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TVS Weekly NewsBrief - The Vietnam Streetwise - Wk.04.2018

29-01-2018 09:49:41

What’s on deck in economics? 2018 credit growth targeted to 17%. The State Bank of Vietnam (SBV) announced that the estimated 2017 credit growth was c.18.2%, down slightly from 18.25% in 2016. It also set the 2018 credit growth target of 17%. Partly, the robust rate of credit growth fueled the surging economic growth to a ten-year high of 6.8% in 2017. We believe, however, the factor will be difficult to sustain when 2018 expected inflation remains under pressure. In addition, many trouble banks are still wary of extending credit because of the still-high level of non-performing loans in the industry. The current ratio of NPL, SML and NPL sold to VAMC was c.7.91% in 2017 Market Watch VNindex steamed up after two-day trading halt; and energy, technology and financials sectors led the gains. The stock market was heading into its most exciting week of the new year after two-day trading halt occurred due to technical software issues. The Vnindex surged 53.57 points, or 5.04%, to 1115.6, booking a fourth straight weekly advance. A spate of upbeat earnings coupled with an equity rush fueled the market. The energy sector was particular outperformer, jumping 6.24% owa on the back of oil price rebound while technology and financial sectors were up 5.81% and 4.84% respectively. The foreign investors remained net-buyers totaling USD 73mn with HDB, VIC and MSN as top buying stocks. It suggested the investors rush in the Vietnam economy powered by consumers.

TVS Weekly NewsBrief - The Vietnam Streetwise - Wk.03.2018

22-01-2018 09:05:40

What’s on deck in economics? NPL ratio declined moderately in 2017. The State Bank of Vietnam (SBV) said that the ratio of non-performing loans (NPL), NPLs sold to the Vietnam Asset Management Company (VAMC) and “special mention” loans has declined to 7.91% in 2017, from 10.08% at end-2016. Meanwhile the bad debt registered to banks’ balance sheet recorded 2.30% at end-November 2017, down from 2.46% at end-2016. The ratio decline reflects a good year for Vietnam banking system, and for the economy in general. Faster-than-expected economic growth, coupled with a modest recovery in real estate sector, made it easier for companies to service their debt. In addition, robust loan growth (c.18.2% in 2017), partly driven by a rapid increase in consumer lending, also helped to dilute the NPL ratio. We believe the NPL ratio will be improved in 2018 when Resolution 42 with new collateral repossession rule comes into implementation. The virtuous cycle of improved NPL leading to credit growth fueling economy, has longer to run. (Chart of the The Week) Weekly average O/N rate stayed flat at 2.12% while SBV continued withdrawing VND 6,667bn via T-Bill sell-outright auction. The weekly average O/N rate remained mostly unchanged at 2.12% after 6-month peak of 2.11% last week amid persistent excess liquidity in banking system. The central bank maintained net withdrawals of VND 6,667bn for third straight week by selling T-bill amount of VND 54,000bn. In a bid to government’s call for lower lending rate, the central bank cut 25bps to 4.75% for OMO rate. G-bond yield curve continued parallel shift downwards. The secondary market bond yields decreased marginally across the board for a second consecutive week, driven mainly by high buying interest of on-the-run State Treasury bond in primary market. The winning rate for 10-year State Treasury bond closed at 4.70% in the week with bid-to-cover ratio of 4.7x. Market Watch VNindex ended the week higher despite looming newly-proposed margin rule; and basic materials sectors led the gains. The VnIndex rose on Thursday and Friday to finish the week strong, with even fears of a proposed margin lending limitation to 40% dampening bullish investor sentiment. The Vnindex advanced 11.96 points, or 1.14%, to 1062.07 while HNXIndex added slightly 0.49 point, or 0.40%, to 122.39. The index clinched its third straight weekly advance. The advancing market saw the sector divergence when only three of nine primary VNindex sectors are finishing in positive territory. The basic material sector was particular outperformer, jumping 3.94% owa. The foreign investors remained net-buyers totaling USD 92.56mn (-17.4% owa) with HDB, VIC and MSN as top buying stocks. The USD 150mn ETF VFMVN30 rebalanced portfolio through buying VJC and PLX.

