pnj-26072012-sbsc

VIETNAM | EQUITY RESEARCH Company Report

2012

I N I T I A T I O N O F C O V E R A G E

1 | See Disclaimers at the end of the report

PHU NHUAN JEWELRY JSC

BUY

TARGET PRICE 48,800 CURRENT PRICE 41,500

S T O C K S T A T I S T I C S

Bloomberg Ticker VN PNJ Equity

Outstanding shares (m) 59.9

Market Cap (VNDbn) 2,489

52W Price range (‘000VND) 24.8-46.4

3M Average Volume 55,551

Beta 0.7

Foreign ownership (%) 46.9

M A J O R S H A R E H O L D E R S

Cao Thi Ngoc Dung 10.15%

Vietnam Azalea Fund Ltd* 6.90%

Deutsche Bank AG 6.28%

Dong A Bank Securities 1.92%

Dong A Capital Co. 1.41%

S T O C K P E R F O R M A N C E

3M 6M 12M

Relative (%) 5.8 4.0 56.6

Absolute 2,300 1,600 15,000

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Volume Last Price

Consumer Goods

The Jewelry Industry’s Queen We initiate coverage on Phu Nhuan Jewelry Joint Stock Company (PNJ), a jewelry

industry outperformer, with a BUY call. We like PNJ for its large domestic market share

(20%), strong branding and extensive distribution system focused on the medium- and

high-end markets.

A high-potential market: Between 2005 and 2011, the value of gold jewelry in

Vietnam increased at a six-year CAGR of 8%, from about USD399m to USD634m.

Vietnamese jewelry consumption is quite low compared to other countries like India

and China but the domestic market’s growth is projected to be positive, driven by

the increase in domestic consumer demand in tandem with a rise in disposable

income levels.

A big domestic player: A strongly-branded player with a prestigious reputation, PNJ

is set to benefit from Vietnam’s jewelry market’s growth. It is a well-positioned

medium- and high-end jeweller with a reputation for excellent design, authentic

quality and superior craftsmanship and enjoys an extensive distribution network and

better client-retailer relationships compared to its peers.

Ambitious plans: The management has set up a five-year plan to maintain its top

position in Vietnam’s retail jewelry market. It also plans to quadruple export

revenue, projecting annual revenue and profit growth at 20% and 15% respectively.

In addition, PNJ plans to expand its retail network to 300 stores by the end of 2017.

Excellent growth record: PNJ’s 2009-2011 CAGR of gold jewelry sales and gross

profit were 29% and 20% respectively, while CAGR for silver jewelry sales were

registered at 36% and 44%.

BUY. We project the company’s posting an EPS of VND3,375 (on new capital of

VND799bn) and a forward PE of 9.2x in 2012. Our target price is VND48,800 per

share, implying a 17% premium on the current price.

Year-end Dec 31 FY09 FY10 FY11 FY12F FY13F

Revenue (VNDbn) 10,256 13,752 17,964 7,255 7,453

Net profit (VNDbn) 204 212 257 270 324

% change yoy 63% 4% 21% 5% 20%

EPS (VND) 5,112 3,534 4,285 4,500 5,396

Diluted EPS (VND) 2,556 2,650 3,214 3,375* 4,047*

BV (VND) 23,894 17,448 18,841 19,331 21,378

DPS (VND) 2,500 2,500 2,500 2,300 2,000

Div yield 4% 7% 6% 6% 5%

ROA 12% 10% 10% 10% 11%

ROE 21% 21% 24% 21% 23%

P/E (x) 2.3 5.6 9.4 9.2 7.7

P/BV (x) 2.5 2.0 2.1 2.1 1.9

Source: PNJ, SBS estimates

* assuming PNJ to increase 33% its charter capital from VND599bn to VND799bn

Vo Bach Ngoc Anh Thu [email protected]

Ext: 8851

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A burgeoning

jewelry market

Vietnam’s jewelry industry is one of the economy’s growing segments. It is in the early stages of

development, marked by many small players but the market has been growing across all key

segments, including gold, silver, platinum and gemstones. Bigger players have significant

opportunities to capture a greater market share, thanks to their advantage of scale..

Like other Asian markets, Vietnamese customers prefer gold jewelry over others. The Vietnam

jewelry market, valued at USD634m in 2011, and grew at CAGR of 8% in 2005-2011. Locally-

manufactured gold jewelry is mainly for domestic consumption; export only takes a small percentage

of the total. Gold jewelry consumption is still quite low (0.15 gram/capita/year) compared with other

countries as India (0.39 gram/capita/year) and China (0.27 gram/capita/year). Going forward, growth

is projected to be positive, driven by increased domestic consumer demand along with the rise in

disposable income levels. Besides that, Vietnamese consumers also value gold as an important

savings and investment vehicle. Long term prospects for jewelry players are attractive, due to growth

in both population (87m people in 2011, CAGR of 1.4% in 1990-2011) and annual tourist arrivals

(3.6m people in 2011, CAGR of 11% in 2000-2011).

A player with a

strong retail

presence

A strongly-branded, prestigious company, PNJ is set to benefit from growth in the jewelry market. It is

a medium- and high-end jeweller with an extensive distribution network (151 stores as of 31 Dec

2011), and enjoys long-term client loyalty. Known for its excellent design, authentic quality and

superior craftsmanship, it has had a developed client base of medium- and high-income customers

for generations.

The company plans to aggressively grow its retail presence in Vietnam by adding 30 new stores in

FY12 to the existing 151 in the network. Since the end of June, it has fulfilled 36% its expansion plan

by opening 11 stores which include 2 gold, 8 silver and 1 Yabling accessories outlets.

Enhancing the

portfolio to drive

growth

PNJ plans to broaden its customer base by expanding its product portfolio and introducing new

machine-made, lightweight, Italian style jewelry to its range of products, which currently span the

low- (Yabling), medium- (silver, gold) and high end (CAO fine brand) segments. The company’s new

jewelry factory, launched in 2012, will expand production capacity from 3m to 5m units, roll out

newer product ranges and reduce wastage, thereby improving margins. In 2011, PNJ shortened the

production process to meet orders more quickly by industrialising production in silvery jewelry by

95% and gold jewelry by 90%. The company also recently industrialised 95% of its low-end jewelry

production process, quickening supply to meet market demand. Currently, PNJ’s design team has 59

Vietnamese members; it is also working with several domestic and international designers to launch

international standard jewelry to the market.

An able

management

team

PNJ’s management is experienced, enthusiastic and well-motivated, with a 24-year history behind

them. The company has come a long way since its humble beginnings as a small jewelry trading store

in 1988. Today, the multi-outlet company has a mix of clients from the high-, middle- and low-ends,

an ever expanding retail network (growing from 87 outlets in 2007 to 151 in 2011), and a diversified

product portfolio. It also holds aggressive promotional, marketing and branding events.

