[BSC Vietnam] We shape our buildings: Thereafter, they shape us (DIG, PPC) 05.05.2017 (REUP)

Dear Value clients and partners,

 

·         Reverse recent trend, the energy sector rocket as top of the board yesterday with + 3.71% gain (despite a recent drop of WTI), followed by industry (+0.8%), consumer discretionary (+0.77%), real estate (+0.63%) and material (+0.55%). The other side of the hill have 4/10 sectors, lagged by consumer staple (-1.28 %) and health care (-0.82%).

Today’s Markets:

·         Indexes, VN-Index  – 0.28%, Hnx-Index + 0.21 %, Upcom + 0.29 %

·         Active, HOSE: FIT, HQC, HAG, FLC, DLG.   HNX: SHB, CEO, KLF, SHN, PVS.

·         Foreigner, Buy: FLC, CII, GAS, PLX, KBC. Sell: BBC, TDH, NT2, BMP, DCM.

·         Notice stocks: CII, HAG, HSG, DCM, FIT, DIG, PVD. => PVD close limit-high

·         Trading volume: ~ 242.8 million shares

·         Trading value: VND 4,270.22 bil ~ USD 187.7 mil

·         Foreigner transaction Net: USD – 1.34 mil. Buy USD 8.8 mil and sell USD 10.14 mil

 

Corporate update:

 

·         DIG (VND 11,400 per share / +4% / Market Cap USD 110 mil). Our analyst had a visit to DIG HQ in Vung tau Province 3 weeks ago. Currently, DIG has a large land in secondary urban areas associated with tourist or industrial zone development, such as Ba Ria – Vung Tau, Dong Nai, Vinh Phuc and Da Lat.

 

In 2016, DIG‘s revenue reached 1,323.5 billion VND, up 88.7% from 2015. The parent company’s PAT was 77,8 billion VND (+402% yoy), EPS 2016 = 336 VND. 2017 business plan: Rev VND 1,406bn (+19% YoY), PAT 128 bn (+119% YoY), corresponding to EPS forward 2017 = VND 537 VND. 1Q2017 business results: Rev VND 249bn (- 14% YoY), PAT VND -15.5 bn.

 

The company has divested capital in Dai Phuoc Lotus, PBT of this deal is about 120 billion VND and will be recognized in 2017Q2. Ministry of Construction now owns 49% of DIG. This ownership may be reduced to 25% by the end of 2017 and to 0% in 2018. Current DIG‘s strategy are to (1) divest capital from inefficient associated companies, and (2) focus on current their projects such as Phoenix, Nam Vinh Yen, Gateway, etc.

 

·         PPC (VND 17.900/share, +0.3%, Market cap: USD 250 mil). In first quarter 2017, PPC recorded NPAT of VND 142 bil, whereas in first quarter 2016, PPC witnessed loss of VND 157 bil, thanks to dramatically decrease of Forex loss from VND 256 bil to VND 162 bil. In 2017, PPC plans to generate 5.591 mil kWh (+7%yoy), revenue might reach VND 7.171 bil (+20%yoy) and NPBT VND 722 bil (+17.4%yoy).

The restructuring of JPY debt. In Feb 2017, PPC has paid JPY 8 bil out of JPY 21.35 bil debt, with the calculated exchange rate of about 204 VND/JPY. In May 2017, PPC will pay back JPY 8 bil, reducing its JPY loan outstanding to just over JPY 6 bil. The rest is planning to be paid in the beginning of 2018. Hence, from mid-2017, PPC will bear less forex risk from JPY/VND fluctuation. Investment Risks: (1) PL1 has been fully depreciated hence less competitive with other power plants in the North. (2) the VND 817 bil invested in QTP has been provisioned with amount of VND 409 bil. The QTP’s business perspective in 2017 is not very bright since the plant is still under strong burden of USD loan outstanding. Our analyst currently posts a target price of 19,300 dong/share which I personally found it conservative. With the FX risk disappear in less than 12 months from now; the stock can be worth much more than that. For more update here

 

Comments:                                                         

·         We shape our buildings: Thereafter, they shape us. As stated in our Sector outlook 2017 Q1 (page 9 link), we maintain a POSITIVE outlook with the following sectors: Construction, Technology, Oil & Gas, Seaport, Electricity, Insurance, Fertilizers, and Rubber. At the same time, we raise the Positive Outlook for the Real estate sector. During Q2, we had few visit and update for DIGLCGHBC, HDC, DXG, NLG, ITCSCR…  and find that we were too conservative with real estate at year beginning. It is not easy to admit wrong opinion but better late than never.

·         The FOL, divestment and strategic offering theme is one of our favorite. Insurance is surely ahead of other sectors in term of FOL and strategic offering.  On 4th of May 2017, PJICO announced details of its capital rise to strategic partner – Samsung Fire & Marine Insurance Co. The deal is completed at price of VND 30,000/share, +28% compare to current price (a 2.6 P/B again similar to PTI, BIC deal), with the total of 17.3M shares or 20% of total charter capital. The deal will bring to PJICO VND 531 Bil of cash, equal to 24% the current total investment value of PGI. After the deal, charter capital of PGI increased to VND 887.1 Bil, and Petrolimex (PLX) is holding 40.9% ownership. The Book value of PGI increased from VND 11,300 to VND 15,100, and the current price is equivalent to new P/B of 1.55x while BMI, PVI are still traded well below the average.

 

Have a nice weekend,

Best regards,

Long Tran

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