We provide an update on HDG, following on our November 2018 report, ‘Reaping profits from first large residential project’. To recap, HDG offers exposure primarily to the real estate and power sectors, which comprise ~90% of its gross profit. The company has a proven track record as a mid-scale developer and has current backlog of VND5.8tn (USD249mn), which should underpin solid real estate earnings through 2020.
We reduce our TP by -7.2% to VND29,800 but upgrade our rating to BUY with a projected TSR of 22.3% mainly due to a 7.6% drop in share price since the date of the removal of the commission floor on February 15, 2019, in addition to general negative sentiment arising from a drop in average trading turnover of 26.1% in H1 2019 vs H1 2018. Our TP cut is not driven by earnings revisions, but a change in methodology to valuing the treasury unit.
We attended VEA’s AGM on June 30, 2019. The AGM approved all proposals on its 2019 target, FY2018 cash dividend and the dismissal of Mr. Tran Ngoc Ha, BOD member and former CEO. VEA targets for its consolidated NPAT-MI to decline 4% in 2019 vs 2018 to VND6.8tn (USD305mn), driven by a 4% decline of shared profit from associates. This guidance is conservative in our view.
We attended GTN’s AGM on June 28, 2019. Proposals on the changes of GTN’s BOD members and its potential partnership with Vinamilk attracted the most attention from shareholders. Management is guiding for 2019 NPAT-MI of VND90bn (USD3.8mn) vs VND8bn (USD322,000) in 2018. This will be underpinned by 10% YoY growth in revenues of both Moc Chau Milk’s (MCM) and Vinatea’s semi-processed tea exports, as well as potential one-off profits from asset disposals.
We attended VTP’s analyst meeting on June 28, 2019, with the main topics being VTP’s expansions into ride-hailing and e-commerce and its early accomplishments in these ventures. Per VTP, on July 1, 2019, it will officially launch two new ventures to “increase its customer value proposition, complete its ecosystem and transform itself into a technology company.”
Although the company does not share its detailed strategy, VTP reaffirms that it still sticks to its five-year profit guidance
We attended BVH’s AGM on June 29, 2019, in Hanoi. Shareholders approved a plan for a private placement of 41.4 million shares, equivalent to 5.91% of shares outstanding. If the 30-day average market price remains at the current level of VND78,993, we would expect the company to raise at least VND3.27tn (USD140mn). The placement is expected to be completed in 2019 or 2020 and is subject to approval from the SSC. The placement will dilute state ownership from 72% to 68%.
We attended NKG’s 2019 annual general meeting (AGM) on Saturday, June 29, 2019, in Binh Duong Province. Shareholders approved management’s guidance for 2019 of 5% revenue growth and NPAT-MI of VND295bn (USD12.8mn vs the VND57bn/USD2.5mn actual 2018 result). Although revenue guidance is in line with our expectation, NPAT-MI guidance is significantly higher than our forecast of VND13bn (USD0.6mn).
We attended PVS’s AGM in Vung Tau on June 28, 2019. Management shared a bright outlook for the M&C segment. We see upside risk for M&C’s signed backlog with the potential of contracts worth approximately USD500mn from the Long Son petrochemical project and Salman project in Brunei. We see capex expansion as a good signal of EPS growth in coming years. PVS is guiding for a capital expenditure of VND1.2tn (USD52mn) in 2019 vs only VND83bn (USD3.6mn) in 2018.
We downgrade our rating from OUTPERFORM to MARKET PERFORM following a 26% share price rally over the last two months. In this report, we raise our target PER for VEA’s associate profits from 10x to 11x in accordance with our select peer group’s five-year average while maintaining a valuation discount of 25%, primarily attributed to VEA’s lack of control over its associate automobile companies.
We attended ACV’s AGM on June 22, 2019, in Ho Chi Minh City. As various State decisions and approvals remain pending, there continues to be limited visibility on major issues affecting ACV such as clarity of runway ownership, timing of runway maintenance, collection of take-off and landing fees (T-O/L), concession allocation and timing of major airport projects, and the timing of ACV’s HOSE listing and the Ministry of Transport’s (MoT) stake sell-down.