Company reports

DHG - Tax Allowance as Key Catalyst - Flash Note - 24 Feb 2017

27-02-2017 10:33:26

We attended the analyst meeting of DHG on 22-Feb-2017 and noted these key points: Tax allowance as key catalyst: DHG reported 2016 net revenue of VND 3,782bn (+4.8% YoY) and NPAT of VND 713bn (+20.3% YoY), exceeding company guidance by 1.3% and 5% respectively. While topline expansion was boosted by robust performance of major brands (see Figure 1), NPAT’s high double-digit growth was mostly attributable to the CIT incentive for new factories in Hau Giang province (0% in 2015-18, 5% in 2019-27, 10% in 2028-29). This allowance saved DHG VND 108bn of CIT in 2016 (2015: VND 45bn); total tax savings over 2015-29 is estimated at VND 1,000bn. DHG has revealed no plan about FOL uplift as well as CEO succession (the current term of Dr. Nga, DHG’s CEO since 2004, will end next year). We anticipate a minimum 30% cash dividend for 2016. The Company will hold another analyst meeting in April 2017 and TVS Research will provide update accordingly.

VNM [+13.7% - NEUTRAL] - Headwinds from rising material cost - Equity Update - 16 Feb 2017

17-02-2017 10:11:13

Revenue growth to moderate in 2017-18F after the stellar 2016 performance. Vinamilk witnessed a successful 2016 when revenue reached the remarkable milestone of US$ 2bn (up 16.8% YoY), driven by robust domestic sales while overseas sales saw major setback last year. We forecast Vinamilk’s average revenue growth to moderate to 12% YoY in 2017-18F, in line with the company guidance of minimum 10% YoY growth over 2017-21F. We also lowered overseas volume growth forecast to 7-9% YoY from 15% YoY after reassessing demand in key export markets.Rising material costs to blow cyclical headwinds against earnings growth in 2017F. Global milk powder price has rallied c.60% growth T12M, boosted by cyclical supply curtail and demand upturn. Considering latest dairy forecasts, we revise our estimate for Vinamilk’s average purchase price of milk powder in 2017F to US$ 3,300/MT from US$ 2,800/MT, an incline of 18%. Under this event, domestic and overseas GPM would fall by 420 bps and 340 bps respectively this year from the all-time-high of 47.3% and 49.5% in 2016, before recovering in 2018F. 2017F NPAT is forecasted at VND 9,649bn, reflecting a slower growth of 3.2% YoY with NPM falls by 180 bps to 18.2%.Key investment risks: (1) Volatility in milk powder prices. Future earnings would be further dampened if the current rally of milk powder prices extends beyond 2017F, and (2) Key management change. Given no confirmation about the CEO’s retirement, whose current term ends in 2Q17, we hold a conservative view regarding the company’s corporate governance in 2017-18F.

LHG - The Street is Still Wet - Equity Update

03-02-2017 11:19:44

We attended LHG’s Extraordinary General Meeting (EGM) seeking shareholder’s approval of VND 172 billion tax-bill payback and new share issuance. Following are the updates: Growth of 60% in revenue and more than 200% in net income. LHG reported VND 480 billion (+60% yoy) in net revenue and VND 161 billion (+230% yoy) in net profit for FY2016. 2016EPS is forecasted to be VND 6,150 (subject to a Land Levy of VND172 billion). Currently LHG is trading at 2.52x. 34% stake investment to Sapulico as Short term catalyst. Sapulico listing on UpCom provides LHG 30%-40% premium. LHG should make a divestment as Sapulico are facing structural shift in business environment which may have enduring effect. Long Hau 3 development as long term catalyst. As the management’s guidance, LHG can enjoy the benefit with followings: (i) convenient distance to economic and transportation hubs; (ii) benefit from infrastructure investments; and (iii) Long Land-Use duration help LHG to enjoy relatively higher occupancy and rental rates. With his guidance, we expect Long Hau 3 to provide stable revenue stream and positive occupancy and rental rates. In additional, big land bank (891ha) supplies opportunities for future expansion. Land Levy as a setback. LHG is obliged to pay back to the State VND172 billion which may possibly be subtracted from Retained earnings. The EGM seeking shareholder’s approval expects the tax pay-back clearance in FY2016. We highlight the investor should wary of the contingent liability hitting hard to FY2016 financial performance. Stock dilution. LHG is to issue further 23,929,595 shares. This amount would be used to reduce debt burden in Long Hau 3 project. As per our calculation, dilution leads to a drop of 31.6% and 24.8% in EPS and BVPS respectively. 

