[Long’s View] The Rise Of Private Sectors (PVS) 23.03.2018 (Delayed)

Summary

  • Vietnam’s stock market capitalization (USD150billion) are on track to surpass Poland (USD150billion) and Turkey (USD218billion). 36% marketcap of top 20 stocks is private companies too.
  • New kid on the block. Hapro (Hanoi Trade Corporation) will IPO on March 30th with 75.9 million shares at starting price of VND12.800/share (~34.5% Charted capital).
  • PVS (VND 22,100/share, 2.3%, market cap of USD 430 million). Our analyst update that Ca Rong Do (the red emperor) is a key project for PTSE. Since our update in Sep 2017, the stock went double thanks to CRD and oil price recovery. Without expected revenue from CRD, the business outlook for PVS in 2018 will be affected, until Sao Vang & Dai Nguyet (2019-2020).

Dear Value Clients and partners;

· The index looks flat today as 5 sectors gain vs 5 sectors lose. Top performers are Consumer Discretionary (+1.02%) and Real estate (+0.9%) while Healthcare lose -1.94% and IT down -0.89%.

Today’s Markets

· Indexes, VN-Index +0.04%, HNX-Index -0.55%, Upcom -0.87%

· Active: HOSE: FLC, IDI, STB, OGC, FIT. HNX: SHB, PVS, ACB, DST, CEO.

· Foreigner, Buy: VHC, VNM, HDB, AAA, SSI. Sell: NVL, CTD, DHG, VJC, NT2.

· Notice stocks: HDB, DIG, FLC, DHG

· Trading volume: ~ 252.78 milliion shares

· Trading value: VND 7003.09 bil~ 311.90 USD mil

· Foreigner transaction: Net 3.40 mil USD Sell 66.69 USD million and Buy 70.09 USD million

· Derivative market: Trading value: VND 1,950 billion ~ USD 86.85 million

VN30F1804@ 1146.5 (-0.03%), VN30F1805@ 1153.0 (-0.10%), VN30F1806@ 1160.6( + 0.04%), VN30F1809@ 1173 (+0.17%)

Corporate update:

· PVS (VND 22,100/share, 2.3%, market cap of USD 430 million). Our analyst update that Ca Rong Do (the red emperor) is a key project for PTSE. Since our update in Sep 2017, the stock went double thanks to CRD and oil price recovery. Without expected revenue from CRD, the business outlook for PVS in 2018 will be affected, until Sao Vang & Dai Nguyet (2019-2020).

The business results have not been improved significantly yet. Most of the segments have no revenue spike in 2018. The construction engineering sector is heavily depended on three big projects: Ca Rong Do Red Emperor(about VND 3,000 billion), Golden Star (about VND 2-3,000 billion), and Long Phu 1 thermal power plant (VND 700 billion)

Port-based Services, 2017 revenue was VND 1,339 billion (-7.87% yoy), gross profit of 2017 was VND 325 billion (+18% yoy, accounting for 40.15% of total gross profit of PVS)

Ship Services, 2017 revenue was VND 2,048 billion (-2.67% yoy), gross profit of 2017 was VND 185 billion (-28.61% yoy, accounting for 22.83% of total gross profit of PVS)

Mechanical and construction services, 2017 revenue reached VND 8,272 billion (-11.64% yoy), gross profit margin was only 1.92% which was lower compared to 2016, gross profit of 2017 was VND 158 billion (-26.63% yoy, accounting for 19.6% of total gross profit).

FSO/FPSO segment, 2017 revenue reached VND 2,957 billion (-9.64% yoy), gross profit of 2017 was VND 133 billion (-4% yoy, accounting for 16.47% of total gross profit).

The issuance of additional shares. The company has completed the procedure and submitted to the ministry for approval, currently waiting for the comments from PVN.

Catalyst: Deploying the Sao Vang & Dai Nguyet, worth over USD 500 million, implemented from 2019 to 2021

Investment risk: Unfavorable price of oil, Large projects are stopped or delayed, Problem of receivables from Long Phu 1 thermal power plant

Comments:

· The rise of private sectors. Vietnam’s stock market capitalization (USD 150 billion) are on track to surpass Poland (USD 150 billion) this year, Turkey (USD 218 billion) next year. Vietnam’s stock market has doubled in size over the past year, fueled by state-owned company sales and listings, and a 48 percent gain in the VNIndex. But when we take a closer look, something is changing too. In the past, Top 10 or even 20 bluechips (78% of the market cap) are SOE (State own enterprises). Now, 36% marketcap of top 20 stocks are belong to private sectors. With the speedup of state divestment process, the private sectors will soon play a much more significant part of the economy and stock market in Vietnam.

· New kid on the block. Hapro (Hanoi Trade Corporation) will IPO on March 30th with 75.9 million shares at starting price of VND12.800/share (~34.5% Charted capital). The company whose business in (1) export and (2) retail will also offer 65% share to strategic partner. FPT retail announced the listing date to HSX will be no later than April the 30th . The theme cool down due to strong profit taking of IPO stocks lately. The first 3 IPO this year after bring investors 25% to 50% at peak, some fell back to the waterline.

Table of the day 28th March 2018: The rise of Private Sector (in Orange)

Source: Bloomberg

Cheers

Long Tran

Cheers,

Tran Thang Long (Mr.)

Head of Research and Institutional Clients

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