20%/25%/15% respectively.   § DMX – High double-digit sales growth is expected in 2018F. DMX was the key growth factor of MWG last year with VND 30.2trn in sales (+120% YoY) and 642 stores by end-2017 (+386 stores vs. 2016). For 2018F, we estimate DMX to continue being MWG’s sales powerhouse given that 386 new stores opened last year will run full year. Particularly, sales is expected to climb to VND 41.5trn (+37% YoY) with 70-80 new stores. SSSG may decrease to 5% (2017: 6.5%) and GPM would increase to 17% (+80 bps YoY).   § TGDD – Matured but still a major sales contributor. TGDD posted VND 34.6trn in sales, up 13.2% despite of negative SSSG (-2%) for the first time after 13 years in market. MWG now plans no expansion for TGDD from 2018F onwards. We estimate 0% SSSG and 0 net new store for TGDD in 2018F. Accordingly, sales would grow slightly 4.2% YoY to VND 36trn, mostly attributable to 2017 new stores that will run full year.

DXG [NOT-RATED] - Transforming into Developer - AGM Notes - 19 March 2018

20-03-2018 09:30:50

We attended DXG’s 2017 Annual General Meeting (AGM) with the following key points: Gross margin surged to 62%, up from 42% in FY2016, benefiting from secondary investment segment. DXG brokers carried out 22,108 transactions in FY17, accounting for 29% of Vietnam’s property market transactions. The combination of brokerage and secondary investment resulted in a 99% YoY increase in brokerage revenue in FY2017. In secondary investment segment, DXG will put money into the trouble projects, in exchange, DXG obtains the right to be the prime broker or convert the loans into actual housing units at favorable prices. In addition, DXG may require the projects to be constructed by DXG’s construction division. At the end of FY2017, DXG had VND 1,546bn (+96% YoY) put as cash advance at more than more than 18 projects of other developers. 2018 outlook sounds good. For FY18, we expect DXG will achieve revenue of VND 4,704bn (+63% YoY) and net income of VND 1,024bn (+36% YoY). Revenue of development sector is based on our assumed DXG’s hand-over of Opal Riverside, Lux City, Opal Garden and Lux Garden. We conservatively forecast that brokerage sector will carry out 23,120 transactions (including DXG/LDG’s projects, third parties’ project and co-develop projects) bringing about VND 1,734bn. Diluted EPS forward is VND 2,660 implying P/E 13.5x.

PHR [+BUY - 21%] - Multiple Potential Catalysts - Equity Update - 16 March 2018

16-03-2018 10:02:57

We attended PHR’s 2018 Annual General Meeting with the following key points: 2017 strong performance. In 2017, PHR delivered a strong growth thanks to a surge in natural rubber (NR) price and rubber-tree liquidation. Revenue and net profit increased by 40% and 44% YoY, reaching at VND 1,654bn and VND 325bn, respectively. Gross profit margin remained high at 17.2%, up from 13.4% in 2016. 2018 target plan. In 2018, PHR sets a conservative plan. Particularly, revenue and net profit will achieve VND 1,931bn (+16.7% YoY) and VND 330bn (+1.5% YoY). Valuation. We reiterate our BUYING rating for PHR with a 12-month target price of VND 55,600 – a 13% potential upside before dividend yield, using a P/E method. We expect 2018F dividend to be VND 4,000, higher than planned cash dividend payment of VND 2,000 as PHR will enjoy strong cash flow without significant capital expenditure. The estimated dividend yield is c.8.13%, delivering total stock return of 21%.Key investment risks. (1) A downside risk in natural rubber price, (2) Delay in booking non-core businesses’ profit, and (3) Economy slowdown.

CTD [+11.5% - HOLD] - Lower Gross Margin Weighted Down Valuation - 2017 Equity Update - 21 Feb 2018

22-02-2018 16:03:48

2018 Outlook – Headwinds from 15% fall in 2017 newly signed contract projects together with gross margin pressure. The FY2018 backlog is estimated VND 22,802bn (+2% YoY) which was below our expectation of VND 24,050bn. We think the shortage was due to VinCity’s delay in FY2017. In addition, 15% fall in newly signed contracts in FY2017 increase the backlog burn rate in FY18 and become a leading indicator for FY18 slowing revenue growth. We forecast CTD will achieve a revenue of VND 30,462bn (+12% YoY) of which construction still accounts for 99.7%. We estimate new contract signed in FY18 will be VND 27,498bn. We forecast FY18’s revenue would be contributed by 79% of backlog transferred from FY17 and 21% of new contracts in 2018. We conservatively reduce full year gross margin to 7% to reflect our concern on residential high-end segment slow-down. Gross profit would be VND 2,150bn (+7% YoY). We still expect CTD to enjoy a strong financial income (VND 276bn), but this amount would be lower than in FY2017 as there will cash disbursements to new revenue platform. Net income arrives at VND 1,699bn (+3% YoY). EPS forward is VND 20,438. Valuation. We revise down our 12-month target price for CTD to VND 206,353 (+11.5% potential upside before dividend yield.) using DCF method. A lower target price reflects our concerns over a not-yet-contribution of new growth platform while core business would witness thinner gross margin and slowing revenue growth.

