SIP – Stable growth in leasing and providing industrial park services
02-10-2024
02-10-2024: SIP
: Industrial Land RE
: Thach Lam Do, CFA
Tags: SIP
- In 1H2024, SIP recorded revenue and gross profit of VND 3.76 tn (USD 151.6mn, +23% YoY) and VND 516bn (USD 21mn, +23%YoY), respectively. Electricity and water distribution for industrial parks (IPs) continues to be the main revenue-generating sector for SIP, with revenue and gross profit to reach VND 3.1 trillion (USD125mn, +22%YoY) and VND 238 billion (USD 9.6mn, +21%YoY), respectively. In terms of sales, the company signed new lease contracts with a total area of ~28ha (completing 60% of the business plan), mainly leasing to customers with large areas.
- For 2H2024, in addition to positive business results from electricity and water distribution to IPs, we expect SIP to start recording revenue from new lease contracts (signed in 2024); thereby revenue and gross profit could reach VND 3,757 billion (USD 151mn, +4%YoY) and VND 571 billion (USD 23mn, +11%YoY), respectively. NPATMI for the 2H2024 and full year can reach VND 567 billion (USD 22.9mn, +12%YoY) and VND 1,111 billion (USD 44.8mn, +20%YoY), respectively. EPS 2024 can reach VND 5,500.
- Using the sum-of-the-parts method, we set a target price for SIP shares at VND 101,600 per share (with an upside potential of +39% compared to the closing price on October 02, 2024), equivalent to a BUY recommendation for long-term investment.
149 Pharmaceutical retail market - Potential growth in the mid-term but beware of risk
01-10-2024
: FRT
: Retailing
: Quyen Nguyen
Tags:
- Pharmacies are one key distribution channel for not only pharmaceuticals but also other products (supplements, cosmetics, FMCG,….) directly to end consumers.
- According to IQVIA, pharmaceutical retail revenue reached VND 125,203 billion (USD 4,968 million) in 2023, growing at an average annual rate of 13.0% from 2018 to 2023. Both IQVIA and our projections estimate that retail revenue will reach VND 186,390 billion (USD 7,399 million) by 2028, growing at an average rate of 8.3% per year. However, the retail channel is expected to lose market share in the overall pharmaceutical sector due to the increasing coverage of Social Healthcare Insurance (SHI), as directed by the government, and improvements in the infrastructure of both public and private hospitals.
- Long Chau is the only pharmaceutical retail chain in the market to have profited since 2021, and currently leading in the number of pharmacy outlets.
- A major risk we highlight, which could impact the current pharmaceutical retail model, is the habit of purchasing prescription drugs without a doctor’s prescription at pharmacies in Vietnam. Regulations clearly prohibit such sales. When these rules are enforced strictly (which we expect will happen in the future, as it is already implemented in many developed countries), it will affect the business operations of current pharmacy retailers significantly.
Coated steel market in 8M2024
30-09-2024
: HPG, HSG, NKG
: Materials
: Dung Ma
Tags: NKG HPG HSG
- Steel coated consumption in 8M2024 experienced positive growth, with total domestic volume reaching 1.527 million tons (+18.9% YoY). The southern region led in terms of volume, accounting for 922,951 tons (60.4%), though the northern region posted stronger growth at +21.8% YoY. Export volumes surged to 2.152 million tons (+48.0% YoY), primarily focused on key markets in ASEAN, the EU, and the U.S. Hoa Sen Group (HSG) maintained its leadership in the domestic market, capturing 34% of the northern market and 21% in the southern region. This represented a 0.5% increase in market share compared to the same period last year. Nam Kim Steel (NKG) also increased its market share by 0.5%, while Ton Dong A (GDA) saw a 2.3% decline, as its factory was operating at full capacity.
- For Q4/2024, domestic volume is projected to reach 600,000 tons (+5.4% QoQ, -1.7% YoY), while export volume is expected to reach 587,500 tons (-14.6% QoQ, +0.5% YoY). Regarding commodity prices (HRC), we believe the decline in Chinese HRC prices will stabilize following real estate support policies. In addition, the recovery in HRC prices in the U.S. and EU has shown signs of improvement, raising expectations that the price gap between domestic and global HRC will widen towards the end of 2024, thereby improving export profit margins for companies.
