VIETNAM PRIMER
Primer by Michel Tosto, Institutional Sales +84 90 805 7002, [email protected]
Company summaries by VinaSecurities Research Team +848 3827 8278, [email protected]
August 2009
VinaSecurities SunWah Tower, 5F 115 Nguyen Hue, District 1, Ho Chi Minh City, Vietnam T: +848 3827 8278 F: +848 3827 8368 E: [email protected] W: www.vinasecurities.com Bloomberg: VNSC
Institutional Sales Rob Hughes, Head of Brokerage Michel Tosto, Institutional Sales T: +848 3827 8278 F: +848 3827 8368 E: [email protected]
Retail Sales Vu Dinh Tam, Head of Retail Hoang Thanh Le, Retail Sales & Trading T: +844 3936 6436 F: +844 3936 6430 E: [email protected]
Equity Research Adrian Cundy, Head of Research - Conglomerates Bui Cam Van, Analyst - Consumers Dinh Thi Thuy Duong, Analyst - Energy & Transportation Doan Thi Van Anh, Analyst - Basic Materials Ho Hong Hai, Analyst - Financials T: +848 3827 8278 F: +848 3827 8368 E: [email protected]
Corporate Finance Ngo Ha Linh, Equity Capital Markets Hoang Vu Binh, Debt Capital Markets T: +848 3827 8278 F: +848 3827 8368 E: [email protected]
1 2 Abbreviations
Organisations
ADB Asia Development Bank CIA Central Intelligence Agency (USA) GSO General Statistic Office (of Vietnam) IFC International Finance Corporation IMF International Monetary Fund MOF Ministry of Finance (of Vietnam) MPI Ministry of Planning and Investments (of Vietnam) SBV State Bank of Vietnam S&P Standard and Poor’s WTO World Trade Organisation
Terms
BTA Bilateral Trade Agreement FCY Foreign Currency FDI Foreign Direct Investments GDP Gross Domestic Product LCY Local Currency LT Long-Term NDF Non-Deliverable Forward VGB Vietnam Government Bonds YOY Year on year
3 4 Foreword
Vietnam has been the second-fastest growing economy in Asia for the past ten years, second only to China, and has now entered the ranks of middle-income countries with a GDP per capita soaring from USD375 in 1999 to USD1,040 in 2008. Vietnam’s cities are bright and bustling. Its workforce is young, literate, and eager to work. Private consumption forms the bedrock of the economy at 65% of GDP, while investments, supported by a high rate of domestic savings and foreign capital inflows, along with rapidly developing international trade, constitute the bulk of economic growth. Everything is in place for Vietnam to enjoy a multi-year economic boom – one you do not want to miss if you’re not already here.
Established in April 2007 with offices in Hanoi and Ho Chi Minh City, VinaSecurities is a premier investment bank fully licensed to operate as a broker-dealer in Vietnam. As a member of the VinaCapital Group, the largest investment management company in Vietnam with over USD1.7 billion in assets under management, VinaSecurities is well capitalized and able to leverage on a strong network of relationships to present the best of Vietnam to our distinguished clients. Continuous investments in our people and technologies keep us at the leading edge, enabling us to provide the highest standard in research, brokerage, and corporate finance services.
In line with our commitment to bring you the best that Vietnam has to offer, we are pleased to present this Vietnam Primer. It contains essential information to make informed decisions about Vietnam’s fundamental drivers – its people, heritage, economy, equities and fixed income markets, listed companies and technical details to quickly gain exposure to Vietnam’s wealth of opportunities.
Yours Sincerely,
Hunt Macnguyen Chairman and CEO
5
Contents
1. Executive Summary 8 2. Economic Confluence 12
2.1. Asia’s second-fastest-growing economy 12 2.2. Changing economic structure 14 2.3. Industrialisation and trade lead growth 16 2.4. Soaring foreign investments 19 2.5. Good fiscal position 23 2.6. Government committed to reforms 26 2.7. Favourable Demographics 27 3. Stock Market 32
3.1. Two bourses, one system 32 3.2. Rapid ascension to stardom 33 3.3. Dramatically improved market conditions 34 3.4. Market composition 36 3.5. Foreign investment regulations 37 3.6. Taxation 37 4. Fixed Income Market 40
4.1. Heavily skewed towards government bonds 40 4.2. Quickly developing market 41 4.3. Policy development 43 4.4. High yields 44 4.5. Foreign investment regulations 46 4.6. Taxation 46
6
5. How to invest in Vietnam 50 Financials 7.11. Asia Commercial Bank 90 5.1. Opening an account 50 7.12. Bao Viet Securities 92 5.2. Market mechanics 51 7.13. Tan Tao Investment Industry 94 5.3. Capital flows 54 7.14. PetroVietnam Finance 96 5.4. Taxes 54 7.15. PetroVietnam Insurance 98 5.5. Foreign ownership limits (FOL) 55 7.16. Saigon Securities 100 5.6. Other important notes for shareholders 56 7.17. Sai Gon Thuong Tin Commercial Bank 102 5.7. Banks offering custodial services in Vietnam 57 7.18. Bank for Foreign Trade of Vietnam 104 6. Country Fundamentals 60 7.19. Vietnam National Reinsurance 106 7.20. Imexpharm Pharmaceutical 108 6.1. Geography 60 Healthcare 6.2. Brief History 61 7.21. Binh Minh Plastic 110 6.3. People 62 Industrials 6.4. Political landscape 62 7.22. Hoa Phat Group 112 6.5. Legal System 66 7.23. Tien Phong Plastic 114 7. Company Fact Sheets 70 7.24. Petroleum Technical Services 116 7.25. PetroVietnam Transportation 118 Basic Material 7.26. Refrigeration Electrical Engineering 120 7.1. PetroVietnam Fertilizer & Chemical 70 7.27. Song Da Urban & Industrial Zone Dev. 122 7.2. Dong Phu Rubber 72 7.28. Vietnam Container Shipping 124 7.3. Tay Ninh Rubber 74 7.29. Vietnam Tanker 126 Consumer Goods Oil and Gas 7.4. An Giang Fisheries 76 7.30. PetroVietnam Drilling and Well Services 128 7.5. Minh Phu Seafood 78 Telecommunications 7.6. Tuong An Vegetable Oil 80 7.31. FPT Corp 130 7.7. Vinh Hoan Corp 82 Utilities 7.8. Viet Nam Dairy Products 84 7.32. Pha Lai Thermal Power 132 7.9.. PetroVietnam General Services 86 7.33. Vinh Son - Song Hinh Hydropower 134 7.10. Phu Nhuan Jewelry 88
7 1.0 Executive Summary
Asia’s second-fastest Booming investments, solid consumption and rising exports are behind growing economy Vietnam’s phenomenal growth. In the past 10 years, Vietnam has been the region’s second fastest growing economy. Real GDP growth has exceeded 7.5% per year on average and per capita income has grown at an outstanding pace of 11.2% per year. The economy has proven resilient to shocks and negative impacts from SARS, avian influenza, natural disasters, high commodity prices, rampant inflation, and anti-dumping suits. Nationwide, income per capita rose from US$375 in 1999 to US$1,040 in 2008 and Vietnam has now entered the ranks of middle income countries. A new Asian tiger is on the prowl.
Shooting out of Vietnam’s cities are bright and bustling and the countryside, where much poverty of the country’s population of 87 million people still live, seem hardly less developed than that of officially much wealthier Thailand. A country once on the brink of famine, Vietnam has transformed itself into one of the largest exporters of farm products. Collectivisation has been scrapped, farmers now work their own land and agricultural prices were liberalised. Rural population growth is peaking while urban centers are taking off while the share of agricultural output in the nation’s GDP has declined from 46.3% to 21% between 1988 and 2008.
On track to Already the poster-child of the Washington consensus (free markets, free prosperity trade, and so on), Vietnam has progressed well along the path to achieving the Millennium Development Goals – the UN’s anti-poverty roadmap. Population growth has eased to an average of 1.1% over the past decade from 2.3% in the 1980s as reliance on informal social insurance mechanisms declines, and poverty has been slashed.
Solid domestic Accounting for 65% of GDP, private consumption is the pillar of the foundation domestic economy, but investments and trade receipts are the real growth drivers. High levels of domestic savings, phenomenal foreign capital inflows and growing overseas remittances are driving rapid growth in investments, which now account for 41.6% of GDP from 27% in 1995, the world’s second highest rate after Singapore.
Increasingly Aside from investment inflows, soaring export earnings are another primary growth driver for Vietnam, reaching 77% of GDP in 2008. integrated with the Principal manufactured exports include garments, footwear, electronic world economy components, and wooden furniture products, reflecting the comparative advantage of Vietnam’s low-cost labour force. While access to external markets has improved with formal trade relations and Vietnam has become the de facto “+1” in multinational investors’ “China+1” strategy, the supply response of Vietnam-based enterprises has been enabled by domestic reforms that have facilitated the private sector and strengthened the investment climate.
8 In the past 10 years, Vietnam has been the region’s second fastest growing economy.
Rising importance of The share of the state sector in manufacturing activity has declined from the private sector 52% in 1995 to under 35% in 2006 – a trend largely attributable to the emergence of a vibrant private sector. Although the state sector retains a key role in sectors of strategic importance, the playing field has been substantially levelled for private domestic and foreign companies alike.
Reasonable fiscal Including off-balance sheet items, Vietnam’s budgetary position is based deficit and on a comparatively high revenue collection of more than USD21 bn, or 20% of GDP, which compares very well against many neighbouring debt burden economies. The fiscal deficit has recently increased to 5.8% of GDP due to the government’s stimulus measures, but total debt remains at a manageable level of 39% of GDP. Prudent and responsive policy measures will be key to ongoing macroeconomic stability.
Political fortitude Political control is vested in the Communist Party of Vietnam which has underwrites socio- proved increasingly responsive and accessible. There has been significant progress in public financial management and the entire 2005 budget was economic stability disclosed to the public for the first time. The National Assembly is now responsible for the approval of the budget, including allocations to lower levels of government, and has become considerably participatory of late.
Poised to reap a An exceptionally favourable demographic profile underpins optimism demographic about Vietnam’s prospects in consumption, investment demand, and as a value-added export base. A young and eager workforce, stable growth dividend and high levels of literacy all ensure that Vietnam will reap the benefits of a substantial demographic dividend. Combined with the Vietnamese peoples’ innate entrepreneurialism, Vietnam’s growth prospects are highly favourable.
Financial sector Until recently, Vietnam was virtually a cash economy without formal development access to consumer credit and, while growth has been astronomical, only 10% of the population is estimated to have a bank account today. a catalyst for The introduction of accessible, formal credit mechanisms and financial consumption products in general is just starting and the sector has much growth potential.
Stock market Although young, the nine year old Ho Chi Minh City stock exchange’s meteoric rise index has outperformed the MSCI Emerging Markets and the MSCI Asia ex-Japan indexed since the beginning of 2005. The investment universe now comprises nearly 400 individual stocks and liquidity has improved dramatically. With a backlog of major state-owned enterprises and growing number of private companies set to list within the next three years, Vietnam’s stock markets will increase in depth, liquidity, and accessibility to foreign investors.
