[BSC Vietnam] August Rush with commodities (GAS, HPG) 07.08.2017

This is a friendly remind about The Asiamoney’s Brokers Poll 2017 will conclude next week. To vote for BSC please follow the linkThanks for your support, it means a lot to me and our team at BSC.

 

·         In term of sectors, the market were quite balance today as 5/5 sector rinsed. Top performance sector was again consumer discretionary (+1.39%), followed by energy (+1.00%) as oil approached the $50 anchor and material (+0.99%). Although finance closed unchanged, please keep in mind that the bank will have support from (1) The resolution on the processing of bad debt No. 42 of credit institutions will come into effect from 15/8/2017 to 15/8/2022 and (2) VPBank will be listed very soon.

 

Today’s Markets:

·         Indexes, VN-Index +0.55%, HNX-Index +0.46%, Upcom -0.12%

·         Active: HOSE: VHG, HQC, ASM, PVD, FLC.  HNX: SHB, KLF, PVS, VCG, KSK.

·         Foreigner, Buy: VCI, PLX, GAS, HPG, VNM. Sell: CII, MSN, HT1, SSI, HCM.

·         Notice stocks: PVD, ASM, PLX, MWG, DCM, SHB, PVS, VCG, KLF, ACB

·         Trading volume: ~ 311.24 million shares

·         Trading value: VND 4802.65 ~ 214.02 USD mil

·         Foreigner transaction Net: 6.04 mil USD Sell 13.02 USD million and Buy 19.06 USD million

 

Corporate update:

 

 

·         GAS – Market Cap $ 5.4 Bil – Mkt price : 64,100 VND/cp (+1.7%). Recent improvement in oil price will directly lead to better business performance for GAS, since most input price is fixed while 70% of output price is pegged to oil price. For 3Q2017, we believe GAS will maintain the strong growth momentum as from 1H2017 (VND 32,706 Bil Revenue +9% yoy ; and VND 4,087 Bil PAT +33.7%). The strong growth in 3Q comes from price and output: FO price average for July was at $291 (up 22% compared to 3Q2016), and continue to increase. Besides, gas output is expected to yield decent growth since 3Q2016, PV Gas conducted major 5-year maintenance for 2 pipelines, which leads to lower gas output last year. In 4Q2017, the yoy difference in output price will be narrowed down, but PV Gas GAS is expected to receive payment for tariff adjustment in Cuu Long pipeline in 2014-2016, estimated at VND 1,000 Bil.Long term prospects come from major projects, such as Su Tu Trang (850 mtu/year 8.5% current output) and Ca Rong Do (1,000 mtu/year).

 

BSC expects GAS to record 2017 Revenue of VND 70,411 Bil (+18.7%) and VND 8,288 Bil of PAT, equivalent to 2017 EPS of 4,332. Our analyst maintain our BUY recommendation to GAS with TP of 72,000 VND/cp (upside 12.5%)

 

·         HPG (VND 32,250, +0.78%, market cap VND 48,921 billion). Consumption output of HPG Construction steel in July reached 209,000 tons, + 24.7% mom and + 50% yoy.Generally for 7 months 2017, construction steel consumption of HPG reached over 1.24 million tons, + 32.3% yoy. HPG’s steel consumption in 2016 reached 1.8 million tons while the designed capacity of the whole group was 2 million tons/year (maximum can reach 2.1 – 2.2 million tons of steel), phase 3 – Hai Duong complex went into operation in Q2/2016 and immediately after several months of operation run with 100% designed capacity. Hence, HPG growth in the next 6M will mainly come from improving gross profit margin. BSC noted that iron ore 62% Fe price is continuing to rise, reaching USD74.12/ton on 07/08/2017, upward trend is better than Q3/2016.

 

BSC forecasts the EAT 2017 at about VND 7,001 billion, EPS 2017 = VND 4,612. Our analyst maintain our recommendation of medium and long term BUY with HPG, a target price of VND 39,200.

 

Comments:                                                         

 

 

·         The effect of the 2Q business results have already come to the final stage as 686 companies (95% of listed companies), had announced their Q2 business results. The total EAT reached VND 33,600 billion, up by 10% over the same period in 2016 and90% companies making profit in the second quarter. The diversification in EAT of listed companies was strong, as profit mainly focused on the leading improved stocks as well as VN30. Top 15 companies contribute over 50% of the total EAT which include VNM, the banks (VCB, BID, CTG, MBB, ACB), HPG (the steel), GAS, PLX, BVH, FPT, MWG, VIC, SAB and HAG.

 

·         August Rush with commodities. Crude oil prices held mostly steady ahead of weekly rig count data from Baker Hughes and OPEC meeting while other commodities (rubber, iron ore) start climbing. Hence, industry leaders performed well today including GAS(Oil & gas leader), HPG (steel top producer) and PHRDRI (natural rubber planner) which have been updated recently by our analysts. If commodities could keep their rally, these stocks are likely to going north.

 

 

Cheers

 

Long Tran

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