Comments on State Budget in 9M2017

The first nine months in 2017 witnessed the budget revenue reaching VND843,100 billion (+13.9% YoY), while the budget expenditure was VND904,600 billion (+6.6% YoY). The state budget deficit is estimated at VND61,500 billion, decreasing by 43.2% compared to the same period of last year, equal to34.5% of the yearly plan. Budget deficit declined mostly thanks to local budget surplus. As of the end of 2017, local budget recorded a surplus of VND57,500 billion, was better than the target deficit of VND6,000 billion for 2017. In contrast, the central budget deficit was VND119,000 billion, equal to 69.1% of the yearly plan.

PV Power – Quick Assessment of Its Power Plants

PetroVietnam Power Corporation (PV Power) is the second largest power generator in Vietnam. According to its recent public announcement, the company plans to offer 29% stake via IPO and to key investors in this December. With electricity generation activities accounting for about 96% of total revenue and gross profit, this business segment plays a critical role in performance of PV Power.

SMV - Supportive Industry Got Ample Room for Growth

Seoul Metal Vietnam Co., Ltd. (SMV) is a subsidiary of Seoul Metal, a system of 12 factories located globally specialized in manufacturing precision mechanical products used in electronic devices. Currently, Seoul Metal Vietnam is manufacturing screws, bots and is importing shafts and springs and is an approved supplier in the supply chain of large industrial multinationals such as Samsung, LG and Daikin. In general, SMV is in a healthy growth phase, able to expand its scale and in a healthy financial position to capitalize on the wave of industrialization. The firm – with a chartered capital of VND 145 billion – is  expected to be listed on the stock exchange in 2017 with an estimated price of VND40,000 per share.

CTG - Business Update

Like the other state-owned banks, low capital adequacy and liquidity ratio have limited CTG's growth prospects. With the whole system’s credit growth of over 20%, CTG's credit growth in 2017 has been revised to 18%. Thanks to large amount of deposits from the State Treasury, we forecast CTG's customer deposits to grow at around 13% this year. Net operating income (before provision) is forecasted at VND16,167B (+19.3% YoY). In addition, given our expectation that CTG will prioritize to make provision for SB in 2017, CTG’s provision expense will grow 43.7% YoY. PBT is forecasted at VND8,950B (+4.9% YoY), 1.7% higher than its target. At the closing price of VND19,150 per share, CTG is trading at PBR of 1.1x, significantly lower than the current sector average of 1.5x, and 22.6% lower than our target price of VND23,500 per share. Therefore, we recommend investors to BUY CTG for LONG-TERM investment.

HAX – Updates on Q3 2017 Business Results

Hang Xanh Automobile Service JSC (HSX:HAX) has officially announced Q3 2017 business results after the meetings with its investors on October 12.

HPG- Many Growth Factors Contribute to Group’s Performance

Hoa Phat Group JSC (HSX:HPG) has announced substantial steel consumption growth in the first 9 months of 2017. In particular, construction steel sales volume reached nearly 1.6 million tons, up 31% over the same period. Steel pipe consumption exceeded 400,000 tons, up 18% over the same period. Thus, in the domestic steel market in 9M 2017, Hoa Phat accounts for nearly 24% of the construction steel market and more than 26% of the steel pipe market, leading in consumption volume and outperforming competitors in both segments.

CSV – Stable Sales to Continue

Since 2012, Southern Basic Chemicals JSC (HSX:CSV) has seen stable sales and production at VND1,550B and 250,000 tons, respectively. We expect CSV’s sales to remain stable at least until 2022 based on the following reasons.

Consumer and Real Estate Loans Reach New Peak

According to GSO, credit growth was 9.58% as of July 2017 compared to end-2016, lower compared to that of the same period in 2016 (~9.64%). However, the updated data from National Financial Supervisory Commission showed that credit growth reached 12.9% compared to end-2016, which was higher than that of the same period last year. So although credit growth steadied in Q3, it was still higher than last year. Based on RongViet Research’s estimate, credit declined 16.1%QoQ but increased 33.8%YoY in Q3. Compared to the government’s target of 21% credit growth, credit should increase 45.1%YoY in the final quarter, twice the amount of credit in Q3. Notably, credit growth in non-manufacturing sectors has slowed down since early 2017, it has increased slightly as of July 2017 (+3.2% compared to end-2016), the lowest level in many years. On the other hand, credit growth in the manufacturing and construction was 22.1%YTD, in which credit in construction was up 26.2%YTD.

CTI – A solution for interest of relevant parties

Recently, BOT Bien Hoa city Alternative road project, invested by Cuong Thuan IDICO JSC (HSX:CTI),  is receiving heavy opposition from drivers. Similar to the case of BOT Cai Lay, Ministry of Transportation and CTI quickly come up with a solution to reduce 20% toll fee for all classes of vehicles from 1 November 2017. However, the issue of tollbooth location is not yet mentioned. Despite that, the suggested solution seems to be the most appropriate after evaluating interest of drivers - investors - bank - Ministry of Transportation.

Not Easy to Beat "Mr Market"

We use median monthly return for the period 2012 – 2017 of the VNIndex and realize that seeking for profit in the first half of the year, especially the first five months will be more easy.

Multiple Impacts From Temporary Halt of Competitive Generation Market

The Ministry of Industry and Trade has sent Decision 3698/QD-BCT to all power plants on the competitive generation market (CGM), indicating suspension of CGM in Q4 2017. This reason for the announcement is to prioritize electricity mobilization from gas-fired thermal power plants. Below are our updates and views on the impact of this decision.