[BSC Vietnam] Typhoon Doksuri The Eagle (VGC) 18.09.2017 (DELAYED)

Sep. 20, 2017 11:55 PM ET|Includes: VanEck Vectors Vietnam ETF (VNM)

Summary

  • Indexes, VN-Index +0.25%, Trading value: VND 4575.94 ~ 203.93 USD mil, Foreigner transaction Net: -4.53 mil USD
  • VGC (VND 21,000 per share/ -0.5% / Market cap USD 390.8 million). Ministry of Construction will continue to withdraw capital at the VGC, the expected rate of 20%
  • Typhoon Doksuri mean “Eagle” in Korean, hit the central of Vietnam last week, left over 100,000 houses damaged. Please support the typhoon victim if you can (link dantri donation).
  • August Rush with commodities (continuous). Last month on my email, I mention the rise of commodities such as oil, iron ore and natural rubber. Since then, the commodities keep heading north, and so as the stocks.

Dear Value clients and partners,

Stocks are keep rising while the anti-corruption are getting hotter. U.S. crude oil prices are back above $50 per barrel as the number of U.S. rigs drilling for new production fell and the energy sectors outperformed the market today with +1.69% gain, followed by Material (+1.02%), Consumer staple (+0.82%) and Finance (+0.78%). The only loser was health care with -1.02% down while most other sectors did not change much.

 

Today’s Markets:

·        Indexes, VN-Index +0.25%, HNX-Index +0.62%, Upcom -0.14%

·        Active: HOSE: FLC, FIT, OGC, SCR, PVD.  HNX: SHB, KLF, PVS, VCG, SHS.

·        Foreigner, Buy: HPG, SSI, CTG, SBT, HII. Sell: VCB, MSN, KBC, NLG, VJC.

·        Notice stocks: HPG, SHB, AAA, VCB, SSI, SHB, KLF, PVS

·        Trading volume: ~253.9 million shares

·         Trading value: VND 4575.94 ~ 203.93 USD mil

·         Foreigner transaction Net: -4.53 mil USD Sell 17.49 USD million and Buy 12.96 USD million

Corporate update:

 

·         VGC (VND 21,000 per share/ -0.5% / Market cap USD 390.8 million). The business performance in 6 months growth achieved positive results. Net sales and EAT in 1H07 were at VND 4,289 billion (+12.1% yoy) and VND 411.1 billion (+58.6% yoy) respectively fulfilling 53% and 60.9% of VGC’s business plan. Profit of 1H17 reached to VND 1.059 trillion (+12% yoy), while gross profit margin was maintained at 24.6% yoy.

·         Accumulative 8M2017 results exceed expectations. According to a recent meeting with VGC, the consolidated revenue in the first eight months of this year reached VND 5,600 billion, fulfilling 69.5% of its FY2010, profit before tax reached VND 682 billion, and fulfilling 81% of the plan. BSC forecasts that VGC will exceed its business targets with net sales and net profit after tax of VND 8,982 billion (+10.3% yoy) and VND 828 billion (+33.2% yoy) respectively. NPAT attributable to shareholder of the parent company is 703.8 billion, EPS FW 2017 = 1,576 VND (we supposed that the bonus & welfare fund 2017 is VND 35 billion)

·         Building glass is expected to remain positive for 2017, but from 2018 will be more difficult due to competition. Gross profit margins for building glass in 1H17 increased sharply to 35.3% from 26.4% in 1H16mainly due to: (1) glass price increased by 15% over the same period, (2) operating more effective after 2 years of cold repair at VFG factory in Bac Ninh, (3) FO oil price (account for 40% COGS of glass) is still low. BSCsaid that the glass market will start to get tougher due to competition as CFG (Chu Lai) is building another factory with two production lines with a total capacity of 1,200 tons per day.

·         VGC said they will try to maintain a gross profit margin of about 30% for the following years. VGC’s float glass and e-low glass are accounting for 22% of market share. Yen Phong’s expandsion and Dong Van 4 will continue to be the main source of income for the industrial zone. According to VGC, with the expansion at Yen Phong Industrial Zone, Samsung is expected to bring VGC about $ 1 trillion revenue, which is expected to be recognized in the period 2018-2019

·         About the plan to divest the state capital at VGC. It is expected that the Ministry of Construction will continue to withdraw capital at the VGC, the expected rate of 20% equivalent to nearly 90 million shares. At present, the plan is being finalized; the expected time is at the beginning of 2018.

Comments:                                                         

·         Typhoon Doksuri mean “Eagle” in Korean, hit the central of Vietnam last week, left over 100,000 houses damaged. Please support the typhoon victim if you can (link dantri donation). Typhoon Doksuri the Eagle is considered as one of the biggest typhoon that ever hit Vietnam. The question here is which stocks will benefit or damaged by the typhoon. (1) Normally people think that Insurance stocks will be hit. But in Vietnam, what I have learned from the mid 2014 incidences of damaged industry zone is that no significant loss recorded on Insurance companies. The main reason is the contracts are mostly reinsurance in the market, which spread the damaged around. (2) The reconstruction after natural disaster will lead to higher demand of building material. But we only consider it as a short term catalyst. In the long run, the demand growth always is the most important factor.

·         August Rush with commodities (continuous). Last month on my email, I mention the rise of commodities such as oil, iron ore and natural rubber. Since then, the commodities keep heading north, and so as the stocks.

Link: https://seekingalpha.com/instablog/13489352-long-tran-thang/5044489-bsc-vietnam-typhoon-doksuri-eagle-vgc-18_09-2017-delayed

Cheers

Long Tran

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