GAS released strong Q3 results. Revenue reached VND15.0 trillion (USD660 million, +9.4% YoY) and NPAT rose to VND1.9 trillion (USD84 million, +97.4% YoY). 9M revenue was VND47.4 trillion (USD2.1 billion, +9.0% YoY) while NPAT jumped to VND5.9 trillion (USD260 million, +47.4% YoY) as gas prices recovered more strongly than crude oil prices. This profit accounts for 73.4% of our 2017 forecast. We are planning to raise our profit forecast given the recent government’s request for EVN to prioritize
Summary – VCB released Q3 2017 results that are largely line with our forecast. Although NIMs contracted slightly, a 6.1% Q-o-Q reduction in provision expense led to a modest surge in net profit growth from Q2 2017. Provisions continued to grow ahead of NPLs and the excess provisions suppressed earnings again in Q3, as expected. While prudent, only the audited Q4 2017 NPLs would enable us to form a view on future provisioning costs and normalized earnings.
Consolidation of two cooking oil subsidiaries fueled a 2.5x increase in 9M 2017 revenue. KDC’s 9M 2017 revenue reached VND5.1 trillion (USD224 million), surging 251% vs 9M 2016 thanks to the consolidation of Tuong An Cooking Oil (TAC) since December 2016 and Vocarimex (VOC) since June 2017. We estimate that these two subsidiaries accounted for 75% of KDC’s consolidated revenue in 9M 2017.
SCS’s 9M 2017 revenue and NPAT grew by 20.4% and 37.1%, respectively, vs 9M 2016. This was driven by (1) strong growth in cargo throughput, especially export cargo, (2) a slight increase in average service price and (3) stable labor costs. SCS’s 9M 2017 results are slightly ahead of our expectations. Therefore, we will likely revise our target price upward, but maintain our rating, in our next update report.
DRC’s Q3 2017 NPAT plunged 70% YoY to VND25 billion (USD1.1 million), significantly below management’s Q3 2017 NPAT guidance of VND72 billion (USD3.2 million). This weak performance took place despite Q3 2017 sales growing 10.4% YoY to VND878 billion (USD38.7 million). 9M 2017 sales were up 8.8% to VND2.6 trillion (USD114.5 million), while NPAT dropped 53.7% YoY to VND131 billion (USD5.8 million). We currently have an OUTPERFORM rating on DRC with a one-year target price of VND25,140,
SMV supplies 60% of the micro fasteners for Samsung Vietnam, or 47% of total Vietnamese mobile phone screw demand. Revenue has increased at a 32.7% CAGR over the last five years with 29% ROE, no debt and strong operating cash flow. Management expects 19% 2017 EPS growth. The company plans to diversify its client base to other Korean and Japanese companies and expand to the automobile-related screw segment.
DHG’s net revenue and NPAT grew 4% and 6%, respectively, in 9M 2017 vs 9M 2016. In-house product sales disappointed, posting a decline of 5% in Q3 2017 vs Q3 2016 even though advertising expenses surged 56% in Q3 2017 vs Q3 2016. This result trails our expectation and underscores our conservative view on the company’s sales outlook. We will likely revise down our FY17 forecasts in the next update. DHG is trading at an unappealing TTM PER of 22.9x.
We initiate coverage on SCS with an OUTPERFORM rating and a target price of VND104,500, implying a total stock return of 10.0% inclusive of a 5.5% dividend yield. Earnings growth will be driven by SCS’s strong market position with high entry barriers and constrained supply. SCS is the only player with spare capacity to benefit from air cargo volume growth in southern Vietnam.
Summary – VPB reported its Q3 2017 earnings, outpacing our conservative estimates and management’s FY2017 guidance trajectory. Q3 net income at VND1.9 trillion (USD83.7 million) came in 18% ahead of our estimate. With a 15%+ beat likely of FY 2017 management guidance and a 18%+ beat of consensus estimates, we expect consensus earning and TP upgrades over the coming weeks.
We attended an analyst meeting and factory visit organized by Pymepharco (PME) in Phu Yen Province on October 12. We were highly impressed with PME’s production facilities, which are top-tier among Vietnamese companies, in our view.