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.

HUT: Transport infrastructure investment: restructuring from BOT to PPP, BT and BOO

Under the current circumstance of a low interest rate level while the government has been encouraging the private sector’s investment into transport infrastructure, such industries including road and bridge development are considered among those who get the most direct benefit. Recently, RongViet Research’s analyst has a meeting with Tasco JSC (HNX-HUT), who is one of the national largest on land transport infrastructure developers in Northern Vietnam and recognized that HUT has remarkably improved its performance. In addition, Hanoi’s real estate market recovery has also been a supporting factor for the projects’ progress under HUT’s management.

CHP - Business result update

Our analyst covering electric sector had a phone talk to Central Hydro Power Jsc (HNX: CHP) about the company’s operation in Q32016. After the conversation, we learn that water level in A Luoi river is still at the expectation during Q3. Therefore, CHP closely follow its generation plan, and sales volume is expected at 124 mn kWh, up by 11% yoy and equal to 90% of total sales volume in the 1H2016.

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.