BCI – Restructuring is to affect earnings outlook

Khang Dien Investment & Trading House Joint-stock Company (HSX – KDH) has just announced a BoD resolution to lend its subsidiary, Binh Chanh Investment Joint-stock Company (HSX – BCI) a maximum amount of VND160 billion. The annualized interest rate is 9.5% and the loan will expire in 3 months after disbursement. Such funding support is no surprise as KDH is now BCI’s controlling shareholder. However, the small size and its short maturity plus slow sales at BCI’s projects imply that the loan will be used for to fund working capital.

HNG - Debt Restructuring - The main driving force for "Turning over a new leaf"

On September 15^th, the first annual general meeting of Hoang Anh Gia Lai Agriculture joint stock company (HNG-HSX) took place. HNG is a subsidiary of Hoang Anh Gia Lai JSC (HAG –HSX), the parent holds 70.45% of its stake (as of 30/06/2016). Although HNG was listed in July last year, the stock has fluctuated recently due to negative earnings results burdened by interest expenses and depreciation as well as bleak outlook of the global agricultural commodity prices. Below is a brief update of the 1H2016 earnings results as well as some assessments for 2016 prospects.

MWG – Maintain impressive growth rates

Last week, Mobile World Investment Corporation (MWG – HSX) announced 8M2016 business results. Significant growth is still the key point in term of both revenue and PAT with +78% yoy and +74% yoy respectively, equivalent to VND 27,028 billion and VND 1,120 billion.

FPT – Without significant improvement

In 8M2016, revenue and PAT for parent shareholders of FPT achieved VND 24,544 billion (-5.5% yoy) and VND 1,119 billion (-1.8% yoy) respectively. RongViet Research maintains BUY recommendation in LONG-TERM for FPT stock with the target price to be VND 58,000/share.

DGC: Growth drivers from new projects

As mentioned in monthly strategy reports, we are positive about the prospect of supporting industry including chemistry. In our two-day business trip to Hanoi, we had a chance to discuss with the representatives of Duc Giang chemicals and detergent powder JSC (HNX: DGC) about their new projects.  

REE – Better chance to penetrate the utilities sector with state’s divestment

On September 14 2016, REE Corp (HSX – REE) announced it would buy 1.2 million shares of Nha Be Water JSC (Upcom – NBW), thereby raising its stakes in NBW from 10% to nearly 22%. This transaction will make NBW an affiliate company of REE in 4Q2016. Previously, between July 22 and August 19, REE acquired a total 3.5 million of Tra Vinh Agricultural Electricity Development JSC (Upcom – DTV) to become the DTV’s largest shareholder and parent company with 66.29% of stakes. In late June 2016, SCIC, DTV’s then-major shareholder, sold its entire stakes or 66% of the company’s share capital. Ever since, DTV’s share prices have been in a rally even though there is almost no liquidity in the stock. Today, the DTV closed at the ceiling price of VND19,700/share, a ten-time increase since the end of June.

What a Failed TPP Would Mean for the Vietnam Economy?

After TPP agreement was signed in 2/2016, the most recent information about this trade agreement is that 12 country members agreed to not re-negotiate. This announcement came out as TPP was asserted to become a failure when US – the leading country in this agreement – is facing several obstacles to pass the deal in short and long-term. The reason is that both of candidates for US President from the Republican and Democratic party criticized the TPP.

BFC – Earning improvement thanks to new factory

Binh Dien Fertilizer JSC (BFC- HOSE), whose well-known brand name "Dau Trau fertilizer" is the leading domestic firm in the business of producing and distributing NPK. In the first 8 months, Vietnam’s imported fertilizers recorded a significant decline, down by 6.5% in volume and 20% in value yoy, in which, the value of imported NPK fertilizers plummeted 30% yoy. Domestic NPK fertilizer production remained weak, decreasing by 7% over the same period. As the same time, BFC has emerged a player in the market.

High infrastructure investment need in Dong Nai province

Dong Nai, the largest province (6,000Km2) in Southeastern Vietnam’s important economic area, sits in the strategic location considered the main gate for this whole area and HoChiMinh City via National Highway 1A. In addition, the province is blessed with a river system which facilitates the cost effective waterways transport mode from center of mainland going downstream towards seaport via Dong Nai port (Dong nai river); GoDau, Phu My, Thi Vai port (Thi Vai river) and Long Tau canal. So, large lank bank for industrial – residential development which is geographically advantaged would serve as Dong Nai’s competitive advantage in attracting FDI.

REE - Opportunities open as earnings slide

For the six-month period ended June 2016, REE reported net revenue up by 4.45yoy while NPAT down by over a third from a year earlier, driven by the enormous foreign exchange loss recognized by PPC, its largest affiliate company by investment value. The retreat of El Nino will a big support to the business of TBC, TMP and Song Ba Ha Hydropower. In addition, there is a possibility that PPC will have extraordinary profits in H2 from the reversal of provision for Quang Ninh Thermal Power and the recovery part of PL1's power sales to EVN in 1H2016.

HSG’s new project – A bold dream

2015-16FY NPAT could be higher than estimation because of the newly announced anti-dumping duties on Chinese imports. Thanks to HSG’s brand recognition and distribution network, sales volume went up in line with capacity increase. HSG is also setting up new production lines including steel pipes and plastic pipes, as well as other steel coating lines running at full capacity. Thus in 2017, 23% increase in volume is likely to be achieved and exceeded. Any lines that operate sooner than scheduled may bring considerable increase in quarterly sales.

September Strategic Report: Stock-picking prevails as liquidity falls

Biased by large stocks, VNIndex and HNIndex have become less representative of the prevailing sentiment in the market. VNIndex being at its five-year high on top of the faltering liquidity should put a great many stocks at a disadvantage. As the likelihood of a correction runs higher, investors should consider realizing profits in those stocks that have gained substantially. Though the view of September’s stock market is not very positive, we believe there are still opportunities.