2017 Market Outlook - tvs.vn reports/2017/T… · 2017 Market Outlook –Charting New Course TVS...

2017 Market Outlook – Charting New Course

TVS Research

1Thien Viet Securities JSC (TVS) does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. Please see more important disclosures in the last pages.

Market Outlook I 27 February 2017

1. 2016 Market Review

2. 2017 Major Investment Theme

3. Our favorable stocks

Content

2Please visit TVS Research on Bloomberg at <TVSJ> GO

1. Economy Outlook – Charting New Course• We expect 2017 economy delivers 6.41% growth (vs. 6.7% government target) with controlled inflation under 7%.

• Although the monetary policy has more room (the Taylor rule rate of 5.43% vs. 9% base rate), the new cabinet isexpected not to take use of it.

• 3.5% fiscal deficit is stretched target which requires government follow strictly financial discipline.

• Uncertain global trade weights on both trade and foreign exchange.

2. Equity Market – Approaching to Next Bar• Given economic stabilization, we expect the VNindex enjoying 10.3% growth to price at 732.23. It does imply 2016

P/E traded at forward 14.45x.

• Market movement gains momentum from new large-cap listings expected speeding up in 2017 . The new cabinettakes SOE-equitization plan seriously when public debt approaching to 60% GDP.

• Foreign trading expected to be net-selling when selling forces does exist, explained by (i) hiking Fed rate, (ii) closing10-year investment horizon fund since inception of 2007, and (iii) ETF being less attractive vehicle.

3. Our favorable sector/stock• Consumer goods sector [portfolio’s growth component] - backed by rising tide of private consumption. Our stock

picks are VNM, PNJ and MWG.

• Oil & Gas [portfolio’s alpha-generation component] – 2017 turnaround year. Our stock coverage are PVD and DCM.

• Real Estate – Time to Enter Affordable Housing Segment. Our stock coverage is NLG

• New listing - Short-term event-driven strategy. Our stock pick is VJC.

Key Highlights


Content


Section 1

2016 Market Review

VN-Index Edged Up 14.82% to Close 09-year Highest


Market outperformed both index (+14.82% YoY) and daily liquidity (+25.73% YoY)…

Source: Thomson Reuters, TVS Research

…attributed to (1) liquidity room expansion of 9.81% YoY…

…(2) margin loan on the surge (+11.3%YoY) …

Source: Company data, TVS Research

Source: IMF, , TVS Research

…and (3) new large-cap listing

Source: Company data TVS Research

Ticker Exchange Short Name GICs SectorMarket Cap

(VNDbn)

SAB HSX Saigon Beverage Food Producers 137,683

ACV Upcom Airport Corp of VN Airport 122,778

HVN Upcom Vietnam Airlines JSC Airline 48,488

NVL HSXNovaland Investment Group Corp

Real Estate 35,834

BHN HSX Hanoi Beverage Food Producers 25,614

…but selling forces did exist


Market traded at 15.92x PE, approaching to 2-standard deviation of 05-year daily PE

Source: Bloomberg, TVS Research

Foreigners turned to net-seller in HSX bourse since 2009

Earning Yield skipped 42bps slightly vs. 10-y bond


Source: HSX, , TVS Research

(20,000)

-

20,000

40,000

60,000

80,000

100,000

120,000

2009 2010 2011 2012 2013 2014 2015 2016

Buy (VNDbn) Sell(VNDbn) Net Buy(VNDbn)

0%

5%

10%

15%

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Earning Yield 10-year bond

Both ETFs exposed to higher redemption


Outs.Shares (mn)

The market players taking brake on bottom line


+37.33% growth in net revenue but 3.51% decline in net income with 4Q2016 weakness


Top line growth attributed to improvement in daily turnover of 21.04%

2016 Revenue Structure


Source: IMF, , TVS Research

Industry Data


2016 2015

Number of Enterprise 75 81

Net Revenue (VNDbn) 13,133 9,563

Net Income (VNDbn) 2,741 2,841

Chartered Capital (VNDbn) 39,095 37,382

Shareholder book value (VNDbn) 44,102 41,675

ROE (%) 6.22% 6.82%

Asset / Equity (x) 1.69 1.59

Outstanding Margin Loan (VNDbn) 27,280 24,503

EPS (VND) 701 760

BVPS (VND) 11,281 11,148

KPI (VNDbn) 2015 2016 % YoY 4Q2015 4Q2016 % QoQ

Net Revenue 9,562 13,132 37.33% 3,086 3,963 28.43%

Net Income 2,841 2,741 -3.51% 809 496 -38.7%

22.6%

23.8%40.5%

9.1%4.0%

Brokerage Services Margin Services Proprietary Trading

Investment Bank Others

-

500.00

1,000.00

1,500.00

2,000.00

2,500.00

3,000.00

3,500.00

2012 2013 2014 2015 2016

Content


Section 2

2017 Major Investment Theme

2017 Vietnam Economy – Charting New Course


We expect nominal GDP growth of 6.41% (below Gov’s target~6.7%), mainly coming from capital growth