FW: MWG [+20.1% - BUY] - Strategic M&A to Secure Future Growth - Equity Update - 04 Jan 2018

04-01-2018 10:28:02

We reiterate the BUY rating for MWG with a revised 12M TP of VND 162,500 (previously VND 131,000) – a 20.1% upside including 2018F DPS of VND 1,200. This upgrade is attributable to improved cash flows following strategic M&A made in 2017. Below are key investment highlights: § #1 M&A: Tran Anh Group (HNX ticker: TAG) – From competitor to subsidiary. MWG completed the negotiation to acquire c.95% stake of TAG – a leading electronics retailer with 16% market share in Northern Vietnam. The deal will be funded by the 5Y 6.55%-fixed corporate bond of US$ 50mn issued in Nov-17, and MWG will possibly pay a premium over market prices. Though TAG’s business performance is questionable (VND 5bn loss in 1H17), MWG expects to leverage TAG’s 34 megastores (1,500-2,000 m2 per store, mostly in Hanoi) to increase its footprint in the North. We anticipate the takeover would not be easy for MWG – a Southern Vietnam-based company – due to culture and store-size differences (typical DMX’s store-size is 400-600 m2), and may take it 12-18 months to optimize the operation at TAG. The “TAG” brand would remain in the first 1-2 years before being replaced by MWG’s own brand. We estimate TAG to generate c.VND 7,500bn in sales and c.VND 110bn in NPAT in 2018&19F (2017E: VND 3,500bn in sales & VND 16bn in loss). § #2 M&A: An Khang (AK) – MWG’s move into retail pharmacy. In Dec-17, MWG announced the acquisition of the pharmacy retailer AK (established in 2006, 14 stores in HCMC). This M&A shows MWG’s ambition to leverage its retail know-how in multi-sector to secure future growth, amid the flagship mobile retail chain TGDD has matured and the fast-growing electronics retail chain DMX would mature in 1-2 years. Though MWG aims to open 30-40 new AK stores in 2018, there is still no clear plan regarding how it will execute the expansion. Thus, we currently rule out AK’s impact on the group financials and will revisit this case in further update. § Bach Hoa Xanh (BHX) – Expecting profit from 2019F onwards. BHX reported VND 1.2trn in sales with 208 new stores in 11M17 (now total 248 stores, 2016: 40 stores). We estimate this grocery retail chain to end 2017 with 280 stores, all locating in suburb districts for pilot testing. BHX is still making loss, of which the primary reason, in our opinion, is due to BHX has yet reached its optimal economies of scale. Thus, despite of the current loss, we believe BHX will certainly accelerate store expansion in 2018-19F with the target of ~2,000 new stores in 2 years. Accordingly, we estimate BHX to start making profit from 2019F thanks to 1) larger scale (2,000 stores by end-2019F, TVS Research estimates), 2) more effective product mix (BHX has trimmed down its SKU from 2,200 to 1,500 in 4Q17), 3) plenty room for raising selling prices (now 10-20% under wet-market rates), and 4) more effective control over inventory loss ratio (from 3-4% currently to 1% in 2019F). Our revised 2017F estimates for BHX: revenue VND 1.8trn with 240 new stores; SSSG 20-25%; gross margin 15%. See Figure 1 for 2018-19F store expansion and sales forecasts. § Dien May Xanh (DMX) – On the right track. DMX reported 11M17 revenue of VND 26trn (+124% YoY), with 351 new stores (607 in total, 2016: 256 stores). The massive store addition is right on track with the management’s target for DMX in 2017 before shifting their expansion focus for BHX in 2018-19F. Our revised 2017F estimates for DMX: revenue VND 28.5trn (+108.5% YoY) with 400 new stores; SSSG 17% (2016: 15%); gross margin 16.5% (+120 bps YoY thanks to higher supplier discount). See Figure 1 for 2018-19F store expansion and sales forecasts. § The Gioi Di Dong (TGDD) – Sign of maturity. TGDD reported 11M17 revenue of VND 31.7trn (+14% YoY), with 117 new stores (1,068 in total, 2016: 951 stores). Comparing to 387 new stores in 2016, it’s obvious the expansion has slowed down, implying sign of maturity. Our revised 2017F estimates for TGDD: revenue VND 34.1trn (+11.4% YoY) with 125 new stores; SSSG 2% (2016: 10%); gross margin 17.5% (+100 bps YoY thanks to higher supplier discount). See Figure 1 for 2018-19F store expansion and sales forecasts.