9 10 2.0 Economic Confluence
11 2.0 Economic Confluence Booming investments, solid consumption and rising exports are driving Vietnam’s phenomenal growth. In little more than a decade, Vietnam has emerged as the second-fastest growing economy in Asia. The government is streamlining legislation and implementing reforms that will open the economy to further trade and investment and, with a population base that is one of Asia’s youngest and most literate, Vietnam is well positioned to enjoy many years of sustainable growth.
2.1 Asia’s second-fastest-growing economy Vietnam has been the region’s second fastest growing economy in Asia for the past ten years. Real GDP has grown at a whopping average of 7.5% per year and per capita income by an outstanding 11.2% per year. Although not without some growing pains, Vietnam’s economy has proved resilient to external shocks and the negative impacts of SARS, avian influenza, natural calamities, high commodity prices, rampant inflation, and trade disputes in newly developing export markets.
Vietnam the fastest growing economy in Asia after China 10-year average GDP growth and max-min indicators (1999-2008) - Regional
Source: IMF 12%
8%
4% 9.4% 7.5% 6.5% 5.6% 5.3% 4.8% 0% China Vietnam India Malaysia Indonesia Thailand
Wealth more than doubled in 10 years...... yet a lot more to go GDP per capita (USD) Vietnam GDP per capita (USD, ‘08) Regional Source: IMF Source: IMF
12 National income per capita rose from US$375 in 1999 to US$1,040 in 2008 and Vietnam has now entered the ranks of middle-income countries. GDP per capita is now slightly above that of India. When taking into account the understated contribution of the informal sector, it’s not difficult to believe that Vietnam is new Asian tiger.
While growth has been accelerating in the years since the Asian financial crisis in 1997 and the dotcom bubble of 2001, it slowed sharply as the economy overheated at the beginning of 2008 and the global economy entered a crisis in the third quarter of the same year. In response to high inflation and a large and growing trade deficit, the government implemented a series of fiscal and monetary tightening measures that were effective in stabilizing the Vietnamese Dong, cutting the trade deficit, and slowing inflation. Reserve requirements were raised from 5% to 11% and the State Bank of Vietnam (SBV) increased the policy base rate to 14%. Inflation has now moderated and the reserve ratio and base rate have returned to pre-crisis levels and below.
Monetary easing led inflation...... and affected the trade balance... Monetary indicators Trade deficit (USD bn) Source: CEIC, Dr. Pham Do Chi - 2009 est. Source: IMF, MOF for 2009 targets
M2 (yoy %) CPI (yoy %)
... pressuring the currency to depreciate...... prompting the gov’t to react 12MO forward NDF vs actual rate (USD/VND) Monetary tightning (%)
% Source: Bloomberg Source: SBV % % % % % % % %
12month forward NDF Interbank spot rate Base rate Reserve Ratio
13 High GDP growth GDP and growth Source: IMF, Dr. Pham Do Chi - 2009 est.
GDP (USD bn) Real GDP growth (%)
As these measures were taking hold, however, the global economic crisis hit. Vietnam being dependent on investments and exports for growth, it is quite sensitive to external shocks. That being said, according to VinaCapital’s chief economist, Dr. Pham Do Chi, the country should grow at a rate of 4-5% in 2009, due in part to solid private consumption as the bedrock of Vietnam’s economic growth, moderate foreign capital inflows, and a low-value added export base. Exports are estimated to contract by only 10% in 2009 as most exports are low value added goods and commodities related. Nevertheless, the current slump will most likely be viewed historically as a small bump in the road to growth. 2.2 Changing economic structure enabling growth
Twenty years of reform has had a profound impact on the structure of Vietnam’s economy. The industrial sector is now the key driver of growth pulling up labour productivity along the way. At the same time, the economy is becoming more investment intensive and integrating rapidly with the global economy.
Industrialisation From a largely agrarian economy in the 1970s, agriculture’s share of driving GDP growth GDP has halved since 1991 and now comprises only 20% of GDP. A rise in industrial activity has transformed the profile of the economy which now accounts for more than 40% of GDP, having grown at a 10% annual rate over the past decade accounting for much of the real growth over the same period. The service sector, on the other hand, has been stable and now makes up 38% of the overall economy.
14 Industry is driving growth...... and job creation GDP by sector (%) Employment by sector (%) Source: ADB Source: GSO
Agriculture Industry Sevices Agriculture Industry Sevices
Rise of the private sector Booming investments and soaring exports don’t happen by miracle. A key factor in Vietnam’s transformation, and behind much of the transformation that irrevocably changed the structure of the economy, is the rise of the private sector (both local and foreign), which makes up 71.5% of all labour and 60% of all investments in the economy. This is a reflection not only of the rapid increase in their numbers, thanks to ongoing reforms, but also their superior efficiency, especially when compared to those of SOEs.
Anyone who has travelled in Vietnam would say how everywhere and anywhere one might look, it is as if every house doubles as a shop, and every street corner becomes an impromptu restaurant, barbershop or a motorcycle repair shop. The entrepreneurial spirit runs deep in Vietnamese culture and has become symbolic of their aspirations for wealth and well-being. As the real estate tycoon who was the first to buy a USD 1.3 million Rolls Royce Phantom would say, it’s more than just for the looks, but also to show the world Vietnam is no longer an impoverish nation.
Private sector is the largest employer...... and leading investments Contribution to labour force (%) Source: GSO, MPI Investment by Ownership (%) Source: GSO
2000 2006 State Private FDI
15 2.3 Industrialisation and trade lead growth While private consumption forms the basis of Vietnam’s economy at 64% of GDP and will remain important as a growth driver, its relative importance has been diminishing. Investments, fuelled by high saving growth, skyrocketing FDI and growing remittances, are a key driver of economic growth. Vietnam is second only to Singapore when comparing the ratio of investments to GDP, and well ahead of economies like Qatar, China and India. Investments now account for 42% of the economy, a target that the government had set for 2010 and reached in 2008.
Growth is investment led...... thanks to high domestic savings GDP components (%) Domestic savings (% of GDP) 100% 35% Source: ADB Source: GSO 30% 80% 25% 60% 20%
40% 15% 10% 20% 5% 0% 0% 1991 1993 1995 1997 1999 2001 2003 2005 2007 1991 1993 1995 1997 1999 2001 2003 2005 2007 M X C I G
One of the most investment intensive economies in the world Investments as % of GDP - Regional 46% Source: : CIA World Factbook 2009 44% 42% 40% 38% 36% 34% Singapore Vietnam Qatar CapeVerde Guyana China Lesotho India Bulgaria
One of the most open Vietnam is one of the most open economies in the world with a ratio economies of imports and exports to GDP reaching 170% in 2008. While this might be startling for a country that used to be closed to the outside world, it is not so surprising when you look at the entrepreneurial spirit of this essentially trading nation. Vietnam’s strategic location between India, Southeast Asia and China, easy access, highly literate and hard-working labour force, favourable export-oriented investments and government policies stressing global economic integration have all contributed to the meteoric rise of exports, which now comprise 75% of GDP, up 35 percentage points over the past decade.
16 Growing reliance on exports, linked to imports Exports & imports, as % of GDP Sources: Bloomberg 100 %
80%
60%
40%
20%
0% 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Export Import Fisheries, rubber, rice and coffee form 41% of all exports (excluding oil exports) and made Vietnam a key player in global commodities. That’s not all bad in a world where commodity prices are poised to stay high by historical standards. Non-commodities based exports such as garments, footwear, electronics and some wood products (furniture) comprise the other 59% of total exports, but are of relatively low added value, something the government wants to address. However, the low reliance on high-value exports is helping Vietnam get through the global economic crisis. While demand for its goods has weakened, it hasn’t collapsed as in several other Asian countries. On the whole, we roughly estimate Vietnam’s exports to be down 10% for 2009. That being said, Vietnam definitely wants to move up the value chain and actively seeks FDI that can help it achieve this goal. The USD1.0 billion Intel factory is a significant move in that direction.
Low value added goods top the list of exports Top export products (USD bn) Source: : GSO 9 8 7 6 5 4 3 2 1 0 1998 1999 2000 2001 2002 2003 2004 2005 2006 Crude Oil Garments Footwear Fishery Products Electronics Wood Products Rubber Rice Coffee
A large portion of imports are linked to exports. Vietnam exports crude oil, but imports all its refined petroleum as it has historically lacked refining capabilities. The country’s first refinery went online this year and has the capacity to refine two thirds of Vietnam’s oil needs. We can expect the trade of oil to come down drastically from this point on and a second refinery is planned. Vietnam also exports large quantities of garments for which fabrics are imported; exports footwear for which rubber is sourced locally and the rest imported; imports all the machinery needed for its manufacturing sector, machinery without which there would be no exports; and fertiliser help grow all the commodities Vietnam has become famous for. Electronics, vehicles and the like are indeed for local consumption however. 17 Most imports are related to the production of exports Top import products (USD bn) Source: GSO 6 5 4 3 2 1 0 1998 2000 2002 2004 2006 Refined Oil Iron & Steel Textile Fabrics Electronics Machinery for Telecom Fertilizers Motocycles Machinery for Textile Motocycles: Unassembled Fibers, Spun
USA and Japan exports soar with BTAs...... and are now Vietnam’s top markets Major export markets (USD bn) Major export markets (%) 14 Source: IMF 25% Source: IMF 12 20% 10 8 15% 6 10% 4 2 5% 0 0% 1998 2000 2002 2004 2006 2008 1998 2000 2002 2004 2006 2008 United States Japan Australia China United States Japan Australia China Germany Singapore Germany Singapore
Since the signing of the US Bilateral Trade Agreement (BTA) in 2001, exports to the US have surged and now account for 21% of all exports. Trade with Japan, which also signed a similar agreement, increased substantially and now accounts for 13% of total exports. Other important trading partners include Australia, China, Germany, Singapore, Malaysia, Korea, Indonesia, and Thailand.
Accession to the WTO in January 2007 has been a catalyst for trade and FDI as multinational enterprises seek to exploit Vietnam’s advantages as a low cost, strategically situated export hub. Intel started work on a USD1 billion assembling factory near Ho Chi Minh City, Microsoft outsources digital animation and modelling to Vietnam, and Nike is considering a footwear research and development center in Vietnam. These examples show that Vietnam is starting to move up the value curve and that higher value exports are not so distant in the future.
18 2.4 Soaring foreign investments
Vietnam is in an envious position when it comes to attracting FDI. Since opening its market to foreign investments in the late 80’s, Vietnam has received an impressive amount of FDI inflows for its size. A government friendly to foreign investment, a young and vibrant workforce, low wages and increasing productivity have all contributed to making Vietnam a key destination for foreign companies looking to outsource to or expand in Asia.