- For the latter part of 2024, we recommend a short term buy on HSG shares, with a target price of VND 23,500, based on the following: 1) A recovery in the real estate market, particularly in the North, where HSG leads the market; 2) A reduction in the export ratio to below 60%, helping to reduce the impact of steel price fluctuations on gross profit margins; 3) HRC prices bottoming out, stabilizing domestic steel prices, and improving domestic profit margins in Q4/2024.
Seafood Industry – Expected to maintain growth momentum in the remaining months of 2024
27-09-2024
: VHC, FMC, ANV
: Fishery
: Hien Le
Tags:
- In August 2024, Vietnam’s pangasius exports saw a slight increase of 2% YoY, reaching USD 174 million. This growth was supported by a 6% YoY increase in export volumes, despite average selling prices for the sector being 4% lower than the same period last year. The overall industry growth rate slowed down in August due to the absence of a low base effect for export volumes. However, export volumes to the U.S. and China maintained strong double-digit growth, with YoY increases of 24% and 19%, respectively.
- Pangasius export value is expected to increase in both price and volume for the remaining months of the year. Price growth is forecasted due to (1) the upcoming holiday season, (2) a low base in 2023, and (3) gradual increases in pangasius prices in line with other fish types. Volume growth will be driven by (1) retail F&B inventory to sales ratios in the U.S. remaining below the 5 year average, (2) lower U.S. imports of fish fillets during 7M2024 compared to the same period last year, suggesting inventory levels are not excessively high, and (3) pangasius prices remaining lower than those of other fish species.
- In August 2024, shrimp exports reached USD 358 million (+8% YoY). Within this, whiteleg shrimp accounted for USD 267 million (+7% YoY), black tiger shrimp reached USD 42 million (-5% YoY), and other shrimp species, primarily lobsters, totaled USD 48 million (+25% YoY). Export volumes for whiteleg and black tiger shrimp rose by 12% and 5%, respectively, although average selling prices remained 4% and 9% lower than last year.
- In the pangasius sector, Vinh Hoan Corporation (VHC) is expected to benefit more than Nam Viet Corporation (ANV) due to anticipated sustained price growth in the US market (main export market of VHC), while prices in China (main export market of ANV) have yet to recover. In the shrimp sector, although Japan’s market (main market of FMC) growth has slowed, increased export volumes to the US and the UK (which together account for 40% of FMC revenue) are expected to improve overall export volumes.
Social Housing Project 2021 – 2030: Expectations for positive changes in the next stage
26-09-2024
: NLG, VHM, TCH
: Real Estate
: Giao Nguyen
Tags:
- Social housing projects in the period of 2021 – 2025: most projects are at the stage of approving investment policies but have not yet been implemented (accounting for 73% of the total number of projects granted investment policies). Meanwhile, the planning progress of most localities is still slow, and the general planning rate for the whole project from 2021 to 2025 is only 2%. At the above rate, it is unlikely that the 2021-2025 Project will reach the set target, most of the reasons for the maf come from the bottleneck in the land fund as well as the policy mechanism that is not attractive to developers and difficult to access for buyers (low income).
- Decree 100/2024, which takes effect from August 1, 2024, and Decree 115/2024, which takes effect on September 16, 2024, are expected to (1) have solutions to help developers shorten the time for social housing development procedures, (2) remove obstacles and bottlenecks over the past years in the procedures for approving investment policies for projects in general and social housing in particular.
- We expect that with the introduction of the above decrees, and at the same time there are more feasible solutions for access to capital from developers and home buyers, the implementation speed of social housing projects will have a marked positive change in the period of 2025 – 2030.
Update on monetary market in Sep 2024
25-09-2024
: VDS
: Macroeconomics
: My Tran
Tags:
- Global currencies did not respond strongly after key monetary policy meetings.
- The SBV continues to support liquidity for the banking system.
GEG – 2024F earnings growth driven by wind energy and lower interest expenses
24-09-2024
: GEG
: Utilities
: Thang Hoang
Tags:
- GEG achieved solid results in H1 2024, with revenue of VND 1,227bn (USD 49mn +19% YoY) and NPAT-MI of VND 11bn (USD 0.4mn; +52% YoY), mainly driven by wind energy segment.
- We estimate that GEG's 2024F revenue of VND 2,321bn (USD 92mn; +7% YoY) and NPAT of VND 192bn (USD 8mn; +40% YoY), due to the full-year contribution of the Tan Phu Dong 1 wind energy project and the falling financial expenses. Accordingly, we estimate forward 2024F EPS of 563 VND.