TVS Weekly NewsBrief - The Vietnam Streetwise - Wk.02.2018

15-01-2018 09:19:06

Market Watch VNindex booked second straight weekly gain ahead of earning seasons; financials and basic materials sectors led the gains. The epic VnIndex tacked on 37.46 points, or 3.7%, to 1,050.11 when the earning season kicks off (as per regulation, 20 January 2018 is the last day to release earnings report). It is 2nd weekly straight gains since the start of 2018. Eight of nine primary VNindex sectors are finishing in positive teritory. The financials and basic materials sectors led the gains, up 6.41% and 5.12% respectively. Hochiminh Development Bank JSC (HDB) hit ceiling on last Friday to jump 14.48% owa after it registered to PV Oil’s strategic partner scheme successfully. The foreign investors increased their large-cap stock accumulation with net-buying of USD 112.03mn (+112% owa) with HDB as top buying stock. They remain optimistic over 2018 economy prospect and company earning growth. Which stocks are in focus? Sai Gon Thuong Tin Real Estate JSC (SCR) gained 12.87% owa to close at 10,700 ahead of 4Q2017 good earnings. The 4Q2017 revenue and earnings guides are VND 1,500bn and 170bn respectively, discussed at EGM. We expect 2018 sees the positive turning point in performance, fueled by both strong cash flow from non-performing land liquidation and new industrial land bank transferred from Thanh Thanh Cong (TTC).

TVS Weekly NewsBrief - The Vietnam Streetwise - Wk.01.2018

08-01-2018 08:40:30

Market Watch VNindex ended stellar first week of 2018 on a down note, buoyed mostly by gains in consumer non-cyclicals, energy and financial stocks. The VnIndex kicked-off 2018 with a bang of 28.41 points to close first week at 1012.65 (+2.89% OWA) albeit it fell on Friday when the investors increased their profit-taking activities. Seven of nine primary VNindex sectors end the week in positive teritory The consumer non-cyclicals sector was a particular outperformer, jumping 5.32%, while energy and financial sectors were up 3.71% and 2.84% respectively. Masan Group (MSN +10.43% owa) and Vinacafe Bien Hoa (VCF +15.09% owa) were among the biggest boosts to consumer non-cyclical sectors to reflect the VCF’s dividend payment of US$ 2.91 per share and Masan Beverage’s intention to increase up to 100% stake of VCF.  The average daily turnover showed a sharp rise of 23.91% with USD 285.86mn, buoyed by “January effect”. The foreign investors increased their large-cap stock accumulation with net-buying of USD 52.74mn. Driven by spiking economy growth and SOE’s divestment speedup, the foreigners were net-buyer with USD 1.03bn since the start of 2017. Which stocks are in focus? Phuoc Hoa Rubber JSC (PHR) gained 7.43% owa to close at 47,000 when investor’s expectations are surrounding better FY2017 performance. Almost the gains came from unlocking land value (Unlock Land Value) when PHR made transformation of agricultural land to high-value ones, namely industrial land, we believe. Stock Ideas MWG – Potential upside to valuation but some uncertainty;(MWG - Strategic M&A to Secure Future Growth). MWG finalized two M&A deals, of which Tran Anh will add the new cash flow to group in 2018&2019. In addition, we expect both BHX and DMX segments make breakeven point during 2018-2019 period that ensure value creation. In the worst case scenario,however, MWG fails to create valuation from synergy between exsiting and new ventures.

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.

TVS Weekly NewsBrief - The Vietnam Streetwise - Wk.52.2017

02-01-2018 09:40:08

Market Watch Vietnam stocks closed out 2017 in upbeat fashion after releasing positive economic data; energy, industrial and financial sectors leading the way. The VnIndex gained more 31.9 points (+3.35% over week ago) to end 2017 at 984.24 recording decade-long high. The gain mostly came after releasing positive economic data showing real GDP growth of 6.81% (upbeating government’s target and chief economist’s consensus). The Energy (+5.57% OWA), Industrial (+5.37% OWA) and Financial (3.81%) sectors are top performers when investor’s expectation is growing on recovery in oil price. In addition, the investor expected that financial sector turned to the light after 05-year NPL restructure. Trading activities on HSX exchange decreased by 11.59%owa with daily average USD 230.8mn when investors limited their activities before New Year’s Eve. The foreign investors increased their large-cap stock accumulation with net-buying of USD 73.97mn. Driven by spiking economy growth and SOE’s divestment speedup, the foreigners were net-buyer with USD 1.03bn since the start of 2017. Which stocks are in focus? Asia Commercial Bank (ACB), inked up 6.65% WTD, was pricing in good 2018 prospects. The investor’s expectation are growing that the 2018 earnings will jump up given ACB lifts NPL provision charge after 05-year restructure. 