In 2008 alone, Vietnam approved over USD60 billion worth of foreign investments, while disbursements stood at an outstanding USD11.5 billion. The Ministry of Planning and Investment (MPI) has set the FDI target for 2009 at USD 30 billion, almost half the figure of 2008. A world economic crisis, increasingly competitive regional countries and Vietnam’s own bottlenecks explain the lower target. Considering the current state of the world’s economy, USD30 billion is still a substantial figure, and a 45% increase compared to 2007. Skyrocketing FDI Net FDI (USD bn) Source: GSO, ADB 60 1,400 50 1,200 40 1,000 800 30 600 20 400 10 200 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Approved FDI (lhs) Disbursed FDI (lhs) Number of project (rhs)
There’s a lag between approved and disbursed FDI as some projects never get off the ground while others find ways to reduce their project capital during the construction of their factory or project. The gap has been increasing of late as the government has been approving high profile mega projects, such as deep-sea ports or mammoth steel mills, which implementation usually take many years, and which may lag considering the current economic climate. Outpacing the region Firms that have drawn-up a “China +1” strategy often make Vietnam the “plus-one”. Some countries, such as Japan even go to the length of officially pronouncing Vietnam as their preferred destination for FDI after China. Vietnam was the only Southeast Asian nation listed in the top 10 investment destinations of multinational companies in 2008 and 2009 in a survey by the UN Conference on Trade and Development. Intel is building a USD1.0 billion factory near Ho Chi Minh City while Foxconn, Posco, Formosa and Berjaya have all announced multi-billion dollars projects in Vietnam.
19 More FDI than its neighbours Net FDI as % of GDP - Regional Source: ADB 10% 9.3 8 % 6 % 4 % 3.7 3.2 2 % 1.4 0 % -2 % - 1.4 1995 1998 2001 2004 2007 Vietnam China Thailand India Malaysia
Vietnam has consistently outperformed its competing Asian nations in attracting FDI, with the difference increasing sharply from 2007. Political stability, a government committed to market reforms, proximity to China, strong work ethic and high productivity growth, albeit from a low base, keep Vietnam on top of the list of countries in which foreign firms are looking to expand their operations in Asia. Benefiting Developed Asian economies account for the major part of FDI inflows from maturing with countries like Taiwan, South Korea, Japan and Singapore in the driving seat. Geographic proximity is an important factor explaining tigers this trend.
Asian tigers are Vietnam’s most important direct investors 1988-2007 cumulative FDI by country
Source: GSO, rounded Taiwan 13%
South Korea 12% Others 24%
France 4% Japan 10% USA 4%
Netherlands 5%
Malaysia 5% Singapore 9%
Hong Kong 6% BVI 8%
20 It is interesting to note that India and China are literally absent from the picture. China has admittedly started to invest more in Vietnam, especially as labour costs are skyrocketing at home, but investments remain very low for now. India, on the other hand, is largely absent. Arguably, with plenty of low cost labour and a fledging local economy, there’s little need for these countries to expand in countries like Vietnam.
FDIs are key to The significance of FDI to the economic growth of Vietnam has Vietnam’s rapid growth steadily increased over the years. While the Vietnamese private sector accounts for more than 50% of all employment, FDI has doubled their contribution to 21% from 2000 to 2006 and probably higher today. Even more striking, foreign invested enterprises contribute more to the state budget than any other economic entity in Vietnam, even state-owned enterprises, although arguably, a large part of this contribution comes from the oil and gas sector.
Private sector provides more jobs...... and FDI pays more tax Contribution to labour force (%) Contribution to state budget (%) Source: GSO, MPI, rounded 51 Source: GSO, MPI, rounded 59 44 50 38 39
28 29 22 18 12 10
State Private FDI State Private FDI 2000 2006 2000 2006
Made in Vietnam The vast majority of FDI is by far directed to the manufacturing sector which accounts for over 53% of all FDI from 1988 to 2007 according to data from the GSO. Industrial parks in and around centers such as Ho Chi Minh City and Hanoi are full of light and heavy industries producing anything from shoes and clothing to steel and paints. Manufacturing, the bulk of Vietnam’s FDI FDI by sector - 1988-2007 Source: GSO, rounded Manufacturing 53% Real estate 14%
Transport & Communications 5%
Minning & Quarrying 4%
Hotel & Tourism 8%
Construction 7%
Agriculture & Forestry 3%
Others 6%
21 As a matter of fact, foreign companies are key players in a variety of high-technology industries such as oil and gas, vehicles, and consumer appliances.
Lately, FDI have become more diversified, with the real estate and tourism sector taking more importance. We’ve also seen more investments in heavy industries thanks to the likes of Posco and their multi-billion dollar steel mill.
FDI should continue to drive Vietnam to higher growth rates, thanks not only to investments, but also the improved productivity that results from technological spillovers.
Foreign holdings in key sectors Source: GSO, MPI Percent of Capital Controlled % Exploitation of crude oil 100 Manufacture of motor vehicles 68 Manufacture of motorcycles 66 Air conditioner 98 Washing machine 98 Fridge 94 Textile 40
2008 sees FDI in heavy industries leading the way FDI by sector - 2008 Source: GSO.
22 2.5 Good fiscal position Including off-balance sheet items, Vietnam’s budgetary position is based on a relatively high revenue collection of more than USD21 billion, or 20% of GDP, which compares very well against many of its Asian neighbours.
Most of the government revenue comes from corporate taxes, which represent 62% of all revenues. Personal taxes, on the other hand, are almost insignificant. The share of SOE-derived revenue has diminished substantially while that of private sector, mostly foreign, has increased substantially over the years. This underlines the growing importance of the private sector, both local and foreign, to the state budget.
Constant level of revenue to GDP...... and much higher than its peers Revenue (% of GDP) Revenue as % of GDP - Regional Source: MOF Source: ADB 30% 30% 25% 25% 20% 20% 15% 15% 10% 10% 5% 5% 0% 0% 2005 2006 2007 2008 1997 1999 2001 2003 2005 2007 Individual Income Tax Natural Resources Tax Real Estate Tax Import & Export Duties Vietnam Thailand Non-Tax Revenues Comsumption Tax China Philippines Capital revenue Corporate Income Tax Indonesia India Even progression of revenues...... private sector contributes more than SOE Revenue (USD bn) Contribution to state budget (%) 25 Source: MOF MOF, GSO, rounded
20
15
10
5 2000 2006 0 2005 2006 2007 2008 The average deficit as a percentage of GDP has stood at 2.25% during the 1996 to 2006 period. Compared to its neighbours, Vietnam did well. However, the fiscal deficit has increased substantially since 2007 as the country streamlined (reduced) its various taxes, and slightly increased spending in areas such as price subsidies to help farmers. Corporate taxes, the bulk of Vietnam’s fiscal revenue, were lowered to 25% against 28% in a bid to increase its competitiveness within the region and help the private sector. The 2009 fiscal deficit is expected to amount to around 9% of GDP as the government presses on with a USD1.0 billion stimulus package to soften the effect of the global economic crisis. It’s a choice the government of Vietnam has made. Yet, GDP should grow at 4-5% for the year.
23 Growing deficit...... mainly due to reduction in taxes Fiscal deficit as % of GDP - Regional Revenues & expenses as % of GDP Source: ADB Source: ADB 4% 29%
2% 27% 25% 0% 23% -2% 21% -4% 19% -6% 17%
-8% 15% 1997 1999 2001 2003 2005 2007 1997 1999 2001 2003 2005 2007 India China Expenditure Philippines Malaysia Revenues Thailand VietNam
Public debt is still manageable...... and external debt is benign Public debt (2008, % of GDP) - Regional External debt / GDP (%) % Source: CIA – World Factbook, 2008 Source: MOF % % % % % % % %
Current account is deteriorating...... while reserves are accumulating Current account as % of GDP Overall balance % of GDP -5% 15% Source: ADB Source: ADB 12% 0% 9% 6% -5% 3% 0% -10% -3% 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Arguably, Vietnam can afford a larger deficit as it is at the lower end of the spectrum in terms of debt to GDP ratio in the region. As of 2008, public debt was still manageable at slightly less than 40% of GDP and external debt is at slightly less than 30% of GDP. Nevertheless, the debt seems manageable, as the proportion of debt service to the budget has been gradually diminishing, even after taking into account the 2008 budget deficit.
24 Debt service is under control External debt metrics 6% Source: MOF 5%
4%
3%
2%
1%
0% 2004 2005 2006 2007 2008 External debt service / Export goods and services (%) External debt service / Budget revenue (%)
Vietnam’s rating has been improving over the years, until the growing trade and fiscal deficit put a dent in its outlook with S&P keeping its BB+ rating, but changing the outlook to negative from stable.
Sovereign Ratings Agency Rating Outlook S&P BB negative Moody's Ba3 negative Fitch BB- negative Source: ADB – Asian Bonds Online
S&P long-term LCY and FCY ratings, historical changes LT LCY Rating / LT FCY Rating / Updates Outlook Outlook May. 03, 2008 BB+/Negative BB/Negative Jun. 12, 2007 BB+/Stable BB/Stable Sep. 07, 2006 BB+/Stable BB/Stable Nov. 03, 2005 BB/Positive BB-/Positive Nov. 01, 2005 BB/Positive BB-/Positive Oct. 18, 2005 BB/Positive BB-/Positive May. 28, 2002 BB/Stable BB-/Stable Source: ADB – Asian Bonds Online
25 2.6 Government committed to reforms
In 1986, Vietnam launched its Doi Moi policy to open the economy and help the country achieve prosperity. State subsidies have been cut, price controls have been lifted, private enterprise has been permitted, State enterprises are gradually being privatised, foreign investment policies have been adopted, and several international treaties have been ratified.
Timeline of important economic events
1986-1989 Reforms targeting macroeconomic stabilization, move away from central planning and Initiation of opening up to FDI (albeit timid) and trade. Doi Moi 1987 – Land policy reforms transfers land use rights from SOEs to farmers, boosting agri- cultural prosperity
1989-1993 Macro reforms like price liberalization (for most products), reduction on monetary and Accelerated Reforms credit expansion, major devaluation of currency and reduction of SOEs. 1989 – First Foreign Investment Law
1994-1997 Reforms in areas of public administration, legislation, public expenditures, business envi- Institutional Reforms ronment, taxes, and many other areas. 1994 – US embargo lifter 1995 – Joins ASEAN; starts process to accede the WTO
1997-1999 Exports and FDI decline significantly, but GDP growth remains positive thanks to domestic Asian Crisis demand. 1998 – Joins APEC 1999-2007 Solid GDP growth propels Vietnam to economic stardom and places it the second best Rise of Vietnam performing country in the world after China. 2000 – Ho Chi Minh City stock market makes its debut 2000 – New Foreign Investment and Enterprise Law adopted, significantly improving on previous laws results in meteoric rise of FDI in Vietnam 2001 – US Bilateral Trade Agreement ratified 2001 – 5 year SOE reform plan with IMF/WB adopted 2001 – Communist Party reaffirms commitment to economic reforms 2001 – Constitution formalizes equal treatment for the private sector 2006 – Anti-Corruption law made effective 2006 – Socio-Economic Development Plan for 2006-2010 adopted 2006 – New Investment Law and Enterprise Law adopted, and allowing foreigners to invest in any sector except those explicitly restricted, and treating local and foreign companies on the same standing 2007 – Vietnam becomes the 150th member of the WTO 2008-Present Exports and FDI decline significantly, but GDP growth remains positive thanks to cheap Global Economic Crisis exports and domestic demand 2009 – First 100% foreign own full banking license granted
It is interesting to note that some of the most significant reforms were the result of negotiations to enter bilateral treaties. The negotiations for the US Bilateral Trade Agreement (BTA) that came in effect in 2001 formed the basis of the 2000 Foreign Investment Law, and the World Trade Organisation (WTO) negotiations pushed the promulgation of the 2006 Investment and Enterprise Laws, which for the first time incorporates WTO related concepts such as Most Favoured Nation and National Treatment. The introduction of modern Investment Laws and Enterprise Laws has also allowed extraordinary levels of Foreign Direct Investments (FDI) to enter Vietnam and help create a vigorous private sector.