PVD [SELL] - It\'s Always Darkest before Dawn - Equity Update - Jan 2017

23-01-2017 11:28:40

2017 OUTLOOK COMMENTS The consensus view is that over 2017 oil price will remains within USD 50 – 60 bbl range, in line with our Base Case scenario. At this price, we see little prospect for significant recovery in day rate. Major global oil companies had also postponed their campaign in Vietnam for 2017, shifting spending instead to cheaper onshore exploration. We expect the spending cut may extend to 2018 unless oil price make a sustainable recovery to USD 70 – 80 bbl range. As it stand we believe PVD will report net losses in 2017. VALUATION: PVD is trading at a trailing P/B of 0.62x. We believe this pricing reflects higher financial distressed risk and delayed earnings recovery. Our FY2017 Base Case scenario implies a -0.8 – 9.2% return. This range is between the 34.9 – 9.8% loss in the Bear Case versus 18.5 – 27.9 % gain in the Bull Case. On this basis we issue a SELL rating.

FPT CORPORATION - FOX Listing as Short-term Catalyst

13-01-2017 09:19:40

11M2016 results saw flat revenue and moderate improved net income. For 11M-2016, FPT reported revenue of VND 35,872 billion (+0% YoY) and net profit of VND 1,730 billion (+8% YoY). Foreign markets play increasing important roles as Revenue and PBT accounted for VND 5,451 billion (+31% YoY) and VN 806 billion (39% YoY) respectively. Across all sub-sectors, Retail (33%); Online Advertising (30%) and Software outsourcing (29%) had the biggest YoY growths, while Distribution and Manufacturing sector suffered a negative YoY growth rate (-30.6%).Valuation. We expect FY2016 FPT would somewhat surpass last year performance by achieving VND39,900-40,200 revenue and VND 1,940-1,960 billion earnings. EPS ranges from VND 4,220 to VND 4,350. Currently FPT is trading at 10.8x 2016EPS.

[TVS] PNJ [+29% - BUY] - All bad things come to an end - 11M2016 Equity Update

30-12-2016 14:24:52

All bad things come to end: Margin upswings and earnings recovery key catalyst. 11M16 EBT reached VND 560bn, up 131% YoY, highlighting a sharp recovery from prior year’s one (-41% YoY) due to major provision for the investment in Dong A Bank. Excluding the impact of provision and one-off income, 11M16 EBT was VND 603bn, up 43%. We believe earnings would flourish from 2017F onwards after full provision was made for Dong A Bank in 2016. Considering core-businesses only, both gross and EBT margins hit record high in 11M16 thanks to the expansion of jewelry retail that has superior margins versus other businesses. Our estimation indicates PNJ to end 2016F with VND 610bn EBT, up 206% YoY and exceeding annual target by 30%. Accordingly, 2016F EPS is VND 4,400, up 245% YoY.Compelling valuations. Our DCF-based 12M-target price is VND 85,000 – a 28% upside, with an implied 2017F EV/EBITDA of 10.4x. We anticipate PNJ to pay VND2,000 cash dividend in FY2016 (interim dividend was VND 1,000), resulting in a 29% stock return. Valuations are compelling, in our view, given PNJ currently trades at 24% discount to regional average EV/EBITDA while its EBITDA margin delivers 26% premium to regional norm.

Vietjet Air - A Flight You Can\'t Miss - Prelisting Notes - 21 December 2016

21-12-2016 17:05:07

We have recently attended a presentation by Vietjet Air management ahead of its pre-listing offering scheduled in February 2017. Please find the highlights of the presentation with our comments below: •Total domestic passengers travel by air grew 21% to 41 mils and accounts for 27.3% of total transported passengers •Government is committed to invest USD 10bn to improve air transportation infrastructure, aiming to increase the number of airports from 22 to 26 by 2019 •According to management team, VJA has increased its market share from 37% last year to 43% in June, surpassing Vietnam Airline (“VNA”) and contributing 70% of the industry growth •The recent offering of 59 millions shares to institutional investors were oversubscribed and existing shareholders are offering 3.5 millions shares to individual investors •The listing is scheduled in the 4th week of February 2017 with no lock-in, VJA will also issue 22.4 millions new shares at offer price for one of the Chairwoman’s holding companies

