HDB – Company Report on Jul 20, 2018

Growth drivers from customer ecosystem and consumer finance

Japan and the EU sign trade agreement

The Japan- European Union Partnership Agreement was signed in Tokyo this Tuesday. It will strengthen links between both parties and provide a base for a host of other free trade efforts, including the 11-nation Trans-Pacific Partnership.

Pharmacy Chain – Lack of a Supportive Environment

Recently, retailers such as MWG and FRT have started to move into pharmaceutical retail. In particular, we see that FRT's Long Chau chain has got off on the right foot. However, the pharmacy chains model still faces many difficulties due to mediocre market size and a lack of a supportive environment.

Bloomberg Live ASEAN Business Summit 2018

More than 50% of participants appreciate and look for opportunities in Vietnam, especially in some sectors such as consumption, infrastructure, tourism, foods export. Similar to other regional countries, Vietnamese companies need to effectively cooperate with domestic and international distributions to exploit Chinese consumer market. Besides, a clever foreign policy is required to China’s debt-trap diplomatic and financing capital.

MCH – Positive Growth thanks to Premium Products

We just had a meeting with representative of Masan Consumer (MCH) to update its business results in Q2 2018, as well as the future prospect and strategy of company in the coming years. Overall, thanks to catching up the trend of FMCG through the premiumization of core portfolio, MCH recorded a remarkable growth rate of 78% in Q1 2018, also its revenue is expected to be VND 7,646 bn (+39% YoY) in 1H 2018.

Jack-Up Rig Day Rates in Southeast Asia and Worldwide in 2018

Normally, the rig day rates fluctuates in the same direction with the oil price. However, the rig rates in the early months of 2018 did not see any increase with the climb of the oil price, it declined sharply. This has greatly impacted on the performance of drilling companies, including PV Drilling. So what is the explanation for this phenomenon?

SCR – Robust Apartment Sales to Boost Revenue

TTC Land is a real estate developer, owning a 1,799 hectare land bank. Its business has been focused on residential projects in HCMC. The company is planning to expand its business with industrial parks and tourism. The land bank will be allocated amongst segments: Residential (Ho Chi Minh City), Industrial parks (Long An and Tay Ninh) and Tourism (Phu Quoc, Kien Giang).

HAX – 1H 2018 PERFORMANCE

After a 92% YoY decline in Q1 2018’s earnings, the business result of HAX witnessed significant improvement in the next quarter, resulting in 35% growth in PBT of 1H 2018. Although the strong growth makes current P/E valuation of HAX look attractive, we still find it reasonable due to the discount for some certain risk factors.  

Vietnam Gold Jewelry Market Overview

According to the World Gold Council, in 2017, Vietnam ranked 14th in gold per capita consumption, globally. Consumers here have two main purposes for buying gold: (1) as a property for saving/investing and (2) for fashion. In terms of quantity, gold bar and coin account for 70% of total gold consumption in Vietnam (Figure 1). However, this number has begun to decline sharply after the 2010-2013 period when the government issued regulations to control the gold market and stop the goldenization in the banking system.

Banking Sector Update

Based on the GSO’s database, we learned that the money supply (M2) and deposit grew 8% YTD and 7.8% YTD respectively by 20^th June 2018, higher than those of 5.7% and 5.9% YTD from the same period of 2017. Meanwhile, credit grew a mere 6.4% YTD versus the growth of 7.5% YTD in the first six months of 2017.

The gap between M2 and credit growth implies abundant liquidity, which helps to decrease the VND overnight interest rate and indirectly keeps stabilized lending interest rate. Particularly, lending rate for short-term is around 6 – 9% per annum (lending rate for borrowers with high credit rating is around 4 – 5%) and for mid- and long-term is around 9 – 11% per annum.

SCS 2018 AGM note

Dividend yield for 2018 as of July 9^th 2018 is 4.2 percent.

Management is confident about air cargo growth which is expected to be sustainable with support from booming e-commerce market as e-commerce goods are usually transported by air.

Monetary Policy Adjusting To Market Movements

There is no doubt that the monetary policy operations of the State Bank of Vietnam (SBV) has improved over the past ten years. During the past two months, we strongly think that SBV’s was aggressive to withdraw money via T-Bill issuances. There were lots of failed auctions during the first half of June which might explain the increase in T-Bills’ interest rates and the appearance of T-Bill’s of 91-day maturity.