INVESTMENT THESIS


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Excellent historic

growth record

coped with an

ambitious 5-year

plan

PNJ has had robust sales growth in the last three years, with 2009-2011 CAGR of gold jewelry sales

and gross profit were at 29% and 20% respectively. Meanwhile, silver jewelry sales and gross profit

had CAGR of 36% and 44% correspondingly.

The company’s management set up a five year-plan that kicked off this year to maintain its growth

momentum, top the domestic market share, increase export revenue fourfold and increase revenue

and profit by 20% and 15% annually, eventually becoming Asia’s leading jewelry processor and

retailer.

We think this plan is feasible, as PNJ management has a clear strategy. It has contracted Milanese

consulting firm Value Partner to restructure and fine-tune its development plan to become Vietnam

and Asia’s top jeweller.

BUY cal l at

DCF fai r -value

of VND48,800

/share

We used the DCF method for our evaluation on PNJ, based on its routine cash flow from the jewelry

business, and valued the company at VND48,800/share. Our calculation was based on the following

assumptions: an average risk-free rate (Rf) of 11.5%, a Beta of 0.72x (Bloomberg), a market premium

of 10%, and an average cost of debt (Rd) of 12%. We have estimated the cost of equity (Re) to be

18.7%, and consequently the weighted average cost of capital (WACC) of PNJ to be 14.9%. The

perpetual growth rate is roughly 4.5%/year after 2016.

F I G U R E 1 : D C F V A L U A T I O N A P P R O A C H

(VND’m) 2012 2013 2014 2015 2016

FCFF (62,449) 340,787 308,070 559,885 651,394

WACC 15.07%

Present value of given year's FCF (54,272) 257,383 202,206 319,367 322,911

PV of FCF 2012-16 1,047,595

Terminal growth rate 0.05

PV of terminal value 3,193,254

FCFF 4,240,849

- Debt 1,312,306

FCFE 2,928,543

Number of shares (year-end) 59,999,142

DCF valuation per share

(VND)

48,800

Source: SBS

Using this method, we arrived at a fair value of VND48,800/share for the company. At the current

price of VND41,500/share, our new 12M target price suggests a 18% return and thus, we recommend

a BUY on the stock.

VALUATION & RECOMMENDATION


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Risks Raw material prices are the biggest risks in this business. Gold accounts for 70%-80% of the

company’s cost of goods sold(COGS). The company cannot simply pass on the cost of gold to

jewelry customers and easily retain its margins at the same time, so the bullish gold market has

become a headwind for PNJ.

This is a low-margin company, with overall net profit margins of 1.5% in 2010 and 1.4% in 2011.

These are caused by the innate low margins (0.17%-0.34%) of the gold bar trading and gold

export businesses. Overall, PNJ’s jewelry businesses have fair gross margins: around 11% for gold

jewelry, 30% for CAO fine jewelry and 62% for silver jewelry. Looking forward, PNJ will focus its

core business to improve its profit margins.

The liquidity of the stock is low, making it less attractive as it limits the actions of large and

institutional investors. As of 15 Mar 2012, the free float is estimated at 59m shares, about 42% of

which are held by foreign institutional investors and 10% by domestic ones who are likely hold on

to their investments for the long term. Only 2.03% of remaining equity is available for foreign

investors, to comply with government mandates.

The gold and gold jewelry sectors have always played an important role in Vietnam’s society and

economy. Between 2005 and 2011, the value of gold in Vietnam increased at a six-year CAGR of 34%,

from about USD882m to USD5,195m, mostly contributed by gold investments. In 2011, Vietnam’s

gold industry grew at 59% y-o-y with consumed volume hitting 100 tonnes at USD5,195m.

F I G U R E 2 : V I E T N A M G O L D D E M A N D

2009 2010 2011 YoY (%) Portion (%)

Volume (tonnes)

Jewelry 16 14 13 -10% 13%

Investment 58 68 87 28% 87%

Total 74 82 100 21% 100%

Value (USD’m)

Jewelry 502 558 634 14% 12%

Investment 1,814 2,713 4,561 68% 88%

Total 2,316 3,271 5,195 59% 100%

Source: World gold council (WGC)

Vietnam is a small player in the global gold and gold jewelry market. This industry is a minor foreign

exchange earner. According to GSO, Vietnam’s precious gems, metal and jewelry export value was

valued about USD2.7bn (-6.1% y-o-y) in 2011. Exports to the South Africa and Switzerland alone

accounted for about 89% of total export of precious metals, gems and jewelry from Vietnam

VIETNAM’S GOLD INVESTMENT & JEWELERY INDUSTRY


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F I G U R E 3 : E X P O R T A N D I M P O R T P R E C I O U S M E T A L , G E M & J E W E L R Y 2 0 0 9 - 2 0 1 1

F I G U R E 4 : M A J O R M E T A L , G E M & J E W E L R Y E X P O R T M A R K E T S F O R V I E T N A M

Source: GSO, SBS Source: GSO, SBS

Gold Investment Demand for gold bars has surged in recent years; in 2011 it rose 28% y-o-y to 87 tonnes, thanks to

decreasing confidence in the VND on account of high inflation and the depreciation of its value

against the greenback. Investors have tried to hedge gold investments against paper money’s loss in

value. The Vietnamese gold investment market in 2011 alone was worth $4.5bn (up 68% y-o-y, and

growing 25% per annum from 2008-2011). Demand has been robust, due to the Vietnamese habit of

placing greater trust in gold – and using it as an investment tool - over paper money and the local

banking system.

F I G U R E 5 : V N ’ S G O L D I N V E S T M E N T M A R K E T S I Z E ,

Q U A R T E R L Y 2 0 0 9 - 2 0 1 2

Source: WGC, SBS

Gold bars were traditionally traded by small family jewellers though the government has controlled

this business since 2012. According to 3 April’s decree 24/2012/ND-CP, government now strictly

controls gold bar trading and gold jewelry businesses. The State now has monopolistic rights to

produce gold bars, manage exports and imports to produce them. Business licenses for gold bar

trading enterprises are granted when companies satisfy the following conditions: they must own

capital of over VND100bn, have paid gold trading taxes of over VND500m for two consecutive years

and possess a distribution network spread over at least three provinces. By the end of 2012, all small

family-owned businesses, banking and jewelery companies must have licenses to legally trade gold

bars.

In 1Q2012, demand for gold investments was at 20 tonnes (up 43% y-o-y, down 21% q-o-q), and

demand in 1QFY12 is likely to remain in a key position with a value of USD1,087m (down 21% q-o-q

and up 71% y-o-y).

