Jack-Up Rig Day Rates in Southeast Asia and Worldwide in 2018

Normally, the rig day rates fluctuates in the same direction with the oil price. However, the rig rates in the early months of 2018 did not see any increase with the climb of the oil price, it declined sharply. This has greatly impacted on the performance of drilling companies, including PV Drilling. So what is the explanation for this phenomenon?

SCR – Robust Apartment Sales to Boost Revenue

TTC Land is a real estate developer, owning a 1,799 hectare land bank. Its business has been focused on residential projects in HCMC. The company is planning to expand its business with industrial parks and tourism. The land bank will be allocated amongst segments: Residential (Ho Chi Minh City), Industrial parks (Long An and Tay Ninh) and Tourism (Phu Quoc, Kien Giang).

HAX – 1H 2018 PERFORMANCE

After a 92% YoY decline in Q1 2018’s earnings, the business result of HAX witnessed significant improvement in the next quarter, resulting in 35% growth in PBT of 1H 2018. Although the strong growth makes current P/E valuation of HAX look attractive, we still find it reasonable due to the discount for some certain risk factors.  

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.