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VSH [M-PF 2.1%] - Huge growth potential on the horizon but low ROE - Initiation

We initiate on VSH with a 10.0x PER-derived TP of VND13,700 (TSR 2.1%) and M-PF rating. VSH possesses good hydropower assets totalling 136MW which has delivered highest utilization rate relative to peers, EBITDA margin and dividend yield among domestic peers. It is constructing Upper Kon Tum project (220MW) to double its capacity by 2020. Gloomy return on equity outlook of less than 10% in the next five years and risk of losing VND600b erases all VSH’s attractiveness.