VIETNAM CONTAINER SHIPPING JSC (VSC) · gateway ports in Haiphong (Lach Huyen port) and Ba Ria –...
Transcript of VIETNAM CONTAINER SHIPPING JSC (VSC) · gateway ports in Haiphong (Lach Huyen port) and Ba Ria –...
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INITIATING COVERAGE: HOLD
Current price (3/27/2015): VND 50,000
Target price: VND 54,800
Short-term trading recommendation Hold
Mid-term resistance level 54,000
Mid-term support level 49,000
Bloomberg ticker: VSC VN Exchange: HSX
Industry: Logistics
Beta 0.96
52w High / Low (VND’000) 71.0/48.0
Outstanding shares (mn) 34.4
Market cap (VNDbn) 1,718.7
LTM Avg trading vol (shares) 57,750
Foreign-owned ratio (%) 49.0%
Year Div.Yield EPS (VND)
2015 VPBS Forecast 1.0% 5,643
2014 3.0% 7,182
2013 7.0% 8,394
2012 8.0% 8,022
2009-14
CAGR
2015E
(VNDbn)
2015-19
CAGR
Revenues 14.3% 863.1 12.0%
EBITDA 11.7% 342.4 11.4%
Net income 9.9% 233.9 8.5%
2014 VSC Selected
peers VNI
P/E 6.9x 8.0x 13.3x
P/B 1.6x 1.4x 1.9x
Debt/Equity 1.2% 24.8% 112.7%
Profit margin 27.8% 25.0% 9.7%
ROE 25.6% 20.0% 14.7%
ROA 18.9% 14.8% 2.8%
Company description:
VSC was established in 1985 as a state-owned entity
and listed its shares on the Ho Chi Minh Stock
Exchange (HSX) in 2008.
The business lines include port operation (60 percent
of 2014 revenues), container yard operation (20
percent), container freight station (10 percent) and
others (10 percent).
2014 results: Total assets: VND1,495 billion (USD70
million); Net revenues: VND891 billion (USD42 million);
Net income: VND248 billion (USD12 million).
We initiate coverage of Vietnam Container Shipping JSC (VSC)
with a long-term HOLD recommendation based on the following:
High growth in revenue and net income from 2016:
New port will increase container throughput: VSC will put its VIP
Green Port (located at a preferred position in Nam Hai Dinh Vu
area) into operation in 2016. We forecast that the container
throughput of the company will increase by 39 percent and the
company will enjoy 35 percent growth y-o-y in port revenue in
2016. We expect this segmental revenue to have a CAGR of 12.4
percent from 2015 to 2019, leading to a CAGR of 12.0 percent in
VSC’s consolidated revenues in the same period.
Flat growth in other segments: Other segments have reached
full capacity and will record stagnant growth.
Stiffer competition will slow earnings growth: Increased
competition will cause margins to tighten so that consolidated
net income will grow with a CAGR of 8.5 percent, compared to
12.0 percent for revenue growth.
Stock seems to be fully valued:
Higher P/E in future due to stock dilution: VSC’s LTM P/E ratio is
slightly lower than its peers despite its higher ROE and ROA.
However, with the issuance of bonus shares (20 percent on par),
the company’s P/E ratio is expected to grow higher in 2015.
Underperforming its peers: During the last 12 months, VSC’s
stock price decreased 13.2 percent, underperforming not only its
peers (+2.8 percent) but also the VN-Index (-6.6 percent).
Please see important disclosure information at the end of this report.
-40
-30
-20
-10
0
10
20
3/14 4/14 5/14 6/14 7/14 8/14 9/14 10/14 11/14 12/14 1/15 2/15 3/15
1 year % price change
VSC Peer Index VN-Index
VIETNAM CONTAINER SHIPPING JSC (VSC) March 30, 2015
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CONTENTS
INDUSTRY OVERVIEW: PORT AND MARINE TERMINALS IN HAIPHONG ......................................................................... 3
COMPANY OVERVIEW ............................................................................................................................................................. 5
Ownership and management structure .............................................................................................................................. 5
Market position ..................................................................................................................................................................... 7
BUSINESS ACTIVITIES ............................................................................................................................................................. 8
Port operation: establishing new port in favorable position ............................................................................................ 8
Container yard operation: volume decreased .................................................................................................................. 11
Container Freight Station: bright growth prospect from new CFSs ..................................................................................... 12
Other segments: decreasing revenue from barging........................................................................................................ 13
BUSINESS PERFORMANCE ................................................................................................................................................... 14
Growth ................................................................................................................................................................................. 14
Profitability and efficiency .................................................................................................................................................. 16
Solvency and liquidity ........................................................................................................................................................ 16
FORECAST ASSUMPTIONS ................................................................................................................................................... 17
VALUATION ............................................................................................................................................................................. 18
DCF model ........................................................................................................................................................................... 19
Market multiple ................................................................................................................................................................... 19
TECHNICAL ANALYSIS .......................................................................................................................................................... 20
CONCLUSION .......................................................................................................................................................................... 21
APPENDIX – VPBS PROJECTION........................................................................................................................................... 22
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INDUSTRY OVERVIEW: PORT AND MARINE
TERMINALS IN HAIPHONG
Vietnam has a sizable seaborne trade thanks to its preferable location. Statistics of
the Vietnam Marine Administration (Vinamarine) showed that the throughput in
Vietnam reached 370.3 million tons in 2014, representing a compound annual growth
rate (CAGR) from 2009 to 2014 of 8.1 percent. Container trade grew with a higher
CAGR of 16.7 percent during the same period to achieve 10.2 million TEUs (twenty
foot equivalent unit of a container) in 2014. Vinamarine has sets a 2015 target for
cargo throughput of Vietnamese port systems of 407 million tons, up 10 percent y-o-y.
The World Bank also estimated that the nationwide container volumes would grow at
an average annual rate of eight to nine percent through 2020. If so, the current
capacity of Northern seaports will be insufficient to meet market demand by 2018.
However, because of additional capacity from newly established seaports under the
master plan, there should be abundant supply.
Ports in the Haiphong area accounted for 17.8 percent of 2014 market share of
Vietnam’s port system. From 2009 to 2014, this area had a CAGR of cargo throughput
of 14.6 percent, which was higher than the growth rate of all Vietnam’s port system
(8.1 percent).
In our view, the volume throughput of Haiphong port area will grow from 14 percent
to 16 percent per year till 2020. The main reasons are as follows:
The rapid growth rate of manufacturing activities in the North area (e.g.
electronics, garment and tires);
Support from growing cross-border trade with southern China, through the
border gates at Mong Cai, Lang Son and Lao Cai;
The improving quality of infrastructure connecting from/to Haiphong City.
Recently, Vietnam has put into operation many highways such as: Haiphong –
Quang Ninh highway and Haiphong – Hanoi highway, etc., leading to the
reduction in transportation time as well as logistics cost, which creates a
competitive advantage for this area.
From 2015 to 2020, thanks to
higher growth import and
export activities, we expect
cargo throughput via Haiphong
port system will increase 14%
to 16% per year.