Source: GSO,EIU, TVS Research

Inflation (measured by CPI) under control with consensus view ~ 5%

Taylor Rule rate of 5.36% implies monetary room

Source: Thomson Reuter,SBV,TVS Research

Source: ChinhphuVietnam, WB, IMF, ADB,TVS Research

3.5% budget deficit requires Gov’s fiscal discipline


GDP growth Target CPI

Vietnam Gov 6.70% 4%

WB 6.30% 5%

IMF 6.20% na

ADB 6.30% 4.50%

EIU 6.60% 4%

Equity Outlook – Enjoy 10% growth from economic stabilization


GDP forecast model 2011 2012 2013 2014 2015 2016 2017F Source

Growth of Capital 7.80% 7% 6.80% 7.10% 7.40% 7.70% 8.0% EIU

Growth of Labor 2.02% 2.02% 2.02% 2.02% 2.02% 2.02% 2.02% World Bank

TPF 2.80% 2.40% 2.10% 2.80% 4.00% 3.00% 3.15% EIU

Output Elasticity (β) 23.8% 15.6% 26.7% 23.2% 12.6% 20.7% 20.7% TVS Calculation

GDP (%) 6.20% 5.20% 5.40% 6.00% 6.70% 6.20% 6.41% TVS Calculation

We expect nominal GDP growth of 6.41% (below Gov’s target~6.7%), mainly coming from capital growth

VNIndex Forecast Model 2011 2012 2013 2014 2015 2016 2017F Source / Note

EPS 47.57 35.09 40.74 42.37 46.22 41.77 44.45 Bloomberg

Earning Yield 13.57% 8.48% 8.07% 7.77% 7.98% 6.28% 6.07% Vnindex divided by EPS

10-year bond 11.90% 10.50% 9.10% 8.00% 6.80% 6.70% 6.70% Reuters

Equity Risk Premium 7.87% 3.18% 4.37% 5.77% 7.88% 5.78% 5.78% TVS calculation

Growth rate 6.20% 5.20% 5.40% 6.00% 6.70% 6.20% 6.41% GDP growth

Vnindex 350.66 413.73 504.63 545.63 579.03 664.87 732.23

Factoring economy growth in Vnindex forecast model, we expect the Vnindex pricing at 732.23 (+10.13%YoY)

Source: TVS Research


Equity Outlook – Major sentiments pushing Vnindex up/down


New IPO and large-cap listing attracting more investors


Gov expected to speed-up SOE restructure to maintain public debt shield at 65% GDP

Fed expected to raise more rate bar

Source: EIU, TVS Research

Source: ChinhphuVietnam, WB, IMF, ADB,TVS Research

Ticker Exchange Short-name GIC's sector Market Cap (VNDbn)

MCH Upcom Masan Consumer Holding Consumer Goods 37,510

na na BinhSon Refinery Energy 35,728

VEAM na Vietnam Engine & Machi Industrial Goods 19,380

na na Petrolimex Energy 17,442

TCB na Techombank Financial 16,416

na na Viettel Global Telecomunication 14,501

na na PV Power Energy 13,361

na na PV Oil Energy 11,104

Slow global growth weights on Vietnam trade

Source: GSO, TVS Research

23,308

4,334104

18,857

12,991

456

<$5,000

$5,000-$25,000

$25,000+

2015

2021F

Net income p.a.:

Consumer Goods - The rising tide of private consumption


Private consumption would expectedly continue driving Vietnam’s GDP growth in upcoming years…

Source: GSO, EIU, TVS Research

…on the back of (1) rising wealth of Vietnamese families…

…(2) highest consumer sentiment index in the region…

Source: Mastercard Asia Pacific Consumer Confidence

Source: BMI, TVS Research

2.2

3.3

3.9

6.7

4.9

4.3

4.2

4.1

4.0 4.1

5.2 5.4 6.0 6.7 6.2 6.6 6.8 6.3 6.2 6.5

(6.0)

