We reiterate a MARKET PERFORM (M-PF) rating for KDH including a 3.8% dividend yield. We raise our target price 10% on a 30 bp cut of WACC and a lower net debt balance in Q1 2017. Sale of stake in associate boosted Q1 2017 NPAT-MI to VND110 billion (USD5 million). Excluding VND30 billion (USD1 million) of pre-tax financial income from the deal, we estimate normalized Q1 2017 earnings would have declined 9% Y-o-Y with a normalized NPAT-MI margin of 13.4%.
We downgrade our rating on GTN to MARKET PERFORM with a total stock return of 7.6% as the stock has increased 6% since our last report. Q1 2017 EPS soared 188% YoY thanks to the newly consolidated dairy subsidiary Vilico (VLC). VLC’s dairy revenue and EBIT rose 17% and 37%, respectively, in Q1 2017 on GPM expansion and softening SG&A, in our estimation. Margins surpassed our previous projections.
We downgrade DQC from OUTPERFORM to MARKET PERFORM with a total return of -6%. We cut our TP by 31% as we trimmed our forecasts and geared our valuation more toward EV/EBITDA method instead of DCF to reflect the uncertainty of medium-term projections. An early Tet, stiff price competition and distractions from a state investigation of a former CEO, who is the current CEO’s sister, dragged down revenue 20% and NPAT 22% in Q1 2017.
We attended TLG’s AGM for 2017 on Tuesday, May 16, 2017 which gave informative highlights on the company’s growth strategy over the next five years. Guidance for 2017 is in line our forecasts with revenue a growing by 13% and NPAT growing by 11% vs 2016 as gross margin normalizes from last year’s high base. Q1 2017 results confirmed full-year expectations of healthy sales growth and slight margin erosion. VND438 billion (USD19.2 million) capex to be invested in a new factory expansion
We keep our OUTPERFORM (O-PF) rating for HT1 with TP lowered by 8% to VND22,300 as Q1 2017 gross margin got hit more severely than we expected. Q1 2017 NPAT fell 16.9% vs Q1 2016 to VND109 billion (USD6.8 million) despite 8.8% revenue growth as gross margin continued to squeeze due to increasing outsourced volume to Ha Long grinding station. We maintain 8.7% FY17 revenue growth driven by healthy cement sales growth of 10%.
We edge down our target price by 1.5% on a lower 2017 earnings forecast, but maintain a BUY recommendation with total return of 22.8%. 2017 should be a bottom with EPS dropping 33.5% vs 2016 due to dilution from upcoming capital raising. Lower expected compensation for Floating, Production, Storage & Offloading (FPSO) Lam Son also outweighs initial Mechanics & Construction (M&C) earnings stream from the Red Emperor project. We are optimistic about 2018 with plenty of jobs from Red Emperor
We upgrade TCM to OUTPERFORM (O-PF) with 13.0% total return given improving labour productivity at Vinh Long workshop and an improving revenue mix. We forecast +4.3% FY17F revenue growth to VND3.2 trillion (USD140 million), propelled by an expected 14.1% YoY increase in garment sales. We pencil in 66.3% FY17F NPAT growth partially due to sharp GPM expansion of 2.1 ppts as contribution from the unprofitable yarn segment declines.
We recommend accumulating PAC for the following reasons. The company’s brand is well-known with more than a 49% share of the battery market. The high growth potential of Vietnam’s auto industry and more penetration into the motorbike battery market ensure revenue growth. Two new factories will increase capacity 28% and generate a VND25 billion (USD1.1 million) gain from the sale of the old factory this year. 2016 PBT may be revised up by 49% to VND238.5 billion (USD10.5 million)
VIB is poised to come off an asset recovery cycle, and strategic shareholder CBA (Commonwealth Bank of Australia) lends operational excellence and strong capital strength. VIB is among the top two Vietnamese banks ready for Basel II regarding operational readiness and capital adequacy.
We reiterate our OUTPERFORM rating for VNM with 11% total return. We raise our TP 3% as Q1 2017 volume growth slightly overshot our expectation in addition to a lower effective tax rate. NPAT surged 36% in Q1 2017 vs Q1 2016 as domestic sales soared 25% on expanded market share while selling expenses declined 2% vs Q1 2016 following an aggressive Q4 2016. For FY17F, we project 18% domestic revenue growth aided by market share acquisition while exports are forecast to rise 10%,