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According to the newest master plan on development of Vietnam's seaport system
through 2020 with orientations toward 2030, in the Decision 1037/QD-TTg of the
Prime Minister dated June 24, 2014, total throughput of Vietnam is estimated to
achieve from 400 to 410 million tons in 2015 and 640 to 680 million tons in 2020.
Therefore, seaports which can serve huge ships will be built up such as: international
gateway ports in Haiphong (Lach Huyen port) and Ba Ria – Vung Tau (Cai Mep – Thi
Vai port), along with Van Phong – Khanh Hoa transshipment port.
Volume of cargo throughput of Vietnamese ports
Source: Vinamarine, VPBS collected
According to the Decision, Lach Huyen port will come to full operation in the coming
years. It includes two components:
Component A has investment capital of VND18,600 billion (USD885 million),
sponsored by ODA from the Japanese Government and Vietnamese reciprocal
capital under public–private partnership methods in order to build infrastructure
for the port during the plan.
Component B includes two harbors which can accommodate up to 100,000 DWT
(deadweight tonnage, one DWT equivalent to one ton) ships with investment
capital of VND6,500 billion (USD309 million) from a joint venture between Saigon
Newport (51 percent) and Molnykit Company – Japan (49 percent).
The project was expected to be completed and fully operational by the middle of
2017. According to the Ministry of Transport, after operating, Lach Huyen Port will
accommodate vessels up to 8,000 TEUs in the next period. The import and export of
goods through the Northern region can be shipped directly to European and
American markets. The plan of Vietnam’s National Shipping Lines (Vinalines) states
that Lach Huyen Port will be able to serve about 30 million tons of throughputs per
year by 2020.
After completion, Lach Huyen port might be a threat to the existing ports in the
Haiphong area although it was said to serve bigger size of vessels or different market
segment. The first reason is the preferential position of Lach Huyen port, which is at
the river mouth or has the shortest shipping way from pilot point. This creates a
convenience for both shippers and senders when using huge vessels to economize
transportation costs. Secondly, the port is connected to Dinh Vu area via sea cross
bridge Tan Vu, which will be constructed above the Nam Trieu channel. Since most
of shippers now use Nam Trieu Channel to access the existing ports in Haiphong, the
bridge will limit the vessel size to this port or reduce the cargo throughput of those
ports.
4%
12%
2%
11%
14%
15%
12%
14% 13%
19%
0%
5%
10%
15%
20%
0
100
200
300
400
2009 2010 2011 2012 2013 2014
mn tonsTotal Haiphong's volumeTotal growth rate Haiphong's growth rate
Lach Huyen International Port
and Tan Vu Lach Huyen Bridge
will be significant threat to all
existing ports in Haiphong
area.
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COMPANY OVERVIEW
Vietnam Container Shipping JSC (VSC) was established in 1985 and listed its shares
on the Ho Chi Minh Stock Exchange (HSX) in 2008. VSC provides logistics services,
including ports, trucking and warehouses throughout Vietnam.
Port operation (57 percent of 2014 revenues): VSC has one existing port in
Haiphong area named Green Port, which was put into operation in 2004. The
company is constructing a new port - VIP Green Port, which is expected to open
in 2016. This new port belongs to VSC’s subsidiary VIP Green Port JSC (VSC
owns 65 percent, Vietnam Petroleum Transport JSC (VIP – HSX) owns 30 percent.
Container yard operation (18 percent): The company currently has
approximately 278,550 square meters in warehouses and container freight
stations in Haiphong, Danang and Ho Chi Minh City.
Container freight storage (CFS) (10 percent): in Q4/2013 and Q1/2014, the
company put into operation two CFSs, which are utilized at 70 percent of
capacity.
Others (15 percent): including inland transportation via trucking, customs
brokerage, shipping agencies and container repairing services.
Company history
Source: Company’s data
Ownership and management structure
VSC operates as a diversified business group with many subsidiaries for each type of
its business activities.
• Established as a state-owned entity1985
• Established a joint venture with five Japanese companies, named Vijaco1995
• Established a subsidiary named Viconship Ho Chi Minh1997
• Equitized Infacon and Cenvico (Viconship Danang)2000
• Was equitized and renamed Vietnam Container Shipping JSC2002
• Put into operation Green Port in September and established TSL Co., Ltd.2004
• Put into operation berth no. 2 of Green Port2006
• Listed shares on Ho Chi Minh Stock Exchange (HSX)2008
• Established a subsidiary named Viconship Quang Ninh2009
• Restructured and established Green Depot Co., Ltd, Green Logistics Center Co., Ltd.
2012
• Established VIP Green Port JSC to construct new port in Nam Hai Dinh Vu area
2014
• Expects to complete first phrase of VIP Green Port2015
The core businesses of VSC are
port and container yard
operation segments.
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Charter capital of subsidiaries and affiliates
Data as of 12/31/2014. Source: Company’s data
VSC’s stock seems quite attractive to foreign investors with current foreign
ownership of 49 percent. However, the stock liquidity is a matter of concern because
the average trading volume is quite low. The maximum daily stock trading volume
during the last 12 months was 286,780 shares on August 22, 2014. Viewed positively,
this proves to some extent that the company’s shareholders believe in the business
results and are long term investors.
Management has strong experience in the port industry and has been working for the
company for several years. Notably, Mr. Nguyen Viet Hoa (Chairman) joined the
company at its establishment, while Mr. Nguyen Van Tien (CEO) has experience in
managing Transvina Port and PTSC Dinh Vu Port. Thanks to this management team,
the company activities are expected to be stable and adaptive to any business
environment changes.
VIETNAM CONTAINER SHIPPING CORPORATION
SUBSIDIARIES
100%
Viconship Ho Chi Minh (VND6 billion -
USD282,000)
Green Depot Co. Ltd. (VND25 billion - USD1 million)
TSL Co. Ltd. (VND200 million - USD9,400)
Green Logistics Center Co., Ltd. (VND90 billion - USD4
million)
Green Star Lines (VND15 billion -
USD704,000)
Viconship Danang (VND6 billion - USD282,000)
VIP Green Port JSC (VND450 billion - USD21
million)- 65%
AFFILIATES
PTSC Dinh Vu Port JSC (VND400 billion -USD19 million) - 22%
Green Star Lines Co., Ltd (VND6
billion -USD282,000)-
49%
Danang Logistics JSC (VND30 billion - USD1
million) - 37%
Low stock liquidity is a matter
of concern.
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Ownership structure Management structure
Source: Exchange data, Bloomberg as of
January 28, 2015
Name Position Year of
birth Qualification
Stock
ownership
Board of Directors 12/31/2014
Mr. Nguyen Viet Hoa Chairman 1956 Construction machinery
Engineering 1.53%
Mr. Nguyen Van Tien Member 1969 Master of Economics 0.12%
Mr. Tran Xuan Bao Member 1963 Engineering 0.22%
Ms. Hoang Thi Ha Member 1962 Bachelor of Economics 0.36%
Mr. Nguyen The Trong Member 1978 Bachelor of Business
Administration 0.02%
Mr. Nguyen Viet Trung Member n/a n/a n/a
Mr. Nghiem Tuan Anh Member n/a n/a n/a
Mr. Hoang Trong Giang Member 1957 Engineering 0.30%
Mr. Hoang Tuan Luc Member n/a n/a n/a
Board of Management
Mr. Nguyen Van Tien CEO 1969 Master of Economics 0.12%
Mr. Tran Xuan Bao CFO 1963 Engineering 0.22%
Mr. Nguyen The Trong COO 1978 Bachelor of Business
Administration 0.02%
Source: Company’s data
Market position
Green Port is located deep inside the Cam River, 30 kilometers away from pilot point.
