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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.

TVS Weekly NewsBrief - The Vietnam Streetwise - Wk09.2018

05-03-2018 09:41:17

What’s on deck in economics? Earlier-than-expected pick up in consumer-price inflation. Data published by General Statistics Office (GSO) showed consumer price inflation accelerated to 3.15% YoY, from 2.65% in January. February marked the highest level since Septermber 2017. It is attributed partly to seasonal factors, namely the changes in consumption behavior surrounding Lunar New Year. Food and foodstuff inflation spiked to 01-year high of 0.27%, ending the long contraction period since April 2017. The pick-up in inflation appeared to be earlier than our expectation (The_Vietnam StreetWise_Wk05.2018), leaving no more room to cut rate in our view. In addition, a rise in global oil prices will lead to cost-push inflationary pressures when Vietnam’s economy is heavily dependent on import. We believe to keep target inflation under 4% in 2018, the SBV may start soon tighter monetary policy.(Chart of the The Week). Market Watch Vietnam stock market extended the rally led by energy and basic material sectors. The VNindex notched its second positive week in a row since Tet holiday. The Vnindex added 18.36 points, or 1.66%, to finish weekly session at 1,121; benefiting from gains in energy and basic material sectors on the back of rotational buying. The week’s gain is not broad with only three of ten primary sectors in solidly higher. The energy sector advanced 4.94% of which notable gainers were PXS (+10.99%), PVD (+6.80%) and GAS (+5.22%) while basic material sector rose 3.31%. Meanwhile, the foreign investors were in net selling position with USD 44.22mn, marking three consecutive net selling weeks, to take profit. Despite weekly net selling, the foreigners were monthly net buying of USD 103mn in February with VRE, VIC, PLX and MWG as top buying stocks.

TVS Weekly NewsBrief - The Vietnam Streetwise - Wk08.2018

26-02-2018 10:45:59

What’s on deck in economics? A strong start for merchandise trade. Estimates released by the General Statistics Office (GSO) showed that export rose by 32.5% YoY, to USD 19bn in January while imports surged by 46.4% YoY, reaching USD 19.3bn. The robust growth rate of export reflects continued strong momentum from riding the global trade wave. In particular, exports of phones and accessories, manufactured and distributed globally by Samsung, rose by 80.3% YoY, to USD 4.2bn. Despite the spike in export turnover, the even faster pace of import growth led to a trade deficit of USD 0.3bn, marking the widest shortfall since May 2017. Rapidly rising output from manufacturing’s sector increased demand for imports of immediate goods, particularly the import growth of manufacturing materials spiked to 65.96% YoY. We expect the Vietnam trade growth maintained strong in 2018 given that the mega-regional trade deal, now called CP-TPP, is approaching to close in March 2018 in principle. (Chart of the The Week). Market Watch Vietnam stock market kicked off the 1st week of Lunar New Year in upbeat fashion with financials and consumer non-cyclical led the gains. Vietnam stocks jolted higher after long-awaited trading sentiment in long Tet holiday and good signal from global stocks. The Vnindex notched 43.12 points, or 4.07%, to finish weekly session at 1,102, benefiting from sharp gains in financials and consumer non-cyclical sectors, two largest market capital sectors. The financial sectors advanced 6.41%, leading by BVH (+13.03%), CTG (+11.73%), VCB (+11.51%) and VIC (+6.35%) while consumer non-cyclical sectors rose 3.29%. Meanwhile, the foreign investors were in net selling position with USD 5.8mn, marking two consecutive net selling weeks, to take profit. The top selling stocks is HPG and VJC.

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.

TVS Weekly NewsBrief - The Vietnam Streetwise - Wk06.2018

12-02-2018 09:06:26

What’s on deck in economics? Retail Sales Continued to Rise despite slowing pace. According to data released by the General Statistics Office (GSO), the value of retail sales (at current prices) posted growth of 9.5% year on year following a 10.9% peak in December 2017, marking first six months of slowing growth. The slowing pace is attributed to mostly the trade segment. The trade segment, which account for 75.33% of all retail sales, has managed to do moderately with sales up by 7.6% (vs. 7.0% in December 2017). In contrast to slowing pace in trade segment, the tourism and hotel/restaurant segments performed very well, recording growth of 17.8% and 20.8% year on year respectively. We continue to expect Vietnam retail sector to experience robust growth on the back of: (i) rising income and favorable demographics, and (ii) government effort to reduce red tape, focusing on food retail, electricity and e-commerce managed by Ministry of Industry and Trade. Given that, foreign investors’ increasing interest in Vietnam’s retail sector is unsurprising. Market Watch VNindex clawed back 101 points of week’s steep loss. The stock market saw a surge in volatility and turmoil when margin was under pressure, coupled with bad sentiment from global stock market. The Vnindex slumped 101 points, or 9.15%, to finish weekly session at 1,003.90, posting largest weekly drops since 22 Feburary 2008. Losses on HSX bourse were broad-based with all sectors finishing with losses. The energy sector was the biggest losers, tanking 18.58% after the unsustained oil price recovery, followed by consumer non-cyclicals and financials, which all fell more than 8%. The bright side of the market may be the net-buying stance from the foreigners with total USD 181.13bn. They took use of sell-off sessions to accumulate the retail-exposed stocks, such as VRE, HDB and MWG.

TVS Weekly NewsBrief - The Vietnam Streetwise - Wk05.2018

05-02-2018 09:29:43

What’s on deck in economics? Inflationary pressures continued to ease. According to data released by the General Statistics Office (GSO), January 2018 CPI grew by 2.65% year on year, marking the sixth consecutive month of slowing headline inflation since August 2017. Food and foodstuff price deflation, which began in April 2017, was again the main factor behind the easing of the headline figure – prices for food and foodstuffs contracted by 1.14% in January 2018, following a 1.80% fall in December 2017. In other words, the food and foodstuff dragged 0.44% CPI down at contribution component level. We believe the food prices will start to pick up from April 2018 as base effects begin to drop out the headline figures. In addition, a forecast pick-up in global oil prices will lead to cost-push inflationary pressures. Market Watch VNindex logged first down week of 2018 as major sectors dropped. The stock market retreated from positive territory amid end-month margin pressures. The selling forces built up throughout the week when the market sentiment took a break before Lunar New Year. The Vnindex fell 10.06 points, or 0.95%, to 1105, marking first down week of 2018. Losses on HSX bourse were broad-based with seven of nine main sectors finishing with losses. We believe it like a correction when market had been overextended and right now is a perfect time for a pullback. The foreign investors remained net-buyers albeit decreasing size of USD 1.73mn with VIC, MWG and SSI as top buying stocks. It suggested the investors rush in the Vietnam economy powered by consumers.