FOREIGN INVESTORS: SSI Update on GAS and DBC 3Q18 prelim results
Market wrap: Vietnam stocks decline ahead of the last day of local ETF rebalancing
Macro wrap: Update on the quality of economic growth of Vietnam
Equity wrap: Update on GAS and DBC 3Q18 prelim results
The future contracts diverged when Nov and Dec contracts sneaked into the green, March and June declined. Liquidity surged to 118,432 contracts, worth of USD 466mn. OI at 13,412 units.
Local ETF rebalancing activities and cautious sentiment have cast a shadow over the VN equities today. Despite the effort from MSN and VNM, VN index was dampened by selling pressure since the ATO session. GAS, VJC, VHM and NVL were being the top laggard. It’s followed by PLX, SAB and VCB. Lenders traded mixed as VIB, VPB, TCB inclined, ACB, TPB moved sideways and other slipped. Realty firms DXG edged higher while other peers covered in red. Brokerage firms retreated. Oil and gas tickers dropped due to the lowest oil price level in almost a month. Foreign investors net sold has accelerated to USD 10mn, top by VNM, NVL and VIC. Traded liquidity improved slightly USD 174mn, mostly thanks to the ETF rebalancing activities.
VN-Index down 0.5% to 958.4 pts while HNX-Index up 0.2% to 108.1 pts.
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Recently, the Minister of Planning and Investment reported to the Standing Committee of the National Assembly on the results of economic restructuring and renewal of the growth model for 2016-2018, and here are some key points.
During the 2016-2018 period, the quality of economic growth has improved markedly. Specifically, the average growth rate of productivity for 2016-2018 posted 5.62% per year, higher than the average growth rate of 4.3% per year for the 2011-2015 period, and stepping up beyond the target of 5.5% per year.
Economic growth has gradually shifted to a focus upon depth, reflected in the increasingly large role of the total factor productivity (TFP) metric in the growth of the economy and the improvement of investment efficiency, which is measured by the ICOR ratio. From 2016 to the current point in 2018, the TFP metric gauging the level of economic growth increased significantly to 42.18%, higher than the level of 33.58% achieved in 2011-2015. Vietnam targets the TFP metric to land around 30% -35% for the 2016-2020 period. At the same time, the ICOR ratio fell to 6.42 in 2016, and further to 6.11 in 2017.
Most noteworthy, the economic growth structure shifted towards increasing the proportion of manufacturing and processing industry to the overall economy, while reducing the importance of the mining sector to total growth. Specifically, the share of the manufacturing and processing industry in terms of GDP has increased from 14.6% in the 2011-2015 period to 16.2% in 2016, 17.4% in 2017, and 18.8% in the first half of 2018. Meanwhile, the share of the mining industry in GDP declined from 8.8% in the 2011-2015 period to 7.6% in 2016, 6.6% in 2017 and 6.0% in the first 6 months of 2018.
The role of the private sector further magnified, represented by the increasing share of private investment as a percent of total investment into the economy, from 12.1% on average in the 2011-2015 period to 12.5% in 2016, 13.5% in 2017, and 13.6% in the first 6 months of 2018.
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Dabaco Group (DBC: HNX): 9M 2018 Preliminary Running Results
Outstanding shares: 83 mil; Market Cap: $ 99 mil USD; Average trading value 3M: $0.10 mil USD, Market price: VND 28,000; and Foreign ownership: 27.5%
Net sales trend: 3Q 2018: +10.5% YoY growth, +14.7% QoQ growth. Overall results up to 9M 2018: +14.3% YoY.
Net profit trend: -1.2% YoY growth, +86.1% QoQ growth. Up to the 9M marker, net profit this year reached VND 246.8 bn (+81.6% YoY), having already achieved 100% of the annual net profit target. Real estate profit recorded up to the 9M 2018was VND 30 bn, compared to 9M 2017 number of VND 258 bn.
Gross profit margin trend: GPM was 18.2% in Q3, which was much higher than previous quarters’ (Q3 12.4%; Q2: 15.7%). This is because the average hog price in Q3 reached VND 52,000 (Q1: VND 31,000; Q2: VND 44,000), which was the highest level in 2018 since the swine crisis. Overall GPM up to 9M reached 15.7% accordingly.
Net profit margin trend: Net profit margin reached 8.3% in Q3, bringing the overall net margin up to 9M to reach 5% (9M 2017: 3.2%).
Preliminary view: At the current price of VND 28,600, DBC is being traded at 2018-2019 PER levels of 8.8x and 7.7x respectively. Our 1Y target price is at VND 32,500 per share (+13.6% upside) which is based on the unchanged target PER of 9x. With the forecast for the hogs price to remain stable over the next year, our rating for DBC is OUTPERFORM.
Petrovietnam Gas JSC (GAS: HOSE)
Outstanding shares: 1,914 mil; Market Cap: $ 9,184 mil USD; Average trading value 3M: $2.14 mil USD, Market price: VND 112,000; and Foreign ownership: 3.64%
According to GAS 3Q 2018 financial statements, the parent company posted VND 51 tn in net revenue (+19.2% YoY) and VND 8.86 tn net profit (+48.4% YoY) up to 9M 2018. Net profit on a standalone basis totaled VND 3.3 tn in 3Q 2018, adding 73.6% YoY. Although we have expected strong profit growth in 3Q 2018, the actual results eclipsed even our own estimates. Strong growth in 3Q 2018 could be attributed to (1) a higher fuel oil price (+45% YoY) which led to a higher selling price of approx. 25% dry gas volume; (2) a higher tariff at the Cuu Long basin (estimated up to 52% YoY on average) and (3) a 14% higher dry gas volume in 3Q 2018 in terms of YoY on a low base from 3Q 2017, as Nhon Trach 2 electricity plant implemented major maintenance during September 2017.
Our current estimates for the parent company are VND 66.3 tn in net revenue (+14.7% YoY) and VND 11.4 tn in net profit (+17.7% YoY) in 2018. For 2019, we estimate the company to post a 17.4% sales growth and 15% net profit growth. Note that we have not taken into account any one-off earnings in 2018/2019F. However, given better than expected 3Q18 results, we might revise upwards our estimate for GAS in 2018/2019 in the following reports. At the current market price of VND 112,000/share, GAS traded at a 2018&2019 P/E of 19.5x and 17x respectively, which is considered quite attractive in our view. Our 1-yr target price is VND 130,000/share, implying a 16% upside from the current market price. Regarding the foreseeable short-term future outlook, we continue to issue an OUTPERFORM rating.
(Source: SSI Securities Services)
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