18%

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100%

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2,000

3,000

2009 2010 2011 4M/2012

Import (USD m) Export (USD m) Import on export ratio (%)

0%

1%

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2%

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33%

56%

0% 20% 40% 60%

Autralia

Hong Kong

Taiwan

Japan

France

America

Switzerland

South Africa

304 563 494 453 503 481 789

940

633

1,877

1,373 1,087

- 200 400 600 800 1,000 1,200 1,400 1,600 1,800 2,000

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Q1-09 Q2-09 Q3-09 Q4-09 Q1-10 Q2-10 Q3-10 Q4-10 Q1-11 Q2-11 Q3-11 Q4-11 Q1-12 V

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Volume (tonnes) Value (US$m)


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Vietnam Gold

Jewelry

Vietnam’s jewelry industry is largely unorganized. There are over 12,000 players in it, the majority

being family jewellers and the others comprising of organised retail players. The domestic jewelry

market has been growing across all key segments including gold, silver, platinum and gemstones, with

gold being the preferred choice among clients. Between 2005 and 2011, the value of gold jewelry in

Vietnam increased at a six-year CAGR of 8%, from about USD399m to USD634m. In 2011, Vietnam’s

gold jewelry demand grew by 14% y-o-y to USD634m, but occupied only 13% of total gold demand.

The jewelry market actually contracted in volume by 10% at 13 tonnes in 2011. The gold price’s

double-digit increase helped to boost the value up 14% y-o-y, even as volume shrank 10% in the same

period.

Vietnam’s gold jewelry industry has grown in value at a CAGR of 8% (a 11% decrease) since 2005,

lower than the growth rate of nominal GDP. We attribute the modest increase to the bull market that

pushed up input costs and end-product prices, which eventually restrained growth.

In 1Q2012, demand slipped 9% to five tonnes, as a y-o-y increase in the local price of gold (and

diminishing VND value) discouraged demand among customers already battling high inflation levels.

Gold jewelry demand in Vietnam in 1QFY12 is likely to turn positive, with a value of USD269m(up

9.8% y-o-y) and volume at five tonnes (down 9% y-o-y).

F I G U R E 6 : V N ’ S J E W E L R Y M A R K E T S I Z E ,

M E A S U R E D Q U A R T E R L Y F O R 2 0 0 9 - 2 0 1 2

Source: WGC, SBS

It is also apparent that jewelry isn’t as popular in Southeast Asia as it is in China or India, which

account for 55% of global demand. Consumption in Vietnam is 0.15 gram/capita/year, compared with

India (0.47 gram/capita/year) and China (0.38 gram/capita/year). Going forward, growth in Vietnam’s

jewelery market is projected to be positive, driven by the increase in domestic consumer demand and

the rise in disposable income levels.

F I G U R E 7 : V N ’ S J E W E L R Y C O N S U M P T I O N P E R C A P I T A P E R Y E A R , 2 0 1 1 D A T A

Source: WGC, SBS

135 114 122 131

183

121 116 138

245

162

91

136

269

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160

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Volume (tonnes) Value (US$m)

0.469

0.381

0.148

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0.400

0.500

India China Vietnam ThaiLand

Gr/

capita/y

ear

India China Vietnam ThaiLand


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Market positions Established in December 1988 as Phu Nhuan Jewelry Shop, equitised in January 2004 and listed in

March 2009, PNJ is a big manufacturer of jewelry products for the domestic Vietnamese market.

One of the jewelry industry’s largest players, PNJ primarily focuses on the domestic market, which

contributes over 97% of its total jewelry sales while the remaining 3% comes from export. In Vietnam,

it owns 20% and 70% of market shares in gold and silver jewelry respectively. The company is ranked

at the 16th of the top 500 largest jewelry companies in the Asia, according to the Plimsoll World

Portfolio Analysis.

Largest retail

distribution

system

PNJ currently has 151 retail stores nationwide and nearly 3,000 wholesalers, concentrated in 56

provinces around the country. Between 2007 and 2011, the number of stores increased at a five-year

CAGR of 20% and by December last year, the company owned 151 outlets, namely 131 PNJ stores, 15

CAO stores and 7 Jemma stores. PNJ plans to expand its retail presence by another nine gold and 21

silver stores in this year. It plans to open 30 to 40 new retail stores per year and aims to own 300

retail stores at the end of 2017.

F I G U R E 8 : N U M B E R O F S T O R E S I N 2 0 0 7 - 2 0 1 1

F I G U R E 9 : S T O R E S B Y P R O D U C T S B R A N D , 2 0 1 1

Source: PNJ, SBS

Business

Advantages

• Quality workforce. PNJ has over 1,000 craftsmen, engineers, and active teams in designing,

marketing, sales and management.

• Modern technological system. It owns hi-tech global standard manufacturing systems from

Germany and Italy, which are up to date.

• Reputable brand name. PNJ has leading brands, namely PNJ Gold, PNJ Silver and CAO Fine

jewelry that domestic and foreign clients are familiar with.

Capacity Currently, PNJ produces about three million items annually. This year, the company will open a new

facility and upgrade its production capacity to five million items.

87 89

110

139 151

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120

160

2007 2008 2009 2010 2011

PNJ 89%

CAO 7%

Jemma 4%

PNJ’S POSITION & STRENGTH


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PNJ’s core

businesses

PNJ products include gold and silver jewelry, precious and semi-precious stones. The portfolio

includes rings, earnings, pendants, bracelets and necklaces. Most customers recognise PNJ Gold and

PNJ silver as two traditional, well-established brands. Besides that, PNJ also owns the luxury CAO Fine

and low-end Yabling brands. CAO fine Jewelry and JEMMA brands belong to PNJ subsidiary CAO

Fashion Company, which specialises in luxury jewelry and accessories. The Yabling brand has just

been launched on the market, retailing items in smaller volumes.

F I G U R E 1 0 : P N J ’ S P R O D U C T B R A N D S

PNJ Gold PNJ Silver Yabling CAO fine Jewelry JEMMA

Source: PNJ, SBS

`

Among the five brands, PNJ Gold and PNJ Silver are main contributors to sales and gross profit. The

gold jewelry market took 20% of total company sales and 52% of gross profit in 2011. The silver

jewelry took 1% and 18% respectively. Additionally there were premium market sales under the

premium ‘CAO’ brand which took 0.4% sales and 5% gross profit respectively

F I G U R E 1 1 : R E V E N U E B Y S E G M E N T S 2 0 1 1

F I G U R E 1 2 : G R O S S P R O F I T B Y S E G M E N T S 2 0 1 1

Source: PNJ, SBS

Gold Jewelry

20% Silver

Jewelry 1%

CAO FINE 0% Gold bar

48%

24k gold export 28%

Watchs 0%

Orther services

0%

Gas 3%

Gold Jewelry

52% Silver Jewelry

18%

CAO FINE 5%

Gold bar 12%

24k gold

export 1%

Watchs 0% Orther

services 2%

Gas 10%

PNJ’S BUSINESS


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Gold Jewelry

Segment

Established in 1988, PNJ Gold targets women aged 25-45 with medium and high incomes as

customers, offering products that feature precious and semi-precious gems set in 24k, 18k, 14k and

10k gold. In 2011, PNJ Gold’s contribution to total revenue shrank y-o-y) to 19.6% and contribution to

total gross profit decreased slightly from 52.7% (2009) to 51.5% (2011). In 2011, the gold jewelry

generated VND3,541bn in sales (up 0.6% y-o-y) to contribute to 20% of total revenue; in this, export

revenue accounted for 2.7% and domestic sales 97.2% of total revenue. From 2009 to 2011, PNJ gold

jewelry grew at CAGR of 28.4%.