(4.0)

(2.0)

-

2.0

4.0

6.0

8.0

10.0

12.0

2012 2013 2014 2015 2016E 2017F 2018F 2019F 2020F 2021F

%

Private consumption Government expenditure

Investment Net export/import

Households ’000

…and (3) growing retail sales and population

Source: GSO, Bloomberg, TVS Research

87.8 88.8 89.7 90.7 91.7 92.6

18.0 20.2 22.2 24.4

26.9 28.9

-

10.0

20.0

30.0

40.0

84.0

86.0

88.0

90.0

92.0

94.0

2011 2012 2013 2014 2015 2016E

VN

D m

mill

ion

peo

ple

Population (LHS) Annual retail sales per head (RHS)

Vietnam, 92.3

Thailand, 68.3

Malaysia, 31.2

Singapore, 30

Indonesia, 70.8

Philippines, 91.6

0

20

40

60

80

100

1H12 2H12 1H13 2H13 1H14 2H14 1H15 2H15 1H16 2H16

-10%

0%

10%

20%

30%

40%

VN Index Consumer goods

Consumer goods stocks as portfolio growth component


Consumer goods index has underperformed VN Index T12M, which makes it a good entry point


Comparing to regional peers, Vietnam’s consumer goods index has delivered average T12M return

Top players’ Trading Data and Key Metrics

Source: Thomson ReutersNote: Highlighted tickers are covered by TVS Research and will be analyzed further in following sections


• Consumer goods Index up 23% T12M• VN Index up 26% T12M

Identifier Company Name SectorPrice change

T12M 52W High 52W Low10-day

average vol.Forward

P/EForward

EV/EBITDAForward

EPS Mkt Cap

VND VND share VND VND bn

KDC.HM Kido Group Corp Consumer staples 82.3% 41,000 19,900 166,335 6.8x n/a 1,185 7,836

MSN.HM Masan Group Corp Consumer staples -10.4% 77,000 58,500 290,106 17.4x 9.8x 3,259 47,579

SBT.HM Thanh Thanh Cong Tay Ninh JSC Consumer staples 24.0% 29,839 18,790 1,272,720 22.1x 15.3x n/a 6,203

VNM.HM* Vietnam Dairy Products JSC Consumer staples 27.7% 156,000 106,670 786,071 22.3x 16.0x 5,990 189,250

VHC.HM Vinh Hoan Corp Consumer staples 121.8% 63,400 23,500 102,895 10.0x 7.4x 6,077 5,077

BMP.HM Binh Minh Plastics JSC Consumer discretionary 53.3% 208,000 112,000 45,888 15.0x 8.5x 12,554 8,573

DRC.HM Danang Rubber JSC Consumer discretionary -3.0% 42,900 29,846 138,577 10.8x 5.8x 3,154 3,766

FPT.HM FPT Corp Consumer discretionary 9.8% 48,500 38,522 881,414 10.3x 5.9x 4,397 20,211

MWG.HM* Mobile World Investment Corp Consumer discretionary 122.4% 178,000 73,000 155,863 15.2x 10.7x 13,710 25,950

PNJ.HM* Phu Nhuan Jewelry JSC Consumer discretionary 72.2% 85,000 44,500 63,018 12.4x 7.8x 5,352 7,640

Vietnam, 23%

Thailand, 54%

Indonesia, 30%

Malaysia, -4%

Philippines, 2%

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

Oil and Gas – 2017 Turnaround Year


Supply vs Demand Remains Imbalanced But Had Trended Down Significantly

Source: IEA, Bloomberg, TVS Research

Inventories Drawdown Picked Up Although Unlikely Reduced by End of 2017

Source: BMI, TVS Research

…But the US Is Restarting Its Production Engines

Source: EIA, TVS Research

-

40

80

120

160

(2)

-

2

4

Global Supply vs Demand (Bbl/day) vs Crude Price (USD)

Surplus Shortage Crude Brent Price

-8%

-4%

0%

4%

8%

12%

2,500

2,600

2,700

2,800

2,900

3,000

3,100

3,200

Ap

r-0

6

Jan

-07

Oct

-07

Jul-

08

Ap

r-0

9

Jan

-10

Oct

-10

Jul-

11

Ap

r-1

2

Jan

-13

Oct

-13

Jul-

14

Ap

r-1

5

Jan

-16

Oct

-16

OECD Stockpiles (Mil bbls) vs Annualized Change (%)

