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.

Large Industrial Park Land Bank: VGC’s Long-Term Advantage

Real estate accounts for approximately 47% and 25% of the parent company’s revenue and its consolidated revenue, respectively. The contribution of industrial parks (IPs) was about 70% and tends to increase when the residential land bank decreases. As a state owned company under the Ministry of Construction, VGC has accumulated a large land bank at a low price to develop industrial parks. The total area of VGC (4,032ha) is much larger than its peers, (KBC, ITA, LHG, etc), with 12 IPs in Bac Ninh, Quang Ninh, Phu Tho, Thai Binh, Ha Nam and Hue. Excluding Yen Phong and Tien Son, the other IPs are almost new and have a lower occupancy rate.  As a result, the large ready-for-rent area gives VGC a comparative advantage in attracting new customers.

Vietnam’s Construction Sector: Gear down to go farther

According to the Ministry of Construction, the construction industry value during the first 10 months of 2016 grew 5.1% YoY to VND124,440 billion, at 78.6% of the MoC’s annual guidance. While the construction value grew by 2.1% YoY, the industry’s manufacturing value expanded 9.9% YoY during 10M2016. Although enthusiasm in the housing market has been cooling off, the real estate market has remained the main driving force of the construction sector.

GMD - Result update report introduction

Deeper integration of Vietnam economy is a growth catalyst for seaport and logistics sector. GMD’s competitiveness comes from its large assets base at strategic location and wide client network. Quickening the process of divesting non-core investment would give the firm resources to expand core business. The expected conversion of VIG bond (worth 40 mil USD) in 2017 could save GMD 50 bn VND in annual interest cost but give rise to great dilution risk in short-term

4Q2016 ETFs' reconstitution results

The Db x-trackers FTSE Vietnam ETF and Van Eck Market Vectors Vietnam ETF will announce their reconstitution results on 02/12/2016 and 09/12/2016, respectively. Using data that was updated on 19/08/2016, RongViet Research forecasts the net volume for some of the stocks:

The Rampant USD and its Effects on the Dong

Since the beginning of this month, the USD index has surged by nearly 4% to its highest level since 2003, around 101.7. This index, however, was up only 2% year to date. The rise in the USD has come just before a 25bps Fed tightening in December and a dovish attitude towards monetary policy of many key central banks around the world. According to the CME Group’s FedWatch tool, market expectations for a December rate increase were 93.5%. The stronger US dollar has put pressure on the yen and many other emerging market currencies. As a result, the yen has dropped sharply against the dollar with a depreciation of 8.2% in a month. China’s RMB has weakened to more than RMB6.9 per dollar, a 10% decline since the currency’s first devaluation in August last year.  Furthermore, other ASEAN currencies also came under depreciation pressure as well.

Tan Lien Phat –TTF: A turning of events

Tan Lien Phat Investment Construction JSC (TLP) just announced that it had registered to sell 28.92 million shares of Truong Thanh Furniture Corporation - JSC (HSX –TTF) out of 72.15 million shares it is currently holding. At 49.9%, TLP, a wholly-owned subsidiary of Vingroup (HSX – VIC) is the largest shareholder of TTF at the moment.