HPG - Updates

HPG has sold roughly 2.5 million tons of construction steel in 11M2019 (+15.0% YoY). Noticeably, HPG’s construction steel selling volume has been growing fast in Vietnam’s southern and central markets, increasing by 104.7% (11M2019, YoY) and 54.4% (11M2019, YoY) respectively. According to management, HPG’s construction sales could reach 2.7 million tons in 2019 and 3.7 million tons in 2020.

The Dung Quat steel complex is 90-95% completed. HPG’s first HRC line will start production in 2Q/2020. HRC factories might take six months to one year to run smoothly because it is HPG’s first time producing HRC. While the first furnace has run smoothly and the second was launched in November 2019, the third and fourth furnaces will be launched in 2Q and 3Q/2020 respectively. These factories will be depreciated in 12 years, after six months of testing.

Update On Seaports In Hai Phong

2019 is a relatively tough year for port operators in Hai Phong as they have faced many headwinds such as:

(1) Overall market growth has decelerated.  After China tightened unofficial importing policy on these products from Vietnam in the mid-2019, the volume of agricultural and seafood products shipped to the Northern Vietnam (to be exported to China afterward) has declined. As these products have been one of the main cargo source through seaports in Hai Phong, cargo volume here went flat in 11M 2019, reaching 4.5mn TEUs (Figure 1). The growth rate was weaker compared to 9% in 2018. In line with this market trend, the growth rate of container volume through several ports here has slowed down as well (table 1). As a result, this has decelerated revenue and core EBT growth of these enterprises (except for GMD due to recognition of robust growth from gains from JVs) (Figure 3).

Rice prospects in 2020

Vietnamese rice will face difficuties in 2020. Production, demand and prices are expected to fluctuate or seesaw meanwhile the Government has not been able to find any new export markets. As a result, we have a reluctant view on the prospect of rice in the next coming year.

Vietnam’s Foreign Trade in 2019

According to Customs’ statistics, Vietnam’s total trade value, in the first 11 months of 2019, reached USD 473 Bn, up 8.1% YoY, lower than last year’s 12.9% YoY. Export revenue was estimated at USD 242 Bn, up 8.4% YoY, and imports were USD 232 Bn, up 7.7% YoY. The 2019 trade surplus is likely to be above USD 10 Bn, marking an all-time high in Vietnam’s trade history. Notably, the trade surplus rose USD 2 Bn in November, which added to FX reserves, which are now over USD 73 Bn.

Looking back to the four-year history of Bach Hoa Xanh

Late 2015 – early 2016: Initial experiment

The Gioi Di Dong chain was still in its “golden era” and Dien May Xanh was just starting to pick up. MWG was growing at 60% annually in revenue and profit. Foreseeing that the smartphone market would soon be saturated and consumer electronics would not be enough to carry the high growth for long, MWG’s management started to think about a new retail market that is big enough for their long-term growth prospect while still fragmented with no industry leader. Foods & FMCG retail was the answer and Bach Hoa Xanh – the grocery chain was born in late 2015.

The Possible Impacts of Some New Regulations on Banks’ Performance

By late 2019 or beginning of 2020, a number of new regulations on banking sector will come into effect. We estimate that the impacts of these documents could diverge between market players with state-owned banks facing more difficulties improving their NIM while the effects on private banks would be mixed.

VN30 review in Jan 2020

The Ho Chi Minh stock exchange will review the VN30 basket based on data at the end of Dec 2019. The results will be annouced on Jan 20, 2020 and will be applied on Feb 3, 2020.

Based on the price on Dec 13 and recent free float data from Fiinpro, we assume that POW and PLX will be added to the basket as their market caps are in the top 20 of the VNALLSHARE Index. Meanwhile, DPM will be deleted from the basket as its market cap fell out of the top 40. The question is whether HOSE will delete GMD or CTD since there can only be a maximum of 30 stocks in the basket. There is no specific rule to delete either one. Hence, the Index Committee will make the final call.

The biggest fund that tracks the VN30 Index is E1VFVN30. Based on the fund structure on Bloomberg, we calculated how much the fund may buy or sell stocks. POW will be bought the most by five million shares, nearly three times its average daily trading volume for the last three months. The fund will also buy more than one million shares of PLX , nearly four times its average daily trading volume for the last three months. Contrarily, the fund will sell all of its DPM shares. All this depends on which of GMD or CTD will be removed from the basket

PVT - 3Q2019 result update and 2020 outlook

For 2020, we project that PVT could post VND8,093bn in revenue, up 1.8% YoY. The core business is projected to grow 9.2%. The NPATMI is forecasted to go up 11.6% to VND747bn. In case of selling Athena vessel, the NPATMI will be higher than our forecast. Then we keep our call BUY for this stock in 2020 with the target price of VND21,300 per share.

SMB – Attractive dividend yield

Rong Viet Securities has a positive outlook for this stock thanks to (1) better business performance through the positive transformation of the whole group, (2) an attractive valuation with trailing P/E of 6x (quite low compared to peers of 18x) and (3) high cash dividend ratio compared to the current market price. With its healthy cash flow, we believe that the firm can maintain a high cash dividend payout ratio for years.

HDG update – Awaiting the launch of Charm Villas

• We estimate that revenue and net profit in 2019 will be VND 4,512 billion (+41% YoY) and VND 795 billion (+31% YoY), respectively. As a result, HDG will fulfill 121% of its profit target for this year. 
• The company is preparing the launch of Charm Villas project (previously named Dragon City) in early-2020. The project will generate VND 2,800 billion in revenue, with an estimated GPM of above 60%, thanks to low land cost.

Construction Stocks’ 9M2019 Performance

Listed construction contractors experienced mixed results in 9M2019 due to the contrasting growth in different subsectors. 

HSG – FY18-19 Updates

This year has been difficult for HSG, as its revenue and NPAT are down VND 28,035 billion (-18.6% yoy) and VND 361.36 billion (-11.9% yoy) respectively. One of the main reasons is lower sales: 1,118,672 tons for coated steel (-12.6% yoy) and 673,613 tons for steel pipes (-11.7% yoy).