In geographical terms, Vietnam’s South and South East areas are major markets, accounting for

76.99% of gold jewelry revenue in 2011, with a growth rate of 19.36% y-o-y. The fiercely competitive

and unique North market accounted for only 6.67% of gold jewelry sales, the Central and Western

areas 8.7% each. PNJ’s business in the Western region saw the greatest growth, with a 19.98%

increase in sales. In recent years, gold prices have fluctuated in an uptrend to affect overall gross

profits; in 2011, the gross profit in this segment was 10.7%, down 4.4% y-o-y.

F I G U R E 1 3 : R E V E N U E A N D G R O S S P R O F I T I N G O L D J E W E L R Y

F I G U R E 1 4 : G O L D J E W E L R Y S A L E S B Y M A R K E T 2 0 1 1

Source: PNJ, SBS

Silver jewelry

segment

The PNJ Silver brand was established from June 2001, targeting girls aged 15 to 25 years and selling

fashion jewelry made from pure silver. PNJ silver jewelry contributed only 0.9% of revenue but gross

profit went up by 17.5%.

In 2009-2011, PNJ silver jewelry enjoyed robust growth at CAGR of 36.1%. In 2011, silver jewelry

revenue showed robust growth of 36.82% y-o-y at VND164bn, with revenues from the South

expanding 37% y-o-y, North by 47%, Central by 67% and the West by 54%.

The South area (including Ho Chi Minh City and the South East) accounted for 62.59% in sales,

followed by the North (22.8%), West (7.6%) and the Central (6.9%) areas. PNJ Silver seems to be a

monopoly brand as there is less competition in the North with a y-o-y high growth rate, and gross

profit of 78% in (up 9.3% y-o-y) last year.

12.3% 11.2%

10.7%

0.0%

5.0%

10.0%

15.0%

0

1,000

2,000

3,000

4,000

2009 2010 2011

Revenue (VND bn) GPM (%)

South 77%

North 7%

Central 8%

Western 8%


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F I G U R E 1 5 : R E V E N U E A N D G R O S S P R O F I T I N S I L V E R J E W E L R Y

F I G U R E 1 6 : S I L V E R J E W E L R Y S A L E S B Y M A R K E T 2 0 1 1

Source: PNJ, SBS

CAO fine jewelry

& JEMMA

segments

CAO Fine Jewelry and Jemma, owned by PNJ subsidiary CAO Fashion Company, are targeted towards

successful businesswomen aged 30 to 45 years, selling luxury jewelry with unique and sophisticated

designs. Jemma targets women with medium to high incomes, aged from 25 to 35 years and markets

fashion jewelry and stylish accessories in fresh, new colours and made with various materials. These

two brands contributed only 0.5% in sales and 5% in gross profit last year.

In 2011, the CAO Fashion Company’s sales were split between CAO Fashion Jewelry (90.4%) and

Jemma (9.6%)

F I G U R E 1 7 : R E V E N U E A N D G R O S S P R O F I T C A O C O M P A N Y

F I G U R E 1 8 : C A O J E W E L R Y S A L E S B Y B R A N D S 2 0 1 1

Source: PNJ, SBS

Gold bar trading

& 24k gold

exports

Beside jewelry, PNJ also trades in gold bars and exports gold. The gold bar business operates on very

thin margins, as prices fluctuate and there is a great difference between world and domestic prices.

Gold bar trading is the biggest contributor for PNJ, generating 47.9% of total revenue (2011), though

it made up only 11.6% in gross profit last year. Between 2009 and 2011, the gold bar business grew at

a CAGR of 149%. In 2011, the gold bar revenue grew by 103.5% y-o-y at VND8,640bn, with the gross

profit margin improved at 0.99%, up seven times from the year before.

In the same period, PNJ 24k gold bar exports were at VND4,966bn (down 14% y-o-y) which was 27.5%

of total revenue and 1.3% of total gross profit. Between 2009 and 2011, PNJ’s gold exports had a

CAGR of 119%

70.3%

71.6% 78.3%

0.0%

30.0%

60.0%

90.0%

0

50

100

150

200

2009 2010 2011

Revenue (VND bn)

South 62%

North 23%

Central 7%

Western 8%

34.5%

33.8%

48.2%

0.0%

20.0%

40.0%

60.0%

0

20

40

60

80

100

2009 2010 2011

Revenue (VND bn)

CAO Fine 90%

JEMMA 10%


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F I G U R E 1 9 : R E V E N U E A N D G R O S S P R O F I T G O L D B A R T R A D I N G

F I G U R E 2 0 : R E V E N U E A N D G R O S S P R O F I T 2 4 K G O L D E X P O R T

Source: PNJ, SBS

Non-core

businesses

PNJ had a 70% stake in gas trading company Dai Viet Energy JSC, which it divested to Tolagaz Viet

Nam Ltd in Dec 2011 for VND 122.5bn. PNJ received a VND52.5bn deposit for the sale on 31 Dec

2011, contributing 3.4% to 2011’s revenue and raising it by 14.5% y-o-y. It announced the liquidation

of its Dai Viet shares on 29 June.

PNJ investment PNJ also has long term investments in banking, real estate and fuel worth VND733bn, comprising 25%

of its total assets and 65% of shareholders equity in FY2011, which generated VND64bn last year.

Total long-term investments at the end of 2011 was valued at VND712bn, after it liquidated its share

of the Kinh Do real estate company.

F I G U R E 2 1 : P N J F I N A N C I A L S L O N G T E R M I N V E S T M E N T

2 0 0 9 2 0 1 0 2 0 1 1

Investment value (VND bn) 520.4 749.5 712.4

Joint-venture investment 129.7 261.5 258.3

Saigon fuel JSC 49.9 138.6 138.6

Dong A land JSC 72.0 91.9 91.9

Hong Vina Ltd., 7.8 10.7 -

Consolidated value of associated Company - 20.3 27.8

Stock investment 401.3 486.0 464.7

Dong A bank 272.1 356.8 356.8

M&C Corp (real estate) 65.4 65.4 65.4

Que Huong Liberty Hotel 40.8 40.8 42.5

Kinh Do Real estate JSC 23.0 23.0 -

Bond investment 0.2 12.8 10.6

Dai Viet investment - 1.1 0.5

Hoang Minh Giam Project - 10.1 10.1

Convertible bond - 1.7 -

Government bond 0.2 - -

Provision (10.8) (10.8) (21.1)

Source: PNJ, SBS

0.13% 0.14%

0.99%

0.00%

0.50%

1.00%

1.50%

0

2,000

4,000

6,000

8,000

10,000

2009 2010 2011

Revenue (VND bn)

1.35%

0.32%

0.20%

0.00%

0.50%

1.00%

1.50%

0

2,000

4,000

6,000

8,000

2009 2010 2011 Revenue (VND bn)


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DongA Bank (EAB) is the company’s biggest investment, accounting for 48% of total investments. PNJ

was a founding shareholder of DongA Bank, with 7.7% ownership at the end of 2011. EAB’s pre-tax

profit for the same period was VND1,255bn (up 46% y-o-y), with a 16% dividend rate at par value.