26 2.7 Favourable Demographics
Much of the growth optimism for Vietnam, be it consumption, investment demand or Vietnam’s rise as an export base, is underpinned by its exceedingly favourable demographic profile. A young and eager population rapidly joining the workforce, stabilizing demographic growth and high levels of literacy all contribute to ensure that Vietnam will reap the benefits of a substantial demographic dividend that will continue to drive consumption and investments for years to come.
Advantageous population base Population (mn) - selected countries 250 Source: CIA – World Factbook, 2009 estimates 200
150
100
50
0 Indonesia Brazil Pakistan Russia Japan Philippines Vietnam Thailand S.Korea Malaysia
Vietnam to overtake Japan and Russia in the next 40 years Population trend - selected countries (mn) 200 Source: US Census Bureau, International Database 180 160 140 120 100 80 60 40 20 0 1950 1970 1990 2010 2030 2050 Philippine Russia Vietnam Japan Thailand Korea Malaysia
The 15th most populous country in the world, Vietnam’s population stands at 87 million and is already larger than that of neighbouring Thailand (66m) and Malaysia (26m). Trends show that Vietnam will continue to be one of the most populous countries in South East Asia, and will even surpass Japan by 2038 and Russia by 2050. A young population Vietnam has an enviable mix of moderating population growth entering the workforce coupled with acceleration in the number of people reaching active working age. This ensures there is plenty of skilled labour to join and spurring the myriads of foreign and local companies that make Vietnam their consumption playground.
27 Population by age group - 1996 (%) Population by age group - 2006 (%) 8 0+ 0.9 80+ 1.2 75-79 1 75-79 1.2 70-74 1.5 70-74 1.5 65-69 2.1 65-69 1.9 60-64 2.3 60-64 1.9 55-59 2.5 55-59 2.8 50-54 2.4 50-54 4.1 45-49 3.4 45-49 5.9 40-44 4.9 40-44 6.8 35-39 7 35-39 7.3 30-34 7.9 30-34 8.1 25-29 8.4 25-29 8.8 20-24 9.4 20-24 10.5 15-19 10.2 15-19 10.8 10-14 12.1 10-14 10.1 5-9 12.3 5-9 8.7 0-4 11.6 0-4 8.2 Population by age group - 2015 (%) Population by age group - 2025 (%)
% % % % % % % % Source: US Census Bureau, International Database Stable socio-economic While Vietnam enjoys stable demographics, its ethnic composition foundation also favours social stability. Close to 80% of the population adheres to a mixture of Animism and Buddhism (though officially they follow no religion) and ethnic minorities comprise only 14% of the population. Furthermore, the collective struggle for independence through the centuries creates a strong, proud, nationalistic bond.
Selected socio-economic indicators Source: CIA Factbook India China Vietnam Malaysia Indonesia Total literacy % 61.0 90.9 90.3 88.7 90.4 Female literacy % 47.8 86.5 86.9 85.4 86.8 Infant mortality /1000 30.2 25.3 22.9 15.9 30.0 Life expectancy years 69.9 73.5 71.6 73.3 70.8 Rising incomes and Population growth has eased to an average of 1.08% over the consumerism past decade from 2.26% in the 1980s as the country has became increasingly prosperous and the social security burden is shifting away from the family . No wonder life-insurance companies are doing so well.
28 Moderating population growth… …leads to rising individual wealth Population gowth (%) GDP per capita (USD) and growth Source: IMF Source: CIA – World Factbook 4.0 % 1,200 25% 3.5 % 1,000 20% 3.0 % 800 2.5 % 15% 2.0 % 600 10% 1.5 % 400 1.0 % 200 5% 0.5 % 0.0 % 0 0% 50 58 66 74 82 90 98 06 14 22 30 38 46 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 1950 2006
With a low GDP per capita, Vietnam still has a lot of potential GDP per capita (USD, 2008) - Regional 9,000 8,000 Source: IMF 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 Malaysia Thailand China Indonesia Vietnam India
Retail sales are resilient albeit the crisis...... while vehicle sales came down sharply Retail sales (yoy%) Vehicle sales (yoy%) Source: Bloomberg, GSO Source: Bloomberg, GSO
2007 2008 2009 2007 2008 2009
Vietnam’s GDP per capita has grown at a strong 11.2% CAGR over the past decade and has risen faster than many of its Asian peers, also surpassing India. In US dollar terms, income per capita rose from US$375 in 1999 to a 2008 level of US$1,040 and Vietnam has now officially entered the ranks of middle-income countries. Increasing wealth and stable population growth has enabled rising disposable incomes that has fuelled the consumption boom evident today. Retail Sales, jumped to a growth rate of 35% yoy in early 2008 due to an expanding monetary supply, but came back down to 25% as the global economic crisis continues. That being said, a growth rate of 25% yoy during a crisis is quite impressive and demonstrates the resilience of the Vietnamese economy. Vehicle sales, as a highly elastic good, have been more volatile. Year on year sales were up 200% in 2008, but shrank as Vietnam’s own credit crunch occurred as the government was fighting inflation. 29 30 3.0 Stock Market
31 3.0 Stock Market 3.1 Two bourses, one system Vietnam has two stock exchanges: the Ho Chi Minh City Stock Exchange (HOSE) and the Hanoi Stock Exchange (HNX). Both are state-owned companies managed under the Ministry of Finance, but plans to privatise the two are in the works with no known timelines. The HOSE was established first in 2000.The exchange initially had only five listed companies. By the end of 2005, only 40 companies had been listed and turnover remained relatively low. The number of listed companies, of which most were privatised state-owned enterprises (SOEs), quickly rose and so did its market capitalisation as some high profile names were listed. For many observers, this is when the stock market really began. The HOSE is today the largest and most liquid stock market in Vietnam. Its index is called the Vietnam Index (Reuters: .VNI, Bloomberg: VNINDEX, http://www.hsx.vn). The HNX was established mid-2005. It had a rather unclear mandate in the beginning, but now specialises in small caps companies, bonds, OTC companies, and will later be the home for derivatives trading while the HOSE will continue to be the main bourse for most mid-cap and large cap stocks. The HNX is already the main bourse for bonds, with only a handful left trading on the HOSE. Its index is called the HNX Index (Reuters: .HNXI, Bloomberg: VHINDEX, http://www.hnx.vn). The transfer of small caps from HOSE to HNX and large caps from HNX to HOSE has just started in June 2009. The OTC exchange made its debut on June 24 2009 and initially included 10 stocks, with more to be added over time.
Key Vietnam Stock Market Metrics 2005 2006 2007 2008 July 2009 Number of Stocks 40 183 249 338 367 HOSE 34 100 138 170 162 HNX 6 83 111 168 205 Market Cap (USD mn) 588 13,774 31,556 13,010 24,100 HOSE … … 22,760 9,687 19,115 HNX … … 8,795 3,323 4,985 Avg. Daily Turnover (USD mn) 0.78 10.10 70.77 42.42 73.91 HOSE 0.72 9.09 54.81 29.08 47.91 HNX 0.07 1.00 15.96 13.34 26 Index Performance* % 20% 147% 26% -66% 32% HOSE 29% 144% 23% -66% 36% HNX -4% 152% 34% -68% 36% PE* … … 31 12 17 HOSE … … 28 13 18 HNX … … 38 9 14 * Market capitalisation weighted averages Sources: Bloomberg, HOSE, HNX
32 Apart from having different daily trading band restrictions, and that the HOSE has an opening and closing session while the HNX has only a continuous order matching session, placing orders on one bourse or the other is seamless. The Ministry of Finance has set the maximum foreign ownership limit of any listed company to 49%, and 30% for banks. Please see our section on market mechanics within this primer for more details on this. 3.2 Rapid ascension to stardom In 2006, the HOSE became the best performing stock market in the world, accruing an outstanding 147%, albeit on the back of a 50% local credit growth. Clear outperformer VNINDEX - Relative performance
500 Source: Bloomberg
400 200
300
200 100
100
0 0 Jan/2005 Jan/2006 Jan/2007 Jan/2008 Jun/2009 VNINDEX (lhs) MSCI EM (lhs) MSCI AXJ (lhs) Value (USD mn) (rhs)
Moreover, the Vietnam Index (VNI) has clearly outperformed the MSCI emerging market index since January 2005, even after taking into account the deep correction that occurred in 2008 as a result of a mix of high inflation, drastically tightened local liquidity, and the global economic crisis.
33 3.3 Dramatically improved market conditions Since the avalanche of new listings in 2006, propelled in part by the ongoing effort to privatise SOEs, the stock market has grown quite spectacularly. The number of listed stocks has increased by 8 times from 2005 to July 2009, while market capitalisation jumped by 40 times over the same period, and that’s even after taking into account the major correction suffered on the Vietnam stock markets due to domestic missteps and the global financial crisis. Liquidity has also dramatically improved with turnover volume soaring by a factor of 65 times, and turnover value by 90 times in the same period. Increasing depth... …and liquidity Market depth Daily volume and value Source: Bloomberg, VinaSecurities Source: HOSE, HNX
Market Cap (USD bn) (lhs) Number of Stocks (rhs) Avg Value /day (USD mn) (lhs) Avg Volume/day (mn shares) (rhs)
As is characteristic of young capital markets, the bulk of market turnover come from retail investors. There isn’t any publicly available data on the proportion of retail investors and institutional investors to total trading value, but market participants generally accept the view that most foreign trades are made by institutions and most local trades are made by individuals. Vietnam doesn’t have a pension fund and mutual fund industry. Local institutions include banks and insurance companies, who are the bond market main players. Foreign investors usually focus on liquid large cap companies and explain why their traded value is constantly higher than their trading volume as percentage of total trades. Local players gaining importance… …yet foreigners are here to stay Foreign participation Foreign turnover volume (million shares)
Source: HOSE, HNX
Source: HOSE, HNX, 2009 is annualised as of July
a % of total Volume % of total Value
34 The proportion of foreign participation in the market declined in 2008 and 2009, but that’s only because the local market has been growing faster. In effect, the number of shares traded by foreigners has actually increased steadily ever since the stock market has opened. Although Vietnam’s capital market grew at an incredible pace over the past few years, it remains relatively young in comparison to its neighbours. Market Cap as a percentage of GDP was at the end of 2008 the lowest in the region. When comparing Market Cap as a % of GDP to GDP per capita, Vietnam is also at the lower spectrum.
