2019 Seaport Industry Outlook

We believe Vietnam seaport’s throughput will continue to grow at double-digit and in-line with trade activities. Our view is predicated on the Government’s efforts to open up trading by participating in regional and international free trade agreements. A number of important FTAs has been implemented such as Vietnam - Korea, CPTPP and Vietnam - EU (expected effective in 2019). Particularly, the CPTPP could significantly boost international trade between Vietnam and other countries in the bloc. According to BMI Research, Vietnam’s total trading value is forecasted to increase 12% per annum over the next four years, reaching a nominal value of USD 735 bn by 2022.

HPG - Dung Quat Project Update

With a capacity of over 2 mn tons annually, the Dung Quat project will become a great milestone for the Hoa Phat Group (HPG). The total capacity of HPG will increase 70% to 5.1 mn tons and revenue could reach VND 70,000 bn if it operates at full capacity at current steel prices. That would boost revenues in 2019 by 30% from this year. However, there are many concerns about the demand for steel since operational pressures affect the sector because of a weaker growth in the real estate sector and the slowdown of public investment.

Monetary Policy Uncertainty in 2019

It is clear that global economic and monetary policies uncertainties are rising around the globe. Although the role of quantitative easing is, generally, being replaced by some form of quantitative tightening, there is a divergence in monetary policies among leading central banks. Central banks of emerging market and developing economy (EMDEs) are strongly affected.

Vietnam’s Bond Market 2018

• The Vietnam's State Treasury reduced the amount of bond issuance in 2018, especially, 20-year-and-30-year maturities
• Registering value over offering value ratio (RVOVR) also fell across all maturities except for the 5-year Government Bonds but decreased for other type of bonds
• The winning yield of under 20 year bonds increased about 0.5% or 50 bps from the second haft of the year. Five--year bonds increased only 20 bps, taking yields down by 100 bps year-to-date, from 4.3% to 3.3% in October 2018
• The trading value of 11M2018 was almost unchanged compared to that of the same period in 2017
• VST will face a difficult year in issuing bond in 2019

Cement & Clinker Export 2018

Vietnam is among the top 10 cement-producing countries, with the installed capacity of 148 million tons per year. According to the Vietnam Cement Association (VNCA), the country faced a surplus of 26Mt of cement overall in 2017. Exports are a way to help remove this excess capacity

Changes in Commodity Markets

Currently, commodity prices are directly linked to geopolitical and macroeconomic factors, according to the World Bank Commodity Markets Outlook.

Key drivers include commodity-specific supply disruptions, the FED interest rate hikes, the greenback’s appreciation, growing trade tensions between major economies and huge pressure put on emerging market and developing economies (EMDEs). While the outlook for commodities is fundamentally affected by shifts in demand, the implications from trade tariffs for market prices is also significant.

VPB – Business Results Update

In 9M 2018, VPB’s consolidated PBT reached VND 6.13 Tn, up by 8.7% YoY and fulfilled 57% of the year guidance. Notably, its subsidiary, FE Credit, continued showing a slower growth and lower contribution into VPB’s consolidated earnings.

Pharmaceutical – Steady but Slow Progress

We believe rising healthcare spending and the replacement of foreign drugs with domestic ones in healthcare facilities are a big and inevitable trend. However, poor results of many listed companies in 2018 has proven that the transition will probably take many years. Therefore, we only have a NEUTRAL view on the pharmaceutical industry for 2019 even though the transition progress in hospital channels may somehow speed up. Investor may expect 2019 to be a tough year for equity markets and consider into this defensive sector. However, winner in the sector needs to have proper facilities, a supportive strategic partner, and eventually manage to sell the drugs to end-users.

PGI – Result Update on Petrolimex Insurance Corporation

For 2019, we expect the original cost of sales will increase by 7.8% YoY. The loss ratio forecasted is 53.55%, mainly due to the fact that spare parts prices will continue rising. The expense ratio and combined ratio are estimated at 46.4% and 99.9%, respectively. The investment business is expected to yield 7.7%. EPS arrives at VND 1,966.

Update on LDG

Long Dien Group’s business includes real estate and tourism. Real estate has become its core segment since 2010 with a focus on selling townhouses and land lots in Dong Nai. During recent years, the company has benefited from: 1) the low-cost of land lots purchased in the past and 2) land prices booming in neighbor provinces such as Dong Nai.

TNG – 10M 2018 Business Results

During the first 10 months of this year, TNG’s net revenue was VND 3,040 bn (+46.6% YoY) while its NPAT reached VND 147 bn (+48.5%). Compared to its guidance, TNG exceeded revenue by 10.6% and 15.9% of NPAT. Gross margin slightly improved over the same period, up from 17.2% (10M 2017) to 17.5% (10M 2018).

VSC - Maintaining Impressive Utilization Rate

2019 outlook: Lower growth momentum

We expect that the volume growth will slow down as the VIP Green Port is reaching its maximum capacity, while the Green Port has limited potential growth due to a location that does not provide much advantages. We estimate total container throughput in 2018 and 2019 will be 1,048K TEU (+31%) and 1,056K TEU (+1% YoY).

On the other hand, we expect the new circular that regulates higher range of international container handling tariffs to apply in Hai Phong next year. This will be an upside potential for VSC.