Examining Foreign Capital Flow in 2016

As of the end of last week, the VN-Index has risen by 17.76% YTD. However, the two exchanges have faced a massive sell-off from foreign investors (about VND6,731 billion). The selling began at the end of 2015, when the market expected the Fed to raise interest rates for the first time since 2008. This action has worried market participants because foreigners have never sold this strongly before. There was a period (from Feb 18^th to Aug 12^th) when they returned to buy, with the exception of April, as they sold VIC to take profit from VIC’s convertible bonds. Overall, this is the first year that foreign investors become net sellers since 2007.

VGC: Catalysts Ahead for VGC to Fully Realize its Potential

Currently, most of VGC’s building materials production lines are running at maximum capacity. Therefore, the firm is planning to add new production capacity by embarking on projects in energy saving glasses, toilet ceramics, tiles and special white glasses. Given that the majority of new projects are able to begin production in late 2017 and early 2018, the company’s main growth catalysts are likely to fully kick in after 2016.

2016 in retrospect

Following the global macroeconomic trend in 2016, with weaker growth than expected and lower trade activities, RongViet Research estimates a lower economic growth of 6.25% in 2016. The main reasons are that 1) Vietnam’s severe drought has negatively affected agricultural production 2) oil production has decreased and 3) trading activities have also decreased.

Good Business Based on the Perspective of Joel Greenblatt and Warren Buffett

The objective of investing in the stock market is choosing a good business to put money into, yet each investor has his own view about a good business. If they had to go with only one criteria, some may choose high ROE or high margins, some may choose strong revenue growth, while some may prefer competitive advantages. For Joel Greenblatt, the higher the Return on Capital Employed, the better the business.

CTI- Worth the Wait

Cuong Thuan IDICO Investment and Development JSC (CTI-HSX) has seen a notable correction recently after its strong rally experienced in previous months.  Since there have not been any adverse changes in fundamentals, any short-term stock price volatility could very well represent an opportunity for long-term investors to BUY this stock.

SAB - Company report introduction

As Vietnam’s largest brewing company, SABECO has various striking advantages among its peers including its well-known brand name and its largest nationwide distribution and production networks. However, the company has seen a slowdown in growth in recent years compared with other competitors, especially with Heineken. However, as many competitors have penetrated into the high-end segment, SABECO’s ability to maintain a high and stable market share in the mid-end segment in the past four years could be considered as an achievement. Hence, we expect that the company’s growth momentum will sustain in coming years, as it continues to perform strongly in the mid and low-end segments while gradually penetrating into the high-end segment.

The State Budget Outlook in 2017

In November 2016, the National Assembly approved the State Budget Plan in 2017; the budget proposes a 16-17% YoY increase in both revenue and expenditure. This plan itself is fairly aggressive, not to mention the further ambition to reallocate the expenditure structure.  This includes cutting down the current expenditure to 74% (2016E: 85% of the total spending) while increasing the infrastructure investment portion to 25% (2016E: only 15% of total spending). There are some key things that need to be noted regarding Vietnam’s fiscal constraints:

SAS – Future Prospects are Dependent on the Development of Tan Son Nhat Airport

Last week, RongViet Research had a meeting with Southern Airports Services JSC (SAS – UPCOM) in order to receive updates about the business results and future prospects of the company. SAS mainly operates in retail and tax-free segments, along with tourism and resort services.

SAB - The Giant of Vietnam’s Beer Industry

Saigon Beer Alcohol Beverage Corp. (SAB-HSX), is listing approximately 641.3 million shares on the HSX tomorrow.  The Ministry of Industry and Trade and Heineken are currently the largest shareholders, owing 89.59% and 5% of its total shares respectively.  It is estimated that SABECO’s free-float ratio is 5.14%, equivalent to 34.69 million shares. According to the company’s plan, the state will divest 53.59% of its stake in 2016 and 36% in 2017. SABECO’s FOL will be 49% after listing and could open up to 100% if approved during next year’s AGM. With an expected low free-float ratio, divestment coupled with the lifting of the foreign ownership limitation could help the stock trade more actively tomorrow.

Looking at banking stocks’ price performance

Another interesting point is that, except for VCB, the ratio of Capitalization/Deposits of listed banks dropped, and even set a new bottom since these banks listed. This indicator reflects the desire of investors between banking shares and deposits. Generally, the lower of this index (compared to the past and compared to the average) is an indicator of "  the fear" for the banking sector and suggest the time to put banking stocks into watchlist.

Oil & Gas – OPEC’s Agreement Needs Time to be Tested

In its meeting last Wednesday, OPEC surprisingly reached an agreement to cut the total oil production for the first time in 8 years. Accordingly, OPEC will cut down the total amount by 1.2 million barrels/day, reaching 32.5 million barrels/day. After the official announcement, the price of crude oil (Brent) jumped to 50.47 USD/barrel, equivalent to an 8.8% increase, and it is approaching the highest level of this year.

DHG - Company Update Report Introduction

Among Vietnamese listed pharmaceutical firms, DHG is the leader in many aspects such as scales, distribution system, and profitability. The company’s continuous effort to improve its management and sale system is another point we highly appreciate. Despite these advantages, DHG is currently trading at a discount P/E compared to other local and regional pharmaceutical companies. Taking into account the historical P/E of DHG, the company's strengths and especially the arrival of the strategic investor Taisho, we recommend investors to ACCUMULATE the stock with a target price of VND119,000 in LONG-TERM, 21% higher than the closing price on 30 November 2016 . At this price, the P/E 2017 is 16x, at which DHG has been traded in the past.