Dong A Land. PNJ holds 30.6% capital of Dong A Land, another long-term investment. Due to real

estate market difficulties, the implementation of two main projects, Golden Square in Da Nang City

and Phu Thuan Residential in District 7, were affected. Dong A Land’s revenue were largely derived

from construction and consultant services. Total revenue generated was VND55bn, while the

company incurred a VND15bm loss, from interest expenses.

Sai Gon Fuel JSC (SFC). PNJ owns 49.99% of Sai Gon Fuel JSC, as of end-2011. SFC VND1,794bn (up

28% y-o-y) in revenue and the profit before tax of VND39.1 bn (down 46.8% y-o-y) for 2011 because

of high cost of goods sold in real estate and gas segments.

Sai Gon M&C and Que Huong Liberty. PNJ holds 5% and 2.6% in each company respectively and

plans to exit from them via a deal this year.

F I G U R E 2 2 : F I N A N C I A L R E V E N U E ( V N D B N )

F I G U R E 2 3 : F I N A N C I A L E X P E N S E ( V N D B N )

Source: PNJ, SBS

In 2011, the company recorded dividends from its investments amounting to VND53bn, which

comprised 82% of total financial income.

Interest expenses are big burden for PNJ. From 2009-2011, the company’s interest expenses grew at

CAGR of 58.5%. The interest expense incurred in 2011 was VND104bn (77% y-o-y). PNJ’s huge

interest expense for its gold debt to produce jewelry always offset high dividend income.

-

10.0

20.0

30.0

40.0

50.0

60.0 2009

2010

2011

-

20.0

40.0

60.0

80.0

100.0

120.0

2009

2010

2011


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Low profit margin business

The company has increased gold bar sales and gold exports since 2009. From 2009 to 2011, revenue

grew at a CAGR of 32%, gross profit at CAGR of 21.4% and net profit at CAGR of 12%. Management

has tried to manage gross margins around 4% against the fluctuating price of gold. Net margins has

decreased from 2% (2009) to 1.4% (2011) because of high interest expense offsetting gross profits.

F I G U R E 2 4 : P R O F I T M A R G I N I N 2 0 0 7 - 2 0 1 1 ( % )

Source: PNJ, SBS

Selling & administration expenses are under control

PNJ owns 151 jewelry stores and has a network that expands by 15 to 20 stores each year. Increased

sales along with network expansion have marked expenses growing at CAGR of 36%, while

administrative costs increased at CAGR of 44% in 2007 to 2011. Selling and administration costs

decreased slightly y-o-y in 2011; PNJ tries to maintain them at 1.8% and 0.6% of sales respectively

F I G U R E 2 5 : S E L L I N G & A D M I N I S T R A T I O N E X P E N S E O N S A L E S I N 0 7 - 1 1 ( % )

Source: PNJ, SBS

8.5% 8.4%

4.9% 3.9%

4.1%

4.7%

3.0% 2.0% 1.5%

1.4%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

-

5,000

10,000

15,000

20,000

2007 2008 2009 2010 2011

Revenue (VND bn) Gross profit (VND bn)

Gross profit margin (%) Net profit margin (%)

3.6% 3.4%

1.8% 1.8% 1.6%

0.9% 1.1%

0.6% 0.6% 0.5%

0.0%

1.0%

2.0%

3.0%

4.0%

2007 2008 2009 2010 2011

% selling expense o sales % administration expense o sales

PNJ FINANCIAL ANALYSIS


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Financial Income In 2011, PNJ incurred a net loss of VND61bn, mainly due to the increment on interest expenses (from

VND58bn to VND103bn, +76.9% y-o-y). Short- and long-term debts rose to VND1,339bn (+57% y-o-y)

by the second quarter, indicating a huge burden on interest expenses.

Abnormal incomes were lower than the year before (-30% y-o-y), as it recorded a low income from

associates (approx. VND11bn) in 2011 against VND21bn in 2010

F I G U R E 2 6 : F I N A N C I A L G A I N ( L O S S ) ( V N D B N )

F I G U R E 2 7 : A B N O R M A L I N C O M E ( V N D B N )

Source: PNJ, SBS

Profitability PNJ showed a strong return on equity (ROE) at 24.2% (+12.5% y-o-y) in 2011, led by the asset

turnover increases of 9.9% y-o-y and a higher proportion of debt in the firm’s capital structure

(+11.6% y-o-y). Returns on asset were at 10.4% (+1.96% y-o-y), and the debt level ratio was at 60.5%

of total assets.

F I G U R E 2 8 : R O E & R O A I N 0 7 - 1 1 ( % )

Source: PNJ, SBS

22.2%

-3.8% -0.7%

1.6%

-19.1% -30.0%

-20.0%

-10.0%

0.0%

10.0%

20.0%

30.0%

(80)

(60)

(40)

(20)

-

20

40

2007 2008 2009 2010 2011

Financial gain (loss) (VND bn)

% financial income in PBT

6% 6% 8%

15%

9%

0%

4%

8%

12%

16%

20%

-

10

20

30

40

50

2007 2008 2009 2010 2011

Other income (VND bn)

Income from associates (VND bn)

% abnormal income in PBT

21.7% 24.0%

21.3% 21.5%

24.2%

12.4% 11.0% 11.6%

10.2% 10.4%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

2007 2008 2009 2010 2011

ROE (%) ROA (%)


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Capital structure More loans are needed to fund gold manufacturing and store expansion; the latter requires over

VND150bn in investment. Short term debt shrank by 36.39% in 2011 as PNJ narrowed its short-term

loans in gold by VND600bn while it increased its own USD and VND loans, especially long-term

borrowings which increased 4.3 times from 2010.

F I G U R E 2 9 : C A P I T A L S T R U C T U R E 2 0 0 9 - 2 0 1 1 ( V N D B N )

F I G U R E 3 0 : L O A N S T R U C T U R E 2 0 0 9 - 2 0 1 1 ( V N D B N )

Source: PNJ, SBS

Mission & Goals for 2012-2017

PNJ aims to be a leading company in jewelry processing and retailing in Asia, while holding pole

position in Vietnam for all of its segments.

It aims for its export sales to expand fourfold by the end of 2017, with revenue increasing 20% and

profit by 15% each year.

