[BSC Vietnam] How the markets react to the rate cut? (REE) 10.07.2017

Dear Value clients and partners,


·         The air turbulence are expected but never create an easy feeling. All 10/10 sectors were in the red when the market open after the SBV’s rate cut of 0.25% last week. As usual, the financial sector (-1.92%) and real estate (-1.86%) dragged down the index with the help of Health care (2.25%) as the biggest loser. Energy and material acted as the least losers with 0.37% to 0.4% down.

 Today’s Markets:

·         Indexes, VN-Index -1.18%%, Hnx-Index -1.19%, Upcom -0.86%

·         Active, HOSE: HSG, HPG, SI, VCI, VNM.   HNX: SHB, PVX, VCG, PVS, ACB.

·         Foreigner, Buy:  VCI, HPG, ROS, GAS, PVS. Sell: VNM, SSI, CTG, VIC, PPC.

·         Notice stocks: HPG, HBC, PVI, LCG, FPT, GAS, PVS

·         Trading volume: ~336 million shares

·         Trading value: VND  5100 ~224.7 USD mil

·         Foreigner transaction Net: 5.7 mil USD

Corporate update:


·         REE (VND 36,050 per share/-3.1%/Market cap USD 500 mil). In 2017 our analyst forecast REE might reach Revenue of VND 4,242 bil (+16%yoy), NPAT VND 1.450 bil (+23.5% yoy) EPS 2017 reaching 3.919 dong/share. He believes that REE has target price of VND 41,140 per share with P/E of 10.5x. 


In 2017 our analyst believe that M&E sector will grow about 30% in revenue compared to last year thanks to booking some high margin projects related to the SOE sector.


The office leasing sector might not see big jump in 2017, forecasted to grow by 2-3% mostly based on USD/VND exchange rate. However, from 2018 going forward, E. Tower Central will boost revenue of this sector. With estimated fulfillment rate of 50% in 2018, leasing price of 20 USD/m2, this towel might add about VND 150 bil REE’s total revenue.


Gain from Joint ventures might witness strong growth thanks to forecasted high profit of PPC in 2017. At the beginning of 2017, PPC has started to restructuring its JPY debt, paying down in advance JPY 8 bil in first quarter and an other JPY 8 bil in May. The rest is planned to be paid off at the beginning of 2018. This debt restructure is believed to help PPC’s performance to be smoother. In 2017, we forecast that PPC reaches revenue of VND 6.715 bil (+12%yoy), NPAT VND 565 bil (+15%yoy). Estimated div payout 15%, REE might get about 112 bil in dividend.


At the end of 2016, VSH had been consolidated to REE. This investment in the long run, together with PPC might play an important role to REE. Now VSH’s capacity is 136 MW, and will be increased to 356 MW in Mar 2019 thanks to Thuong Kon Tum project. In 2017, we forecast that VSH reaches revenue VND 643 bil (+54%yoy), NPAT VND 400 bil (+55%yoy), with 10% div payout, cash received by REE might be at VND 44 bil



·         How the markets react to the rate cut? Since 2003, the State bank of Vietnam (SBV) changed their policies rate 42 times, from min 3% to max 13%. Since 2012, the rate went down from 13% to 4.25% lately by 8 x 1% cut, 1 x 0.5% cut and 1 x 0.25% cut (which is this time).  The drop is not as big as before but the trend of lower interest rate is still on. Our analyst gives me an interesting observation that the market strongly fluctuated around 1 month after the rate cut. The Vnindex had never moved less than 2.2% in one month after the last 9 cuts (min -4.0%, max +12.2%). Hence, the bad news is that market should prepare for a wild ride this July. The good news is that it is always getting better (at least on average). In term of sectors, the winners of 4-6/9 times were rubber, oil & gas, energy, plastic, steel and IT.



Long Tran

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