ACV - 2019 AGM Update

2018 Recap: Passenger growth rate has shown signs of slowing down, PAT increased strongly after applying the service prices increase in accordance with Decision 2345 of MoT.

Impact of US-China trade war on the Textile & Apparel Industry

Overall, the escalation of the trade war has undermined the decline in Chinese textile exports to the US market. Under concerns about the possibility of imposition of additional duties on garment products from China in the future (a USD 300 bn tax package being submitted), fashion companies in the US should shift its orders to the neighboring markets to prevent risks. However, we believe that China has not stepped foot in this war, it is increasingly improving the skills of workers, focusing on producing high quality products, developing upstream textile to minimize the risk of price competition from neighboring countries, including Vietnam.

PDR - Focus on projects in Binh Dinh

Phat Dat Real Estate Development JSC (HSX: PDR) is a longstanding real estate developer whose a major project of under one-hectare clusters in HCMC. As HCMC market has been slowing down, PDR has shifted its focus to the central region. This is reflected in the 5-year plan with CARG of 38% and 51% of the developed land area concentrating in Binh Dinh (171.8 ha) and Quang Ngai (49.8 ha). Part of these income stream will be used to acquire new land bank in HCMC with the expectation of deployment when the market rebounds.

NT2 – Weak 2019 earnings outlook despite of improvement in core business

In summary, we forecast that NT2’s 2019 NPAT would reach VND 753 billion (-4% YoY), corresponding to EPS of 2,569 VND/share. While management team has expressed their will is to maintain cash dividend stable at 2,500 VND/share, we believe that such dividend policy would require the company to use short-term borrowing to finance the shortfall in working capital. This condition would remain until 2022, when NT2 has repaid its long-term debts and has ample free cash flows to pay dividend. We maintain our target price for NT2 stock at 27,100 VND/share, implying a marginal upside from current market price. However, we also recommend investors to wait until the new PPA price for Nhon Trach 2 plant is finalized to assess the outlook and valuation of the company.

HAX – Expect A Slight Increase in 2Q 2019 Earnings

In summary, we forecast that 2019 consolidated NPAT may reach VND 110 billion (+10% YoY), corresponding to EPS of 3,133 VND/share. Including our estimate for 2Q 2019 performance, 1H 2019 NPAT will complete 35% of our 2019 NPAT forecast, quite reasonable due to low 1Q 2019 earnings. At current market price, HAX is trading at a forward P/E ratio of 4.5x. We maintain our BUY recommendation for HAX stock with target price being at 19,600 VND/share.

PGV – Preparing for a restructuring phase

Although 2018 earnings from core electricity production business witnessed strong improvement, the adverse effects from rising interest rates and exchange rates movements has resulted in negative bottom line for PGV in the year. In 2019, we expect that the company would return to positive earnings level despite no significant breakthrough. However, FY2019 would be an important preparation step in the restructuring phase of the company. Hence, the success of 2019 plan could help PGV achieve significant improvements not only in its income statement but also in balance sheet.

A brief look at ERP system, from the recent issue of PNJ

The impact of the ERP incident on business results and stock price in the short term is inevitable, but this does not affect PNJ's competitive position and growth potential in the long term. PNJ's decline in Q2 revenue is also not a sign that the company is entering a difficult period when demand decreases. On the other hand, it can be seen that difficulties in implementing ERP on a large-scale system is a significant barrier in both cost and difficulty for other jewelry chains if they want to catch up with PNJ. We believe that short-term corrections of PNJ stock price will be good buying opportunities for investors with long-term vision.

Vietnamese Pangasius Industry: in the Initial Stage of Restructuring

Decree 36/2014 / ND-CP has set the foundation for restructuring Vietnamese pangasius industry. Solutions, though still need time to create changes on the industry level, have shown a new stage of development focusing on quality.

Consumer megatrends in Vietnam

Vietnam’s consumer market has always been attractive due to supportive demographic, economic growth and high urbanization rate. As Vietnam’s real GPD will growth by 91.4% during 2019 – 2030, consumer expenditure will also rocket (figure 2). By 2030, 46 million urban consumers will have USD 169 bn worth of spending while that for 61 million of rural counterpart will be USD 173 bn. More importantly, middle class - the foundation of consumer is rising fast: in 2030, 49% of households will have an annual disposable income of USD 5,000 to USD 15,000, an increase from 33.8% in 2018. Those create huge opportunities for companies that can adapt to the market’s changes.

Will FED cut its rate?

There are many economic and political events in June. In addition to G20 meeting in Japan which is likely to see US-China talks on the sideline, financial investors are looking for chances in FED’s rate cuts. In June meeting, the officials will release their economic assessment and monetary policy’s directions in 2H2019. Whether FED will cut rates becomes an important issue.

PC1- Result Update Report

Rong Viet Securities Corporation hereby presents the Result Update Report on Power Construction JSC No. 1 (HSX: PC1) with the overall opinion as follows:

“We appreciate PC1’s efforts to operate three distinctive business while maintaining the overall efficiency. Its power construction business still has ample room to grow owing to EVN’s demand on new electricity infrastructure. This also provides opportunities to its steel structure manufacturing business. Regarding PC1’s hydropower business, we think its stability will stand out as a major contributor of earnings to PC1. In fact, PC1’s electricity portfolio, including two HPPs under construction and five other initiated projects, contributes the largest proportion in our PC1’s sum-of-the-parts valuation. Last but not least, we appreciate PC1’s ability to obtain prime-location land banks and its residential projects’ profitability, which can act as a surprise factor to the company’s earnings. 

IMO 2020

The International Maritime Organization (IMO) has regulated that from January 1, 2020, all vessels operating outside the emission control area (ECA) will have to use fuel with a maximum sulfur content of 0.5. % compared to the current limit of 3.5%. This regulation is designed to reduce the amount of sulfur oxide (SOx) from ships discharging into the environment and minimize the impact on the global warming. Previously, in emission control areas (ECA)* and ports in Europe, IMO has regulated that the sulfur limit in fuel oil used on board is only 0.1%.