Underinvestment Often Precede A Price Reversal…


28.2% 29.7%

-13.0%

12.3%21.2%

11.2% 7.3% 4.8%

-23.8%-28.6%

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Annual Change of Global Oil & Gas Capex

50,000

60,000

70,000

80,000

90,000

100,000

4,000

6,000

8,000

10,000

No

v-0

6

Au

g-0

7

May

-08

Feb

-09

No

v-0

9

Au

g-1

0

May

-11

Feb

-12

No

v-1

2

Au

g-1

3

May

-14

Feb

-15

No

v-1

5

Au

g-1

6

US Production

Oil (Bbl/d) Gas (Mcf/d)

Oil & Gas Sector Will Continue To Be Volatile Throughout 2017 With High Macro Uncertainty


Oil & Gas stocks, driven by crude price recovery, outperformed VN Index most of 2016…


…they also outperformed global peers by a wide margin because of GAS’s skewness

Top players’ Trading Data and Key Metrics

Source: BloombergNote: Highlighted tickers are covered by TVS Research


Identifier Company Name SectorPrice change

T12M 52W High 52W Low10-day

average vol.Forward

P/EForward

EV/EBITDAForward

EPS Mkt Cap

VND VND share VND VND bn

GAS.HM PV Gas JSC Down Stream 70.8% 70,900 38,800 1,058,555 14.9 9.6 4,132 118,054

PVD.HM PV Drilling & Well Services Up Stream 7.0% 31,600 20,100 3,011,272 60.7 11.0 380 8,825

PVS.HN PV Technical Services Up Stream 34.0% 21,500 13,700 2,210,844 9.9 4.8 1,923 8,487

PVT.HM PV Transportation Corp Mid Stream 46.3% 14,900 8,700 718,625 13.0 4.2 995 3,631

PLC.HM Petrolimex Petrochemical Down Stream -18.4% 33,300 25,000 49,260 11,9 8.3 2,456 2,359

PET.HM PV General Services Mid Stream -5.4% 13,200 10,100 366,339 5.6 6.9 1,950 953

PVX.HM PV Construction JSC Up Stream -14.3% 3,100 1,800 2,630,150 12.8 9.5 188 960

PXS.HM PV Equipment & Metal Structure Up Stream 0.4% 14,700 9,500 615,995 5.8 4.3 1,918 672

PVC.HM Drilling Mud Corp Up Stream -36.6% 15,100 7,900 239,120 5.6 24.6 1,655 460

PVB.HM PV Coating Up Stream -36.4% 21,500 9,800 195,830 60.2 na 218 283

DCM.HM PV Ca Mau Fertilizer Down Stream -8.4% 12,300 9,400 948,520 8.7 4.1 1,226 5,665

CNG.HM CNG Vietnam Down Stream 26.7% 45,000 31,200 13,131 8.3 3.7 4,710 1,053

PGS.HM Southern Gas Company Down Stream 21.8% 18,800 14,500 739,010 2.3 3.4 8,246 940

-10%

10%

30%

50%

70%

Vietnam O&G Index VN Index

-5%

15%

35%

55%

75%

Vietnam O&G Index Crude Brent Global O&G Index

Real Estate – Time to Enter Affordable House Segment


Source: Oxford Economics, TVS Research

Source: Ministry of Construction Source: CBRE, TVS Research

44.36

37.15 36.1533.75 32.9 32.62

21.65 21.63 19.4516.85

05

101520253035404550

Average House price to Income in 2016

Given the living standard and infrastructure, housingprices in Vietnam seem relatively so high…

...and the potential imbalance of supply and demand

Real estate market observes a shortage of affordable housingsupply while supply of higher segments is excessive.CBRE Vietnam forecast that affordable housing segment willbecome the main stream in 2017 taking account for 39% marketshare in HCMC at the expense of mid end segment.