Smallest market capitalisation as % of GDP, yet its larger SOEs have not privatised Market capitalisation as a % of GDP - Regional 140% Source: Bloomberg, IMF, as of year-end 2008 120% 100% 80% 60% 40% 20% 0% Singapore Malaysia India China Thailand Philippines Indonesia Pakistan Vietnam
Vietnam on the path to market growth Market development - Regional 60% India Source: Bloomberg, IMF, as of year-end 2008 50% 40% China Thailand 30% Philippines 20% Thailand Pakistan
Mkt Cap as a % of GDP 10% Vietnam 0% 0 500 1000 1500 2000 2500 3000 3500 4000 4500 GDP per Capita Notwithstanding that, there is little doubt that the Vietnamese stock markets will continue to soar in terms of market capitalisation and liquidity as most large state-owned enterprises are expected list in between 2009 and 2011. For example, Bao Viet Holdings and Vietcombank listed on July 1st 2009, respectively adding USD1.6bn and USD4bn to the total market capitalisation, which increased from USD18bn to USD24bn as a result, and may mean Vietnam has surpassed Pakistan in terms of market cap as a percentage of GDP today.
35 Selected upcoming listings and IPOs
Float Announced Likely Size Likely English Name Action Sector Value Timing (USD mn) Float (%) (USD )mn) MH Bank Listing Bank TBA 600 0.2 120 Eximbank Listing Bank TBA VP Bank Listing Bank TBA ViB Bank Listing Bank TBA Incombank Listing Bank TBA 1500 0.2 300 BIDV Listing Bank TBA 2000 0.2 400 Habubank Listing Bank TBA Agribank Listing Bank TBA Military Bank Listing Bank TBA Techcombank Listing Bank TBA Sabeco Listing Brewery TBA Habeco Listing Brewery TBA Mobifone IPO Telecom TBA 4300 0.2 860 Viettel IPO Telecom 2009-10 1000 0.2 200 Vinaphone IPO Telecom 2009-10 3500 0.2 700 EVN Telecom IPO Telecom 2009 Vietnam Airlines IPO Airline 2009 Source: VinaSecurities
Due to the plunging stock market and unfavourable economic conditions, many IPOs have been delayed indefinitely by the government. An updated schedule has not been issued and it is unclear at this time if IPOs planned for 2010 will also be delayed. If not, we could have a substantial amount of IPOs coming to market at the same time. As to when the privatisation program will resume, the answer probably lies somewhere between the urgency to privatise SOEs before their markets liberalise under the WTO accession roadmap, i.e. between 2010 and 2014, and the pressure to sell state assets at reasonable prices. Interests in resuming the program have been felt when the VNINDEX reached the 500-600 level.
3.4 Market composition
The Vietnam stock market composition is weighted towards financials which account for more than 50% of the combined market cap. Market dominated by financials Market structure by ICB sector Technology 0.6% Source: Bloomberg, as of July 1st, 2009 Health Care 1.5% Telecom 2.8% Oil & Gas 3.4% Consumer Services 3.7% Utilities 4.4% Basic Materials 6.9% Consumer Good 13.0% Industrial 13.4% Financial 50.2%
0% 10% 20% 30% 40% 50% 60% 36 The distortion is largely caused by three banks, ACB, STB and VCB that together account for over 28% of the total market cap. When taking into account that foreign ownership is full for these three banks, tracking the index can be tricky. The stock market is also characterised by few large cap and a long tail of small caps. As of July 1st, there were 60 companies with a market cap of USD50 million and above, 40 companies with a market cap above USD90 million, and 20 companies with a market cap above USD210 million, representing respectively 87%, 80% and 71% of total market cap. Long trail of micro-caps with a few large firms Market structure by market cap
318 Source: Bloomberg, as of July 1st, 2009
23 8 11
Market Cap (USD bn) (lhs) # of Stocks (rhs) 3.5 Foreign investment regulations Other than the limits on FX transactions, there are no exchange controls on selling and buying Vietnam stocks. As long as investors pay their legal obligation to the state (taxes), there are no restrictions on the repatriation of funds. Various disclosure rules apply when buying and selling stocks in companies in which the investor is a member of the board or is an executive, or when holding more than 5% of the total outstanding shares. Foreign ownership is restricted to 49% for all non-bank enterprises, and 30% for banks. Investors do need to open a trading account with a local broker, a custodian account with a bank, local or foreign, incorporated in Vietnam, and open a depository account with the Vietnam Depository Department. All these formalities are a bit cumbersome, but once completed, there are no other restrictions or paperwork to complete other than those in relation to disclosure rules.
3.6 Taxation Institutional investors pay a 0.1% withholding tax on the value of any stock or investment certificate they sell. There are no capital gains or remittance tax. Dividends are also tax-free. Individuals don’t pay any taxes on securities transactions, capital gains or dividends. On January 2009, the National Assembly passed a new personal income tax law that imposes a tax regime to individuals comparable to that of institutional investors. However, as of July 2009, the application of the law has been postponed indefinitely.
37 4.0
38 4.0 Fixed Income Market
39 4.0 Fixed Income Market 4.1 Heavily skewed towards government bonds
Vietnam’s money market is dominated by Vietnam Government Bonds (VGB) and Vietnam Development Bank (VDB) bonds, a non-profit state bank with a mandate to reduce poverty and hunger and assist in the development of exports. Municipal and corporate bonds comprise 4% and 7% of total outstanding bonds as of May 27, 2009, respectively. Government bonds are issued in maturities of 2, 3, 5, 10 and 15 years, with the 5-year bond being the most abundant and liquid. According to Bloomberg, 96% of all outstanding bonds were VND denominated, with the remaining being USD denominated, as of June 2009.
Dominated by government bonds...... with most maturing in the next 3 years Bonds by issuer type Source: Bloomberg, Bonds by maturity (USD bn) as of May 27, 2009 2.5 Source: Bloomberg, as of May 27, 2009 2.0 VDB 30% State 59% 1.5
1.0
Munis 4% 0.5 Corp 7% 0 2009 2011 2013 2015 2017 2019
Bonds are sold through various sales channels. However, there has been a recent shift towards auctions and underwriting, away from retailing and private placements. Once issued, all bonds are listed on the HNX. There are no fixed schedules for bond issuance. The state Treasury (which organises the bond issuance for the government) announces at the end of each quarter a broad plan of issuance, including total amount to raise, number of likely auctions and a tentative schedule. That being said, a Dutch-style auction (uniform price) is typically conducted every fortnight. Notices are sent 2-4 days beforehand and only institutional investors or enterprises holding bond-bidding certificates may participate. Bond bidders are required to indicate the tendering volume and yield bid and deposit up to 10 percent of their bid value. Treasury always has an undisclosed target ceiling. If yield bids are higher than the ceiling, the auction has failed. Winners are notified within one day.
40 Municipal bonds As of May 27, 2009, only 4%, or 355 million USD, of the value of all outstanding bonds were municipal bonds. Most municipal bonds are issued by Vietnam’s three major cities (Ho Chi Minh City, Hanoi, and Dong Nai), in issues of 5, 10, 15 year maturities with limited disclosure. Smaller provincial authorities are unlikely to issue bonds under present circumstances as specific MOF approval is required. Municipal bonds are also subject to quotas on issuing amounts and interest rates. Sub-national authorities are not permitted to issue bonds in foreign currency.
Corporate bonds As of May 27, 2009, four corporate bonds were traded on the stock market with a total value of USD 760mn, or 7% of total outstanding bonds in Vietnam. Most corporate bonds are issued as private placements. Issuances of corporate bonds have doubled since the introduction of new laws in 2006 regulating private placements. Almost all bond purchases are by institutions, particularly insurance companies. The secondary market for those bonds is small and illiquid and dominated by a few players. The underdevelopment of the corporate bond market is partially due to the lack of awareness among corporations of this instrument as a source of financing. With equity valuations sky-high in 2007, it was virtually impossible to convince companies to finance their development by issuing debt securities instead of new shares. Vietnam’s credit crunch in 2008 then caused interest rates to spike and made it difficult for companies to borrow. With interest rates back to pre-crisis levels, and stock market valuations at more reasonable levels, we expect more Vietnamese companies will turn toward the debt markets for their financing needs.
Other fixed income There are no derivatives, no project revenue bonds (bonds supported instruments by the revenues of the project being financed and without recourse to the sponsoring authority) and no securitization of revenue flows from existing assets has taken place to support the finance of new assets as there are currently no laws in Vietnam governing securitization. Other hurdles to the development of alternative debt markets are aplenty. The State Budget Law does not allow sub-national governments to pledge specific taxes, user fees, or project revenue streams to bondholders. It also stipulates that money generated from municipal bond issuances must be deposited in the State Treasury on nil–interest terms.
4.2 Quickly developing market Since the government took steps to reform the debt market in 2006, depth and liquidity have dramatically improved. The ratio of market capitalisation to GDP tripled from 2004 to 2008 and average daily turnover increased one-hundredfold during the same period, averaging USD 45 million in 2008. Bond issuances have been reduced severely during 2008 as high interest rates (base rate was 14%) made it unattractive for the government to issue any bonds beyond its immediate needs. Several “non-essential” government projects were slashed as a result.
41 Increasing depth...... and liquidity Outstanding Bonds (USD bn) Avg daily trading value (USD mn) Source: ADB, IMF Source: HOSE, HNX
USD bn (lhs) % of GDP (rhs)
4.3 Relatively smaller market than peers Size of debt market as % to GDP
Source: ADB Asia bond online, IMF, data as of September 2008, rounded
Notwithstanding its swift development, Vietnam’s debt market remains embryonic relative to its regional peers. The ratio of outstanding bonds to GDP was estimated at 16.35% as of September 2008, well below the regional average.
In addition to being a small market, the Vietnam bond market suffers from liquidity issues that can be attributed to structural factors, which include:
A fragmented market Too many small outstanding bond issues fragment the market and depress liquidity in the secondary market. As of May 27, 2009, there were 500 government bonds outstanding, all listed on the HNX, with a few remnants on the HOSE to be phased out. Trades can be made by order matching on the trading floor, or through negotiation, in which case it is still required to be matched by a licensed Vietnamese broker and registered at the HNX. The vast majority of trades are made through direct negotiation.
42 Interference Auction prices lower than those in the secondary market are interfering with secondary market trading. Nobody likes to pay a premium price to market price. This has considerably hampered the issuance of new bonds by the government. As of June 2009, over 14 bond auctions have failed to attract winning bids since the beginning of the year. Local commercial banks buy nearly 50% of issuances, focusing on terms of five years or less and tend to buy and hold. Insurance companies are also substantial buyers, focusing on the longer term bonds of 10-15 years and also tend to buy and hold. It is not uncommon for insurance companies, both local and foreign, to have over half of their total investment portfolios in government bonds. Other institutional investors include the Social Security Fund, non-bank finance companies, securities firms, and more recently investment funds.