- For 2025, GEG's growth potential will be (1) its ability to negotiate electricity tariff negotiations with EPTC for the Tan Phu Dong 1 project and (2) debt restructuring through the retirement of its high-yield old outstanding loans.
- GEG's share price is trading at 11,550 VND/share (P/B 0.9x) - a fairly high discount compared to its book, which reflects current gloomy outlook for GEG-owned renewable energy projects. We will update GEG's valuation in the future reports.
Vietnam's vaccine market to expand – who will benefit?
23-09-2024
: FRT
: Retailing
: Quyen Nguyen
Tags:
- We estimate that revenue of the vaccine market grew at an annual average rate of 3.1% between 2014 and 2023, reaching VND 20,010 billion (USD 794 million) by 2023. The market's growth has been supported by rising disposable income and population growth.
- During the 2024-2030 period, we project the vaccine market will continue to grow at an average annual rate of 6.9%, reaching VND 31,964 billion (USD 1,268 million) by 2030. This growth will be driven by continued increase in disposable income and sustained public interest in health and disease prevention.
- Over the past 5-7 years, Vietnam's vaccination market has seen strong participation from private sector players, including three major private chains: VNVC, Long Châu, and Nhidong 315. These private entities have addressed the limitations of public healthcare facilities, such as overcrowding, long waiting times, poor service, and vaccine shortages. Additionally, private providers meet the demand for supplementary vaccinations for diseases not covered under the Expanded Program on Immunization (EPI) and for vaccines targeting adult populations.
HAH - Expecting growth surge in 2H2024 thanks to high charter rates
20-09-2024
: HAH
: Seaports
: Quan Cao
Tags:
- In 8M2024, HAH achieved a transport volume of 391,000 TEUs (+50% YoY). International and domestic volumes stood at 129,000 TEUs (+103% YoY) and 262,000 TEUs (+33% YoY), respectively. Several factors drive this growth in container transport: (1) HAH's partnership with the shipping company ONE to tap into the Intra Asia market, (2) there are more service routes/ports compared to the SPLY, and (3) the recovery in import-export activities since 2H2023.
- In 1H2024, HAH reported revenue of VND 1,653 billion (+31% YoY, USD 66 mn) and NPAT-MI of VND 170 billion (-21% YoY, USD 7mn), completing 42% and 38% of full-year targets, and achieving 53% and 58% of our forecast, respectively. A larger profit is expected to be concentrated in 2H2024, as the vessel HAIAN OPUS began chartering in August 2024 at a rate of USD 24,000 per day, and HAIAN MIND is set to be chartered from October 2024 at the same rate. This rate represents a 60% increase over the average charter rate of USD 15,000 per day in 1H2024.
- Given positive financial results in 1H2024, we have revised our projections for 2024. We now forecast revenue of VND 3,719 billion (+42% YoY, USD 148 mn) and NPAT-MI of VND 478 billion (+24% YoY, USD 19 mn), increasing 18% and 62%, respectively, compared to our previous estimates. The strong profit adjustment is due to HAH securing higher-than-expected charter rates. Diluted EPS is projected to be VND 3,184.
- Using a combination of the EV/EBITDA and P/B valuation methods, with target multiples of 1.7x and 7.0x, we have set a target price of VND 50,600 per share for HAH in 2024. At this target price, the 2024 forecasted P/B and EV/EBITDA multiples are 1.9x and 5.0x, respectively. We recommend a BUY rating for HAH, with an expected total return of 25%, based on the closing price as of September 20, 2024.
O&G marine shipping segment in 2H2024 – “Keep up with good work”
19-09-2024
: PVT, PVP, PDV, GSP
: Oil & Gas
: Ngan Le
Tags:
The oil and gas marine transportation market includes segments for the transportation of crude oil, oil products/chemicals, and LPG. Overall, charter rates for the oil and gas transportation sector increase from mid-2022 to mid-2023 and remain relatively stable throughout 2024 due to increasing demand for transportation while vessel supply remains limited.
In 2025, overcapacity due to the increase in vessel supply is forecast to pose a risk of a cooling in charter rates. However, rates may vary depending on the type and size of vessels. Currently, new orders are concentrated in medium (Aframax, MR) and large (LNG carriers) size vessels, with almost no orders for smaller vessels (13k dwt, 20k dwt, 3,500-5,000 cbm). Therefore, we believe that charter rates for smaller vessels may remain stable in 2025.
