2016 in retrospect

Following the global macroeconomic trend in 2016, with weaker growth than expected and lower trade activities, RongViet Research estimates a lower economic growth of 6.25% in 2016. The main reasons are that 1) Vietnam’s severe drought has negatively affected agricultural production 2) oil production has decreased and 3) trading activities have also decreased.

Good Business Based on the Perspective of Joel Greenblatt and Warren Buffett

The objective of investing in the stock market is choosing a good business to put money into, yet each investor has his own view about a good business. If they had to go with only one criteria, some may choose high ROE or high margins, some may choose strong revenue growth, while some may prefer competitive advantages. For Joel Greenblatt, the higher the Return on Capital Employed, the better the business.

CTI- Worth the Wait

Cuong Thuan IDICO Investment and Development JSC (CTI-HSX) has seen a notable correction recently after its strong rally experienced in previous months.  Since there have not been any adverse changes in fundamentals, any short-term stock price volatility could very well represent an opportunity for long-term investors to BUY this stock.

SAB - Company report introduction

As Vietnam’s largest brewing company, SABECO has various striking advantages among its peers including its well-known brand name and its largest nationwide distribution and production networks. However, the company has seen a slowdown in growth in recent years compared with other competitors, especially with Heineken. However, as many competitors have penetrated into the high-end segment, SABECO’s ability to maintain a high and stable market share in the mid-end segment in the past four years could be considered as an achievement. Hence, we expect that the company’s growth momentum will sustain in coming years, as it continues to perform strongly in the mid and low-end segments while gradually penetrating into the high-end segment.

The State Budget Outlook in 2017

In November 2016, the National Assembly approved the State Budget Plan in 2017; the budget proposes a 16-17% YoY increase in both revenue and expenditure. This plan itself is fairly aggressive, not to mention the further ambition to reallocate the expenditure structure.  This includes cutting down the current expenditure to 74% (2016E: 85% of the total spending) while increasing the infrastructure investment portion to 25% (2016E: only 15% of total spending). There are some key things that need to be noted regarding Vietnam’s fiscal constraints:

SAS – Future Prospects are Dependent on the Development of Tan Son Nhat Airport

Last week, RongViet Research had a meeting with Southern Airports Services JSC (SAS – UPCOM) in order to receive updates about the business results and future prospects of the company. SAS mainly operates in retail and tax-free segments, along with tourism and resort services.

SAB - The Giant of Vietnam’s Beer Industry

Saigon Beer Alcohol Beverage Corp. (SAB-HSX), is listing approximately 641.3 million shares on the HSX tomorrow.  The Ministry of Industry and Trade and Heineken are currently the largest shareholders, owing 89.59% and 5% of its total shares respectively.  It is estimated that SABECO’s free-float ratio is 5.14%, equivalent to 34.69 million shares. According to the company’s plan, the state will divest 53.59% of its stake in 2016 and 36% in 2017. SABECO’s FOL will be 49% after listing and could open up to 100% if approved during next year’s AGM. With an expected low free-float ratio, divestment coupled with the lifting of the foreign ownership limitation could help the stock trade more actively tomorrow.

Looking at banking stocks’ price performance

Another interesting point is that, except for VCB, the ratio of Capitalization/Deposits of listed banks dropped, and even set a new bottom since these banks listed. This indicator reflects the desire of investors between banking shares and deposits. Generally, the lower of this index (compared to the past and compared to the average) is an indicator of "  the fear" for the banking sector and suggest the time to put banking stocks into watchlist.

Oil & Gas – OPEC’s Agreement Needs Time to be Tested

In its meeting last Wednesday, OPEC surprisingly reached an agreement to cut the total oil production for the first time in 8 years. Accordingly, OPEC will cut down the total amount by 1.2 million barrels/day, reaching 32.5 million barrels/day. After the official announcement, the price of crude oil (Brent) jumped to 50.47 USD/barrel, equivalent to an 8.8% increase, and it is approaching the highest level of this year.

DHG - Company Update Report Introduction

Among Vietnamese listed pharmaceutical firms, DHG is the leader in many aspects such as scales, distribution system, and profitability. The company’s continuous effort to improve its management and sale system is another point we highly appreciate. Despite these advantages, DHG is currently trading at a discount P/E compared to other local and regional pharmaceutical companies. Taking into account the historical P/E of DHG, the company's strengths and especially the arrival of the strategic investor Taisho, we recommend investors to ACCUMULATE the stock with a target price of VND119,000 in LONG-TERM, 21% higher than the closing price on 30 November 2016 . At this price, the P/E 2017 is 16x, at which DHG has been traded in the past.

Large Industrial Park Land Bank: VGC’s Long-Term Advantage

Real estate accounts for approximately 47% and 25% of the parent company’s revenue and its consolidated revenue, respectively. The contribution of industrial parks (IPs) was about 70% and tends to increase when the residential land bank decreases. As a state owned company under the Ministry of Construction, VGC has accumulated a large land bank at a low price to develop industrial parks. The total area of VGC (4,032ha) is much larger than its peers, (KBC, ITA, LHG, etc), with 12 IPs in Bac Ninh, Quang Ninh, Phu Tho, Thai Binh, Ha Nam and Hue. Excluding Yen Phong and Tien Son, the other IPs are almost new and have a lower occupancy rate.  As a result, the large ready-for-rent area gives VGC a comparative advantage in attracting new customers.

Vietnam’s Construction Sector: Gear down to go farther

According to the Ministry of Construction, the construction industry value during the first 10 months of 2016 grew 5.1% YoY to VND124,440 billion, at 78.6% of the MoC’s annual guidance. While the construction value grew by 2.1% YoY, the industry’s manufacturing value expanded 9.9% YoY during 10M2016. Although enthusiasm in the housing market has been cooling off, the real estate market has remained the main driving force of the construction sector.