30%

31%

39%

2017

High end

Mid end

Affordable

…which gives rise to affordable housing segment in 2017

Vietnam has a relatively fast urbanization rate and a lowurbanization population. With a fast annual urbanization rateand level of urbanization more than 45% by 2020, dwelling is apressing need. HCMC and Hanoi are expected to welcome atleast 480,000 new inhabitants who demand 10.6 million of livingareas, equivalent to 177,000 units of 60sqm- apartments …yetdormitories provide 13-14% demand of workers and immigrantsat HCMC and Hanoi.*Average living area per capita is 22sqm/person – VietnamMinistry of Construction

…dormitories cater 13-14% demand

Source: CBRE

Content


Section 3

Our Favorable Stock

Price @12-Jan-17: 69,400

12M TP: 85,000

0

100,000

200,000

300,000

400,000

500,000

600,000

0

20,000

40,000

60,000

80,000

100,000sh

areVN

D

Volume (RHS)Price (LHS)

PNJ – Positive outlook: BUY, 22.5% upsidePhu Nhuan Jewelry JSC (PNJ) is the No.1 jewelry and watch specialist retailer in Vietnam with 25% market share. The Company manufactures and markets jewelry pieces, stamped gold bars, and jewelry products made of gold and silver under various brand names including PNJ Gold, PNJ Silver and CAO Fine Jewelry. It also trades gemstones and precious metals as materials for jewelry manufacturing.


6,408

7,604 7,2477,741

8,5969,235

9,90110,652

11,36612,176

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

VN

D b

n

PNJ Gold PNJ Silver Gold bar Other

Expanding jewelry retail (est. 255 stores by end-2017) would accelerate revenue growth over 2017F-2021F…


Company Name

EV/EBITDA

(x)

EBITDA

margin P/E (x)

Country/

Area of HQ

Regional mean 9.7 7.6% 14.9 Asia

Phu Nhuan Jewelry JSC 7.8 10.1% 12.4 Vietnam

Chow Sang Sang Int Ltd 8.5 6.7% 12.5 Hong Kong

Luk Fook Holdings Int Ltd 7.8 9.7% 12.7 Hong Kong

Chow Tai Fook Jewellery Ltd 14.2 9.1% 22.9 Hong Kong

Renaissance Jewellery Ltd 8.4 6.0% 14.8 India

Poh Kong Holdings Bhd 14.2 5.3% 23.5 Malaysia

Vaibhav Global Ltd 7.7 4.5% 12.3 India

…and simultaneously induce double-digit earning growth thanks to its high-margin products

Source: TVS Research for PNJ, Thomson Reuters for other companies

Compelling valuations at 24% EV/EBITDA and 20% P/E discounts to regional mean

12M target price of VND 85,000 – a 22.5% upside

Source: Bloomberg, TVS Research (see full report here)

Source: Company data, TVS ResearchNote: Data has excluded impact from non-core businesses

336

514643

773

9161,052

1,201

8.0%

49.7%

13.6%

20.3% 18.5%14.8% 14.2%

0

200

400

600

800

1,000

1,200

1,400

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

2015A 2016E 2017F 2018F 2019F 2020F 2021F

VN

D b

n

NPAT (RHS) EPS growth (LHS)

https://www.tvs.vn/images/2014/document/company reports/2016/T12/TVS_PNJ_AllBadThingsComeToEnd_11M2016EquityUpdate_29Dec2016.pdf

Price @ 12-Jan-17: 160,000

12M TP: 190,000

0

300,000

600,000

900,000

1,200,000

1,500,000

030,00060,00090,000

120,000150,000180,000210,000

shareV

ND


MWG – The music is still on: BUY, 18.6% upsideMobile World Investment Corporation (MWG) is a leading B2C electronics and appliances specialist retailer in Vietnam. The Company operates two retail chains, namely thegioididong.com (TGDD) specializing in retail sale of mobile devices (35% mkt. share) and dienmayxanh.com (DMX) in household appliances (10% mkt. share). MWG is also piloting the grocery chain bachhoaxanh.com (BHX) which would fully operate from 2018 onwards.


DMX to succeed TGDD as MWG’s next sales powerhouse over 2017F-2020F…


…at the cost of short-term margins downswing as DMX is less profitable than TGDD

Source: TVS Research for MWG, Thomson Reuters for other tickers

Valuations appear reasonable in global context



Source: Company data, TVS ResearchNote: Data doesn’t include BachHoaXanh due to uncertainties in estimating its figures

20.8

30.635.4

38.8 40.5 42.04.5

12.9

22.330.7

38.143.1

564

984

1,1841,284 1,334 1,364

69

220

440

660

830960

0

200

400

600

800

1,000

1,200

1,400

1,600

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

2015A 2016E 2017F 2018F 2019F 2020F

store

VN

D t

rn

Revenue TGDD (LHS) Revenue DMX (LHS)