4.3 Policy development International corporate The government has given the go ahead to the Viet Nam bonds Shipbuilding Industry Group (VINASHIN) to issue VND3 trillion (USD171.6 million) of local bonds and, for the first time, international bonds worth USD400 million to raise capital for its core projects. This is welcome news as it creates a precedent for other SOEs and perhaps large private companies.
USD8 billion The Prime Minister has ordered the Ministry of Finance, Ministry stimulus package of Planning and Investment, and the State Bank to work together in managing and allocating the planned USD8 billion economic stimulus package. USD1 bn will be allocated to subsidize 4% of company loans and enhance small business lending access. Most of this stimulus package was supposed to be financed by the issuance of new bonds. However, as we speak, all bond issuance failed as the yield investors bid was higher than that of the ceiling yield the government was prepared to pay.
MOF led market The MOF plans to develop a primary dealer system for government developments bonds where the latter would commit to buying a minimum volume to distribute to investors and enhance liquidity in the primary market. In terms of issuance, the MOF will shift towards issuing bigger lots and lengthen the maturity profile in a bid to enhance liquidity in the secondary market. Also important, the MOF intends to establish an independent credit rating agency for the rating of all bonds. Moreover, the corporate bond issue roadmap is expected to be released in 2010 to help create a more attractive investment channel for both foreign and domestic investors. All of these plans should considerably help the depth and liquidity of the market and demonstrates the government’s openness and intentions to make the debt markets more efficient.
Bond Trade Association Bond traders plan to set up a Vietnam Bond Trade Association. The Bank for Investment and Development of Vietnam (BIDV) and the IFC will play a major role in the operation of the association and ensure that it operates according to transparent and international standards.
43 4.4 High yields While depth and liquidity isn’t great, Vietnamese bonds do tend to offer higher yields than most other Asian markets – Indonesia being the only exception. Higher yields underlines risk premium Yields - Regional- 2Y Avg, Min, Max and Current Yields Source: Bloomberg, 5Y government bond, as of May 27, 2009 20%
15%
10%
5%
0% Vietnam Indonesia India Thailand Malaysia China Singapore avg 10.90% 11.13% 7.54% 3.80% 3.63% 3.45% 1.97% min 7.19% 8.47% 5.13% 2.06% 2.67% 1.78% 1.03% max 20.53% 20.06% 9.50% 5.74% 4.34% 4.27% 3.08% current 9.25% 9.80% 6.42% 2.82% 3.68% 2.36% 1.18%
The high volatility shown in the 5Y VGB is due to a spike in yields as investors sold everything they could before Armageddon. The catastrophe many expected was a steep 50% devaluation of the local currency from 17,500 to 22-25,000 VND/USD as supported by the 12mo forward NDF. This scenario came about as observers were concerned with Vietnam’s high levels of inflation (23% year on year average for 2008) and high trade deficit that came with a spur of consumption fuelled by a 50% credit growth in 2007. The government reacted by increasing benchmark interest rates from 8% to 14% and by mandating local banks to purchase T-bills. The tactic worked, lending subsided, liquidity restraints deflated assets bubbles (property, stock market), and the global credit crisis helped commodity prices and inflation to moderate. Benchmark interest rates have since been lowered to 7% and VGB yields came back down to slightly above 9%. Stable yield, except when on the verge of a currency crisis 5Y VGB Yield Source: Bloomberg 20 %
15 %
10%
5 % 06 07 08 09 10 11 12 01 02 03 04 05 06 07 08 09 10 11 12 01 02 03 04 05 2007 2008 2009
44 Other risks in trading Vietnamese bonds include currency volatility, inflationary pressures and semi-closed accounts. Vietnam’s exchange rate policy is a hybrid; permitted to trade freely within increasingly widening trading bands around a target rate set daily by the central bank. Investors FX needs aren’t always met as local banks, including foreign ones, have limited USD supply and that the SBV doesn’t always answer calls for USD liquidity. Rapid growth in money supply leads to inflation Monetary indicators
Source: CEIC
2002 2003 2004 2005 2006 2007 2008 M2 (yoy%) CPI (yoy%) Prime rate (%)
To the credit of the government, measures implemented in response to significant macroeconomic challenges in 2008 were effective in stabilizing the Vietnamese Dong, cutting the trade deficit, and slowing inflation. As these measures were taking hold, the global economic outlook worsened in the fall of 2008. As a result, many economists predict growth to slow to around 4-5% if current trends continue. 12 months forward NDF were all pricing these factors in 12mo forward NDF vs actual rate (USD/VND) 25,000 Source: Bloomberg 23,000
21,000
19,000
17,000 15,000 01 02 03 04 05 06 07 08 09 10 11 12 01 02 03 04 05 2008 2009 12month forward NDF Actual Rate
45 4.5 Foreign investment regulations Other than the limits on FX transactions, there are no other exchange controls on selling and buying Vietnam bonds. As long as investors pay their legal obligation to the state (taxes), there are no restrictions on the repatriation of funds. Foreign investors require no local regulatory approvals to invest in the debt market and there are currently no limitations on foreign ownership. Investors do need to open a trading account with a local broker, a custodian account with a bank, local or foreign, incorporated in Vietnam, and open a depository account with the Vietnam Depository Department. All these formalities are a bit cumbersome, but once completed, there are no other restrictions or paperwork to complete. 4.6 Taxation Institutional investors pay a 0.1% withholding tax on interest earned on each coupon payment date, on principal and interest at maturity, and on the value of sales proceeds (when selling only). There are no capital gains or remittance taxes. Individual investors don’t pay any taxes on bond transactions, interests or principal. On January 2009, the National Assembly passed a new personal income tax law that imposes a tax regime to individuals comparable to that of institutional investors. However, as of July 2009, the application of the law has been postponed indefinitely.
46 47 5.0
48 5.0 How to invest in Vietnam
49 5.0 How to invest in Vietnam 5.1 Opening an account To start trading in Vietnam, investors must establish relationships with a custodian and a broker. While many brokers offer custodian services, the vast majority of foreign investors prefer to work with one of the four international banks with full operations in Vietnam. Local institutions also increasingly use local banks, and sometimes foreign banks, as their custodian. Banks offering full custodial services are detailed at the end of this chapter.
The custodian The relationship with the custodian is crucial. Not only will they open a capital contribution account, a cash account and a depository account, but they will also liaise with authorities to register the investor and obtain the investor’s trading code. Registration is usually quite straightforward as long as all documents are provided. In addition to traditional custodial services, custodians offer cash management and reporting services (to relevant authorities). They also take care of paying taxes on behalf of the investor.
The broker It is also necessary to open an account with a validly licensed broker in Vietnam. The broker receives and executes all trades and reports to the investor’s custodian at the end of each day for settlement. Brokers, unless also acting as custodian, are not involved in the settlement process which limits operational risks for investors.
One broker/ Due to current regulations, any legal entity can open only one custodian rule depository account with a custodian and one trading account with a broker. It is not permissible to have more than one custodian and/or one broker per legal entity. Note that Vietnam has no regards as to who the beneficial owner is and that the restriction is limited to each legal entity. It is entirely possible for a fund manager who manages two funds to appoint a different broker for each fund, as long as each fund is a different legal entity, and yet to use the same (or different) custodian for convenience.
Special rule for foreign Foreign brokers incorporated under foreign laws are allowed to have securities companies two custodial accounts (one for principle trading and one for clients) linked to one securities trading code (STC) only. This means that the current limitation that bans the buying and selling of the same stock within the same day applies to both accounts combined. However, the two accounts are able to trade between each other. Such trades are conducted on the custodial system, not through the market.
Special rule for local Locally licensed fund managers are permitted to have more than one fund managers custody account: one for proprietary trading and one for each fund under their management. If the fund manager also provides portfolio management services, the fund manager must open two custody accounts, one for local clients and the other for foreign clients. For their foreign clients’ portfolios, the fund manager must apply for a securities trading code (STC). 50 5.2 Market Mechanics
Basics Stock exchanges Ho Chi Minh Stock Exchange Hanoi Stock Exchange (abbr.) (HOSE) (HNX) Further information Reuters: .VNI Reuters: .HNXI Bloomberg: VNINDEX Bloomberg: VHINDEX http://www.hsx.vn http://www.hnx.vn
Currency of trade Vietnam Dong (VND)
Trading days Monday – Friday
Holidays • January 1st – New Year • Jan-Feb – Vietnamese (Chinese) New Year (last day of the last lunar month to the third day of the first lunar month inclusively) • April – King Hung Commemorations (10th day of the 3rd lunar month) • April 30 – Liberation Day • May 1 – Labour Day • September 2 – National Holiday
Boards • One main board only (HOSE) • Main board (HNX) • OTC board (UpCom) Trading hours HOSE: Equities (no bonds on HOSE) HNX: Equities & Bonds Session 1: 08:30-9:00 (Periodic OM) Session 1: 08:30 – 11:00 Session 2: 09:00-10:15 (Cont. OM) (Continuous OM and PT) Session 3: 10:15-10:30 (Periodic OM) Session 4: 10:30-11:00 (Put-Trough) UpCom: Equities & Bonds Session 1: 10:00 – 11:30 Sessions 1-2-3 are for order matching Session 2: 13:30 – 15:00 (OM). Matching in session 1 and 3 (Continuous OM and PT) is done at the end of each session (periodic) while Session 2 matching is HNX only has one session where matching is continuous throughout the session and conducted by order matching (OM) or put- follows the PTQ priority principle (more through (PT) both for equities and bonds. A details on this further). Put-Trough (PT) is optional if trading at least 5,000 shares or 1,000 bonds. Order matching A Put-Through (PT) is the act of directly (OM) is mandatory for smaller trades. matching an order with another market participant, aka block dealing. On the UpCom has two sessions where trades are HOSE, any order of 20,000 shares or matched through OM or PT. On the first day more must be matched through PT, of a newly listed stock, only OM orders are either by finding your own counterparty, accepted. or asking your broker to help through their network or by posting an EOI on the main board. In any cases, all PT transactions need to be matched in the exchange system.
