HSG- Underperforming FY2016-2017

HSG- Underperforming FY2016-2017

HSG has ended its fiscal year with a disappointing net profit even though other indicators met its growth targets. HSG estimated that the total sales volume of the FY was 1.66 million tons, up 20% over the same period last year and exceeded 5% of the plan. Revenue reached over VND26,000 billion, up 46% over the same period and exceeded 14% over the plan. It can be seen that HSG achieved impressive revenue growth, thanks to a satisfactory sales volume and better sales prices compared to the plan. However, HSG’s EAT is only VND1,330 billion, down 12% YoY and 19% lower than the plan. Taking into account the fact that the world steel price was higher in FY2016-2017 than the previous fiscal year, the underperforming results could be attributed to two main reasons as follows:

PVT – Profit would return to growth track from 2018

Petro Vietnam Transportation (HSX:PVT) has lately announced its Q3 2017 business result with consolidated revenue recording VND1424 billion (-11%YoY) and profit after tax (after minority interest) of VND102 billion (-6%YoY). So, for the first nine months, the firm posted accumulated revenue of VND4447 billion (-8%YoY) and bottom-line (after minority interest) of VND256 billion (-15%YoY).  

Novaland – Business Update Q3 2017

In 9M 2017, NVL recorded revenue of VND5,736 billion (-20% YoY) and NPAT-MI of VND 1,322 billion (-16% YoY), due to a sharp decrease in financial income and lower number of handovers in real estate projects. Revenue mainly comes from three projects, namely Lakeview City (56%), Orchard Garden (13%) and Garden Gate Residence (16%).

BFC – Comments on Q3 Business Results

Binh Dien Fertilizer (HSX:BFC) announced its Q3 business results with VND1,581B revenues (+6.4% YoY) and VND72.7B NPAT (-13.4% YoY). For 9M 2017, the company recorded VND4,856B revenue (+6.2% YoY) and VND280B NPAT (+9.6%), fulfilling 71% and 82% of its revenue and profit targets, respectively.

The low gross margin is the main reason for the fall of BFC’s NPAT. Looking more deeply into raw material expenses (which constitute nearly 90% of BFC’s operating cost), and selling prices, we found two notable points:

PHR – Company Report Released on 07 November 2017

Phuoc Hoa Rubber JSC (HSX:PHR) is a large player among the listed rubber companies with core business revolving around planting and exploiting natural rubber in the Southeast, which is a key region for planting natural rubber trees. In addition, the company also expanded its plantation area through Kampong Thom project in Cambodia. Besides the natural rubber business, PHR is highly appreciated for its huge land bank at favorable location, which enables the company to have valuable assets in industrial park segment and even transfer its land to industrial park developers at relatively high prices. In the long term, Phuoc Hoa-Dak Lak forestry project is expected to have significant contribution to the growth of PHR’s business results.

Reviewing Q3 2017 Business Results of Listed Companies

In conclusion, the earnings growth of HSX and HNX were 15.1% and 22.0%, respectively. For the VN30, the earnings growth was just only 11%. This figure implies a somewhat unsustainable increase of the index, which was clearly affected by ROS. Meanwhile, the performance of mid-cap stocks, displayed by the VNMID index, seems to lag behind their high earnings growth (led by PPC, DXG, HBC and NLG). This could yield interesting opportunity, but investors need to pay attention to the quality and sustainability of earnings.

PME – Initial Coverage Released on 06 November 2017

In terms of valuation, the leading pharmaceutical companies are trading at a high P/E of about 20 times, a significant premium compared to the 16 times P/E of the VNIndex. For PME, we believe that the company is worthy of P/E of a growth company. It should be able to maintain a growth rate of 20% per year, thanks to support from the upcoming policies and competitive advantage brought by its modern facilities. Using P/E and FCFF method, we estimate the reasonable price of PME to be VND124,000/share. This target price, combined with a cash dividend of VND2,000/share, yields a total return of 85% from the initial listing price of VND68,000/share. Therefore, we recommend investors to BUY the stock.

Updates on Margin Lending Figures

By the end of Q3 2017, total margin supplied by securities firms was more than VND36,155 billion (+9.2% QoQ and 22% YoY). Since beginning of this year, the margin level has increased from VND29,688 billion to VND36,155 billion.

FPT- Core Businesses Continue to Maintain Stable Growth

In 9M2017, FPT reached a revenue of over VND31,000 billion, up 9% over the same period and reached the EAT (attributed to shareholders of parent company) over VND1,500 billion, up 13% over the same period. The bright spot in FPT's past nine months of business lies in the revenue growth of the Telecom sector and an improvement in the performance of the Technology and Distribution & Retail businesses.

Quick Update on Thalexim

Yesterday, HSX announced the auction result of Thanh Le General Import Export Trading Corp (Thalexim) with an average winning price of VND14,832, 40% higher than the beginning price.

IDICO - Initial report introduction

IDICO is one of Vietnam’s most recognized infrastructure developers. Leveraged on its construction capability, the firm has expanded successfully into industrial parks and invested in toll road and hydropower projects. In the short term, industrial park services would be the firms’ main earnings driver as continuous strength in FDI inflow expects to increase occupancy and lease rate for its low cost developed industrial parks. On the other hand, investments in toll road and hydropower are sustainable growth generators in the long run given their stable demand and strong operating cash flow. The firm also commands a solid financial position with 2/3 of debt tied to healthy cash generating projects.

REE: Business Updates

In Q3 2017, total revenue and profit of Refrigeration Electrical Engineering Corporation (HSX:REE) reached VND1,083B (+16% YoY) and VND398B (+51% YoY) respectively. 9M2017, total revenue and profit reached VND3,327B (+41% YoY) and VND1,099B (+113% YoY), fulfilling 72% and 97% of the full year target respectively.