PROJECTIONS

1H2012 results In 1H2012, the company added 11 new stores, totalling 162 outlets across Vietnam. Management

was confident of meeting its target of adding 30 stores during the current financial year.

In its unconsolidated financial results, PNJ reported 1HFY12 net revenue of VND3,318bn (down 58%

y-o-y) on the back of weak gold bar demand. Gold segment sales decreased 59% at VND2,956bn

while gold bar sales shrank 61% to VND1,454bn. 24k gold exports were down 100% y-o-y and gold

jewelry only shrank by 1% y-o-y at VND 1,796 bn. PNJ expects gold trading revenue to fall this year,

due to expected lower consumption of gold bars after the issuance of the new MOF circular on gold

bar trading management. Besides that, silver jewelry sales slightly increased 0.5% (at VND85 bn) in

basis y-o-y respectively.

Moreover, selling expense has increased with higher employees’ wages. PNJ had a operating profit of

VND152bn (down 16% y-o-y) for 2011, which translated into a PAT of VND127bn (-14% y-o-y).

0.5

0.8 1.1

1.3

1.6

-

0.4

0.8

1.2

1.6

2.0

-

400

800

1,200

1,600

2,000

2007 2008 2009 2010 2011

Debt (D) Equity (E) D/E (%)

-

400

800

1,200

Short term loan (VND bn)

Long Term loan (VND bn)

2007 2008 2009 2010 2011

PROJECTION & OUTLOOK


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F I G U R E 3 1 : P & L ( V N D B N ) 1 H 1 1 1 H 1 2 Y - O - Y %

Total revenue 7,962 3,344 -58.0%

Gold segment 7,276 2,956 -59.4%

Gem & Jewelry 590 293 -50.2%

Silver segment 86 86 0.5%

Watch 3 3 5.3%

Service 8 5 -40.7%

Net revenue 7,930 3,318 -58.2%

Expenditure (7,748) (3,165) -59.1%

as % of sales 97.7% 95.4% -2.4%

Cost of goods sold (COGS) (7,612) (3,023) -60.3%

% COGS on revenue 96.0% 91.1% -5.1%

Selling expenses (101) (109) 7.5%

% on revenue 1.3% 3.3% 156.8%

Administration expenses (34) (33) -3.4%

% on revenue 0.4% 1.0% 130.9%

EBIT 182 152 -16.1%

Financial income/loss (2) (7) 209.5%

Other income 5 10 113.3%

Profit before tax 183 156 -15.2%

Total tax (36) (29) -19.3%

Net profit 148 127 -14.2%

Source: PNJ, SBS

Gross profit margins for 1H12 was up to 8.9% (+4.8% y-o-y), due to strong contributions from the

jewelry segment. Gold jewelry sales accounted for 70% of gross profit, followed by silver at 22%, gold

bar trading at 6% and others at 2%. The cost of goods sold as a percentage of net sales were down 5%

y-o-y to 91.1% in 1HFY12. Gross profits margin of jewelery sales also decreased on average by 2.2%

due to more spending on promotions to boost sales in 1H2012.

PNJ recorded 4.6% (+2.3% y-o-y) in EBIT margin in 1H2012, while net profit margin went up to 3.8%

(+1.96% y-o-y). According to the company’s targets, PNJ’s operations in 1HFY12 have fulfilled the

revenue and net income target at 32% and 49% respectively

F I G U R E 3 2 : M A R G I N ( % ) 1 H 1 1 1 H 1 2 Y - O - Y %

Gross profit margin 4.0% 8.9% 4.88%

EBIT margin 2.3% 4.6% 2.30%

EBT margin 2.3% 4.7% 2.38%

Effective tax rate 19.5% 18.6% -0.94%

Net profit margin 1.9% 3.8% 1.96%

Projections for 2012-2016

On 25 May 2012 the State Bank officially promulgated Circular No. 16/2012/TT-NHNN to guide some

articles of Decree No. 24/2012/ND-CP on the management of gold trading activities. According to the

circular, the six-month transition period for gold trading businesses starting on 10 July is a period in

which banks and enterprises need to acquire new licenses in order to be legally allowed to trade in

gold bars.

Over the next five years, PNJ will focus on its core business while reducing its operations in gold bar

trading and 24k gold exports. We expect revenue from gold and CAO fine jewelry sales to grow at

CAGR of 13% and 11%, lower than the 24% and 22% respectively recorded from 2007 to 2011. Silver

sales will grow to 35%, a 1% increase from the 2007 to 2011 period as well.

In 29 June, PNJ also completed liquidating its stake in Dai Viet Energy (Vinagas) to Totalgaz Company

at VND122.5bn, thereby earning VND52.5bn in income for the company


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Charter capital raising plan

The company is scheduled to increase its charter capital from VND599.9bn to VND799.9bn (+33% y-o-

y) through the issuance of 19,999,728 shares, of which 60% has been set aside for bonus shares, 25%

for private issue and 15% allocated for its Employee Stock Ownership Plan in FY12.

The Company recently announced that the ex-right date for bonus share would be 24 August 2012.

We also raised the questions of schedule and target price for the remainder of shares to be issued,

though company representatives answered that the plan has not fixed yet. In this model, we assume

that the issuing price for employees and strategic investors will be VND15,000 and VND34,000 per

share (after being adjusted for the bonus share issuance mentioned), respectively. Hence, the total

proceeds from the issuance is approximately VND200 bn.

F I G U R E 3 3 : P N J P & L P R O J E C T I O N F Y 1 2 - 1 6

(VND bn) 2009 2010 2011 2012E 2013E 2014E 2015E 2016E

Total Net Sales 10,256 13,752 17,964 7,255 7,453 7,748 8,165 8,767

Sales growth (%) 145% 34% 31% -60% 3% 4% 5% 7%

CoGS 9,755 13,211 17,226 6,586 6,626 6,786 7,076 7,488

Gross profit 501 542 738 669 827 962 1,090 1,278

Gross profit margin (%) 5% 4% 4% 9% 11% 12% 13% 15%

SG&A 247 322 388 356 365 380 408 447

SG&A as % of sales 2% 2% 2% 5% 5% 5% 5% 5%

EBITDA 292 280 334 447 552 691 790 942

EBITDA margin (%) 3% 2% 2% 6% 7% 9% 10% 11%

EBITDA growth rate (%) 52% -4% 19% 34% 23% 25% 14% 19%

Operating profit 254 219 351 313 462 582 681 831

Operating profit margin (%) 2% 2% 2% 4% 6% 8% 8% 9%

Financial income & Others 20 45 (32) 20 (30) (32) (32) (34)