NLG - Time to Enter Affordable Housing Segment - 3Q2016 Equity Update

21-12-2016 11:23:18

This year’s earnings guidance may be fell short despite Q3’s vigorous performance. Nam Long Investment Corporation (NLG) reported VND 604 billion revenue (+152% QoQ) and VND 35 billion net income (+133% QoQ) in Q32016. 84% revenue in Q32016 were generated from Ehome 3 (VND 183 billion), Ehome 4 (VND 15 billion) and Flora Sakura (VND 311 billion). The robust growth of 152% and 133% YoY in 3Q2016 revenue and profit may be overshadowed by the fact that NLG has just reached 52% and 45% of this year’s targets.   Investment Thesis – Time to Enter Affordable House Segment.   We believe it is right time to enter affordable house segment when there is large mismatch between supply and demand. Our research indicated that a typical house price for typical family (2-bed room, 60sqm) should not be more than USD1,108 per sqm. We believe NLG taps into the affordable demand with his following core competence: ·         Leading market position with 14.2% share in affordable housing demand. The majority of NLG’s products are positioned in the affordable segment: apartments and villas/townhouses are priced below USD1,000 per sqm and USD1,200 per sqm respectively. More than 86% of company’s revenues would come from affordable segments (Valora/Flora/Ehome) ·         Operating as full-integration real estate developer. The firm established a system of subsidiaries each of which operates at a different stage of value chain. Each stage builds up a part of a closed loop and provides added -values. Hence, the company has a system to implement parts or all of the work to meet the needs of the value chain. This would help the firm to improve profit margin and provide competitive output prices.

FPT CORPORATION - Divestment Delay

02-12-2016 13:53:02

3Q2016 witnessed a good performance as revenue and EBT grew by +7% and +22% YoY respectively. Revenue exhibited the strongest quarterly performance since 2Q2015. Telecom and Technology sector contributed most to both top line and bottom line growth.Divestment delay in Retail and Distribution segments disconnects 2016’s earnings. Distribution & Retail segments continue incurring low margin compared with others in 9M2016 and it created the economic sense to divest them from FPT’s portfolio. As per management guidance, the divestment deal may not be closed in 2016 as they can not reach agreement with the potential buyers to sell bundle of Retail and Distribution.Healthy growth in Software Segment driven by oversea market development, particularly Japan. 9M-2016 witnessed a jump of revenue to VND4,169 billion (+27% YoY) and EBT to VND 604 billion (+30% YoY). Oversea markets also signify a very high profit margin as they possess only 15% of FPT’s revenue but account for 30% of EBT. Among foreign markets, Japan plays an increasingly important role that represents the best foreign market in 2016 so far and an average 32% growth / year over the last 10 years.

DGW - One Stop Shop as Key Differentiator - Flash Note - 30 November 2016

30-11-2016 16:04:45

Continued expansion of Consumer Electronics would propel healthy growth of Electronics Distribution. According to GfK’s representative, Vietnam’s Consumer Electronics (CE) market size achieved US$ 7bn in 2015 at 15% CAGR over 2011-2015. In our recent equity update for Mobile World Group (MWG ticker) “The Music Is Still On”, we cited forecast by Euromonitor indicating Vietnam’s CE would continue seeing double-digit growth rate of 18% in 2016F before this figure moderate to 3-6% over 2017F-2020F, mostly on the back of rising disposable income. Likewise, Dell’s Country Manager shared Vietnam’s PC sector is among top 4 fastest growing nations in Asian-Pacific (after China, India and Australia) thanks to the large client base of 50,000-70,000 university freshmen renewed annually. Following these information, Electronics Distribution is anticipated to grow healthily over the next 2-3 years.Upstream and downstream integration risk from giant retailers and manufacturers. With the rapid expansion of electronics retailers such as MWG in terms of both financial and store network, there is risk that retailers could cut out wholesalers like DGW to work directly with suppliers. On the other hand, manufacturers after several years operating in Vietnam may consider building their own logistics and sales network to serve end-users. Though these risks are currently insignificant due to wholesales’ advantages in ordering and stocking sizable quantities of inventories, still there are case studies of Walmart (No.1 global retailer) or Dell (computer manufacturer) that almost eliminated wholesalers in their supply chain in the US market.In 2016, DGW owns 8% and 30% market share in mobile phone and laptop distribution respectively. DGW has the largest distribution network covering 6,000 retail outlets, while the 1st and 2nd runner-up (PSD and FPT) have 2,100 and 1,500 locations.