November 3, 2016
Disclaimer: the opinions expressed herein are that of Rongviet Securities and not of VietnamAdvisors. This is NOT a solicitation to buy or sell securities.
NoiBai Cargo: Strong price discount creates opportunity
NoiBai Cargo (NCT-HSX) reported 9M2016 revenue of 512 bil VND (down 14.6%yoy) and 19.4%yoy fall in PAT to 205 bil VND. This result is largely anticipated in 2016 as new industry entrant ALS put in use full capacity this year. Moreover, sharing of international air freight clients to ALS started to make a toll in NCT’s operating margin which has gone down 3.6 percentage points in 9M2016 compared to last year ‘s similar period. The result is in line with our forecasts in NCT company report published in July 2016.
In particulars, 2016 revenue and PAT are estimated to report 725 bil VND (-9%yoy) and 275 bil VND (-12%yoy) equivalent to EPS 2016 of 10,208VND. At today share price, the stock is trading at p/e 8x. That has reflected a strong investors’ discount to current market share reduction, its competitors’ cargo terminal expansion plan (ACSV) and possible impact on cargo demand resulted from recent Samsung Galaxy Note 7 incident.
After all, we believe on a low chance that NCT stock price continues to go further down given strong air freight handling demand on the horizon from new electronics maker investment in Northern Vietnam and strong business cash flow to maintain the stock’s dividend yield higher than deposit rate (at stock price on 21 Oct 2016).
Ha Tien 1 Vicem Cement: Good business results
According to a recent report of Vietnam National Cement Association (VNCA), the total consumption of cement and clinker was 55.55 million tons, up 7% over the year. In particular, domestic sales made of for the largest proportion (78.7%) and had a positive growth of about 10%. Due to fierce competition with China, exports have been slowing down and had a slightly negative growth at 2%. Despite oversupply remains but many large enterprises such as Ha Tien 1 Vicem Cement JSC (HSX: HT1) still maintained its good business trend.
In Q3, net sales and NPAT of HT1 reached VND2,113.94 and VND257.99 billion, up 10.7% and 87.3% over the year, respectively. Factors supporting HT1 earnings may include: (1) the rebound of real estate market and construction activity supported HT1 consumption by 9.2%; (2) interest expense decreased due to payment of debt; (3) much lower loss in fx (just VND10.4 billion instead of 83.4 billion as of Q3 last year), and (4) the extraordinary income from the liquidation of assets. If excluding the impact of exchange rates and the abnormal factors, profit before tax could increase just 20.7%.
Relating to Thu Duc grinding terminal, HT1 has stopped operating at this terminal in order to complete the relocation by the end of this year or early next year at the latest. This will decrease the grinding capacity of HT1 by about 1.2-1.5 million tons per year. However, HT1 can increase the rate of exploitation in the remaining three grinding stations Phu Huu, Cam Ranh and Long An. Also, the Company is also hiring Ha Long Cement JSC, a new member of VICEM, to do outsourcing work (~50% output of Thu Duc terminal). Therefore, we believe that the business operations of the HT1 should not be affected heavily by the impact of Thu Duc’s relocation.
Oversupply and cement industry still tends to rise when export still has no bright spots and new supplies from the expansion project of Cong Thanh Cement and Vissai (total capacity of about 7 million tons) are expected to put into operation later this year. Domestic demand maintaining positive but could hardly absorb the new supply increase.
This is a huge disincentive for the rise in prices of cement. HT1, despite the geographical advantages in the South, will also be affected. In addition, the increase in prices of some types of important energy like coal (~ 22% of COGS) and electricity (~ 13% of COGS) cause the decrease in gross margin of the cement businesses.
Assuming that the exchange rates with EUR and USD maintain stability in the Q4/2016, the NPAT of HT1 might reach about VND900 billion, corresponding to EPS of 2,256 VND/share (excluding bonus and welfare rate of 20 %). HT1 is trading at a PE forward of about 11.6 times, relatively reasonable for a leading enterprise like HT1.
Imexpharm Corporation: Strong growth in Q3
IMP has announced Q3 earning result, in which net revenue and NPAT was VND 215bn (+17%) and VND 23bn (+31%), respectively. Summing up 3 quarters, the company just completed 59% of total revenue plan and 62% of PBT 2016 plan.
Revenue of IMP products in Q3 was 230.5bn, 49% pop. Strong performance in Q3 has somewhat made up the poor result in 1H 2016. For the last quarter, history shows that it is typically the time IMP records highest revenue. For example, revenue of IMP products in Q4 2015 accounted for over 30% of the full year. Q4 2016 seems to follow this trend, considering the contribution of 2 EU-GMP factories. We estimate IMP to complete over 90% of 2016 plan, close to our forecast in our company report last August.
Yesterday, IMP also officially confirm the price of VND45.000/share for the upcoming share issuance that will take place in Q4 this year. Taking into account these new shares on the calculation, we project EPS 2016 to be VND2.600, which translates to a forward P/E of 24x, the highest among all listed pharmaceutical companies.
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