Vietnam Capital Markets

“The macro is great but the micro is challenging” we often hear investors say about Vietnam. Indeed, Vietnam’s capital market is small, unsophisticated and remains hard to access particular for overseas investors.

We believe that in the next decade, we should witness significant financial deepening in Vietnam. Currently it is the only country in the region excluding China where bank credit exceeds the sum of listed bonds and equities. Credit provided by the financial sector has grown from 21% of GDP in 1997 to 142% 20 years later. Such growth rates are unsustainable for Vietnam.

Sonadezi Chau Duc (HSX: SZC) – Huge available land bank for leasing

SZC’s long-term upside potential comes from a large industrial land bank for leasing. The stock price is trading at 2019 forward P/E of 13.7x and P/B of 1.3x, which is not attractive for a one-year holder. However, we believe it is worth considering for long term investors providing the company can successfully restructure its activities and maintain stable inflow from the industrial park segment.

TCB – Update on business performance 2018 and 2019 AGM

So far, TCB has been successful in increasing revenues by expanding its customer base (mainly affluent individuals), widening product/ service offerings and reducing transaction costs. We see high potential in both bancassurance and TCB’s bond business and recognize its high profitability. We appreciate TCB’s sophisticated organizational development initiatives in brand positioning, customer relationship management and employee management which are in line with their overall organizational strategy and set the bank apart from peers.

Having said that, the positive earnings growth in 2017 and 2018 is partly due to extraordinary income including divestments and up-front fees. Also, it should be noted that TCB’s current business has concentration risks including the dependence on large corporate clients (especially in real estate development) as well as related mortgage loans to affluent and mass affluent segments.

SWC –2019 AGM Update

We believe SWC’s prospects look bright. The company’s core businesses are poised to benefit from the inland port masterplan in Ho Chi Minh City and another tailwind comes from the river container shipping market. At current prices, the dividend yield is attractive. However, investors should pay attention to the possibility of delisting in the future when STG is approved to buy the remaining free-floating shares without a public bid.

SAB – Strategy is to focus on 7 key areas

SAB is still under restructuring: cutting costs and optimizing production and business processes. We believe it will take more time before we see meaningful results. In addition, the increase in the special consumption tax on alcohol and the fluctuation of raw material prices will be risks to consider when investing in this company.

Result Update on PetroVietnam Fertilizer and Chemicals Corp

We maintain ACCUMULATE for DPM with the target price of VND19,800 per share, basing on the FCFF and P/E method. Plus cash dividend of VND1,000, generating a total return of 15%, compared to the closing price on Apr 16^th 2019. The business result is likely to hit the bottom in this year before recovering in 2020. So we think that the investor should take advantage of the opportunity as the bad result is released in the coming times.

Result Update on Da Nang Rubber JSC

We revise our target price to VND 23,500/share, down 2% from the recent valuation, mainly due to the decline in radial tire segment. This target price, coupled with a VND 1,000 cash dividend in the next 12 months, would yield a total return of 15% (calculated based on the closing price on 16 April). Furthermore, we expect that the divestment could be a short-term catalyst for the stock price and the prospect of DRC from 2021 onward would be strong. Therefore, we have an ACCUMULATE recommendation on DRC

New Company Report: Hoa Sen Group JSC (HSX: HSG)

Rong Viet Securities Corporation hereby presents the Company Update on Hoa Sen Group JSC (HSX: HSG) with the overall opinion as follows:

“Hoa Sen Group JSC (HSX: HSG) has been through a volatile period due to reduced raw material prices and risky speculative activities. Disappointing business results have put pressures on investor sentiment and its stock price. 

Nevertheless, Hoa Sen maintains its key advantage in the domestic retail market thanks to a strong brand name and domestic distribution network while its direct competitors rely more on lower margin exports.

By reducing speculation activities and limiting transactions with related parties, HSG is on the right track to restore profitability. The increasingly fierce competition in both domestic and international markets is making a lot of domestic manufacturers face difficulties. We believe that HSG has the higher ground to recover in the intermediate term.

KBC - 2019 AGM Update

For the time being, we keep our forecast with net revenue of VND 2,393 billion (-5% YoY) and NPATMI of VND 661 billion (-12% YoY) for FY2019. VDSC keeps the target price of VND 15,900 per share, giving us a current FY2019 P/E of 10.6x, based on the closing price on April 12. Notwithstanding, we also notice two potential upside catalysts for the stock price, including the approval in investment license of Trang Due 3 zone (687 ha) and the success in sales launch of Trang Due UA (42 ha). These two projects should be included in our forecast when further details are reported.

Lowest export growth in 10 years due to global economic slowdown

• Export growth increased 5.3% YoY, the lowest level in 10 years, due to global economic slowdown
• However, we expect exports to pick up as advanced economies and China introduce stimulus measures.
• Net export to the US skyrockted. At the same time, net import from China rose sharply
• Export of phones in major market decelrated or declined except for the US (+87%)

HAH –2019 AGM Update

Competition is heating up in Hai Phong’s ports. Oversupply in the container handling capacity is estimated around 32% after capacity rose 34% to 6.6 million TEUs per annum in 2018. Last year two new ports came into operation including Nam Dinh Vu and HICT. This has negatively affected the business results of HAH and 2018 NPATMI decreased 8% to VND135 billion.

FSC Certification – Bottleneck Problem for Exporting Rubber Wood Products to Europe

Europe is a very potential market for wooden products. European imports of wooden table- and kitchenware increased from €264 million in 2012 to €398 million in 2016, an average annual growth rate of 11%. A lot of tableware and kitchenware products are made of rubber wood. However, Vietnam only account for a very small portion of European import. The reason is that Europe requires FSC certification. Not many rubber plantation in Vietnam is FSC-certified at the moment.