VPA/FLEGT and the future of Vietnamese timber exports

A Voluntary Partnership Agreement (VPA) is a legally binding trade agreement between the EU and a timber-exporting country outside the EU. VPAs will obviously promote trade in legal timber, and moreover, address the causes of illegality by improving forest governance and law enforcement.

VCB: Business Update

The State Securities Commission of Vietnam (SSC) approved of VCB offering its shares to financial investors. Accordingly, we learned that the bank will issue nearly 108 Mn new shares to GIC and Mizuho, and received USD 270 Mn in return. Hence, the average offered price is around VND 57,000 - 57,500 per share.

Key Logistics Service Providers In Vietnam E-commerce

Owing to the country’s increasing internet penetration and the emerging trend of online shopping, Vietnam is one of the fastest growing E-commerce markets in Southeast Asia. In accordance with Vietnam E-Commerce Whitebook 2018, the market size of B2C E-commerce was USD 6.2 bn in 2017 and is forecasted to continue rising rapidly in upcoming years. In tandem with such booming, the demand for logistics service within the E-commerce ecosystem, E-logistics, is expected to be a very high. Vietnam e-commerce retail logistics market is valued at EUR90 mn in 2018, and is forecasted to experience an average growth of 42% per year till 2022F, according to Ken Research.

Personal Insurance Continues to be The Main Source of Revenue for The Insurance Industry

For the whole year of 2018, total market premium revenue is estimated at VND 133,654 bn (+24% YoY), of which life insurance premiums came at VND 87,960 bn (+33% YoY), non-life insurance premiums reached VND 45,694 bn (+10% YoY). This is the fifth year in a row that the  Vietnam insurance market has achieved a premium growth rate of over 20%. The high growth of the sector is mainly attributed to personal insurance, including life insurance, healthcare insurance and motor vehicle insurance.

Another country is shifting towards the right

In Brazil, on January 1^st, Jair Bolsonaro, was inthronized as the new president of Latin America’s largest economy. Elected in October 2018, his victory represents the rising extreme right: more power to the state, climate skepticism, misogynism, homophobia, fighting corruption using the strength of the military.

VHC – 11M2018 Business Results

11M2018 export value is estimated at USD 348 mn, +27% YoY, driven by good selling prices. The average selling price (ASP) of pangasius rose by 34% YoY in 11M2018, while the volume decreased slightly by 5% YoY.

Development of The Corporate Bond Market

• Vietnam corporate oustanding bonds reached 1.45% of GDP in 2018, compared with 21.48% GDP of VGBs. Thailand, Indonesian, Malaysian and Singaporean corporate bonds reached 20.80%, 2.87%, 33.77%, and 46.34% of each country's GDP, respectively, according to the Asian Development Bank.
• In addition, the corporate bond market is more likely interesting for public listed companies. Because unlisted companies are often small businesses, auditing costs and high interest rates prevent them from issuing bonds.
• In our opinion, the Vietnam’s corporate bond market lacks two main factors in order to develop itself and catch up with regional countries.
• Individual investors have difficulties entering the corporate bond market.
• We think that in order to develop the corporate bond market, the number and size of funds needs to grow.

Update on CTI

For FY2018, revenue and NPAT are supposed to arrive at VND 1,114 billion (+2% YoY) and VND 147 billion (-4% YoY), respectively. Cuong Thuan IDICO (HSX: CTI) announced its FY2019 target revenue of VND 1,795 billion (+61% YoY) and NPAT of VND 192 billion (+30% YoY). Earning growth should come from increasing production of quarries. We think CTI has geographic advantages in supplying quarries to nearby construction projects. Jobs from Long Thanh Airport could be a catalyst in 2019 as construction activities are pushed up.

Update on the International and Domestic Tourism Situation in Vietnam in 2018

In 2018, the number of international and domestic tourists was still healthy. The growth looks set to slow down a little bit but does not look set to stop. However, Vietnam is still stuck in cashing in on a high tourist numbers although tourism industry, beside manufacturing industry is prioritized.

ACV - Improving Non-aeronautical Revenue Takes Times

Non-aeronautical revenue account for only 19% of ACV’s revenue in 2017. Non-aeronautical revenue/pax is also very low compared to other airports.

Fertilizer – 2018 business results and opportunities for 2019

The fertilizer industry is going to end 2018 with lower net profit compared to 2017. Expecting a change in the VAT policy continues to be a key point which created “tiny waves” in stock prices in 2018. However, the sector has to wait for another year to get the confirmation from the Ministry of Finance (MoF) about the proposed amendments on VAT regulations. On the back of less support from fundamental factors, we believe the 2019 drivers for fertilizer stocks will come from the adjustment in VAT policies and the expectations about divestment.

The Progress of Compliance to Basel II Capital Adequacy

Ten commercial banks, including VCB, BIDV, CTG, TCB, ACB, VPB, MBB, Maritime Bank, STB and VIB, are selected to pilot for Circular 41 one year in advance, since 01/01/2019.

So far, only three of them (VCB, VIB, VPB) and OCB (a non-pilot bank) submitted registration documents to adopt Circular 41 in advance. VCB and VIB have become the first two banks that received approval from the SBV to apply the new standard. These two banks also affirmed that they will continue to implement Circular 13 and will request for early adoption within 2019. VPB and OCB are awaiting approvals.