TVS Weekly NewsBrief - The Vietnam Streetwise - Wk.51.2017

25-12-2017 10:11:27

Market Watch ThaiBev’s completion of Sabeco auction drives market’s gain. The VnIndex regained 17.16 points (+1.83% over week ago) to end at 952.3 after two losing streak. The gain in part came after Thai Beverage (ThaiBev) completed a purchase of 53.59% stake at US$ 14.3 per share in an auction (No.1 Beer Maker in Privatization). Trading activities on HSX exchange surged with daily average USD 260.9mn (+22.1% owa). The foreign investors increased their participation and turned to net-buyer with USD 43.38mn. It was noted VanEck ETF fund sold a piece of portfolio, including VIC (+7.7% WTD) and VNM (+3.0% WTD), for year-end distribution. Which stocks are in focus? Sabeco (SAB), the 2nd largest loser, dropped 18.8% WTD following the ThaiBev’s completion of SAB’s acquisation. The market implication is that the minority shareholders made strong sale-off to avoid overpaying and the daily traders took profit.   Stock Ideas Binh Son Refining and Petrochemical Company Ltd (BSR) taking privatization. The multi-dollar refinery is going to privatization (Vietnam Giant Refinery Takes Privatization). Currently the business performance tied to oil price recovery. We are bias to oil price upside based on the fact: (i) stronger economy performance from key countries, especially US and China, (ii) OPEC and Russia deal extending oil ouput cut to end 2018.

BSR [NOT - RATED] - Vietnam Giant Refinery Takes Privatization - IPO Flash Notes - 21 Dec 2017

22-12-2017 09:36:52

We attended Binh Son Refining and Petrochemical Company Ltd.,’s IPO Roadshow with following key fact: 2017 Business Preview Tied to A Recovery in Price Realizations and Higher Crack Spread. ·         9M2017 revenue and net profit (NPAT) reached VND 54,304bn and VND 5,466bn, equivalent to 87% and 325% of 2017 company guidance, respectively.  FY2017 NPAT guided by management team will be around VND 8,000bn, increasing by 78% YoY and exceeding 3.8 times of 2017 budget. ·         9M2017 gasoline and diesel consumption volume reported at 4.2 mn tons, equivalent to 84% of 2017 plan. Dung Quat plant operates at 103-105% total design capacity (6.5 mn tons/year). ·         In 2017, BSR delivers a strong performance on the back of oil price recovery and favorable tax policy. Oil price increases by 16.7% YoY, and crack spread* increases by 18.4% YoY which fuels BSR’s strong performance. In addition, from 1/1/2017 BSR has enjoyed import tax exemption when the refined products are considered as import substitution. Thus, gross margin increased from 2.6% in 9M2016 to 11.5% in 9M2017. ·         BSR ranks the 1st position in domestic gasoline market, with 28% share, followed by imported products from Singapore (26%), Korea (16%) and Malaysia (16%). ·         BSR has a strong client base, operating in oil and gas distribution and retail sector, e.g. Petrolimex (PLX-HSX), PVOil, and Saigon Petro. ·         2017 is the third year for the major plant turnaround conducted every 3 years, which lasted 51 days. The next one will be conducted in 2020. In 2021, Dung Quat plant will stop in 2 months for plant upgrade and expansion. *Crack spread ratio: refers to the price difference between a barrel of crude oil and the petroleum products refined from it. 2018 – 2022 onwards Plan – Focusing on high-end products ·         In 2018 – 2020, BSR’s guided revenue and NPAT growth are 14.3% and 1.5% CAGR respectively. ·         The expansion project is expected to complete in 2021 and put into operation in 2022. It adds more 2 mn tons to 8.5 mn tons/year. Total projected investment cost is USD 1.8bn with an IRR of 8-11%. It will be financed at a Debt-to-Equity ratio of 70/30. ·         After plant expansion, the company will add more high-end petroleum products (RON97, DO and Asphalt) to its product portfolio , whose the quality is complied with EURO V standard according to Decision No. 49/2011/QD-TTg.** ·         The Southern and Central regions are the target market, which will account for 90% and 10% of total volume consumption. ·         Blue Whale gas field project: with estimated reserve of 150 bn cubic meters, and locating at 80-100km east off the Central coast in Vietnam, the project is expected to put into operation in 2023 and be main gas source for Dung Quat Plant expansion. Dung Quat Plant will use 1 bn cubic meters for deep processing.

