PLC - Major merging deal in asphalt industry at the end of 2015

Over the last 2 years, Vietnam has improved the infrastructure in transportation. According to the report from World Economic Forum, competitiveness index of transport infrastructure in Vietnam increased by 9 ranks, from rank 76 (2014 – 2015) to 67 (2015 – 2016). The basic construction concentrated in road (lowest rank) and created positive economic effect on related sectors. In particular, asphalt industry significantly benefits from such trend with total sale volume of the whole industry in 2015 reached approximately 933,000 tons (+23% compared to 2014). CAGR for the period 2009-2015 was approximately 14%.

SBV guides market new exchange rate policy

Today, new exchange rate policy began to take effect. According to Decision No. 2730, from Jan 04, 2016, SBV will announce the central rate between Vietnam dong and US dollar (central rate for short) instead of the average interbank exchange rate.

Market: My dear VNIndex

Let’s say markets are similar to human being. “A flow will have ebb” is held true in case of VNIndex and “easy come, easy” is how events take places in stock markets. Therefore, investors’ sentiment changed from time to time. There might be high tim like “670, 700 or 800 must be the destination for this year Index” or there might be low time like “There is no way this is the bottom, I will come back when it is 460”. In general, patient and able to stay with markets until this day is a real success. We, those who are stock traders should and must have a firm will to avoid “Index wave sickness”.

Otran logistics JSC – integrated logistics service is competitive advantage

Lately, RongViet Research analyst had a meeting and site visit at the–about to-IPO Otran logistics JSC (OTG). Being one of Otran group (formerly Vinacommodities) subsidiaries, OTG is an indispensable part of Otran group’s agricultural trading business. Going private since 4Q2014, OTG is providing services such as port stevedoring, warehousing and road trucking with the chartered capital of VND500 billion. Currently, OTG has 02 subsidiaries being Otran Dong Nai (97%) and Northern Otran (90%) plus 02 affiliates including Otran Energy (195)- depot leasing and Thi Vai general port (30%).   

Vietnam economic review 2015: Headwinds and Tailwinds

Vietnam economy has spent a smooth year in 2015. Looking back the whole year, the economic activities have been widened thanks to the improvement of consumption and industrial segment. However, trade balance, exchange rate and interest rate... have been the remaining issues. The main keys of Vietnam economy in 2015 will be discussed below.

The impacts from US’s lifting crude exports on global prices: Do not get too worried!

In 12/2015, US president passed the bill to eliminate the crude export barrier that had existed for nearly 40 years. It opens the unlimited opportunities for crude producers in US to find partners and export crude oil in the future. At this moment, crude price in WTI future contract (US light sweet oil) has surpassed Brent price for the first time since 2010. This pointed out the immediate effect from US decision on global price movements. However, we believe that this could not be an alarming issue for crude prospects in short-term.

CVT - New granite plant could be a big growth driven factor from 2016

The flourish of real estate market and positive construction activities have been positive support elements for business operations of many building material companies. In the first 9 months of 2015, there was about 58% of listed construction building enterprises having better revenue and earnings than the same period last year; this proportion rose to 75% for tile ones. Of which, we realize that CMC JSC (HNX - CVT) has positive earnings growth and relatively good outlook in the upcoming years.

Timber industry under exporting perspective

In 11M2015, Vietnam Customs Statistics recorded USD 6.1 bn (+9.2% y-o-y) by exporting wood and wooden products. Based on the historical data of wood and wooden products, we realized that growth rate of export wood products has been slowed down since 2010 and it shows no sign of heating up. Since there is only a month ahead, it is easy to predict 2015 growth rate of Vietnam wood and wooden products would be around 10%; and would not be back to the “golden period” in 2011-2012. One month left until 2016, the industry growth rate was forecasted to achieve about 10%, and it could be difficult to return to the "Golden Age" between 2010-2011 (~15%) This is contrast to the forecast from earlier this year when TPP had been expected to bring the optimistic prospect for the total exporting value of the industries, which directly benefit from new trade agreement including timber, fishery and textile.

No domestic steel price recovery in 2016

World steel market has been sinking in overcapacity status since 2014 while deteriorating demand has caused raw material and steel prices to fall sharply. Regarding the domestic market, due to limited productive capacity which cannot meet the quality demand and provide competitive price, China steel has the opportunity to be a big fish in a little pond even though demand has improved. At the moment, leading mining companies (Vale, BHP Billiton and Rio Tinto) are in the race to reduce costs. In addition, the effects of restructuring and reducing capacity in China are limited on the global steel price in 2016. Generally, the overcapacity crisis in China is likely to last long with an excess supply of up to 300 million tons per year.

VCB: Meaningful profit growth likely resume

End of Sept, VCB positively fulfilled its whole year target. Accordingly, pre-provision operating profit got VND9,366 bn, up by 21.8% y-o-y and completed more than 80% target. Despite of that, VCB continued to pay a large proportion of income on provision and bad debt solution, its pretax profit was merely VND4,649 bn, up by 11.2% y-o-y and fulfilled c. 79% yearly plan.

Hung Dao Container JSC (HDO-HNX) – “Urgent” need to lower bank borrowings

Last week, RongViet Research analyst made a visit to Hung Dao Container JSC (HDO-HNX) and had a discussion with the firm’s management regarding its business prospects going forward. Once proud to be the only Vietnamese container maker, the firm’s business performance has gone through rough patches over the past years as global economic recession caused slumping demand. Going into 2015, the recovery of Vietnam economy fostered by strong increase in industrial production activities has been giving HDO’s business result a positive boost and promises a brighter business outlook in years ahead.

After the Fed hiking interest rate, what is the forecast for Vietnam interest rate?

In the Federal Open Market Committee (FOMC), Fed has decided to raise interest rates for the first time in nearly 10 years. As that situation, many investors have questioned relating the impact of this change on the Vietnam interest rate outlook in upcoming years. In the Advisory Diary, we will discuss shortly our opinions about this question.

Based on historical factors, the recent FED hiking interest rate (06/2004 – 06/2006) were accelerating the process of tightening monetary in Asian countries, with a 150 to 300 percent points increase of policy interest rate (except the Philippines). However, at this time, there is a divergence in the Asian monetary policy. According the recent forecast of Goldman Sachs, FED raises rate would unlikely have impact to Asian monetary policy in upcoming years. For Vietnam’s interest rate, we believe it would accelerate the process of hiking interest rate. However, the impact on the economy might last at least 6 months to 1 year later.