51 Foreign ownership Equities: 49% of listed shares; 30% for banks; limit (FOL) Bonds: No FOL published daily by Bloomberg, HOSE and HNX
Price Units / Ticks / Price unit / tick if Equities Bonds aka Quote unit current OM PT OM/PT price is (VND): HOSE HNX UpCom All Exch All Exch ≤ 49,900 100vnd 100vnd 100vnd None None 50,000 to <100,000 500vnd 100vnd 100vnd None None ≥ 100,000 1,000vnd 100vnd 100vnd None None
Board lot HOSE HNX Equities: 10 shares, none for PT Equities: 100 shares, none for PT (does not apply to Bonds: 100 bonds, none for PT PT transactions) UpCom Equities & Bonds: No board lot, but a min. of 10 shares must be traded
Order types & validity HOSE HNX LO: Limit order, valid the entire day LO: Limit order, valid the entire day (does not apply to ATO: Market order valid in 1st session PT transactions) only, priority over LO UpCom ATC: Market order valid in 3rd session LO: Limit order, valid the entire day only, priority over LO Amending and cancel- HOSE HNX ling orders Session 1: Cannot cancel any orders. Session 1: Unmatched part of any Unmatched portion of any ATO orders can be cancelled at any time. (does not apply to orders are automatically cancelled at PT transactions) the end UpCom Session 2: Unmatched part of any All sessions: Unmatched part of any orders can be cancelled at any time orders can be cancelled at any time. Session 3: Can only cancel limit orders that were placed in previous sessions Session 4: N/A – does not apply to PT Matching principle HOSE HNX LO bids at higher or equal prices to LO bids at higher or equal prices to asks (does not apply to asks prices are matched against each prices are matched against each other PT transactions) other following the PTQ principle. following the PTQ principle. Partial fills Partial fills are possible. are possible.
See section on “order matching and UpCom price determination” for details about LO orders of the same price and volume how ATO and ATC orders are matched. are matched. Orders cannot be partially filled. Matching priority All exchanges #1 – Price priority: priority to highest price bids or lowest asks. (does not apply to #2 – Time priority: for orders at same price, priority to orders that came in first. PT transactions) #3 – Quantity priority: for orders at same price and time, priority is given to orders with the highest quantity of shares.
52 Settlement HOSE HNX Equities: T+3 days, if transacting Equities: T+3 days, if transacting over over 100,000 shares, T+1 100,000 shares, choice of T+1,2 or 3 (money/stocks received on settlement Bonds: T+3, if transacting over 100,000 day can only be used the day after) bonds, choice of T+1,2 or 3
UpCom Equities & Bonds: T+3 Face value Equities: 10,000vnd – Bonds: 100,000vnd Odd-lots Odd lots may be kept, sold in a PT transaction, or sold to your broker.
Other restrictions Funding / Short Selling: Investors must have sufficient funds in their VND account if buying, or securities if selling (e.g. short selling is not permitted). If investors have a pending FX transaction into VND, your custodian may take this into account when verifying for funding requirements. Same day Buy / Sell: It is not possible for an entity to buy and sell the same shares on the same day. Securities borrowing or lending: Not permitted.
Trading unlisted Unlisted OTC transactions are based on the exchange of physical script and are OTC securities effected by signing a sales purchase agreement (SPA) with the counter party. Transactions in the unlisted OTC sphere aren’t reported to any centralized exchange or trading system. Price information can be obtained by talking to those who see OTC transactions being done (brokers). A few websites also collate the information provided by various brokers (http://www.sanotc.com). Volume information is very hard to obtain. For in-depth details on the unlisted OTC market operations, please ask for our Guide to Vietnam Market Mechanics.
Restrictions on insider Shareholders that are also members of the board of management or board of trading controllers, a director, general director, deputy director or chief accountant of a newly listed company must undertake to hold 100% of the shares they own for a period of six (6) months from the date of listing and 50% of this amount for the following six (6) months, excluding any shares held by individuals acting as repre- sentative of the State.
53 5.3 Capital flows Capital control There are no explicit capital controls in Vietnam providing funds have been legally obtained and all obligations to the state discharged. However, availability of foreign currencies is not guaranteed. There are no FX restrictions and quota and FX forwards are allowed for genuine underlying transactions. The SBV fixes the USD/VND target rate on a daily basis and the inter-bank market is permitted to trade within a ± 5% band of the target rate.
Source of capital Foreign investors are entitled to purchase securities in Vietnam provided the source of funds is legal, such as: 1. Foreign currency remitted from abroad into Vietnam in accordance with current provisions on foreign exchange control; 2. Distributed profits of from direct investment activities in Vietnam; 3. Receipts of foreign investors from the transfer, liquidation, dissolution of their direct investment activities in Vietnam in accordance with provisions of applicable laws; 4. Salaries, bonuses and other legal income of foreign individuals in Vietnam in accordance with provisions of applicable laws; 5. Other sources if accepted by the State Bank.
Remittances After having fulfilled their tax obligations to the State, foreign investors are entitled to purchase foreign currency at authorized banks to remit overseas. Custodian banks usually take care of this for their clients.
5.4 Taxes
Institutional investors pay a 0.1% withholding tax on interest earned on each payment date of a bond coupon, on principal and interest at maturity, and on the value of sales proceeds (when selling only) of both bonds, stocks and investment certificates. There are no capital gains or remittance taxes. Dividends are also free of tax. Individual investors don’t pay any taxes on trading activities. No capital gains tax, no sales tax, no stamp duty, no remittance tax, and no tax on stock dividend, coupon or principle (for bonds). On January 2009, the National Assembly passed a new personal income tax law that imposes a tax regime to individuals comparable to that of institutional investors. However, as of July 2009, the application of the law has been postponed indefinitely.
54 5.5 Foreign ownership limits (FOL)
Subject to the exceptions listed below, foreign investors are permitted to make capital contributions and purchase shares in Vietnamese enterprises without restrictions as to ownership. Particularities also apply to sectors as per WTO commitments.
FOL for listed The FOL for listed securities on either the HOSE or the HNX is 49% of total securities listed shares. However, the total FOL for banks is 30% of total listed shares with a maximum of 5% for any single investor, 10% for any one banking investor, and 15% for any strategic investor (banks). A 20% stake requires the approval of the Prime Minster. FOL for banks include related persons (see further within this chapter for more details). There are no FOL for listed bonds. FOL is published daily by Bloomberg.
FOL for unlisted The FOL for unlisted securities varies as per WTO commitments. In general, securities the FOL is 30%, but varies with the sector. For banks, investors should note that to buy even a single share of an OTC bank, it is imperative to secure the approval of the State Bank of Vietnam (SBV). In practice, such approval has so far only been granted to foreign banks who also pledged to act as a strategic investor. There are no FOL for unlisted bonds.
FOL for IPOs Foreigners are allowed to buy up to 30% of state-owned enterprises (SOE) through an IPO unless otherwise restricted. If an SOE is privatised by other means, the FOL will be determined by the government when appropriate. It’s important to note that once an IPO is completed, the stock is traded on the OTC for a certain time before it lists. This can be anywhere from three months to two years.
Related persons as The parent company of that organisation or any other member company it applies to banks’ that is within the same parent company with that organisation; FOL include • Any person or an institution that manages the parent company or has the authority to appoint the executive officer in the parent company of that organisation; • Any member company or subsidiary of that organisation; • Any executive officer, member of the Board of Controllers or person/ an organisation having the authority to appoint the executive officer of that organisation; • Any shareholder or group of shareholders holding 10% or more of total common shares of that organisation; • Spouse, parent, adoptive parent, children, adopted children, and brothers and sisters (and spouses of these persons) of any executive officer, member of the Board of Controllers, or shareholder holding 10% or more of the total common shares of that organisation; • Spouse, parent, adoptive parent, children, adopted children, and brothers and sisters (and spouses of these persons) of that individual; • An individual authorized to represent such persons referred to in paragraphs (1), (2), (3), (4), (5), (6), and (7) above, with respect to their authorisers and related persons of those authorisers and authorised persons.
55 5.6 Other important notes for investors
Disclosure Disclosure is required for any transactions that change the ownership of an investor to above or below 5%, as well as above or below 25%, of the total listed outstanding shares of any listed company. If an investor already owns over 5%, any sell/purchase executed in a single day equal to or above 1% of listed outstanding shares must be disclosed. There are no disclosure requirements for listed or OTC bonds. As for OTC shares of unlisted companies, disclosure vary with the sector and according to Vietnam’s WTO service commitments.
WTO Vietnam’s WTO service commitments are Vietnam’s specific agreements toward WTO members with respect to gradually opening local markets. Different sectors are scheduled to open to foreign participation at different times (years) and in some cases only gradually. Generally speaking, manufacturing isn’t restricted except for particular goods such as oil & gas, automobile, beer and fertilizers. Note that local regulations in practice may narrow down the framework set by Vietnam’s WTO service commitments from time to time.
Board seats Rules on whether an investor is entitled to a board seat after it has acquired a significant portion of a company’s outstanding shares are entirely subject to the particular company’s charter. In general, with a stake of at least 10%, investors are entitled to nominate one (1) person, but this does not imply that person will be accepted. Note that board member nominations are held every 5 years (unless the company’s charter sets out another term of office) by annual shareholder meeting, unless a vacancy becomes available beforehand, or the number of members is increased by decision ratified at an annual shareholder meeting.
Strategic investors If foreign investors desire to become strategic investors of Vietnamese enterprises, they must demonstrate the financial and technical capacity to support the latter to develop and improve management, as well as transfer modern technologies on a long term basis.
56 5.7 Banks offering custodial services in Vietnam
HSBC 235 Dong Khoi, District 1, HCMC T: +848 3829 2288 Ext: 269 F: +848 3822 7380 Securities services Direct: +848 3520 3269 [email protected]
Standard 37 Ton Duc Thang, District 1, HCMC T: +848 3829 8335 Chartered Bank F: +848 3829 8426 Relationship Manager Direct: +844 3946 8145 [email protected]
Citibank 17 Ngo Quyen, 1st Floor, Hanoi T: +844 3825 1950, ext 466 F: +844 3936 1247 Securities Services Direct: +844 3825 1950 ext 466 [email protected]
Deutsche Bank 14F, 65 Le Loi Blvd, District 1, HCMC T: +848 3829 9000 ext 309 Domestic Custody Services [email protected]
Bank for 12-14 Nam Ky Khoi Nghia, District 1, HCMC T: +848 3821 8812 Investment and F: +848 3821 8813 Development of Depository & Custody Vietnam (BIDV) Direct: +848 3821 8812 ext 110 [email protected]
57 58 6.0 Country Fundamentals
59 6.0 Country Fundamentals 6.1 Geography
Vietnam is a Southeast Asian country sharing land borders with CHINA Cambodia (1,228km) and Laos (2,130km) to the west, and China Lao Cai Fan Si Pan (1,281km) to the north. It is bordered by with the Gulf of Thailand to
Hong the south, the Gulf of Tonkin to the north-east, and the South China HANOI Gai Haiphong Sea to the east, totalling 3,444 km of coastline. Extending 1,650 km from north to south, the country is only 50km across at its narrowest point. The terrain is characterised by low, flat Hainan LAOS Vinh Gulf of Dao Tonkin (CHINA) deltas in the south and north, highlands in the centre and mountains
Me k in the far north. o n g Vietnam is culturally and economically characterised by its shape
Hue and can be analysed today according to three distinct regions. The Da north is characterised by Hanoi, the political capital, an increasingly THAILAND Nang industrial region near the border with China, and an important port in Hai Phong. The centre is often referred to as the cultural hub of
Quy Nhon Vietnam, with arts, handicraft and music from the region being popular throughout the country. It is also becoming an important CAMBODIA transhipment base for international shipping routes, more so when Nha Trang Cam Ranh the East-West highway is eventually completed. Danang, Vietnam’s third city, is also becoming an industrial area of note to foreign Ho Chi Minh City Me investors. The south is dominated by Ho Chi Minh City, the country’s Long Xuyen k ong Dao Phu largest city and major economic and manufacturing center. The Quoc Can Tho South Gulf of China Mekong delta is home to the largest farming activity in Vietnam. Thailand Sea Con Dao Vietnam is comparable in land area to Malaysia, slightly larger than Italy and Philippines, and slightly smaller than Japan and Germany.
