Vietnam Gold Jewelry Market Overview

According to the World Gold Council, in 2017, Vietnam ranked 14th in gold per capita consumption, globally. Consumers here have two main purposes for buying gold: (1) as a property for saving/investing and (2) for fashion. In terms of quantity, gold bar and coin account for 70% of total gold consumption in Vietnam (Figure 1). However, this number has begun to decline sharply after the 2010-2013 period when the government issued regulations to control the gold market and stop the goldenization in the banking system.

Banking Sector Update

Based on the GSO’s database, we learned that the money supply (M2) and deposit grew 8% YTD and 7.8% YTD respectively by 20^th June 2018, higher than those of 5.7% and 5.9% YTD from the same period of 2017. Meanwhile, credit grew a mere 6.4% YTD versus the growth of 7.5% YTD in the first six months of 2017.

The gap between M2 and credit growth implies abundant liquidity, which helps to decrease the VND overnight interest rate and indirectly keeps stabilized lending interest rate. Particularly, lending rate for short-term is around 6 – 9% per annum (lending rate for borrowers with high credit rating is around 4 – 5%) and for mid- and long-term is around 9 – 11% per annum.

SCS 2018 AGM note

Dividend yield for 2018 as of July 9^th 2018 is 4.2 percent.

Management is confident about air cargo growth which is expected to be sustainable with support from booming e-commerce market as e-commerce goods are usually transported by air.

Monetary Policy Adjusting To Market Movements

There is no doubt that the monetary policy operations of the State Bank of Vietnam (SBV) has improved over the past ten years. During the past two months, we strongly think that SBV’s was aggressive to withdraw money via T-Bill issuances. There were lots of failed auctions during the first half of June which might explain the increase in T-Bills’ interest rates and the appearance of T-Bill’s of 91-day maturity.

VEA – Attractive Cash Dividend

Vietnam Engine and Agricultural Machinery Corporation JSC (VEAM) has listed on UpCom under the ticker VEA after almost two years since its IPO in August 2016. VEAM is a large corporation who has over VND 13 trillion charter capital, 88.47% of which is owned by MoIT. The company’s core business is manufacturing engines, agricultural machinery and trucks. The company is known for holding the state’s ownerships at some popular motorbike and automobile FDIs, which are Toyota Vietnam (TMV), Honda Vietnam (HVN) and Ford Vietnam.

State Bank of Vietnam’s Intervention in FX Rate

Let’s remind ourselves of what happened in 2015. At the time, the dong experienced a touch period due to the shakes of Chinese financial market and the yuan’s depreciation. After 3 times of depreciating the dong, SBV spent over USD 6 Bn in intervening and stabilizing the FX market. Following that, the dong wobbled in the last two month of 2016 in which the US president, Donald Trump, won the election. This time took approximately USD 1-1.5 Bn out of SBV’s vault to erase a big percentage of FX rate’s depreciation.

HD Saison – Driving HDB’s Growth

In the context when credit growth is most likely to be monitored more closely 2H2018, which can slow down the growth of banking industry, HD Saison's high potential will act as the key driver of HDB’s growth.

Corporate earnings without the financial sector – where are we?

In our last month’s strategy report, we have noted that the financial sector (banks, real estate, and brokerages) had contributed a large amount to earnings growth of the market. Financial sector account for nearly half of total market cap (figure 1) and half of NPAT of the whole market (figure 2). As such, we examine corporate earnings in Q1 without the financial sector.

VCG – Restructuring plan

In 2017, Vinaconex has restructured its businesses for the 5-year plan as dividing into two core segments, namely Vinaconex Invest - real estate segment and Vinaconex CM - construction segment. As a result, VCG will transfer the real estate projects under development status into Vinaconex Invest, while Vinaconex CM will focus on civil and infrastructure construction.

HDC - Handover to drive Q1's revenue

Hodeco is one of the leading real estate developer in Ba Ria - Vung Tau. The company possesses a huge amount of land in prime location in Vung Tau City. Its major products are apartments, social houses and land lots. Hodeco has recently been focusing on developing condotels and tourism apartments.

PERFORMANCE UPDATES

• Q1 2018 recorded a significant increase in revenues with VND 248 billion (+251% qoq); in which real estate segment accounts for 90%. The acceleration mainly came from booking revenue of Binh Gia Apartment, whose products were almost transferred in Q1. The project has average gross margin at 15%. Net profit was reported at VND 26 billion (+114% qoq). Despite the revenue surge, we notably see a decrease in GPM from 29% to 16% as well as NPM from 17% to 10%.

DCM – Strong Operating Performance, but Low Market Valuation

Despite strong and stable operating cash flow (average at VND 2 tn/year), DCM is worth a moderate market capitalization of VND 5.8 trillion (which is even lower than the company’s book value of VND 6.4 trillion). This indicates that the market is using a high discount rate for the stock. We will justify how reasonable that rate is.

STK – Update from Analyst Meeting 06/2018

Century Synthetic Fiber Corp (STK) has just announced results from the first five month of 2018, with revenues of VND 994.6 bn (42% of the yearly plan) and NPAT of VND 77.6 bn (61% of the yearly plan). In the coming years, STK will concentrate on investing in its core business to benefit from the shift of textile and garment orders from China to Vietnam due to competitive labor and production costs. It will also attempt to take advantage of the opportunities offered by trade agreements (CPTPP, EVFTA) to enjoy preferential tariffs.