Market view: What does market cap-to-GDP tell us?

On October 5th, the market cap of Vietnam stock market, including HSX, HNX and UPCOM, had reached the all-time high of VND1.68 million billion, equivalent to 55% GDP of 9M2016. This brought us to a well-known ratio created by Warren Buffet to measure how “hot" the market is: Market Cap to GDP. Using this ratio, this article will focus on the HSX market capitalization to thereby evaluate whether VN-Index is currently undervalued or overvalued.

Comment on the wave of foreign investments into Vietnam pharmaceutical industry

Vietnam Pharmaceutical industry recent days was on a hype with the acquisition of Glomed Pharmaceutical by Abbott as well as their success in lifting FOL in Domesco (DMC) for the first time in the history of the industry. Previously, the industry was also caught off guard by the purchase of 24.4% shares of Hau Giang Pharmaceutical (DHG) by Taisho. After these deals, the wave of foreign investment into Vietnam's pharmaceutical industry has been the talk of the town for quite a long time. Our analyst pin-board today will comment on a few aspects of this story.

WSB – Struggles to achieve optimistic growth and maintain market share

Saigon Beer Western JSC (WSB - Upcom) which is a subsidiary of Saigon Alcohol Beer and Beverages Corporation (Sabeco), located in Can Tho city. Recently, investors have paid more attentions on the divestment from Sabeco and Habeco (two leading brewery companies in Vietnam). Below is a brief update and some assessments for 2016.

NNC - Company report introduction

Da Nui Nho JSC (HSX: NNC) specializes in mining and processing gravel products in the South. Along with optimistic growth momentum of infrastructure and real estate sectors, the ownership of Nui Nho mine has strongly supported NNC’s earnings. Stone consumption volume increased at CAGR of 18.6%/year during 2012-2015 period and may remain positive in long term.

DHA - Brief update on the first 9 months of 2016

Q3 reporting season has just started and some enterprises have gradually revealed the first 9-month business results, including Hoa An JSC (HSX: DHA). In general, earnings of DHA was somewhat pessimistic compared to the same period last year.

Buy opportunity in trough time

According to Vietnam Maritime Administration (Vinamarine), Vietnam ports handled 38.58 mil tons of cargo in September this year (up 11.1%yoy). Accumulated cargo passing through the system recorded annualized growth of 11% to 314.1 mil tons for the first 9 months of 2016. Containerized goods caught attention with 19% growth in volume reaching 9.97 mil Teus relatively to last year same period. Continued recovering domestic manufacturing and especially higher FDI flow are seen to be the major propeller for trade activities in the country. According to Vietnam Foreign investment Agency (FIA), Vietnam attracted 1,820 new FDI projects (up by 27.1%yoy) for the year ended September with total disbursed fund of 11.02 bil USD (up 12.4% yoy). Logistics services providers (particularly seaports) are earmarked to benefit from this trend.   

Comment on foreign trading activities

The YTD buy/sell of off-shore investors reached a “disappointed” record: minus VND4,675 billion. There were 2 main reasons. First of all, YTD outflows from 2 largest ETFs were estimated around USD87 million, equivalent to VND1,941 billion. Secondly, the bias of VIC due to profit takers at convertible bonds of VIC was around VND4,466 billion. Therefore, if we exclude these technical trading values, it turns out that foreigners net bought VND1,732 billion after 9 months.

What about upcoming October? We are of the opinion that they will turn to net buyer again for 2 following reasons.

REE - Company report introduction

The decline in PPC’s profitability made a dent in REE’s H1 NPAT. The fact that the JPY gained over 15% against the VND and PPC failed to conclude the electricity sales contract (PPA) for Pha Lai 1 (PL1) in the first half was the main reason for its disappointing results in 1H2016. 

Vietnam Macro Picture (3Q2016)

Vietnam macro big picture in 3Q2016 was briefly summerized by RongViet Research:

Oil & Gas – Need an “united” OPEC to be the firm base for oil recovery

Saudi Arabia and OPEC have reached an agreement to limit production for the first time in 8 years at a meeting in Algeria on September 28th 2016. The deal took the global oil and the energy industry by surprise due to recent issues from Saudi Arabia itself and its perspective about market over the last few months.

PVD – Quick Update

Last week, RongViet Research had a meeting with PetroVietnam Drilling & Well Services Corporation (PVD - HSX) about business operation as well as prospect in the medium and long term. In the situation that average oil prices from the beginning of the year was $43 per barrel, PVD obviously is one of the oil & gas businesses suffering the most negative impacts from low oil prices.

CTI – Company report introduction

Cuong Thuan Investment Development IDICO JSC specializes in infrastructure construction in Southeastern Vietnam and Dong Nai province. The firm’s vision to become a BOT project developer is first executed following the success of BOT Vo Nguyen Giap project in 2014.  CTI has also been actively acquiring stone quarries in Dong Nai to secure this resources supply in the future. In short and medium term, CTI’s earnings growth would be driven by strong performance from current and new BOT projects thrown in one after another. Stably improved stream of toll cash flow would allay concerns on CTI’s high leverage.