Commodity Recovery in 2016 and Wildcards During 2017

After experiencing a sharp plunge in 2015, commodities prices in general have experienced a significant recovery in 2016 following a 5-year bear market. Among the gainers, iron ore, zinc and natural gas were the year’s best performers. It is believed that the rally may extend over the next few years supported by supply and demand dynamics as producers across the complex have scaled back supply since most commodities have been trading below their marginal cost of production.  The rally could also occur for an extended period causing world-wide producers to reduce output and cut investments in future projects.

Vietnam’s Airport Sector – Limitations and Opportunities

Airports Corporation of Vietnam (ACV-Upcom) operates 22 commercial airports in Vietnam. The firm recorded nearly 81 million passengers in 2016 making it one of largest Asian airports by annual passenger volume. Vietnam’s aviation and airport industry growth prospect is well supported by (1) the rise of Vietnamese middle class income (believed to make up half the Vietnamese population in 5 years’ time – Nielson), (2) “flying costs” becoming more affordable and (3) time saving.

Significant Changes in Tax Policies for the Fertilizer Industry

The fertilizer industry struggled during 2016 due to unfavourable conditions such as decreasing demand, rising competition and unfavourable tax policies. However, some significant changes in tax policies will result in pros and cons for the fertilizer industry during 2017. Below is a brief assessment of tax policies which will affect the fertilizer industry in 2017.

HSG’s FY16-17 AGM: Core Business Remains Solid

HSG has been setting up a number of production lines, which will raise its capacity by 28% in 2016-2017FY and will enable HSG to achieve its targeted volume growth of 20%.

ITD – Quick Update

ITD has solid experience in providing technology solutions for the transportation sector, especially intelligent transportation systems (ITS), namely automatic toll collectors. Even though it has been operating in this area for 10 years, the ITS segment has increasingly contributed to the company’s business results thanks to the development of transport infrastructure. Rong Viet Research believes that growth dynamics from this development will continue to be a foundation for ITD’s long term prospects.

2017 Domestic Steel Price: A Stronger Bounce is Ahead

The global steel industry witnessed a supply shock in 2016, resulting from China’s policies to control steel production. With the aim of wiping out small-scale and inefficient steel mills to reform the industry, China has put a cap on coking coal mines’ production days.  This has resulted in commodity prices surging by 247% during 6 months, reaching the peak of nearly USD309 per ton in November 2016. Consequently, scrap and iron ore prices rose by 67% and 85% YoY respectively.

ACB: Notable Resolution of its Legacy Problems

ACB has been able to restructure its business much sooner than the banking industry in general, and has mostly resolved its legacy issues as of the end of 2016.  While many competitors of ACB are still under the restructuring progress, ACB is currently in a better standing, as it has already resolved many of these issues. For 2016, we expect that ACB’s PBT will reach VND1,556 billion, 3.5% higher than its guidance and up by 18.4% YoY.  Its NPAT is projected to reach VND1,245 billion (+21% YoY). At the closing price of VND19,200, ACB is trading at 1.29x its 2017 PBR.

VGT – Vietnam’s Textile Giant Joins the UPCoM

A total of 500 million shares of Vietnam National Textile and Garment Group (VGT) were listed on the UPCoM today with an initial reference price of VND13,500/share. The strong demand pushed the stock’s price up to VND17,100, resulting in a market capitalization of VND8,550 billion. 24% of VGT’s shares are restricted from being transferred, which includes 120 million shares of strategic shareholders.  The government holds 53.49% of VGT’s stake, following by VID Group (~14%) and Vingroup (~10%).

Sale and Leaseback Model in the Aviation Industry

The sale and leaseback is a very popular model in the aviation industry.

2016: A Peaceful Year for Vietnam’s Economy

Vietnam’s economy was more favorable at the close of this year, as compared to the beginning of this year. Specifically, risk factors for Vietnam, such as China’s economy and the FED’s rate hike, have not been as negative as expected. To sum up 2016, industrial production demonstrated persistent growth with stable consumption. In contrast, the agriculture sector grew poorly, and there was also a steep decline in crude exploitation due to low global oil prices. The big picture of Vietnam has been built on the stability of inflation, interest rates and exchange rates. However, the downturn of the commercial sector and the eliminated expectations for the TPP have caused investors to be somewhat pessimistic about future prospects. In today’s Pinboard, RongViet Research will point out the crucial economic factors in 2016.

NVL – An Impressive Entrance

Today was the first trading day of Novaland Investment Group Corporation (Novaland-NVL) on the HSX. The stock surged at the opening of the session to the ceiling price of VND60,000, and remained at this price throughout the day.  The market’s reaction today was widely expected, as Novaland has a very strong reputation in Vietnam, and  this listing has been highly anticipated for two years.

Brief Note about Three Breweries that will be Listed Soon

Apart from the listing of SAB and BHN, some of Sabeco’s subsidiaries also plan to list in the near future.  In today’s Analyst Pinboard, RongViet Research makes a brief assessment of the business activities of three brewing companies that plan to list on the UPCoM in late-2016 and early-2017.