As such, the company’s port location is less competitive than many ports that were
built later such as: Dinh Vu Port of Dinh Vu Investment and Development JSC (DVP –
HSX), Nam Hai Dinh Vu Port of Gemadept Corporation (GMD – HSX) and Hai An Port
of Hai An Transport and Stevedoring JSC (HAH-HSX). In 2014, the company’s market
share in Haiphong area was about 12 percent in terms of container throughput via
port.
With the new VIP Green Port, which we discuss below, the company’s capacity is
expected to reach 800,000 TEUs per year, which would currently rank second behind
Haiphong Port JSC (1 million TEUs).
Comparison with other ports’ capacity
Name of Port No. of berths Max vessel size (DWT) Maximum draft (m)
Tan Vu 5 20,000 10.5
Nam Hai 1 10,000 9.0
Hai An 1 20,000 8.7
Dinh Vu 2 40,000 8.7
Tan Cang 189 1 15,000 8.7
PTSC Dinh Vu 1 20,000 8.5
Hoang Dieu 11 10,000 7.4
Chua Ve 5 10,000 8.4
Doan Xa 1 10,000 8.4
Green Port 2 20,000 8.0
Transvina 1 12,000 7.8
Source: Company data
BOM
5%
Deustche
Bank Group
9%
Franklin
Temptation
10%
PXP Fund
5%
Vietnam
Holding
15%
Other
foreign
shareholders
10%
Others
46%
Green Port is located deep
inside of Cam River, leading to
less competitive advantage.
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BUSINESS ACTIVITIES
VSC operates in logistics services with a wide range of services related to port
systems. According to the company’s management, in 2014, port operation
contributed 57 percent to consolidated revenues, followed by container yard services
(18 percent), CFS services (10 percent) and trucking and other services (15 percent).
Port operation: establishing new port in favorable position
Green Port: low future growth prospect
Currently, VSC has one main port: Green Port. Constructed in 2004, this port is
located in the Cam River with the shipping way of 30 kilometers from the pilot point
(the starting point of maritime access channel). The port’s position is not favorable as
it is located deep inside the Cam River.
The port’s designed capacity is approximately 300,000 to 350,000 TEUs per year. It
has two berths that are each 160 meters long and can accommodate vessels up to
20,000 DWT (deadweight tonnage).
From 2011 to 2014, the port a had high utilization rate thanks to the wide range of
services that the company provides along with the port services such as: container
trucking, barging or repairing services. Some notable shippers of the company are
OOCL, Evergreen, MSC and Dongyoung.
From 2009 to 2014, the container throughput via Green Port increased from 319,000
TEUs to 360,000 TEUs in 2014, representing a CAGR of 2.4 percent. During this time,
the container throughput peaked in 2011 and then dropped significantly in 2012. In
2013 and 2014, the container throughput stayed at 360,000 TEUs, which is considered
to be a full utilization rate of this port. As such, the company had to transfer a part of
its goods to PTSC Dinh Vu Port. In 2014, we estimate this number was 70,000 TEUs,
leading to total container throughput of VSC of 430,000 TEUs.
In 2015, the company aims to achieve 360,000 TEUs of container throughput via its
Green Port, equal to 2014’s figure.
Throughput via Green Port (TEU) and Haiphong ports (ton)
Source: Company’s data, VPBS collected
We believe that the growth prospects for this port are now limited. The main reasons
are (1) the limitation of space for expansion due to infrastructure development of
Haiphong Government, (2) the fiercer competition from existing ports, and (3) the
entrance of new ports.
0
20
40
60
80
300
320
340
360
380
2009 2010 2011 2012 2013 2014
mn tons'000 TEUs VSC Haiphong ports
Green Port currently operates
at full capacity with a CAGR of
2.4% of container throughput
from 2009 to 2014.
The most contributed segment
in consolidated revenues is
port (57%).
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With regards to the new ports, many companies, such as Gemadept Corporation
(GMD – HSX), Dinh Vu Investment and Development JSC (DVP – HSX) constructed
new ports in Dinh Vu Industrial Zone. This zone is located at the river mouth, creating
capacity to accommodate bigger vessels and increasing convenience for shippers
with a wider turning basin than the locations deep inside Cam River. In addition, the
establishment of Lach Huyen International Port, which may be launched in 2017, will
be a big threat of the company.
In terms of infrastructure development, the Haiphong Government is relocating those
ports which are deep inside Cam River towards the Dinh Vu Industrial Zone in order
to expand the city’s residential area. This creates a threat for the port’s expansion.
Moreover, construction has begun on Bach Dang Bridge as a result of government’s
effort to reduce the transportation time from Quang Ninh province to Haiphong City
and Hanoi. Completion is expected by the end of 2016. This bridge will cross over the
maritime access channel and might limit the size of vessels entering Cam River.
New port: additional growth opportunity
The Dinh Vu Industrial Zone is expected to become the leading zone in the Northern
area in the near future with increasing cargo throughput for the Haiphong port
system. Recently, many new big FDI (foreign direct investment) enterprises (e.g.
Bridgestone Vietnam Tire Manufacturing LLC) have established their factories in Dinh
Vu Industrial Zone.
VSC established a new port named VIP Green Port in order to increase its
competitiveness and capture the growth opportunity in Dinh Vu area. In October
2014, VSC and Vietnam Petroleum Transport JSC (VIP – HSX) set up a joint venture,
VIP Green Port JSC, with charter capital of VND450 billion (USD21 million). VSC
contributed 65 percent of the capital, followed by VIP (30 percent) and others (5 percent).
On November 11, 2014, VIP Green Port JSC commenced construction of VIP Green
Port. The new port is projected to have two 200 meter long berths and can
accommodate two vessels of 20,000 DWT to 30,000 DWT at the same time. The
maximum draft is 10.5 meters. VSC expects that the first phase of this project will be
finished in November 2015 and the second phase will be completed in September
2016. It is located in Dinh Vu area, next to Dinh Vu Port of DVP (capacity of 500,000
TEUs per year) and Nam Hai Dinh Vu Port of GMD (capacity of 500,000 TEUs per
year). According to management, the designed capacity of this port will be 600,000
TEUs after two phases. However, the capacity can reach 700,000 TEUs to 800,000
TEUs if the loading/unloading speed is improved.
Total investment capital of this port is estimated to be VND1,337 billion (USD62
million). In its 2015 annual general meeting, VSC’s shareholders gave approval for
VSC to guarantee a loan of VND700 billion (USD33 million) to VIP Green Port JSC
from JSC Bank for Foreign Trade of Vietnam (VCB). The loan term is 10 years with an
interest rate equal to the one year base lending rate (6.8 percent in 2015) plus a
margin (1.8 percent in 2015). This loan will be disbursed according to the
construction progress and payment term by the company for machinery and
equipment.
