Corporate earnings without the financial sector – where are we?

In our last month’s strategy report, we have noted that the financial sector (banks, real estate, and brokerages) had contributed a large amount to earnings growth of the market. Financial sector account for nearly half of total market cap (figure 1) and half of NPAT of the whole market (figure 2). As such, we examine corporate earnings in Q1 without the financial sector.

VCG – Restructuring plan

In 2017, Vinaconex has restructured its businesses for the 5-year plan as dividing into two core segments, namely Vinaconex Invest - real estate segment and Vinaconex CM - construction segment. As a result, VCG will transfer the real estate projects under development status into Vinaconex Invest, while Vinaconex CM will focus on civil and infrastructure construction.

HDC - Handover to drive Q1's revenue

Hodeco is one of the leading real estate developer in Ba Ria - Vung Tau. The company possesses a huge amount of land in prime location in Vung Tau City. Its major products are apartments, social houses and land lots. Hodeco has recently been focusing on developing condotels and tourism apartments.

PERFORMANCE UPDATES

• Q1 2018 recorded a significant increase in revenues with VND 248 billion (+251% qoq); in which real estate segment accounts for 90%. The acceleration mainly came from booking revenue of Binh Gia Apartment, whose products were almost transferred in Q1. The project has average gross margin at 15%. Net profit was reported at VND 26 billion (+114% qoq). Despite the revenue surge, we notably see a decrease in GPM from 29% to 16% as well as NPM from 17% to 10%.

DCM – Strong Operating Performance, but Low Market Valuation

Despite strong and stable operating cash flow (average at VND 2 tn/year), DCM is worth a moderate market capitalization of VND 5.8 trillion (which is even lower than the company’s book value of VND 6.4 trillion). This indicates that the market is using a high discount rate for the stock. We will justify how reasonable that rate is.

STK – Update from Analyst Meeting 06/2018

Century Synthetic Fiber Corp (STK) has just announced results from the first five month of 2018, with revenues of VND 994.6 bn (42% of the yearly plan) and NPAT of VND 77.6 bn (61% of the yearly plan). In the coming years, STK will concentrate on investing in its core business to benefit from the shift of textile and garment orders from China to Vietnam due to competitive labor and production costs. It will also attempt to take advantage of the opportunities offered by trade agreements (CPTPP, EVFTA) to enjoy preferential tariffs.

Haiphong seaports overview

We estimate seaports in Haiphong handled a total of 4.5 mn TEUs of containers in 2017, rising 11.1 percent YoY to reach an all-time high, accounting for 30 percent of total container throughput in Vietnam. CAGR 5 year from 2012-2017 was 11.3 percent. As an international terminal for import-export activities, we expect Haiphong’s container throughput for 2018 to reach 5 mn TEUs (+12 percent YoY) due to: (1)  sustainable FDI growth, (2) Northern Vietnam to remain a large proportion of FDI flows into Vietnam.

Prospects of FDI Flows To Developing Asia

In 2018, FDI inflows to developing Asia are projected to remain stagnant although there could be an increase in intraregional FDI to the CLMV countries, including Cambodia, Laos, Myanmar and Vietnam. The expectation of an increase in global FDI is tempered by a series of risk factors, including 1) Geopolitical risks, growing trade tensions and concerns about a shift towards protectionist policies, 2) Tax reforms in the United States, 3) Longer-term forecasts for a potential economic slowdown and 4) Rising interest rates in developed economies with potentially serious implications for emerging market currencies and economic stability.

Van Phu Updates

Van Phu is a developer owning a huge land bank in Ha Dong District, Ha Noi and some land lots at prime location in other district such as Giang Vo, Nam Tu Liem, Dong Da and Tay Ho, Hanoi. The company is proactive in the space of infrastructure development through Build & Transfer (BT) projects, which it executes in exchange for land.

PXS – Hoping for 2019

As an EPCIC company, PXS is suffering from the downtrend in the oil price. Because most of its revenues come from the M&C segment, the business has been experiencing a “gloomy” period for years. PXS will face another difficult year before things bottom out in 2019.

Yeah1 is about to list – an interesting case

Founded in 2006, Yeah1 Group (YEG) is the largest Fully-integrated and Multi-channel media platform in Vietnam. YEG owns the largest Youtube multichannel network in Asia and operates the 6^th biggest YouTube Multi-channel network in the world by views. With 80 percent of total revenue coming from overseas, YEG is also expanding into Thailand, Indonesia and the Philippines, looking to increase its global footprint in the international digital media and advertising industry.

SCS – Good Business but Rich Valuations

Overall, SCS has a solid business with great margins. We expect the company to maintain its bottom line growth by 20%/year thanks to its competitive advantages.  However, the stock is trading at a rich valuation of 26.6x trailing P/E.