Pre-tax income 275 264 318 333 432 551 649 797

Tax 55 53 61 63 108 138 162 199

Effective tax rate (%) 20% 20% 19% 19% 25% 25% 25% 25%

Net profit 204 212 257 270 324 413 487 598

Net profit margin (%) 2.0% 1.5% 1.4% 3.7% 4.3% 5.3% 6.0% 6.8%

Net profit growth (%) 63% 4% 21% 5% 20% 28% 18% 23%

Number of shares (m, year-end) 40 60 60 80 80 80 80 80

EPS (VND) 5,112 3,534 4,285 3,375* 4,047*

5,164*

6,085*

7,473*

EPS growth (%) 22% -31% 21% -21% 20% 28% 18% 23%

Source: SBS forecast

* assuming PNJ to increase 33% its charter capital from VND599bn to VND799bn


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Background PNJ was established in 1988 as a trading business and today, is one of the leading gold jewelry players

in Vietnam with a 20% market share. The group’s initial capital was registered at VND599.9bn in Dec

2011. This year, the company will increase its charter capital from VND599.9bn to VND799.9bn (+33%

y-o-y) through the issuance of 19,999,728 shares, of which 60% has been set aside for bonus shares,

25% for private issue and 15% allocated for its Employee Stock Ownership Plan in FY12

C H A R T 3 4 : P N J ’ S C H A R T E R C A P I T A L

Source: PNJ, SBS

Shareholders Structure

Up to 30 June, there were 599m outstanding shares held by domestic and foreign investors to the

ratio of 1.13:1. The company’s share liquidity averages 55,551 shares per day over a period of 90

days. There is room for another 2.03% in its foreign shareholding portion

About 10.1% of PNJ’s shares are owned by chairman and General Director Ms Cao Thi Ngoc Dung.

Other major shareholders are the Vietnam Azaleah Fund Ltd (6.90%), Deutsche Bank (6.28%), DongA

Bank Securities (1.92%) and Dong A Capital Company (1.41%)

C H A R T 3 5 : P N J ’ S S H A R E H O L D E R S T R U C T U R E

Source: PNJ, Bloomberg, SBS

Company Structure

C H A R T 3 6 : S U B S I D I A R I E S A N D A S S O C I A T E D C O M P A N I E S ( 3 1 / 1 2 / 2 0 1 1 )

Company Business type PNJ’s stake Charter Cap (VND bn)

Subsidiary

CAO fashion Company Ltd., Jewelry 100.00% 10

PNJ laboratory company Ltd., (PNJL) Appraisal Services 100.00% 10

Associated company

Dong A land JSC Real estate 30.62% 100

Saigon fuel JSC (SFC) Fuel 49.99% 103

Source: PNJ, SBS

40 55 100 120 240 300

600

800

0

200

400

600

800

1000

Chart

er

capital

(VN

D b

n)

10.1% 1.9%

1.4%

39.6%

6.9%

6.3%

33.8%

CEO - Ms Dung

Dong A Bank Securities

Dong A Capital Company

Other domestic investors

Vietnam Azalea Fund Ltd

Deutche Bank & Deutche AM

Other foreign investors

COMPANY OVERVIEW


APPENDIX 1

BAL ANCE SHEE T (V ND bn )

YEARLY R ATIO S

2009 2010 2011

2009 2010 2011

Assets 2,025.7 2,464.2 2,928.1

Growth rate

Current assets 982.0 1,176.6 1,605.0

Revenue growth rate 145.4% 34.1% 30.6%

Long-term assets 1,043.6 1,287.6 1,323.1

Gross profit growth rate 43.1% 8.2% 36.3%

Fixed assets 362.8 331.6 419.6

Net profit growth rate 62.9% 3.7% 21.3%

Long-term investments 520.4 749.5 712.4

Total asset growth rate 20.4% 21.6% 18.8%

Resources 2,025.7 2,464.2 2,928.1

Equity growth rate 7.0% 9.5% 8.0%

Liabilities 987.4 1,375.1 1,771.0

Profitability ratios

Current liabilities 869.7 1,224.7 973.4

Gross profit margin 4.9% 3.9% 4.1%

Long-term borrowings and liabilities 117.7 150.4 797.6

EBIT margin - - -

Equities 991.4 1,060.4 1,130.5

Profit before tax margin 2.7% 1.9% 1.8%

Owner's equity 955.7 1,046.9 1,130.5

Net profit margin 2.0% 1.5% 1.4%

Contributed capital 400.0 600.0 600.0

ROA 10.1% 8.6% 8.8%

Capital surplus 425.0 225.0 225.0

ROE 21.4% 20.3% 22.7%

Retained profits/(accumulated losses) 52.3 143.7 197.1

Dupont Analysis

Net profit margin(1) 2.0% 1.5% 1.4%

INCOME STAT EMENT (V ND bn )

Asset turnover (2)

2009 2010 2011

Equity multiplier (3) 211.9% 235.4% 259.0%

Net sales 10,256.3 13,752.4 17,963.8

ROE = (1)x(2)x(3) 21.4% 20.3% 22.7%

COGS 9,755.4 13,210.5 17,225.5

Management ratios

Gross profit /(loss) 500.9 541.9 738.3

Receivable outstanding days 1.4 0.8 0.8

Financial income 85.2 86.1 64.8

Inventory outstanding days 19.5 20.8 20.5

Financial expense 75.8 60.4 125.5

Payable outstanding days 0.2 0.2 0.2

Interest expense

Asset turnover 5.1 5.6 6.1

Selling expenses 185.5 243.3 289.5

Long-term asset turnover 9.8 10.7 13.6

G&A expenses 61.1 79.2 98.1

Fix asset turnover 28.3 41.5 42.8

Net operating profit /(loss) 263.7 245.1 289.9

Liquidity ratios

Other income 12.1 30.7 29.9

Current ratio 1.1 1.0 1.6

Other expenses 1.0 11.9 1.6

Quick ratio 0.5 0.3 0.7

Profit /(loss) before tax 274.7 263.9 318.2

Cash ratio 0.3 0.3 0.5

Corporate income tax 54.6 51.9 60.7

Capital Structure

Profit after tax 219.8 211.3 257.5

Total debt/Total Equity 103.3% 131.4% 156.7%

Net profit/(accumulated losses) 204.5 212.0 257.1

Total debt/Total Asset 48.7% 55.8% 60.5%

Total asset/Total Equity 211.9% 235.4% 259.0%

CASH FLOW ST ATEME NT ( V ND b n )

Index per share

2009 2010 2011

PE 7.10 9.79 9.68

Cash flows from operating activities

PBV 1.74

Profit/(loss) before tax 274.7 263.9 318.2

PS 0.14 0.15 0.14

Depreciation and amortisation 41.0 43.9 42.3

EPS (VND per share) 5,843 4,240 4,285

Allowances and provisions 2.5 0.1 12.1

Revenue/share (VND/share) 293,038 275,050 299,402

Profits/(losses) from investing activities (71.7) (83.8) (69.0)

