PC1- Result Update Report

Rong Viet Securities Corporation hereby presents the Result Update Report on Power Construction JSC No. 1 (HSX: PC1) with the overall opinion as follows:

“We appreciate PC1’s efforts to operate three distinctive business while maintaining the overall efficiency. Its power construction business still has ample room to grow owing to EVN’s demand on new electricity infrastructure. This also provides opportunities to its steel structure manufacturing business. Regarding PC1’s hydropower business, we think its stability will stand out as a major contributor of earnings to PC1. In fact, PC1’s electricity portfolio, including two HPPs under construction and five other initiated projects, contributes the largest proportion in our PC1’s sum-of-the-parts valuation. Last but not least, we appreciate PC1’s ability to obtain prime-location land banks and its residential projects’ profitability, which can act as a surprise factor to the company’s earnings. 

IMO 2020

The International Maritime Organization (IMO) has regulated that from January 1, 2020, all vessels operating outside the emission control area (ECA) will have to use fuel with a maximum sulfur content of 0.5. % compared to the current limit of 3.5%. This regulation is designed to reduce the amount of sulfur oxide (SOx) from ships discharging into the environment and minimize the impact on the global warming. Previously, in emission control areas (ECA)* and ports in Europe, IMO has regulated that the sulfur limit in fuel oil used on board is only 0.1%.

Funds may increase Vietnam's weights in near future

• Most funds had similar trend performance with MSCI Frontier Market Index
• Most funds reduced its exposure to Vietnam as of June 5th compared to April 1st
• Vietnam and Kuwait stock market's weights are still lower in most funds than in MSCI Frontier Market Index
• We suppose that the funds may reduce Argentina market’s weights and add Kuwait and Vietnam markets weights
• However, the flow may not big as investors still concern about trade wars and other global uncertainties

BMP – Improving Efficiency is The Top Priority

BMP’s 4M2019 performance was in line with its guidance in terms of its top line. 4M2019’s sales volume and revenue were 31,700 tons and VND 1,323 billion respectively.

PPC – Low sales volume weakens 2019 earnings outlook

In summary, although PPC’s 2019 earnings outlook is weaker than last year’s, the strong cash flows and rising contribution of both QTP and HND, the two biggest investments of PPC, support our belief in the company’s ability to maintain annual cash dividend at VND 3,000 /share in the coming years, corresponding to a yield of 11.5% at the closing price of June 6, 2019. We consider this dividend yield relatively attractive. We are in progress of revising our target price on PPC stock and will update in the next report.

FRT – Result Update on FPT Digital Retail JSC

Our target price for FRT is 50,000 VND / share. We have a NEUTRAL recommendation on the stock.

TV2: Listing on HSX on June 6th, 2019

Power Engineering Consulting Company 2 JSC (HNX:TV2) is listing on the HSX on June 6th, 2019. TV2 is capable and experienced in planning, survey, construction, operation and EPC of electricity related-projects. TV2 is a subsidiary of Vietnam Electricity Corporation (EVN), thus can participate in large and important projects that pioneer the renewable energy trend in Vietnam.

TV2 operation is currently divided into three main departments: Consultancy, EPC & Electro-mechanical and Investment. The most important sub-divisions are Survey, Planning and EPC. TV2’s traditionally works for business associates with small-sized service contracts. However, since 2014, TV2 signed its first EPC contract. Though small in number, EPC accounted for a major portion of the company’s 2018 and 2019 backlog.

TV2 also holds participations in renewable electricity power plants. TV2 owns 100% of Vinh Tan Solar Power, has a controlling ownership in Tan Thuan Wind Power and has strategic ownerships in affiliates that operate Son My 3.1 Solar Power and Thac Ba 2 Hydropower Plant. TV2’s long-term investment objective is to reach 500 MW and participate in consulting, planning, and construction activities at these projects.

Iron ore price may remain high in 2019

The iron ore price soared to the 5-year high and the Spot Index surpassed USD 100 per ton last week, exceeding the 2017 peak. The rally started when an iron ore mine operated by Vale halted production. The iron ore price soared 12.5% one month after the incident. The surge took us by surprise as the mine only accounts for 2% of 2019 global iron ore output. The Iron Ore Spot Index is now 40% higher than the beginning of the year and 59% higher than the same period last year.

GMD - Withstanding Fierce Competition

After many years and lack of capital, the Gemalink deep-water port project has been restarted. As shipping lines tend to use large vessels to transport containers, this strategic project is crucial for GMD in order to secure fast container volume growth in Cai Mep, Vung Tau. GMD will compete directly with market leaders Saigon New Port and Vinalines.

TCB – 1Q 2019 Business Performance Update

1Q 2019 marked the 14^th consecutive quarter of normalized TOI growth. PBT reached VND 2,617 Bn (+1.9% YoY), achieving 22.3% of the full-year target thanks to strong net interest income growth (expansion of corporate bond portfolio) and lower provision expenses. Growth would be 56% YoY if we exclude the one-off earnings from the sale of Techcom Finance.