As the earnings season is well on its way, 21 companies of the 53 we cover have announced their Q2 business results. There is a generally positive bias on the numbers as eight companies announced better-than-expected results, ten were in-line with our forecasts, and only three has worse-than-expected results. You can find more details in our Coverage List attached.
Of note on the power sector, thanks to strong rainfall in the South of Vietnam, southern hydro-power producers have been doing pretty well. Our power analyst also mentioned HND (thermal power) as a stock to look at, as its operating earnings were quite positive last quarter and as the SCIC seeks to divest. If you’d like to speak with our power analyst, please let me know.
VN-Index has fluctuated within a narrow range of 920-940 points this week, and ended the week at 935.52 points on Friday up only 0.2% week over week. However the downtrend still dominated the market in the last trading week of July.
For the whole week, foreigners were net selling the market offloading VND490.4bn (USD21.3mn) worth of shares on the HOSE. However, they ended the Friday net buying VND16.3bn (USD0.71mn). Overall, foreigners represented 13% of this week’s total trading on the HOSE.
Both HNX and HSX indices bounced back after testing their support levels (920 and 100 points for HSX and HNX, respectively) thanks to the recovery of blue-chip-stocks. In contrast, the significant increase in speculative stocks triggered a profit taking pressure on them. The short-term trend is still unsettled, so investors should remain balanced portfolios with both cash and equity. Besides, shifting focus to companies establishing their Q2 earnings is advised.
Also worth noting, as of July 20, 2018, FDI disbursements reached USD9.85 billion, an increase of 8.8% over the same period in 2017. According to the report of the Department of Foreign Investment – Ministry of Planning and Investment, total 7 months in 2018, the total capital registered new and increased capital and share purchase of foreign investors is USD22.94 billion, up 4.6% over the same period of 2017.
According to the General Department of Customs, total import turnover of goods in Vietnam in the first 6 months of 2018 reached nearly USD110.9 billion, up 9.6% over the same period last year. In particular, the import value of the top 10 commodities reached more than USD76 billion, accounting for nearly 70% of the total import value of the country. Of these, only two categories of machinery, equipment and spare parts and computers, electronic products and components reached USD35.7 billion, accounting for 32.2% of the total import value of the whole country.
The Department of Trade and Industry (DGTR) – Ministry of Commerce and Industry of India has released the anti-dumping investigation data of filament yarn nylon or imports from the European Union (EU) and Vietnam. Accordingly, the DGTR determined that some Vietnamese and EU exporters had dumped into the market at a range of 0% – 55% for Vietnam, 10% to 20% for the EU. This has caused significant damage to India’s manufacturing industry. So far, this hasn’t caused any problem to Vietnamese firms’ activities as India is not the biggest importer of Vietnamese yarn.
Rong Viet Securities Equity Research Summary
Company Report
In the past week Rong Viet research initiated on two stocks: HCM DEVELOPMENT J.S. COMMERCIAL BANK (HSX: HDB) and FPT DIGITAL RETAIL (HSX: FRT) .
Ho Chi Minh Development Joint Stock Commercial Bank – Growth Drivers from Customer Ecosystem and Consumer Finance (Initiation, HDB VN, BUY, PT: VND42,000, TR: 23%)
- HDB has achieved impressive results with 110% YoY growth in PBT 2017 and 170% YoY growth in PBT 1Q2018.
- HDB will be able to maintain this robust growth following its retail banking strategy with advantages from huge customer ecosystem, extensive transaction network and efficiency improvements.
- The contribution of HD Saison – the third biggest player in the booming consumer finance sector – is another significant competitive advantage of HDB.
- The merger with PGBank will be a milestone in the comprehensive strategic partnership between HDB and Petrolimex.
- The stock is trading at 2x current EPS of VND7,719. Furthermore, at its current price, it is trading at ~1.9x P/B. In this year, dividend yield is expected to be VND1,000.
FPT Digital Retail – Aggressive Plan Needs to be Proven (Initiation, FRT VN, ACCUMULATE, PT: VND84,000, TR: 17%)
- Smartphone market still has room for growth.
- F.Studio – take advantage of the unauthorized Apple market.
- Though the outlook for mobile phones isn’t as attractive as it used to be a few years ago, FRT’s stock price is now at a level that is within a realistic trading range. After a 25% drop from its peak, the stock is not too expensive. Adding a cash dividend of VND2,000, the potential total return is 17%.
- FRT is the second largest mobile phone retailer in Vietnam, after MWG. Its smaller size will allow FRT to expand, although the smartphone market is gradually becoming saturated.
- The Long Chau pharmacy chain is promising. However, in order to truly become the driving force of FRT, Long Chau needs to succeed on a large scale, not only in Ho Chi Minh City. This is a difficult task, especially since the current environment is not really ideal for the development of pharmacy chains
By Marc Djandji, CFA
Head of Institutional Sales, Rong Viet Securities (VDSC) | marc.djandji@vdsc.com.vn