Additionally, VSC will grant a loan of VND100 billion (USD5 million) for VIP Green
Port JSC.
VIP Green Port is expected to
boost segmental revenue after
being launched in 2016. The
port has a preferable location at
Dinh Vu area.
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VIP Green Port project
Phase Start date
Expected
completion
date
Investment
capital Borrowings Capacity Note
First
phase
November
2014
November
2015
VND980 billion
(USD46 million)
VND530 billion
(USD25 million)
250,000
TEUs (first
berth)
Land use rights in 37 years of VND350 billion
(USD16 million). Machinery and equipment's
value is VND334 billion (USD16 million),
according to management. VND296 billion
(USD14 million) is used for infrastructure.
Second
phase
November
2015
September
2016
VND360 billion
(USD33 million)
VND270 billion
(USD13 million)
250,000
TEUs
(second
berth)
VND135 billion (USD6 million) is for second
berth. Machinery and equipment’s value of
VND225 billion (USD10 million).
Source: Company’s data
The company will use modern equipment such as two gantry quay cranes (QC crane)
and eight RTG (rubber-tyred gantry) cranes. This type of crane will help the company
increase stacking productivity, leading to a higher container throughput as well as
gross margin than the existing port (Green Port), which uses multi-function cranes
(this old type of crane has lower capacity than gantry quay crane). The company
expects the payback period to be seven years and the container throughput to be
around 60 percent of capacity (or 200,000 TEUs) in 2016 and 70 percent in the
following years.
With the establishment of VIP Green Port, VSC can now serve its VIP clients with
modern equipment. Currently, the company already has clients with container
throughput of 50 percent of its first berth’s capacity or 125,000 TEUs for its new port.
VIP Green Port JSC will also enjoy a favorable tax scheme from Haiphong
government. In details, the company will be exempted from corporate income tax
from 2014 to 2018 and entitled to an income tax rate of five percent from 2019 to
2028. With this tax incentive scheme, we expect that VIP Green Port will add high
value to both VSC and VIP from 2016 onwards.
VPBS forecast: 2016 revenues increase 35 percent y-o-y thanks to new port
In terms of the old port – Green Port, we forecast that the container throughput will
stay at 360,000 TEUs per year in 2015 and 2016 due to full utilization rate. However,
from 2017 onwards, due to operation of the new port and the infrastructure
development, we forecast that the container throughput will decline steadily to
300,000 TEUs in 2019. We expect that the gross margin of this port will stay at 45
percent during the forecast period.
As the new port – VIP Green Port - will be put into operation in 2016, we
conservatively forecast that the container throughput of this port will equal 50
percent of capacity in 2016, 70 percent in 2017, 80 percent in 2018, and will reach 90
percent of capacity in 2019. We expect the gross margin of this port to be
significantly lower than the firm’s older port because it will need to compete with the
neighboring port of GMD in order to build up its customer base. Therefore we expect
that VIP Green port will record a gross margin of 35 percent in 2016 (in line with
statements by management) and then increase by 2 percent each year thanks to
improving in productivity.
However, we expect revenues to grow more slowly container throughput because
the company will be forced to cut prices due to the competition from GMD, DVP and
Haiphong Port JSC.
New port will help port revenue
increase 35% y-o-y in 2016.
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Forecast revenue and gross margin of port operation
2011 2012 2013 2014 2015F 2016F 2017F 2018F 2019F
Container throughput (TEUs) 373,000 347,000 360,000 430,000 440,000 610,000 710,000 780,000 800,000
% y-o-y 11% -7% 4% 6% 2% 39% 16% 10% 3%
Green Port (TEUs) 373,000 347,000 360,000 360,000 360,000 360,000 360,000 330,000 300,000
PTSC Dinh Vu (TEUs)* 70,000 80,000 0 0 0 0
VIP Green Port (TEUs) 250,000 350,000 400,000 450,000
Revenue (VNDbn) 508 518 700 804 885 911
% y-o-y 2% 35% 15% 10% 3%
Gross profit (VNDbn) 229 233 286 330 368 387
Gross margin 45% 45% 41% 41% 42% 43%
Green Port 45% 45% 45% 45% 45% 45%
VIP Green Port 35% 37% 39% 41%
Note: *: this is the container throughput that VSC hires PTSC Dinh Vu Port to load/unload. Source: VPBS
Container yard operation: volume decreased
Container yard (C/Y) operation of the company includes loading and unloading
containers from depots in Haiphong, Danang and Ho Chi Minh City. The total yard
area of the company is around 278,550 square meters.
The company has one big depot in Haiphong area (Green depot) with 90,000 square
meters. This depot contributed about 18 percent to 2014 consolidated revenues of
VSC.
Total area of VSC Container throughput of VSC’s yard
Name Area
(sqm)
Stacking
Capacity (TEU)
Chua Ve
Terminal area 60,000 2,000
CFS 5,000
Green depot
Terminal area 90,000 6,372
Green Logistic Center
Terminal area 86,000 6,248
CFS 1 7,525
CFS 2 7,525
Danang
An Hai Dong warehouse 950
Hai Son container yard 14,500 750
Ho Chi Minh City
Warehouse No 1 6,000
Warehouse No 2 1,500
Container yard 1 12,100 600
Container yard 2 7,500 350
Total 278,550
Source: Company’s data Source: Company’s data
This segmental container throughput decreased significantly, from 508,620 TEUs in
2009 to 129,000 TEUs in 2012, and then bounced back to 210,000 TEUs in 2014 due to
the competition from others company within the area.
In 2015, the company plans to spend VND31 billion (USD1.5 million) to buy another
container yard with area of 26,400 sqm, which is located next to the Green Depot in
Haiphong area. If the project is completed, the company can increase its terminal
area in the Green Depot to 116,400 sqm, leading to an increase in its container
throughput. VSC aims to achieve this segmental container throughput in 2015 of
220,000 TEUs, up five percent y-o-y.
509
214
276
129 130
210
0 7 8 8 11 18
0
100
200
300
400
500
600
2009 2010 2011 2012 2013 2014
thousand TEUs Depot CFS
In order to maintain a stable
container throughput, the
company starts to increase its
yard area.
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From 2015 to 2016, we expect that the company’s container throughput might
increase 10 percent per year thanks to the new additional area in the Green Depot
area, which would translate into higher segmental revenue. From 2017 to 2019, we
expect that container throughput as well as revenue will increase just five percent per
year. In addition, we forecast that the company will only maintain this segment’s
gross margin at 2014’s level of 25 percent.
Forecast revenue and gross margin of container yard operation
2011 2012 2013 2014 2015F 2016F 2017F 2018F 2019F
Throughput (TEUs) 276,000 129,000 130,000 210,000 231,000 254,100 266,805 280,145 294,153
% y-o-y 29% -53% 1% 62% 10% 10% 5% 5% 5%
Revenues (VNDbn) 160 176 194 204 214 225
% y-o-y
10% 10% 5% 5% 5%
Gross profit (VNDbn) 40 44 49 51 54 56
Gross margin (%)
25% 25% 25% 25% 25% 25%
Source: VPBS
Container Freight Station: bright growth prospect from new CFSs
VSC has just put into operation two CFSs in the Green Logistics Center (located in
Dinh Vu area) with around 15,050 square meters in Q4/2013 and Q1/2014. According
to management, these CFSs were operated at 70 percent to 75 percent of their
capacity in 2014 with the majority of goods being garment and textile products.