Retail stores TGDD (RHS) Retail stores DMX (RHS)

15.5% 16.1% 16.0% 16.3% 16.5% 16.5%

4.2% 3.7% 3.7% 4.1% 4.2% 4.2%

0.0%

5.0%

10.0%

15.0%

20.0%

2015A 2016E 2017F 2018F 2019F 2020F

Gross profit margin NPAT margin

BIG.BK

COM7.BK6281.TW

KOMP.WA

071840.KSMVID.MM

MWG.HM

PRD.WA

2450.TW6154.TWO

TELE.JK2430.TW

Global mean

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

0.00 5.00 10.00 15.00 20.00 25.00 30.00

20

17

F EB

ITD

A m

argi

n

2017F EV/EBITDA (x)

https://www.thegioididong.com/

https://www.dienmayxanh.com/

https://www.bachhoaxanh.com/

https://www.tvs.vn/images/2014/document/company reports/2016/T11/TVS_MWG_BUY_TheMusicIsStillOn_3Q2016Update_24Nov2016.pdf

Price @ 21-Feb-17: 130,300

12M TP: 148,800

01,000,0002,000,0003,000,0004,000,0005,000,0006,000,0007,000,000

030,00060,00090,000

120,000150,000180,000

shareV

ND


34.2%36.1% 35.2%

40.6% 42.4%

21.9% 21.1%17.4%

19.4% 20.9%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

0

1,000

2,000

3,000

4,000

5,000

6,000

Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17

USD

/MT

WMP price (LHS) SMP price (LHS)

Gross profit margin (RHS) NPAT margin (RHS)

VNM – Milk is less tasty: NEUTRALVinamilk JSC (VNM) is the largest dairy company in Vietnam whose 2015 revenue reached VND40trn (US$1.8bn), yielding a combined market share of 42%. The company’s key competitive advantage lies in its nationwide distribution network covering 212,000 retailers and 1,600 supermarkets. Besides local market, Vinamilk also exports to 43 countries, having subsidiaries in USA, Poland, Cambodia and one associate in New Zealand.


Milk powder price as contrarian leading indicator of VNM’s margins would continue its 2016 rally in 2017…

Source: Company data, Global Dairy Trade, TVS ResearchNote: 2016 margins are estimated figures

…implying margins downswing this year, while sales would grow at slower pace after peaking in 2016

Source: TVS Research for VNM, Thomson Reuters for other companies




Justifiable valuations compared to global dairy top 20

26.6 30.9 35.0 40.146.8

53.1 58.6

5.8 6.5 6.1 7.8 9.4 9.6 11.6

22.8%

16.5%

13.3% 14.3%16.8%

13.4%

10.4%

21.9% 21.1%

17.4%19.4% 20.0%

18.2%19.7%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

2012A 2013A 2014A 2015A 2016A 2017F 2018F

VN

D t

rn

Revenue (LHS) NPAT (LHS)

Revenue YoY growth (RHS) NPAT margin (RHS)

Global mean

Vinamilk

Indofood

Lotte Food

Nestle

Danone

China Mengniu

Fonterra Inner Mongolia YiliSaputo

Dean Foods

UnileverKraft Heinz Co

Meiji

SavenciaBright Dairy & Food

0%

5%

10%

15%

20%

25%

0.0x 5.0x 10.0x 15.0x 20.0x 25.0x

20

17

F EB

ITD

A m

argi

n

2017F EV/EBITDA

https://www.tvs.vn/images/2014/document/company reports/2017/Thang 2/TVS_VNM_HeadwindsFromRisingMaterialCosts_EquityUpdate_10Feb2017.pdf

DCM – It’s All About Yield: NEUTRAL, 10% upsideSouthern Gas Trading Joint Stock Company, formerly Petrovietnam Southern Gas Joint Stock Company, is a Vietnam-based company engaged in the trading of liquefied petroleum gas (LPG). Its products include LPG cylinders of 12 and 45 kilograms for household usage, along with industrial storage tanks for manufacturing activities. It also trades compressed natural gas (CNG), petroleum, lubricants, fertilizers and supplies for the gas industry.


