Power Industry: Looking for new investment opportunities

La Nina’s return in Q1 2018 makes the situation of this year similar to that of 2017: (1) operation of hydropower plants outpace their multi-year average level, (2) demand for thermal power plants may be affected by copious hydropower supply, (3) cool weather due to La Nina results in lower expected consumtion growth in household segment. Given weak intensity of La Nina in 2018, we expect that the performance of the hydropower group would decline moderately compare to 2017 while the core-business of thermal power group would be driven by two conflicting factors including: (1) the recovery in operation after being affected by major overhaul in 2017, and (2) a reduction in Qc, which is the key protection of their profit. From our view about the sector, we believe that the investment flow to power sector would need to look for new opportunities in IPO companies such as PV Power, GENCO 3, or upcoming IPO companies like GENCO 1 and GENCO 2.

Quick look at 2017's real estate companies result and 2018's prospect

Quick look at 2017's real estate companies result and 2018's prospect

PVT - Positive Outlook for 2018 Despite the Late Operation of Nghi Son

PVTrans ended 2017 with positive business results when the revenue slightly decreased by 9% to VND6,128 B but the PAT increased by 3.5% to VND496 B. This is an unexpected earnings when the 2017 business activities was forecasted not to be favorable because of the maintenance from Dung Quat oil refinery.

Airport Transactions - Multiple are Rising

Currently, Vietnam’s airports are immature, and have huge potential for yield improvement. For regulation, the French partner wants to establish the principle of “One Airport - One Operator” at all 22 airports currently managed by ACV, through a special decree or circular issued by the Ministry of Transport (MoT) before completing the acquisition. This means ACV will remain to be the only operator even when airports are expanded or upgraded.

Mekophar's Company Report Release (UPCOM: MKP)

Dear Sirs/Madams,

Rong Viet Securities Corporation hereby presents the Company Report on Mekophar Chemical Pharmaceutical JSC (UPCOM: MKP) with the overall opinion as follows:

DGW: Business result update and 2018 plan

The market for electronic devices has become saturating, added by the trend of big retailers to import directly from manufacturers makes the market share for contributors shrinking. DGW quickly caught that change and adjusted its business model by developing/providing Market Expansion Services and starting to distribute healthcare products as well as FMCG (Fast Moving Consumer Goods). Up to now, DGW has signed an exclusive distributing contract with Xiaomi and Kingsmen – a functional food brand made by Medistar Vietnam as well as completed acquiring CL Ltd to start distributing high-quality Japanese FMCGs.

CTD- The Search for Growth Drivers Has Just Begun

After many years of surpassing the annual guidance, CTD unexpectedly failed to reach the target of VND1,750 billion in NPAT despite achieving the revenue target of VND27,000 billion. The main reason is that Q4/2017 business results did not reach the expected growth as CTD recorded only VND414 billion NPAT, equivalent to the same period last year. Thus, in the whole year 2017, CTD's revenue reached VND 27,153 billion, +31% over the same period; NPAT is VND1,653 billion, +16% over the same period.

VCB: Business Updates

At the current market price of VND63,300 per share, VCB is trading at PBR and PER forward of 3.7x and 27x respectively. This valuation is not attractive when compared with the average PBR of its peers in Vietnam as well as in the region. However, there are many catalysts for VCB such as (1) VCB’s market cap accounts around 8% of total market cap in HSX (closing price on 19^th Jan) and there is more than 9% of room for foreign investors, VCB is considered as a feasible investment case for offshore funds; (2) Positive outlook for the banking sector in 2018, in which VCB with its high market share in terms of lending, deposit and services, will be significantly benefit. In addition, if VCB can finish its divestment plan in 2018, its PBT can grow more than 30% YoY; and (3) The prospect of its private placement plan (issuing around 10% of current charter capital to strategic or financial investors) becomes more apparent when the methods to define issuance price is more flexible, which will base not only on modeling but also on VCB’s current market price. Therefore, we think that VCB’s market price is strongly driven by the market. The stock price can rally further, however, we think it could be risky for long-term investors to invest in VCB at this time.

PGI Updates

PGI organzied an Analyst Meeting recently to inform about the estimates for FY2017 earnings and target for FY2018.

Outlook for Fertilizer Stocks in 2018

Although the weather in 2017 was better than in the previous year, the fertilizer industry saw business results that were below expectations. only 5%, while NPAT to be almost flat. The severe over-supply condition, along with adverse movements of input prices due to the rally of crude oil, was the main drag for the industry. We expect these headwinds to continue in 2018 considering the expansion of fertilizer manufacturers as well as the positive forecast for crude oil prices in the near future. Therefore, we believe drivers for fertilizer stocks will come from the adjustment in policies and the expected divestments, rather than profit growth.