The container throughput of the CFS segment enjoyed a CAGR of 24.8 percent during
the period from 2010 to 2014, thanks to the operation of two new CFSs in Q4/2013
and 2014. According to management, gross margin of this segment was 30 percent in
2014. In 2015, the company targets to achieve 20,000 TEUs of container throughput,
up 14 percent y-o-y.
In the future, thanks to the upcoming free-trade agreements such as: Vietnam –
Europe, Vietnam – Korea, Trans Pacific Partnership (TPP), the garment and textile of
Vietnam will benefit the most. This might lead to the substantially increase of
revenue for VSC in this segment.
However, the company might cope with fiercer competition from both domestic and
foreign rivals. Some notable direct competitors are GMD, which will expand its
warehouse and logistic centers in the North of Vietnam, and DVP. This will result in
lower gross margins for this segment whenever the competition is tougher.
As such, we forecast that revenue growth of this segment will be 10 percent in 2015
thanks to full operation of the CFSs and five percent each year from 2016 onwards,
while gross margin will stay at 35 percent during the forecast period.
Forecast revenue and gross margin of CFS
2014 2015F 2016F 2017F 2018F 2019F
Throughput (TEUs) 17,500 21,000 22,050 23,153 24,310 25,526
% y-o-y 65% 20% 5% 5% 5% 5%
Revenue (VNDbn) 89 98 103 108 113 119
% y-o-y 10% 5% 5% 5% 5%
Gross profit (VNDbn) 31 34 36 38 40 42
Gross margin (%) 35% 35% 35% 35% 35% 35%
Source: VPBS
Container throughput of the
CFS segment had a CAGR of
24.8% from 2010 to 2014,
thanks to two new CFSs in
Q4/2013 and 2014.
www.VPBS.com.vn Page | 13
Other segments: decreasing revenue from barging
Other business activities of VSC include container repairing, forwarding agency,
trucking and barging. These activities made up about 15 percent of 2014 consolidated
revenues of VSC. According to the management, gross margin of this segment is
from around 9 percent.
In 2014, the company has disposed of two barges as its client, MSC shipping,
stopped landing in Cai Lan International Terminal in Quang Ninh province last
December. Additionally, the company cannot operate its barges efficiently in other
routes such as Cat Lai or Phnom Penh route. This caused a 52.9 percent y-o-y drop in
container throughput in 2014. As such, from 2015 onwards, the company does not
provide shipping services or record shipping revenue.
In terms of trucking, the revenue ton.kilometer1 enjoyed a CAGR of 14.7 percent from
2009 to 2014 and achieved 54 million ton km. This is because in 2014, there was a
new regulation that limits the maximum freight weight of the trucks, then the
trucking segment of the company had higher growth rate (23.9 percent y-o-y).
Additionally, from September 2014 till February 5, 2015, oil prices plummeted 51.5
percent and 44.7 percent in gasoline RON 92 and diesel DO 025S, respectively. This
reduction will push up the gross margin of this segment as the reduction of
transportation fees will be much less than the reduction of fuel costs.
In 2015, the company plans to purchase an additional 15 container trucks and two
cargo trucks with total investment capital of VND33.2 billion (USD1.6 million). This
supplement to the company’s fleet will help this segmental revenue and profit go up.
Actually, the company targets the revenue ton kilometer of trucking will be 60 million
ton km, up 11 percent y-o-y.
During the forecast period, for this segment, we expect revenue and gross margin as
below:
2015: down 47 percent y-o-y in revenue due to the lack of barging revenue. We
expect that this segment’s gross margin will be 10 percent during the forecast
period thanks to lower fuel costs.
2016 onwards: we believe that revenue will grow 10 percent per year with the
gross margin being stable at 10 percent.
Forecast revenue and gross margin of other segments
2014 2015F 2016F 2017F 2018F 2019F
Revenue (VNDbn) 134 70 77 85 94 103
% y-o-y -47% 10% 10% 10% 10%
Gross profit (VNDbn) 12 7 8 9 9 10
Gross margin (%) 9% 10% 10% 10% 10% 10%
Source: VPBS
1 Revenue ton.kilometer: used to determine the total amount of freight that is shipped by a transportation company.
The company plans to buy
additional 17 trucks for trucking
services in 2015.
www.VPBS.com.vn Page | 14
BUSINESS PERFORMANCE
Growth
Revenues
From 2009 to 2014, the consolidated net revenues of VSC achieved a CAGR of 14.3
percent, which was much higher than that of container throughput at 3.6 percent,
thanks to revenues from other logistics segments, such as CFS and trucking. In
comparison to other listed port companies in Haiphong, VSC’s revenues had a lower
CAGR than DVP (15.4 percent) in the same period since VSC’s port location is less
favorable.
During this period, the growth rate of revenues reached its peak in 2009 at 46 percent
due to the increment in container throughput of all business segments. Of this, the 48
percent augmentation of port’s container throughput was the main cause.
After that, the revenue growth rate decreased to around 20 percent per year from
2010 to 2012 due to the slowdown in container throughput of the port’s segment as
well as container depot. However, the shipping segment (via two barges and one
small sized vessel) helped the company maintain its positive growth.
In 2013, consolidated revenues only increased two percent y-o-y due to the price
competition from existing ports. But in 2014, revenues grew 13 percent y-o-y mainly
thanks to the surge in the CFS and port segments.
For 2015, the company’s management expects to achieve VND800 billion (USD37
million) in consolidated revenues, down 10 percent y-o-y, due to the lack of barging
revenue.
Consolidated net revenues
Source: Consolidated financial statements
Operating cost
From 2009 to 2014, operating cost (including cost of services, selling and general and
administrative expenses) had a CAGR of 15.9 percent, higher than that of
consolidated revenues. The main element that drove the rising trend of operating
cost was outside cost, which contributed, on average, about 40 percent during the
period and had a CAGR of 22.6 percent. The second largest expense was labor cost,
which had a CAGR of 11.5 percent.
From 2009 to 2012, due to the high growth rate of operating cost, which was driven
mostly by outside cost and labor cost, the company’s margin experienced a down
trend. However, in 2013, the company tried to cut cost by reducing labor and outside
costs.
46%
20%17%
21%
2%
13%
0%
10%
20%
30%
40%
50%
-
200
400
600
800
1,000
2009 2010 2011 2012 2013 2014
VNDbn Revenues Growth rate
The company had a lower
CAGR of revenue than DVP due
to less favorable port position.
Operating cost increased at a
higher speed than revenues.
www.VPBS.com.vn Page | 15
In 2014, only other costs decreased while other types of cost by elements increased,
of which, outside cost increased the most. Certainly, this led to the decline in the
company’s margin.
For all periods, raw materials consistently increased year over year mainly due to the
increment in electricity prices.
