Invest in Vietnam: 3 Stocks To Profit From Price Discounts

Next Story

Grant Thornton: Fiscal Deficit And Divestment Strategy

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

noibai2

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

cement5

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

pharma2

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.
analystpinboard_201610212-1

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.
analystpinboard_201610212-2

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.

DISCLAIMERS

This report is prepared in order to provide information and analysis to clients of Rong Viet Securities only. It is and should not be construed as an offer to sell or a solicitation of an offer to purchase any securities. No consideration has been given to the investment objectives, financial situation or particular needs of any specific. The readers should be aware that Rong Viet Securities may have a conflict of interest that can compromise the objectivity this research. This research is to be viewed by investors only as a source of reference when making investments. Investors are to take full responsibility of their own decisions. VDSC shall not be liable for any loss, damages, cost or expense incurring or arising from the use or reliance, either full or partial, of the information in this publication.The opinions expressed in this research report reflect only the analyst’s personal views of the subject securities or matters; and no part of the research analyst’s compensation was, is, or will be, directly or indirectly, related to the specific recommendations or opinions expressed in the report.

The information herein is compiled by or arrived at Rong Viet Securities from sources believed to be reliable. We, however, do not guarantee its accuracy or completeness. Opinions, estimations and projections expressed in this report are deemed valid up to the date of publication of this report and can be subject to change without notice.

This research report is copyrighted by Rong Viet Securities. All rights reserved. Therefore, copy, reproduction, republish or redistribution by any person or party for any purpose is strictly prohibited without the written permission of VDSC. Copyright 2016 Viet Dragon Securities Corporation.

IMPORTANT DISCLOSURES FOR U.S. PERSONS
This research report was prepared by Viet Dragon Securities Corp. (“VDSC”), a company authorized to engage in securities activities in Vietnam. VDSC is not a registered broker-dealer in the United States and, therefore, is not subject to U.S. rules regarding the preparation of research reports and the independence of research analysts. This research report is provided for distribution to “major U.S. institutional investors” in reliance on the exemption from registration provided by Rule 15a-6 of the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”).

Any U.S. recipient of this research report wishing to effect any transaction to buy or sell securities or related financial instruments based on the information provided in this research report should do so only through Rosenblatt Securities Inc., 40 Wall Street 59th Floor, New York, NY 10005, a registered broker dealer in the United States. Under no circumstances should any recipient of this research report effect any transaction to buy or sell securities or related financial instruments through VDSC. Rosenblatt Securities Inc. accepts responsibility for the contents of this research report, subject to the terms set out below, to the extent that it is delivered to a U.S. person other than a major U.S. institutional investor.

The analyst whose name appears in this research report is not registered or qualified as a research analyst with the Financial Industry Regulatory Authority (“FINRA”) and may not be an associated person of Rosenblatt Securities Inc. and, therefore, may not be subject to applicable restrictions under FINRA Rules on communications with a subject company, public appearances and trading securities held by a research analyst account.

Ownership and Material Conflicts of Interest
Rosenblatt Securities Inc. or its affiliates does not ‘beneficially own,’ as determined in accordance with Section 13(d) of the Exchange Act, 1% or more of any of the equity securities mentioned in the report. Rosenblatt Securities Inc, its affiliates and/or their respective officers, directors or employees may have interests, or long or short positions, and may at any time make purchases or sales as a principal or agent of the securities referred to herein. Rosenblatt Securities Inc. is not aware of any material conflict of interest as of the date of this publication.

Compensation and Investment Banking Activities
Rosenblatt Securities Inc. or any affiliate has not managed or co-managed a public offering of securities for the subject company in the past 12 months, nor received compensation for investment banking services from the subject company in the past 12 months, neither does it or any affiliate expect to receive, or intends to seek compensation for investment banking services from the subject company in the next 3 months.

Additional Disclosures
This research report is for distribution only under such circumstances as may be permitted by applicable law. This research report has no regard to the specific investment objectives, financial situation or particular needs of any specific recipient, even if sent only to a single recipient. This research report is not guaranteed to be a complete statement or summary of any securities, markets, reports or developments referred to in this research report. Neither VDSC nor any of its directors, officers, employees or agents shall have any liability, however arising, for any error, inaccuracy or incompleteness of fact or opinion in this research report or lack of care in this research report’s preparation or publication, or any losses or damages which may arise from the use of this research report.

VDSC may rely on information barriers, such as “Chinese Walls” to control the flow of information within the areas, units, divisions, groups, or affiliates of VDSC.

Investing in any non-U.S. securities or related financial instruments (including ADRs) discussed in this research report may present certain risks. The securities of non-U.S. issuers may not be registered with, or be subject to the regulations of, the U.S. Securities and Exchange Commission. Information on such nonU.S. securities or related financial instruments may be limited. Foreign companies may not be subject to audit and reporting standards and regulatory requirements comparable to those in effect within the United States.

The value of any investment or income from any securities or related financial instruments discussed in this research report denominated in a currency other than U.S. dollars is subject to exchange rate fluctuations that may have a positive or adverse effect on the value of or income from such securities or related financial instruments.

Past performance is not necessarily a guide to future performance and no representation or warranty, express or implied, is made by VDSC with respect to future performance. Income from investments may fluctuate. The price or value of the investments to which this research report relates, either directly or indirectly, may fall or rise against the interest of investors. Any recommendation or opinion contained in this research report may become outdated as a consequence of changes in the environment in which the issuer of the securities under analysis operates, in addition to changes in the estimates and forecasts, assumptions and valuation methodology used herein.

No part of the content of this research report may be copied, forwarded or duplicated in any form or by any means without the prior.

More From the Author

  • Significant Changes in Tax Policies for the Fertilizer Industry
  • Stock Market and Banking Liquidity in 2017
  • How the Rampant USD is Affecting the Dong
  • Invest in Vietnam: How You Should Be Reading Market Cap-To-GDP
  • Invest in Vietnam: Should You Invest in Saigon Beer?
  • Invest in Vietnam: How You Should Pick Stocks, not Chase Trends
  • Invest in Vietnam: Your Vietnam Macroeconomic Overview
  • Invest in Vietnam: Central Hydropower Back to Routine
  • Invest in Vietnam: Bullish on Agrochemical
  • Invest in Vietnam: Southern Gas Rising in Financial Capability
  • Invest in Vietnam: Picking Stocks for Sustainable Gains as Liquidity Falls
  • Invest in Vietnam: Looking For Low Valuation Stocks Part 2
  • Invest in Vietnam: Looking For Low Valuation Stocks
  • Vietnam & BREXIT
  • Invest in Vietnam: Automobile Market May Diverge Due to Tax Adjustment
  • Invest in Vietnam: Vietnam Power Strategies
  • Invest in Vietnam: Your Guide on Rubber Sector Growth
  • Invest in Vietnam: Bullish Vietnam Textile Investment on Back of TPP
  • Invest in Vietnam: Your Updates On Enthusiasm & Profit Taking
  • Invest in Vietnam: Why You Should Jump Into Vietnam Phu Tai
  • One thought on “Invest in Vietnam: 3 Stocks To Profit From Price Discounts

    1. ha tien is affected by the trend of cement industy. this is not sure. we need a deeper analysis to see the effect of the industry trend on Ha tien. above analysis is shallow and so is not instrumental.

    Leave a Reply

    Subscribe Today

    We will send directly to your inbox the latest Vietnam investment commentaries, travel tips and "in the know" tidbits! 
    Join the Vietnamese IN CROWD!
    First Name
    Email address