For Vietnam's oil and gas marine transportation companies, particularly PVT and its subsidiaries (including PVP, GSP, and PDV), we expect NPAT to grow in 2H 2024 compared to 6M 2024, due to 1) active fleet expansion and 2) an increase in transportation trips for BSR. We forecast the following NPAT growth rates for 2H2024 as follow: PVT (+36% HoH, +47% YoY), PVP (+17% HoH, 48% YoY), PDV (+150% HoH, +352% YoY, boosted by ship liquidation proceeds in Q3 2024), GSP (+3% HoH, +53% YoY).
FY2024 is a blooming year for Vietnam’s O&G marine transportation segment as most of companies are forecasted to achive impressive growth in NPAT, as detail: PVT (VND 1,224 bn, +26% YoY, corresponding EPS is VND 3,233), PVP (VND 228 bn, +24% YoY, corresponding EPS is VND 2,269), PDV (VND 196 bn, +206% YoY, corresponding EPS is VND 2,966), GSP (VND 120 bn, +41% YoY, corresponding EPS is VND 1,958). Using 5-yr average P/E at 9.5x, we recommend TP for PVT stock at VND 30,700/share, equivalent to a return of 11% at the closing price on Sep 19th 2024.
Stock Market – What matters now as the Fed begins cutting rates?
18-09-2024
: VDS
: Financial Services
: Hung Le
Tags:
- The U.S. labor market is cooling down compared to the pre-pandemic period. Inflation is decreasing, but the unemployment rate is rising, though it has not yet surpassed the full employment threshold. This provides a basis for the U.S. Federal Reserve (FED) to implement moderate interest rate cuts, facilitating a soft landing for the economy. Global investors are eagerly awaiting the FED's interest rate meeting, with hopes for the first rate cut in four years. The market is focused on the potential reduction, which could be 25 or 50 basis points (bps), with 25 bps currently being the base scenario.
- Throughout history, when the Federal Reserve (FED) has cut interest rates, the U.S. stock market has responded differently depending on the severity of recessions and financial crises. Currently, the market is anticipating a "soft landing" scenario for the U.S. economy. Under this scenario, we expect the U.S. stock market to react positively following the FED's decision to lower interest rates.
- The Federal Reserve's decision to cut interest rates could have a positive impact on global financial markets, including Vietnam, in a scenario where the U.S. economy cools down without entering a recession. The correlation between the VN Index and the S&P 500 stands at a positive 0.6. Therefore, if the FED reduces interest rates and the U.S. economy achieves a soft landing, the Vietnamese stock market may indirectly benefit from international capital flows shifting towards higher-risk and higher-expected-return assets over the next 12 months.
LHG – Positive outlook from Long Hau industrial park 03 (Phase 01)
17-09-2024
: LHG
: Real Estate
: Thach Lam Do, CFA
Tags: LHG
- In 1H2024, LHG recorded revenue of VND 238 bn (USD 9.5mn, +31% YoY), mainly from land leasing at Long Hau Industrial Park 3 - phase 01 (LH3 IP), and from ready-built factory leasing (RBF). Gross profit reached VND 134 bn (USD 5.4mn, +45% YoY), and gross profit margin improved to 56%, as the margin of the industrial park leasing segment rose to 64%. NPAT reached VND 97 billion (USD 4mn, +33% YoY), equivalent to 74% of the business plan.
- For 2H2024, we expect revenue to reach VND 262 billion (USD 10.5mn, +24% YoY), driven by: 1/ VND 108 billion (USD 4.3mn, +40% YoY) from the delivery of approximately 2 ha at LH3 IP, and 2/ VND 104 billion (USD 4.2mn, +28% YoY) from RBF leasing. With stable industrial park rental prices in 2H2024, gross profit is expected to reach VND 135 billion (USD 5.4mn, +24% YoY), with a gross margin of 52%. As a result, NPAT for 2H2024 and 2024 is estimated at VND 96 billion (USD 3.8mn, +5% YoY, due to high deposit interest income in 2H2023) and VND 193 billion (USD 7.7mn, +16% YoY), respectively. The corresponding EPS for 2024 to be VND 3,850.
- Using the sum-of-the-parts method, we set a target price for LHG shares at VND 59,000 per share (with an upside potential of +59% compared to the closing price on September 17, 2024), equivalent to a BUY recommendation for long-term investment.