Operating cost structure Fluctuation of operating cost elements
Source: Company’s data Source: Company’s data
Total assets and equity
Total assets and owners’ equity grew with the CAGRs from 2009 to 2014 of 18.2
percent and 19.7 percent, respectively. This means that the company mainly financed
its assets by its equity. Actually, equity usually made up 70 percent of VSC’s total
assets. This enabled the company to maintain solid and stable financial position.
This capital structure showed its advantage during the high interest rate period,
reducing financial distress and creating positive results for the company. However,
during the low interest period rate, the company will need to change its capital
structure towards more debt as the cost of equity is much higher than the interest
rate. Additionally, the company can easily have access to the borrowings with
competitive interest rates from banks.
Through its dividend by share scheme, VSC’s share capital in 2014 was 3.6 times
higher than 2009’s figure. During this time, the company also maintained a high cash
dividend ratio, from 15 percent to 60 percent on par per year.
Asset structure (VNDbn)
Source: Consolidated financial statements
38 60 53 60 93 102 65 67 74 113
99 112 34
44 42 44
64 70
102 137
197
223 199
283
61
63
74
103 68
59
-
200
400
600
800
2009 2010 2011 2012 2013 2014
VNDbnRaw materials Labor cost Depreciation
Outsides Others
2010 2011 2012 2013 2014
Raw materials 59% -11% 13% 55% 10%
Labor cost 3% 11% 53% -12% 13%
Depreciation 28% -6% 7% 44% 9%
Outsides 35% 44% 13% -11% 42%
Others 4% 18% 39% -34% -13%
-40%
0%
40%
80%
431541 643
758884
1,058216
271214
297249
437
290 284 265510
639
1,015
357528 592
545493
480
2009 2010 2011 2012 2013 2014
0
400
800
1,200
1,6002009 2010 2011 2012 2013 2014Equity Liabilities Non-current assets Current assets
The company mainly financed
its assets by its equity.
www.VPBS.com.vn Page | 16
Profitability and efficiency
As we mentioned above, from 2009 to 2014, VSC’s net income enjoyed a CAGR of 9.9
percent, lower than the growth rate of revenues, due to the increment of outside
costs and labor costs. The margins decreased gradually from 2009 to 2012 and then
recovered in 2013 thanks to the reduction in those costs. However, in 2014, VSC’s
margins declined due to the reduction of gross margin of CFS and port segments.
In 2015, with the targeted revenues down 10 percent, the company plans to achieve
VND245 billion (USD12 million) in profits before tax, down 19 percent y-o-y due to
the increment of labor cost as well as decrease in gross margin in most of segments.
Net income Profitability ratios
Source: Consolidated financial statements Source: Consolidated financial statements
The company’s ROE and ROA trended downward together as net income had a lower
growth rate than total assets and equity.
ROE decreased from 29 percent in 2009 to 19 percent in 2014 due to the decreases in
all factors (net margin, asset turnover and asset to equity). This showed that the
company’s profitability declined or the efficiency of equity and assets reduced.
Return on assets and return on equity Return on equity analysis
Source: Consolidated financial statements Source: Consolidated financial statements
Solvency and liquidity
As we mentioned above, the company did not have financial distress from
borrowings as it financed its assets by equity. Consequently, the liquidity ratio of VSC
was quite positive.
180 197 229
268 303 312
155 180 191
229 240 248
-
100
200
300
400
2009 2010 2011 2012 2013 2014
VNDbn Gross profits Net income
25%
30%
35%
40%
45%
2009 2010 2011 2012 2013 2014
Gross margin EBIT margin EBITDA marginPBT margin Net margin
43%
37%
32% 33%29%
26%
29%25% 23% 24%
22%19%
0%
10%
20%
30%
40%
50%
2009 2010 2011 2012 2013 2014
ROE ROA
0.8 0.8 0.8 0.8
0.7 0.7
1.5 1.5 1.4 1.4 1.3 1.4
34% 33%30% 29% 30%
28%
0%
10%
20%
30%
40%
0.4
0.8
1.2
1.6
2.0
2009 2010 2011 2012 2013 2014
Asset turnover Asset to equity
Net margin
www.VPBS.com.vn Page | 17
However, from 2015 onwards, due to the capital demand for VIP Green Port JSC, the
company expects to increase its debt position from a low level in the period from
2009 to 2014. This will help ensure the company has flexible capital resources as well
as minimize its cost of capital in the current environment of low interest rates.
Liquidity analysis
2009 2010 2011 2012 2013 2014
Cash ratio * 0.3x 0.3x 0.3x 0.2x 1.2x 0.8x
Quick ratio 1.9x 2.0x 2.7x 1.9x 1.9x 1.6x
Current ratio 2.0x 2.0x 2.8x 2.1x 2.1x 1.8x
Debt-to-equity 13.7% 4.6% 0.1% 5.3% 1.0% 1.2%
Debt-to-total assets 9.1% 3.1% 0.1% 3.8% 0.8% 0.9%
Debt/EBITDA 0.3x 0.1x 0.0x 0.1x 0.0x 0.0x
EBITDA/ Int. exp. 110.4x 77.5x 412.3x 237.5x 227.2x 808.1x
Note:*cash ratio = (cash + cash equivalent) / current liabilities
Source: Consolidated financial statements, VPBS summary
FORECAST ASSUMPTIONS
Revenues and gross profits
We forecast revenue growth and gross margin for each segment separately based on
our analysis of each industry, our discussion with management and our assessment
of each segment’s outlook and potential.
We expect that consolidated revenues will decline by three percent this year then
grow at a CAGR of eight percent over the four following years. The port operation
segment will enjoy the highest growth rate due to the operation of VIP Green Port
starting from 2016.
VPBS forecast
2015f 2016f 2017f 2018f 2019f
Revenue (% y-o-y) -3% 24% 12% 9% 4%
Port 2% 35% 15% 10% 3%
Container yard 10% 10% 5% 5% 5%
CFS 10% 5% 5% 5% 5%
Others -47% 10% 10% 10% 10%
Gross margin 37% 35% 36% 36% 36%
Port 45% 41% 41% 42% 43%
Container yard 25% 25% 25% 25% 25%
CFS 35% 35% 35% 35% 35%
Others 10% 10% 10% 10% 10%
Financial activities
We forecast financial income and expenses as below:
Dividends from investments: remaining at VND5 billion each year
Interest income: remaining at five percent of cash and cash equivalents
Interest expenses of short-term borrowings: remaining at six percent of short-
term borrowings
Interest expenses of long-term borrowings: based on the loan disbursement and
repayment schedule of the company for two phases of VIP Green Port.
www.VPBS.com.vn Page | 18
Tax rates
We forecast income tax expenses by multiplying profits before tax (excluding share
of profit of associates as this amount is profit after tax of associates) by appropriate
tax rates. According to Decision no. 218/2013/ND-CP issued on December 26, 2013,
the corporate income tax was lowered from 25 percent to 22 percent in 2014 and 20
percent from 2016 onwards. Additionally, with the tax incentives of VIP Green Port,
the effective tax rate will be from 16.4 percent to 20.9 percent during the forecasted
period.
