[BSC Vietnam] Anti Corruption To Build More Transparent (HDC) 04.08.2017

Dear Valued clients
Summary:

  • Stock was flat today after an eventful week of Anti corruption news. U.S. crude oil closed slightly higher for the whole week heading to OPEC meeting next week.
  • HDC (VND 16,200 per share / +3.8% / Market Cap USD 32.1 million). HDC is one of the largest real estate company at Vung Tau. We supposed that the key catalyst
  • July in a minute: Vnindex +0.91% mom and HNX-Index + 2.06% mom. market capitalization reached USD 92.86 billion + 0.88 % with USD 204.25 million turnover
  • Anti corruption to build more transparent. Việt Nam on Thursday reaffirmed that former Chairman of the state-run PetroVietnam Construction Corporation (PVX), turned himself in to police. The fact that investors remained calm with the news, was so difference to how they  badly reacted to that same kind of news few years ago (2013-2015).
  • Beside stocks that mentioned on the sector outlook update (the 4 investment themes), we noted that the fertilizer will have saveguard tariff on DAP, MAP(~20% to 22%).

·         Stock was flat today after an eventful week of Anti corruption news. U.S. crude oil closed slightly higher for the whole week heading to OPEC meeting next week. Top performance sector was consumer discretionary (+3.78%), followed by energy (+3.04%) and industry (+0.74%). Most other sector remained unchanged. Our analyst recently have bullish update and report on REE (the top utilities investor), HDC (the real estate developer with state divestment potential) and FPT (top IT and telecom stock) had their good week.

Today’s Markets:

·         Indexes, VN-Index +0.02%, Hnx-Index +0.49%, Upcom +0.24%

·         Active: HOSE: OGC,KSA,ASM, PVD, HQC.   HNX: PVS, SHB, SHS, KLF, ACM.

·         Foreigner, Buy: NLG, VCI, VNM, DXG, DHG.  Sell: SSI, CII, GMD, SBT, PPC.

·         Notice stocks: SBT, NVL, HAI, BHS, PVD, PVS, SHS

·         Trading volume: ~ 267.4 million shares

·         Trading value: VND 4676.54 ~ 208.46 USD mil

·         Foreigner transaction Net: 3.42 mil USD Sell 8.57 USD million and Buy 11.99 USD million

Corporate update:

 

·         HDC (VND 16,200 per share / +3.8% / Market Cap USD 32.1 million). HDC is one of the largest real estate company at Vung Tau. We supposed that the key catalyst of HDC is the divestment of SCIC (12.02% of HDC’s shareholder equity) and restructure process by transferring its project. Our analyst have a bullish view on HDC with TP of 18,300 VND/share (link)

HDC is implementing 16 projects, having the low capital expenditure. In the end of Q1/17, HDC has VND 976.7 billion of inventories, equivalent to 66.2% of total asset. BSC noticed that its asset has not been revalued since equitization in 2001. In 2017 business plan, HDC will transfer 5,1ha of Go Sao project at HCMC. In current, its legal procedures had completed. We expected that HDC will recognize VND 120 billion of revenue and VND 50 billion of gross profit.

Business result was improved from 2015 thanks to the restructuring process. The CAGR of revenue and net profit in the period of 2014-2015 reached 13% and 9% respectively. The gross margin in 2016 was improved from 5.7% in 2014 to 12.1% in 2016. The revenue in Q1/2017 was VND 70.7 billion (-43.7% yoy), however the gross profit was VND 20.8 billion (+55.2% yoy) thanks to the contribution of Phu My project. Its project had a low capital expenditure.

The optimistic business plan in 2017. HDC expected that revenue and net profit before tax in 2017 will reach VND 605 billion (+26% yoy) and VND 80 billion (+20% yoy) respectively.

The divestment of SCIC in HDC. According to the divestment plan of SCIC in 2017, SCIC will divest 5.3 million shares of HDC, equivalent to 12.03% of its shareholder’s equity. Thus, we expected that it will be a catalyst which can help HDC to improve business performance after divestment. Lucerne Enterprise is currently a second largest shareholder of HDC with 4.05 million shares, equivalent to 9.3% of its shareholder’s equity

Comments:                                                         

·         July in a minute: Vnindex +0.91% mom and HNX-Index + 2.06% mom thanks to SAB (+7.5 points), GAS (+3.4 points), BID (+2.5 points). The market capitalization reached USD 92.86 billion + 0.88 %. The average transaction value + 5.29% mom to nearly USD 204.25 million per session. Foreigners were net buyers on the HSX with VND 2.551 billion, net sellers on the HNX with VND 254 billion.

Macro numbers: The PMI dropped to 51.7 from 52.5, total retail sales of consumer goods and services up 10.3%. CPI up 0.11% mom andcredit growth reached 8.92%. Foreign investment in July decreased sharply (-34.4% yoy) while The VND/USD interbank rate was the same as that at the end of June. Interbank rates declined sharply indicating abundant liquidity which can explain why Banking stocks (+1.19%) is the main force that helped the market rebound at the end of the month, (SHB +9.2%, BID + 8.8% and MBB + 6.7%).

·         Anti corruption to build more transparent. Việt Nam on Thursday reaffirmed that former Chairman of the state-run PetroVietnam Construction Corporation (PVX), Trịnh Xuân Thanh turned himself in to police in Việt Nam. Before that news, Trầm Bê, Sacombank’s (STB) former chairman, and Phan Huy Khang, the bank’s former CEO, were arrested on Monday for allegedly economic mismanagement related to a unauthorized lending of VNĐ1.8 trillion (US$80 million). The fact that investors remained calm with the news, was so difference to how they  badly reacted to that same kind of news few years ago (2013-2015).

 

By the way, the increasing caution is visible in the air then we only prioritize stocks with great story and strong FA. Beside stocks that mentioned on the sector outlook update (the 4 investment themes), we noted that the fertilizer will have saveguard tariff on DAP, MAP(~20% to 22%). The benefited stocks from that news are expected to be DDV (DAP-Vinachem is currently running DAP) and QBS (owns 19.17% DDV)

 

Cheers

Long Tran

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