DCM [Not-Rated] - State-Owned Divestment: New Catalyst - Flash Notes - 12 December 2017

13-12-2017 11:04:32

2017 Preview – Strong top-line growth thanks to Cambodia fertilizer market expansion ·         2017 estimated revenue and NPAT will reach VND 6,000bn (+21% YoY) and VND 650-680bn (+4-9% YoY), exceeding 13% and 3%-7% of company guidance, respectively. 2017 urea production volume is estimated at 880,000 tons (+9.4% YoY), equivalent to 110% of design capacity. Total expected fertilizer consumption is 955,000 tons, with 880,000 tons of urea and 75,000 tons of other trading fertilizers (NPK, DAP and Potash) (Figure 2). ·         In 2017, the company held c.41% market share. Mekong Delta and Cambodia are the target markets of DCM, in which, the shares are c.58% and c.38% for the former and the latter respectively. Regarding South-Eastern and North-North Central region, its shares are c.24% and c.12%, respectively (Figure 1). ·         DCM is the leading urea exporter to Cambodia. In 9M2017, the company exported c.79,000 tons urea (+34% YoY) to Cambodia. Total Cambodia fertilizer consumption is 700,000 tons/year and a half of this belongs to urea. With low fertilizer usage rate (30kg/ha) as compared with Vietnam (397 kg/ha), Cambodia has high fertilizer demand and is a promising market that could support for DCM’s long-term growth. ·         According to the 2017 target plan, the company sets a low gasoline price in 2017, at USD 1.52/MMBTU, to maintain the company’s ROE of 12% agreed between DCM and Vietnam government. The figure is lower than 2017F DPM’s input price of USD 4.56/MMBTU.

DXG [+29% - BUY] - 3Q2017 Strong Performance Bolstered By Brokerage Segment - 3Q2017 Equity Update - 12 December 2017

13-12-2017 10:52:34

We initiate a BUY rating for Dat Xanh Real Estate & Construction Corporation (HOSE: DXG) with a 12-month target price of VND 25,388 (+25% potential upside before dividend yield) based on the following key points: 3Q2017 showed mark improvement driven by brokerage sector. In 3Q2017, DXG has reported an improvement in its financial results with revenue reaching VND 797bn (+240% YoY) and net profit of VND 257bn. The positive results were bolstered by strong performance in both brokerage and development sectors. In particular, development sector increased five times to contribute VND 241bn while brokerage sector achieved VND 512bn (+228% YoY). As the result, DXG achieved revenue of VND 1,676bn (+27% YoY) and earnings of VND 460bn (+219% YoY) in 9M2017 season. EPS reached VND 1,609 (+31% YoY). Brokerage sector has replaced development sector to be the biggest contributor accounting for 57% revenue. Brokerage sector is likely to do well in coming quarters, but high gross margin comes at a cost of (i) forfeit opportunity costs of the amount used as deposits; (ii) risk of those financially distressed projects. In addition, we expect gross margin of development sector to be decreasing as the company may have capitalized the loans into the COGS. For FY2017, we forecast that DXG will achieve VND 3,499bn in revenue (+39% YoY) and VND 1,715bn (+53% YoY) in gross profit. We forecast brokerage segment will carry out 11,450 transactions and brings about VND 1,177bn (+45% YoY). Development segment will report revenue of VND 1,914bn (+29% YoY). On pro-forma basis, we expect Opal Riverside and Opal Garden projects will be main contributor to FY2017 results. FY2017 earning is expected to be VND 826bn (+54% YoY) and EPS arrives at VND 3,010. For FY2018, we conservatively forecast that DXG would achieve revenue of VND 3,843bn (+9.8% y/y) and gross profit VND 1,706bn (-0.5% YoY). Development revenue will come from already sold-out projects Opal Garden and Lux Garden and partly from Opal Skyview and Gem Riverside. We expect brokerage segment will continue to do well and grow at least 10% YoY due to ease-money policy in 4Q2017. FY2018 EPS is lower because of lower-than–expected-selling progress in FY2017, which may affect FY2018 revenue. This is amplified by an issuance of additional 17.3 million shares in 4Q2017. However, a good selling progress at key project Gem Riverside next year would offset for FY2017 slow sale.