Yield Is Attractive Considering DCM’s Guaranteed ROE


Urea Remains A Challenging Market, DCM’s Increased Volume Was Not Enough To Counter Falling Price

Source: DCM, TVS Research

To Counter Oversupplied Domestic Market, DCM Is Increasing Their Export To Neighbor Markets

Source: DCM, TVS Research

DCM Enjoys Cost Advantage From Low Gas Input Price

Source: DCM, TVS Research (1) Analyst Estimates

6,279 5,815

4,909

846 715 637

FY2014 FY2015 FY2016

Revenue vs Pretax Profit (VND bn)

Revenue Pretax Profit

808

797 804

808

773

814

FY2014 FY2015 FY2016

Quantity Produced vs Sold (‘000 tons of Urea Equivalent)

Quantity Produced Quantity Sold

30%

35%36%

35%

FY2013 FY2014 FY2015 FY2016

DCM’s Cambodia Market Share

50

200

20(1)

2016 Export 2016 Demand

Export vs Demand (‘000 Tons)

6.69

3.81

2.12

4.063.57

1.75(1)

FY2014 FY2015 FY2016

Prelim vs Actual Gas Price (USD/mmbtu)

Prelim Actual 7.0%

8.0%

9.0%

10.0%

Annualized Dividend Yield

PVD – The Night Is Still Long : Buy on DipPetrovietnam Drilling and Well Services Joint Stock Company is a Vietnam-based provider of oil and gas drilling services. The Company offers drilling services on a contract basis, along with other well maintenance and conditioning services to petroleum exploration companies. The Company is majority-owned subsidiary of Vietnam National Oil and Gas Group (Petrovietnam), and it had six subsidiaries and two joint ventures.


-

20

40

60

80

100

-

40

80

120

160

Au

g-1

3

Oct

-13

Dec

-13

Feb

-14

Ap

r-1

4

Jun

-14

Au

g-1

4

Oct

-14

Dec

-14

Feb

-15

Ap

r-1

5

Jun

-15

Au

g-1

5

Oct

-15

Dec

-15

Feb

-16

Ap

r-1

6

Jun

-16

Au

g-1

6

Oct

-16

Dec

-16

South East Asia Average Day Rate for Jack Up Rigs

Average Day Rate (USD '000) Crude Brent (USD) Utilization Rate (%)

We Do Not Expect Upward Revision to PVD’s Multiple

Source:Bloomberg, TVS Research

-

1.0

2.0

3.0

-

5

10

15

20

25

Jan

-13

Ap

r-1

3

Jul-

13

Oct

-13

Jan

-14

Ap

r-1

4

Jul-

14

Oct

-14

Jan

-15

Ap

r-1

5

Jul-

15

Oct

-15

Jan

-16

Ap

r-1

6

Jul-

16

Oct

-16

Jan

-17

Ap

r-1

7

Annualized ROE vs P/B

ROE (%) P/B (x)

Even In The Case Where Oil Price Maintain USD 50/bbl, Oversupply Still Plagues Offshore Drillers

Source: IEA, Bloomberg, TVS Research

Contracts Are Likely Muted And PVD Will Need To Tap On Its Cash Reserve

Source: PVD Management, TVS Research

Contract Schedule Q1 2017 Q2 2017 Q3 2017 Q4 2017

PV Drilling I Myanmar

PV Drilling II Ready Stacked

PV Drilling III Ready Stacked

PV Drilling V (TAD) Ready Stacked

PV Drilling VI Hoan Long –Hoan Vu

Ready Stacked

PV Drilling 11 Algieria

51 55

127

54 52 54

97

40

Due 2017 Due 2018 Due 2019-2021 Beyond 2021

PVD’s Outstanding Debt (USDm)

Q4 2015 Q3 2016

PVD May Need Debt Restructuring in 2018


NLG - Leading position in affordable housing segment


Strategic Location – Proximity 15 km from CBD

Source: NLG, TVS Research

Revenue breakdown


Brand Type Price Concept Criteria

ValoraVilla/Townh

ouseUSD1,500/sqm

Villa for young

leaders3P- Peaceful Proficient Perspective

Flora ApartmentUSD800-

1,200/sqm

Condo for young

managers

Doubled facilities – Environment for

children

Ehom

e

ApartmentUSD600-

800/sqmThe first home

3E – Economy Efficiency Ecology

Ehom

eS3S - Social Small Smart

All apartment priced below US$ 1,200 per sqm

2014 20156M-

2016

Number of sold units in HCMCAll grades 11,569 22,065 13,278

Affordable 7,124 10,207 6,283

NLG's sold unitsAll grades 1,321 1,809 1,103

Affordable 1,204 1,317 893

NLG's market share in HCMCAll grades 11.4% 8.2% 8.3%

Affordable 16.9% 12.9% 14.2%

9M-2016 revenue break

down0%

Ehome 320%

Ehome 415%

Ehome 4 (townhouse)