Book value (VND/share) 23,894 17,448 18,841

Operating profit before changes in WC 299.7 282.8 493.3

CF from operating activities 45.5 3.1 154.2

Cash flows from investing activities

Receipt/payments for additions to assets (102.5) (112.4) (115.7)

Receipt/payments for investments entities (125.6) (217.1) (70.0)

CF from investing activities (102.5) (203.3) (102.9)

Cash flows from financing activities

Proceeds from equity issued (0.0)

Proceeds from long-term borrowings 3,836.4 6,600.0 8,767.1

CF from financing activities 121.6 263.1 61.2

Net CF during the period 64.7 62.8 112.6

Cash at the beginning 210.5 275.0 337.8

Cash at the end 275.0 337.8 454.1


APPENDIX 2

BAL ANCE SHEE T (V ND b n )

QU AR TERL Y RATIO S

QII-11 QIII-11 QIV-11 QI-12

QII-11 QIII-11 QIV-11 QI-12

Assets 2,765.6 3,143.4 2,916.7 2,899.2

Growth rate

Current assets 1,494.1 1,814.0 1,606.7 1,584.2

Revenue growth rate (Y-o-y) 6.7% 36.3% 15.0% -45.4% Long-term assets 1,271.5 1,329.4 1,310.0 1,315.1

Gross profit growth rate (Y-o-y) 5% 60% 31% -8%

Fixed assets 351.9 413.3 412.4 426.1

Net profit growth rate (Y-o-y) -16% -17% 42% 0% Long-term investments 725.5 720.8 702.1 713.8

Profitability ratio

Resources 2,765.6 3,143.4 2,916.7 2,899.2

Gross margin 3.1% 3.0% 5.8% 10.1% Liabilities 1,598.3 1,984.7 1,769.9 1,650.2

EBIT margin 2.0% 1.6% 2.4% 7.2%

Current liabilities 748.5 1,136.2 847.7 856.1

Net profit margin 1.2% 0.8% 1.5% 4.6% Long-term liabilities 849.8 848.5 922.2 794.1

ROA (4Q) 9.6% 8.4% 8.6% 8.4%

Equities 1,141.4 1,131.5 1,120.2 1,223.6

ROE (4Q) 21.7% 20.9% 21.8% 21.4% Equity 1,141.4 1,131.5 1,120.2 1,223.6

Management ratio

Contributed capital 600.0 600.0 600.0 600.0

Receivable outstanding days 1 1 1 2

Capital surplus 225.0 225.0 225.0 225.0

Inventory outstanding days 18 13 29 51 Retained profits 207.9 198.0 129.8 290.3

Payable outstanding days 0 2 0 0

Liquidity ratio

INCOME STATE MENT (V ND bn )

Current ratio 1.8 1.8 1.4 1.8 QII-11 QIII-11 QIV-11 QI-12

Quick ratio 0.8 0.8 0.8 0.7

Total Revenue 4,554.8 6,514.9 3,212.8 2,054.0

Cash ratio 0.5 0.4 0.5 0.4 Net sales 4,542.4 6,498.3 3,189.2 2,035.9

Capital Structure

COGS 4,401.8 6,301.3 3,005.6 1,829.9

Total debt/Total equity 140.0% 175.4% 158.0% 134.9% Gross profit /(loss) 140.6 197.0 183.6 206.0

Total debt/total asset 57.8% 63.1% 60.7% 56.9%

Financial income 26.7 6.0 24.9 21.9

Total asset/total equity 242.3% 277.8% 260.4% 236.9% Financial expense 32.4 42.2 32.8 29.1

Index per share

Interest expense 28.1 33.2 23.9 29.0

PE 10.3 10.7 10.1 10.1 Selling expenses 59.5 72.9 89.4 74.0

EPS (VND per share) 4037 3871 4111 4108

G&A expenses 19.8 21.8 32.1 21.0

Net operatiing profit 55.7 66.1 54.1 103.9

Other income 7.8 4.0 5.4 20.6

Other expenses 1.1 0.2 5.9 7.1

Profit /(loss) before tax 62.4 69.9 53.7 117.3

Corporate income tax 8.5 18.8 5.7 25.1

Profit after tax 54.0 51.0 48.0 92.2

Net profit 54.2 50.2 48.7 93.4


REPORT TRACKING

Reports issued Date Recommendation 12M Target price Market price at issuing date

Company Note 25/11/2011 Not Rated NA 35,500

Company Update 1Q12 10/5/2012 Not Rated NA 42,500

SBS Research Guide to Investment Ratings Buy: Share price may exceed 15% over the next 12 months Neutral: Share price may fall within the range of +/- 15% over the next 12 months Take Profit: Target price has been attained. Look to accumulate at lower levels Sell: Share price may fall by more than 15% over the next 12 months Not Rated (NR): Stock is not within regular research coverage

48.8

10.0

15.0

20.0

25.0

30.0

35.0

40.0

45.0

50.0

55.0 PNJ SBS target Price


DISCLAIMER

The information and statements contained herein, including any expression of opinion, are based upon sources believed to be reliable but their accuracy, completeness, and correctness are not guaranteed. Expressions of opinion herein were arrived at after due and careful consideration and they were based upon the best information then known to us, and in our opinion are fair and reasonable in the circumstances prevailing at the time. Expressions of opinion contained herein are subject to change without notice. This document is not and should not be construed as, an offer or the solicitation of an offer to buy or sell any securities. SBS and other related companies and/or their officers, directors and employees may have positions and may have affect transactions in securities of companies mentioned herein and may also perform or seek to perform investment banking services for these companies. No person is authorized to give any information or to make any representation not contained in this document and any information or representation not contained in this document must not be relied upon as having been authorized by or on behalf of SBS. This document is private circulation only and is not for publication in the press or elsewhere. SBS accepts no liabilities whatsoever for any direct or consequential loss arising from any use of this document or its contents. The use of any information, statements forecasts and projection contained herein shall be at the sole discretion and risk of the users. This document is confidential and is intended solely for the use of its recipient. Any duplication or redistribution of this document is prohibited.

Sacombank Securities Company

Head office

278 Nam Ky Khoi Nghia street, District 3 Ho Chi Minh City Vietnam Tel: +84 (8) 6268 6868 Fax: +84 (8) 6255 5957 www.sbsc.com.vn

Research Division

Tel: +84 (8) 6268 6868 (Ext: 8763) Email: [email protected] Hanoi Cambodia Laos

6th

-7th Floor, 88 Ly Thuong Kiet Street Hoan Kiem District Hanoi Vietnam Tel: +84 (4) 3942 8076 Fax: +84 (8) 3942 8075 Email: [email protected]

Sacombank Securities (Cambodia) PLC 56 Preah Norodom Blvd Sangkat CheyChumneas, Khan Daun Penh, Cambodia Tel: +855 23 999 890 Fax: +855 23 999 891

Lanexang Securities Public Company 5th Floor, LSX Building, Ban Phonthan Vientiane Capital The Lao P.D.R

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