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.

Business Registration in 2018 in Vietnam

In 2018, there have been significant changes in the number of business registrations as the number of shutdown and suspended companies climbed up while that of newly established ones grew at a slower pace. From our point of view, the current reforms do not seem comprehensive enough. Small-scale companies are more likely to be affected by the slow progress of reforming the ‘business environment’.

2018 recap of listed retailers

As 2018 is coming to an end, companies in the retail sector (MWG, FRT, PNJ and DGW) have had quite a good year with estimated NPAT growth of over 30%. The overall story is that MWG and FRT expand to other businesses, PNJ increased its jewelry retailing segment and DGW claims growth in niche markets. Let’s have a brief look at their activities this year.

Economic activity in China

The National Bureau of Statistics (NBS) revealed that the manufacturing Purchasing Managers Index (PMI) declined to 50.0 in November, a threshold level. It was at 50.2 in October and is now at its lowest since July 2016.

The non-manufacturing PMI came at 54.3, from 54.9 in October, due to contraction in the construction sector.

The imports sub-index dropped to 47.1 and the new export order index stayed stagnant at 47.0.

Overall it shows that the economy’s rate of growth is decelerating slightly. Slower external demand growth probably weighs on activity growth.

DRC – 4Q 2018 Business Update

In the last quarter of 2018, sales in the radial tire segment, a key product of DRC, may continue to experience strong growth. On the contrary, bias tires will witness a decline in selling volume. We anticipate that earnings in 4Q 2018 will fall compared to the same period last year.

The Growth Potential of Banks’ Service Income

In near-term, we believe that key generators of fee income growth include the settlement and insurance activities. Each bank can has its own advantage and corresponding strategy to expand service oncome. In the long-term, excluding one-off income, we expect total services income of banks under our coverage to grow with at a CAGR of 25.9% p.a. until 2022. We also expect that the contribution of service income on TOI will be expanded from 8.6% (estimated in 2018) to 10.0% in 2019 and 13.8% in 2022.