9%

Ehome 521%

Flora Sakura27%

Others8%

0% 0% 0%


Held 14.2% HCM market share in affordable apartment


VJC– A Flight You Can’t Miss: Buy, +50% upsideVietjet Aviation Joint Stock Company (Vietjet) is a Vietnam-based company primarily engaged in airlines sector. The Company's leading business activities include the transportation of passengers and cargo via scheduled flights, the operation of chartered flight services, the rental of aircraft spaces for advertisement, the trading and leasing of aircrafts, as well as the provision of other support activities for air transport businesses.


…With Ambitious But Executable Expansion Plan

Source: VJA Offer Circular, TVS Research

Vietjet Air Is Growing Fast, Having Overtaken The Incumbent Vietnam Airline As No 1 Domestic Player


Ancillary Revenue Such As Add-ons And In-Flight Shopping Will Be VJA’s Future Profit Drivers


Operating Metrics Rivals Regional Peers…


3,793

8,706

19,845

8,879

12,557

0.8%

4.1%5.9%

8.4%9.8%

2013 2014 2015 6M 2015 6M 2016

Total Revenue in VND bn vs Net Margin (%)

Revenue Net Margin

28

17

45

55

Domestic International

Current Routes vs Planned Expansion

38

78

219

Current 2019E 2023E

Planned Fleet ExpansionSEAAirlines

RASK –CASK(USD)

RASK –CASK, ex-Fuel (USD)

Fleet Size(Planes)

ASKGrowth

(%)

RPK Growth

(%)

LoadFactor

(%)

EBITDAR Margin

(%)

NetMargin

(%)

AirAsia 1.22 2.58 81 8.1 10.0 81.0 44.7 8.6

Cebu Pacific

0.86 2.41 55 21.5 22.6 79.8 33.3 7.9

Thai AirAsia

0.58 2.16 45 17.5 19.7 81.0 29.8 6.8

Average 0.89 2.38 60 15.7 17.4 80.6 35.9 7.8

Vietjet Air 0.44 2.16 30 82.1 83.7 88.1 32.8 6.1

623

1,193

2,475

1,019

1,672

16.4% 17.2%

22.3%19.9%

22.6%

2013 2014 2015 6M 2015 6M 2016

Ancillary Revenue in VND bn vs as % of Total Revenue

Revenue % Total Revenue


Disclose

ANALYST CERTIFICATIONWe, Research Department of Thien Viet Securities JSC (TVS), hereby certify that the views expressed in this research report accurately reflectour personal views about the subject securities or issuers. We will not compensate, directly or indirectly, for any specific recommendations orviews expressed in this report.

DISCLAIMERCopyright ©2017 Thien Viet Securities JSC (TVS). ALL RIGHT RESERVED. This research report is prepared for the use of TVS clients and may notbe redistributed, retransmitted or disclosed as a whole or partially in any form or manner without the prior written consent of Thien VietSecurities Company (TVS). The information herein is obtained from various sources and TVS does not guarantee its accuracy. Neither theinformation nor any opinions expressed in this publication constitutes a buy or sell recommendation on any securities or investment. TVStherefore does not take any responsibilities for any investor’s decisions.

12-month rating Definition

Buy Total Stock’s Return > 15%

Neutral Total Stock’s Return between (-15%) and 15%

Sell Total Stock Return < (-15%)

Short-term rating Definition

Buy Stock price expected to rise within three-month because of a specific catalyst or event

Sell Stock price expected to fall within three-month because of a specific catalyst or event

Not-ratedThe investment rating and target price, if any, suspended as there is not a sufficient fundamental basis for

determining an investment rating or target.

TVS Investment Research: Equity Rating Definitions


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CONTACTS

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Research Department

Duy Nguyen (Mr.), ManagerEquity Capital [email protected]

Son Nguyen (Mr.), Senior AnalystReal Estate; [email protected]

Trung Dong (Mr.), AssociateConsumer Goods; [email protected]

Bach Nguyen(Mr.), AnalystOil & Gas; Industrial [email protected]

Quang Luong (Mr.), AnalystTeam [email protected]

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