Balance sheet
We make the following key assumptions with regard to VSC’s consolidated balance
sheet:
Day sales outstanding: remaining stable at 65 days
Day inventory outstanding: remaining stable at 10 days
Day payables outstanding: remaining stable at 50 days
Current assets and current liabilities: remaining stable as a percentage of related
consolidated revenues and expenses
Capex: VND630 billion (USD29.3 million) in 2015 for first phase of VIP Green Port
and VND360 billion (USD16.7 million) in 2016 for the second phase. Additionally,
the company will spend VND72.5 billion (USD3.4 million) in 2015 and VND10
billion (USD0.5 million) each year from 2017 to 2019 to supplement its trucking
fleet.
Long-term borrowings: according to the two investment phases of VIP Green
Port, the company will incur VND530 billion (USD24.7 million) in 2015 and
VND270 billion (USD12.6) in 2016.
Dividends: management expects to distribute dividends from 20 percent to 30
percent on par value per year. Due to huge capital demand for new ports, we
expect that VSC will distribute cash dividend of five percent on par from 2015 to
2016 and 10 percent from 2017 to 2019, besides the company will maintain 15
percent stock dividends from 2015 to 2017 and reduce to 10 percent per year in
2018 and 2019.
VALUATION
We employed the two methods of valuation - discounted cash flow (DCF) and market
multiples (price to earnings) - to derive a fair value of VSC at VND54,800 per share.
We put a 70 percent weight for DCF value as this method includes the valuation from
new port meanwhile P/E multiple method has not reflected the new port’s potential.
Valuation matrix Fair price Weight (VND/share)
DCF method 59,000 70% 41,300
P/E multiple 45,100 30% 13,530
Fair stock price 54,800
www.VPBS.com.vn Page | 19
DCF model
We use the discounted cash flow (DCF) model to value VSC as we believe future cash
flow remains the key fundamental value-driver of VSC stock. Our DCF model
suggests a target price of VND59,000 per share for VSC stock.
Our inputs for the VSC model are as follows:
The risk-free rate is taken from the yield of 5-year local currency Government
bond yields, which is equivalent to 5.48 percent.
The expected market risk premium is 8.76 percent.
VSC’s beta is estimated to be 0.96.
Cost of equity is estimated to be 13.85 percent by using the capital asset pricing
model (CAPM).
Weighted average cost of capital (WACC) is calculated to be 14.0 percent.
VSC’s terminal growth rate is assessed to be 5.0 percent.
Sensitivity of WACC and terminal growth rate to a target stock price
Market multiple
We use Price to earnings multiple method to derive the value of VSC value at
VND45,100 per share.
Compared to the peer group, we noted that VSC’s LTM P/E is lower although the
company’s ROA and ROE are higher. In addition, VSC has the low level of
borrowings.
Selected peer comparison
Data as of 3/27/2015. Source: Bloomberg, Company’s data, VPBS forecast
Sensitivity of P/E to a target stock price
##### 11.0% 12.0% 13.0% 14.0% 15.0% 16.0% 17.0%
6.0% 116,400 94,000 78,100 66,100 56,900 49,500 43,500
5.5% 106,100 87,000 73,000 62,400 54,000 47,200 41,600
5.0% 97,500 81,000 68,600 59,000 51,400 45,100 39,900
4.5% 90,200 75,700 64,700 56,000 49,000 43,200 38,400
4.0% 84,000 71,200 61,200 53,300 46,800 41,500 37,000
WACC
Term
inal g
row
th r
ate
ROE ROADebt /
equity
Net
marginP/E P/B
VNDbn VNDbn % y-o-y VNDbn % y-o-y
GMD Gemadept Corp HSX 3,147 2,987 18% 539 180% 13% 8% 39% 18% 5.0 0.6
DVP Dinh Vu Port Invest. & Develop. JSC HSX 1,956 542 8% 228 16% 30% 24% 16% 42% 8.6 2.4
HAH Hai An Transport & Stevedoring JSC HSX 821 431 93% 133 61% 35% 23% 44% 31% 6.2 1.9
CLL Cat Lai Port JSC HSX 720 235 18% 76 -7% 20% 15% 25% 33% 9.5 1.8
PDN Dong Nai Port JSC HSX 438 270 33% 48 6% 16% 11% 46% 18% 9.2 1.4
DXP Doan Xa Port JSC HNX 319 160 -16% 40 -26% 17% 15% 0% 25% 8.0 1.3
STG South Logistics JSC HSX 193 873 32% 30 25% 21% 14% 0% 3% 6.4 1.3
Average 1,085 785 27% 156 36% 22% 16% 24% 24% 7.6 1.5
Median 720 431 18% 76 16% 20% 15% 25% 25% 8.0 1.4
VSC Vietnam Container Shipping JSC HSX 1,719 891 13% 248 3% 26% 19% 1% 28% 6.9 1.6
ExchgTicker
Current
Company Market
cap
2014
Sales Net income
6.0x 6.5x 7.0x 7.5x 8.0x 8.5x 9.0x 9.5x 10.0x
33,800 36,700 39,500 42,300 45,100 47,900 50,800 53,600 56,400
P/E
www.VPBS.com.vn Page | 20
TECHNICAL ANALYSIS
VSC’s technical chart showed a downtrend after breaking down the mid-term support
level of the MA50 at VND57,500 per share on October 20, 2014. After bottoming out
at VND48,000 per share, VSC advanced to cross above the long-term resistance level
of the MA200 and has been adjusting since then until now.
The price of VSC is moving sideways around the strong support band of VND48,000
to VND50,000 per share and its trading volume has been low recently. This shows
that the selling pressure is weak, helping to reinforce the accumulation possibility of
this ticker.
Therefore, we recommend a HOLD for VSC at the time of the publishing report.
As of 3/27/2015 VSC (VND/share)
Horizon analytic 3 to 6 months
3-month highest price 54,000
3-month lowest price 48,500
Current 50-day MA 51,500
Current 100-day MA 50,800
Mid-term resistance level 54,000
Mid-term support level 49,000
Recommendation HOLD
www.VPBS.com.vn Page | 21
CONCLUSION
The container throughput via Haiphong’s port systems is expected to grow from 14
percent to 16 percent per year from 2015 onwards thanks to many new free-trade
agreements of Vietnam. This creates a high potential growth rate for this area.
However, there is also a risk of over capacity when Lach Huyen International Port
project is expected to be put into operation from 2017.
VSC has a long development history with a high growth rate during the past five
years. The company had a CAGR of 14.3 percent in consolidated net revenues from
2009 to 2014, which was in line with CAGR of Haiphong’s cargo throughput (14.6%).
This proves that the company could keep pace with the area’s growth.
With preferable location of VIP Green Port, we expect that VSC can enjoy CAGRs of
12.0 percent and 8.5 percent in revenues and net income, respectively, for the period
from 2015 to 2019. The company will invest in new port in 2015, and the growth rate
will start from 2016 onwards.
