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TVS Weekly NewsBrief - The Vietnam Streetwise - Wk19.2018

15-05-2018 14:15:20

What’s on deck in economics? The state budget is on track for fiscal consolidation. Data released by Ministry of Finance (MoF) showed that the budget was on track for fiscal consolidation. On the revenue side, the government collected USD 19.63bn, marking a 12.1% YoY increase, owing to improved local tax collection (+14.5%) and rising crude oil collection (+27%) in spite of lowing customs revenue (-4.1%) resulting from applying ASEAN duty-free regime. On the expenditure side, the government spent USD 18.03bn, representing a slight 4.6% YoY increase, largely owing to a 5.2% drop in investment expenditure. The faster pace of revenue collection leaves the budget surplus of USD 1.6bn. The minor surplus underpins fiscal consolidation in 2018 as the government seeks to rein in the country’s ratio of public debt to GDP. (Chart of the Week)   Market Watch Vietnam stock market eked out a modest gain, snapping 04-week losing streak. The Vnindex was up 18.05 points, or 1.76%, to 1044.8; ending 04-week losing streak. In our view, it is only the weekly correction after AGM and earning season factors fading. The energy sector had been the biggest gainer (+8.21%) of which notable gainers was GAS (+13.33% owa), following US President’s decision to pull out of a multilateral nuclear deal with Iran, leaving the oil price retreat from its highest level since 2014. The industrial sector helped to push index into positive territory, led by FLC (+9.81%), VJC (+7.28%) and CTD (7.55%). The foreign investors turned to net buyers with modest value of USD 6.38mn.

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%.

TVS Weekly NewsBrief - The Vietnam Streetwise - Wk13.2018 VN

02-04-2018 11:11:17

What’s on deck in economics? 1Q2018 Vietnam economy started strong foot. Data released by General Statistics Office (GSO) on March, 29 2018 confirmed the Vietnam economy is doing well. The real GDP growth came in at a strong 7.4% YoY in 1Q2018. It appears that the strong momentum in manufacturing has carried over into the start of 2018, with output growing by 13.6% YoY while the mining sector on the road to recovery recorded growth by 0.4%, ending the double-digit contraction (10% YoY) since 1Q2017. Agriculture sector also recorded its 6-year high of 4.05%. Services sector growth came in at a modest 6.7%, on a par with the 6.5% last year. The first quarter robust outturn means that the full-year real GDP growth target of 6.7% is well within reach. Although economic activities remains strong in 1Q2018, the consumer price index (CPI) dipped in March for the first time since June 2017, leaving the inflation increased by 2.66% YoY (or 0.97% YTD). It appears to be simply an ironing-out of Tet holiday-related factors. (Chart of the Week)  Market Watch Vietnam stock market logged six winning streak with technology and financial sectors leading the rally. The VNindex was on track for sixth weekly gain in a row. The Vnindex was up 20.87 points, or 1.81%, to finish weekly record above 1174 since 2007. The index clinched its sixth straight weekly advance since Tet Eve. The smart money was on rotational buying ahead of 1Q2018 earnings and AGM seasons. The technology sector rallied 4.47% of which notable gainers was CMG (+13.19% owa). The financial sector helped to push index into positive territory, led by VIC (+7.07%) and VRE (2.54%). The surge in VIC’s stock marked the Vingroup as the first-time largest market capital, surpassing Vinamilk. The foreign investors turned to net selling value of USD 1.19mn to log 1Q2018 profit/loss in Net Asset Value (NAV) report

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.

TVS Weekly NewsBrief - The Vietnam Streetwise - Wk12.2018

26-03-2018 15:11:17

What’s on deck in economics? Underground economy accounted for 25-30% GDP. In 2018, the government is working hard to bring the underground economy into the formal sector. Some media reported that the sector accounted for some 25-30% GDP and employed nearly 60% of workers. Putting informal work into the statistics supports more tax collection and reduce fiscal deficit when the import duties from ASEAN are phased out, in our view. In addition, the informal work makes Debt/GDP ratio more rosy when the size of GDP increases at least by 20%. Market Watch Vietnam stock market logged five winning streak albeit the worries of global trade ware rose. The VNindex was on track for fifth weekly gain in a row. The Vnindex was up 3.64 points, or 0.30%, to finish weekly session at 1,153. The index clinched its fifth straight weekly advance since Tet Eve. The smart money was on rotational buying ahead of 1Q2018 earnings and AGM seasons. The healthcare sector extended rally 4.30% of which notable gainers was DHG (+10.43% owa). The energy sector helped to push index into positive territory after oil prices extended advance by 6.16%. The foreign investors snapped 05 selling streak with net buying value of USD 29.89mn, a good support amid market sideway.

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.

TVS Research Portfolio Model - Bi - Weekly Updates - March 16 2018

20-03-2018 06:15:04

Portfolio Performance Review ·         Our Model Portfolio (MP) focused on the large-cap, namely financial (46% market cap) and consumer (25% market cap), with value bias where we assume the stock prices are undervalued in term of (i) valuation, (ii) superior future growth and (iii) company-specific elements, including industry leader and good management team. (Please see our Table in next page) ·         Our MP value recorded growth of 19.4% YTD, outperforming slightly 16.9% of Vnindex. Our favorite stock picks in financial sector, namely VPB (56.8% YTD) and MBB (+44.8% YTD), continued contribution of 15.25% total return while MWG’s performance dragged 2.69% total portfolio return down. ·         MBB (TVS Wk04.2018). Our investment ideas are on the back: (i) healthier balance sheet, (ii) good net interest margin and (iii) attractive valuation with 2.08x P/B delivering ROE~14.81%. With an improving growth profile, MBB deserves to trade with peers, typically ACB, in our view. ·         VPB (TVS Wk05.2018). Our investment ideas are on the back: (i) aggressive NPAT plan of VND 10,800bn (+32.95%YoY), and (ii) a plan to divest partial stake of FE Credit, a VPB’s subsidiary specializing in consumer finance.

TVS Weekly NewsBrief - The Vietnam Streetwise - Wk11.2018

20-03-2018 06:14:05

What’s on deck in economics? Solid Economic Growth for 1Q2018. During New Zealand’s visit, the Prime Minister Nguyen Xuan Phuc informed that Vietnam’s real GDP may surge to 7.41% in 1Q2018 – the highest growth rate seen since 1Q2009. The substanial pick-up in the first quarter 2018 is driven by strong start for merchandise trade (Week_08.2018), rise of retail sales (Week_06.2018), and surge in manufacturing sector with Industrial Production Index recording 15.2% YoY growth. The outlook for merchandise trade, retail sales and manufacturing sectors is good for 2018 against the backdrop of government’s initiatives to cut business red tape, CP-TPP sign-off, and continued strong Foreign Direct Investment (FDI) inflow. (Chart of the The Week). Market Watch Vietnam stock market extended its winning streak for a fourth weekly session when energy sector lifted the index. The VNindex was on track for fourth weekly gain in a row. The Vnindex surged 26.78 points, or 2.38%, to finish weekly session at 1,150. The index has been up for four straight weeks since Tet Eve. The smart money was on rotational buying when the energy and health care sectors turned to lead the gains ahead of 1Q2018 earnings and AGM seasons. The energy sector advanced 8.74% of which notable gainers was GAS (+14.23%) while healthcare sector rose 3.78% with DHG (+8.39%) as biggest gainer. Meanwhile, the foreign investors turned to net selling position with USD 18.24mn through ETF rebalance activities.

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.