The full foreign room and low liquidity are two matters of concern for this stock. As
such, we give a long-term HOLD recommendation with 1-year target price of
VND54,800 per share.
www.VPBS.com.vn Page | 22
APPENDIX – VPBS PROJECTION
INCOME STATEMENT (VNDbn) 2011A 2012A 2013A 2014A 2015F 2016F 2017F 2018F 2019F
Port operation 508 518 700 804 885 911
Container yard operation 160 176 194 204 214 225
Container Freight Storage 89 98 103 108 113 119
Others 134 70 77 85 94 103
Revenues 644 779 792 891 863 1,074 1,202 1,306 1,358
% y-o-y 17.5% 21.0% 1.6% 12.5% -3.2% 24.4% 11.9% 8.7% 4.0%
COGS 373 467 425 509 460 579 639 698 723
Gross profits (excluding depreciation) 271 312 367 382 403 495 563 608 635
Selling expenses 0 0 3 3 9 11 12 13 14
G&A expenses 25 32 31 45 52 75 84 91 95
Selling and G&A expenses 25 32 35 48 60 86 96 104 109
EBITDA 245 280 333 334 342 409 467 503 527
Depreciation & amortization 42 44 64 70 84 117 135 138 140
EBIT 204 236 269 264 258 292 331 366 387
Financial income 52 45 16 16 23 24 33 39 48
Financial expense 24 -5 -4 -8 1 24 35 31 35
Net other incomes / (expenses) 8 4 2 1 1 1 1 1 1
Income from associates 0 0 13 13 15 16 18 19 21
EBT 240 290 304 302 296 309 348 394 422
Tax expense 49 61 63 54 62 56 57 65 71
Effective tax rate 20.4% 21.2% 20.9% 18.0% 20.9% 18.0% 16.5% 16.4% 16.7%
Profits after tax 191 229 240 248 234 254 291 329 352
Minority interest - - - - - 14 25 28 28
Net income 191 229 240 248 234 240 267 301 324
% margin 29.7% 29.3% 30.4% 27.8% 27.1% 22.3% 22.2% 23.1% 23.8%
EPS (VND) 10,028 8,022 8,394 7,182 5,643 5,028 4,862 4,999 4,883
www.VPBS.com.vn Page | 23
BALANCE SHEET (VNDbn) 2011A 2012A 2013A 2014A 2015F 2016F 2017F 2018F 2019F
Cash & near cash items 59 47 282 216 243 426 543 726 761
Short term investments 389 331 61 52 52 52 102 152 252
Accounts receivables 126 127 121 154 153 229 199 267 217
Inventories 8 15 10 7 22 16 27 19 28
Other current assets 10 25 19 51 69 107 144 183 278
Current assets 592 545 493 480 540 830 1,014 1,347 1,537
Net fixed assets 212 365 457 421 1,039 1,282 1,162 1,039 915
Long-term investments 36 25 42 100 100 100 150 200 300
Other long-term assets 17 120 141 493 511 500 529 538 577
Long-term assets 265 510 639 1,015 1,651 1,883 1,841 1,777 1,791
Total assets 857 1,054 1,133 1,495 2,190 2,713 2,855 3,124 3,328
Accounts payable 79 82 82 90 59 131 81 148 88
Short-term borrowings 1 9 0 4 4 5 5 6 6
Other short-term liabilities 131 173 158 176 170 161 156 144 109
Current liabilities 211 265 239 270 234 297 242 298 203
Long-term borrowings 0 31 9 9 535 749 667 587 507
Other long-term liabilities 3 1 1 0 0 0 0 0 0
Long-term liabilities 3 33 10 10 535 749 667 587 507
Total liabilities 214 297 249 279 768 1,046 909 885 710
Share capital & APIC 276 278 325 383 414 477 548 603 663
Retained earnings 182 218 234 251 402 546 703 884 1,141
Equity 643 758 884 1,058 1,265 1,495 1,750 2,016 2,366
Minority interest 0 0 0 158 158 172 196 224 252
Total liabilities and equity 857 1,055 1,133 1,495 2,190 2,713 2,855 3,124 3,328
www.VPBS.com.vn Page | 24
CASH FLOW STATEMENT (VNDbn) 2011A 2012A 2013A 2014A 2015F 2016F 2017F 2018F 2019F
Cash from operation activities 83 119 240 (39) 231 322 301 386 274
Cash from investing activities (70) (127) 97 (84) (702) (360) (115) (115) (215)
Cash from financing activities (113) (75) (146) 88 498 220 (69) (87) (25)
Net changes in cash (100) (83) 191 (36) 27 183 117 184 34
Beginning cash balance 89 59 47 282 216 243 426 543 726
Ending cash balance (11) (24) 238 246 243 426 543 726 761
Free cash flow to firm 101 (72) 95 (64) (470) (18) 315 397 289
RATIO ANALYSIS 2011A 2012A 2013A 2014A 2015F 2016F 2017F 2018F 2018F
Profitability ratios
Reported gross margin 35.6% 34.4% 38.3% 35.0% 36.9% 35.2% 35.6% 36.0% 36.5%
Gross margin (excluding depreciation) 42.0% 40.1% 46.4% 42.8% 46.7% 46.1% 46.9% 46.5% 46.8%
EBITDA margin 38.1% 36.0% 42.0% 37.4% 39.7% 38.1% 38.9% 38.5% 38.8%
Operating margin 31.6% 30.3% 33.9% 29.6% 29.9% 27.2% 27.6% 28.0% 28.5%
Net profit margin 29.7% 29.3% 30.4% 27.8% 27.1% 22.3% 22.2% 23.1% 23.8%
Return on avg. assets 22.9% 23.9% 22.0% 18.9% 12.7% 9.8% 9.6% 10.1% 10.0%
Return on avg. equity 32.3% 32.7% 29.3% 25.6% 20.1% 17.4% 16.4% 16.0% 14.8%
Leverage ratios
Interest coverage ratio (EBIT/I) 342.5x 199.9x 183.5x 638.6x 270.3x 12.0x 9.4x 11.8x 11.0x
EBITDA / (I + capex) 5.1x 1.3x 1.9x 9.7x 0.5x 1.1x 9.3x 10.9x 10.5x
Total debt/capital 0.1% 5.1% 1.0% 1.2% 29.9% 33.5% 27.8% 22.7% 17.8%
Total debt/equity 0.1% 5.3% 1.0% 1.2% 42.6% 50.4% 38.4% 29.4% 21.7%
Liquidity ratios
Asset turnover 0.8x 0.8x 0.7x 0.7x 0.5x 0.4x 0.4x 0.4x 0.4x
Accounts receivable turnover (days) 61.0 59.1 57.1 56.4 65.0 65.0 65.0 65.0 65.0
Accounts payable turnover (days) 65.0 57.5 61.2 54.0 50.0 50.0 50.0 50.0 50.0
Inventory turnover (days) 8.9 8.5 9.6 5.6 10.0 10.0 10.0 10.0 10.0
Current ratio 2.8x 2.1x 2.1x 1.8x 2.3x 2.8x 4.2x 4.5x 7.6x
Quick ratio 2.7x 1.9x 1.9x 1.6x 1.9x 2.4x 3.5x 3.8x 6.1x
www.VPBS.com.vn Page | 25
GUIDE TO RATINGS DEFINITION
VPBank Securities (VPBS) uses the following ratings system:
Buy: Expected return, including dividends, over the next 12 months is greater than 15 percent.
Hold: Expected return, including dividends, over the next 12 months is from -10 percent to +15 percent.
Sell: Expected return, including dividends, over the next 12 months is below -10 percent.
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www.VPBS.com.vn Page | 26
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