Land Area (km2) - selected countries 400,000 Source: CIA – World Factbook 350,000
300,000
250,000
200,000 Japan Germany Malaysia Vietnam Poland Italy Philippines
60 6.2 Brief History
The area of present day Vietnam emerged as ethnically distinct around 200 BC, although from 111 BC to 939 AD it was under Chinese rule. This period saw the establishment of considerable Chinese cultural influence and it is today an integral part of Vietnamese culture, profoundly influencing its language, art, philosophy and other aspects of its society. Local uprisings during the decline of the T’ang dynasty led to the restoration of Vietnamese independence in 939 AD. By the early 11th century, the country was unified, and although Chinese and Mongol armies made incursions, the Vietnamese were able to push them back while extending their influence south into the Mekong Delta. Internal feuds between rival families led Vietnam to be divided in the early 17th century and reunified only in 1802 when Nguyen Anh took power with the assistance of a French missionary. France invaded in 1858 and by 1893 occupied all of Vietnam, Cambodia and Laos. The resistance to French rule developed steadily during the 1920s and 1930s. In 1941 Ho Chi Minh returned to Vietnam after 30 years of exile and founded the Viet Minh. In March 1945, the Japanese ousted the French civil and military authorities and encouraged Emperor Bao Dai to proclaim Vietnam’s independence under Japanese protection. Following the Japanese surrender to the Allies shortly thereafter, Bao Dai abdicated in favour of Ho Chi Minh who became the first President of the Viet Minh provisional government of the Democratic Republic of Vietnam (DRV). In the south, the Viet Minh influence was weaker and in September 1945, British and French troops re-established control over Cochinchine and opened negotiations with the DRV. In December 1946, open warfare broke out between Viet Minh forces and the French. Fighting continued until 1954, when the French suffered a convincing defeat at Dien Bien Phu. They surrendered to the Viet Minh on May 7, 1954, the day before the opening of the Geneva Conference on Indochina that arranged a cease- fire between communist and non-communist forces, and established a military demarcation zone at the 17th parallel. The southern part of the country was proclaimed the Republic of Vietnam under Ngo Dinh Diem. By August 1955, all French forces had left Vietnam. Elections to reunify the country in 1956 were never held and pro-Communist forces based in the south began, with DRV support, to organize guerrilla warfare against the Diem government. In 1960, the National Liberation Front of South Vietnam (NLF) was formed to attack South Vietnamese government-held positions. The decline of security in the countryside led South Vietnam to formally request direct military assistance from the USA. The growing strength and increased military activity of the NLF and North Vietnamese troops resulted in the Vietnamese government becoming reliant on US military assistance which expanded rapidly from 1965 and peaked in 1968. In January 1969, peace talks began in Paris between representatives of the DRV, the US, the NLF and South Vietnam. In the same year, the US gradually began to withdraw its troops in response to growing domestic and foreign pressure. In January 1973, a peace agreement was reached, allowing for a cease-fire, exchange of prisoners, and withdrawal of all foreign troops. The country was reunited and the Socialist Republic of Vietnam was declared in 1976. It has since then remained a one-party communist state.
61 6.3 People Originating in what is today southern China and northern Vietnam, the Vietnamese people pushed southward over 2000 years ago to occupy the entire eastern coast of the Indochinese Peninsula. Notwithstanding the various incursions of foreign forces into its present day territory, Vietnam has maintained the unique features of a highly integrated culture. Ethnic Vietnamese, or Kinh, constitute approximately 86% of Vietnam’s population. The remaining 14% is divided between 54 other ethnic groups concentrated in the country’s hills and mountains to the north and in the central highlands. Vietnamese is the official language of the country. It is a tonal language with influences from Thai, Khmer, and Chinese. Years of domination by the Chinese has deeply influenced Vietnamese culture, its language, art, philosophy and other aspects of its society. Disciplined Confucian philosophy regarding work ethics, emphasis on education and closely knitted family values are in fact very similar to that of other Asian tigers such as Japan, Korea, Singapore, Taiwan and Hong Kong. The Vietnamese are known for their entrepreneurial spirit and openness to new ideas which help them to quickly absorb new ideas and technologies. Years of French influence can also be felt in the culture; from its adaptation of French baguette to its romanised written language after a French missionary found a way in the early 20th century to write the language using various accents to simulate its six tones.
6.4 Political landscape The Socialist Republic of Vietnam exists today as a one-party communist state governed by the Communist Party of Vietnam (CPV) and is one of the most politically stable countries in Southeast Asia. Vietnam’s social, economical and political institutions are closely knit together, which in turn helps cement views and foster social and political stability.
The current political system of Vietnam, as per the 1992 Constitution and 2001 amendments, is composed of the following main institutions: • Communist Party of Vietnam, including the General Secretary of the Party; • National Assembly, including the President; • Government, Prime Minister, Ministries and ministry-equivalent State bodies; • People’s Councils and Committees in all 64 provinces and autonomous cities. • People’s Courts (Supreme and Regional); • People’s Procuracy (Supreme and Regional);
62 Key political indicators Source: Ministry of Foreign Affairs (MOF) System Single party - Communist Supreme representative body National Assembly Legislature Unicameral Term of office 5 years Last elections 20 May 2007 Head of State President Head of Government Prime Minister
The Communist Party The role of the CPV, acknowledged in the 1992 Constitution, is to of Vietnam act “as the leading force of the State and the society”. Doing so, the CPV transcend through much of Vietnam’s political system and social institutions. While the 1992 Constitution stipulates that the CPV is subject to the rule of law and is not permitted to interfere in the day-to-day running of the Government, the Party’s various committees are tasked with the setup of Party cells within every part of Vietnam’s political system. The relevant Party committees are tasked to set up bodies within the state’s leading agencies, e.g. the National Assembly and the People’s Councils. The role of these bodies is to: “(…) lead and make other members of the organization implement the guidelines and policies of the Party, increase the influence of the Party, improve the close relationship between the Party and the people, realize the Party’s resolution on organization and personnel management and decide matters of organization and personnel management in line with the duties assigned by the Politburo”. (MOF) In addition, the Party committees place Party boards within most political institutions, including the Government, Ministries, Courts, Inspection Agencies, and the likes. The role of these boards is to: “(…) make other members of the bodies understand and implement the Party’s guidelines and policies; give advice on operation, duties, organization, and personnel management; make decision within their competence, and to observe the implementation of the Party’s guidelines and policies”. (MOF) The National Congress of the Communist Party of Vietnam convenes every 5 years to outline the overall direction of the country and formalize policies for the future. The National Congress elects the Central Committee, which elects the Politburo. The top four positions in the Politburo are held by the Party General Secretary, the General Minister of Public Security, the State President, and the Prime Minister. The highest position in the Party is that of the General Secretary. The Party Secretariat, which consists of eight Politburo members, oversees day-to-day policy implementation. Aside from the Communist Party, the most powerful institutions within the Vietnamese government are the executive agencies created by the 1992 constitution, namely the offices of the president and the prime minister.
63 Political structure of Vietnam
Elections allow the people to vote for their candidate of choice at the National Assembly, and at the People’s Councils of each level of government (ward, district, city and province).
People * *
People’s * National Council Assembly at all levels
Standing Standing Chief People’s * Committee Committee Procurator, President of the Primme of the Supreme Committees at Minister all levels National National People’s Assembly Assembly Procuracy
Government, Deputy Prime Ministers, Ministers
* All levels means at ward, district, city and provincial levels. ** The people elect the national assembly and their representative at the People’s Council of all levels.
64 The National Assembly, The National Assembly is the sole organ with constitutional and the Standing Committee legislative rights. Its role is to legislate, decide on the fundamental policies and direction of the country, and to carry out its role as the and the President supreme supervisor of all activities of the State. In practice, Vietnam’s legislative, executive and judiciary functions partially overlap. Once seen as little more than a rubber stamp, the National Assembly has become more vocal and assertive in exercising its authority over lawmaking, particularly in recent years. However, the National Assembly is still subject to Communist Party direction as about 80% of the deputies in the National Assembly are Communist Party members. The members of the National Assembly are elected directly by the people in limited elections, hold office for a term of five years and meet at least twice a year at the convocation of its Standing Committee. The National Assembly also decides matters of War, Peace, state of Emergency, and ratifies or revokes any international treaties that Vietnam has signed or adhered to. The Standing Committee of the National Assembly is in session for the remainder of the year. As well as certain other powers, the Standing Committee issues ordinances and presents draft laws to the National Assembly. The President is Vietnam’s Head of State and Commander in Chief of the Armed Forces. He also represent’s Vietnam in domestic and foreign affairs. The President is elected by the National Assembly and his term of office matches that of the National Assembly. The Government The Government is the executive organ of the National Assembly and the supreme state administrative agency of Vietnam. The Prime Minister heads a cabinet composed of deputy prime ministers, ministries and commissions. Together, they form what we call a Government. The Prime Minister is accountable to the National Assembly, the Standing Committee and the President. The Prime Minister is elected or dismissed by the National Assembly at the President’s request. The Deputy Prime Ministers and Heads of ministerial-level agencies are approved by the National Assembly at the Prime Minister’s request. Ministries and other state bodies of note to financial investors in Vietnam include: • The State Bank of Vietnam considers applications for licences in the banking and finance sector and exercises credit and foreign exchange control relating to investment activities • The Ministry of Finance determines policies on investment support and investment incentives, in particular on tax incentives applicable to investment, and receives applications for foreign invested insurance providers • The State Securities Commission of Vietnam, overseen by the Ministry of Finance, considers applications for licences in the securities sector (such as securities companies and fund management companies) and supervises the stock exchanges When dealing in private equity, additional ministries may be involved depending on the sector in which the investment is made. People’s councils and The People’s Council is the local organ of State Power. It represents committees the will, aspirations, and mastery of the people. It is elected by the local people and is accountable to them and to the superior State organs (Standing Committee of the National Assembly).
65 Domestic policy: Recent economic woes (rampaging inflation in 2008 and a drop focus on reforms in GDP growth in 2009) did raise some concern regarding the government’s commitment to ongoing market reforms. That being said, a reversal in policy is highly unlikely. Support for reforms remains strong within the CPV while short term reforms will probably be geared towards maintaining socio-economic stability. When the dust settles, 2008 will increasingly feel like a bump in the road towards prosperity for this promising country.
Foreign policy: Diplomatic relations with the US were normalised in 1995 following everyone’s friend the visit to the country by then President Clinton and the lifting of the US trade embargo in 1994. US support was instrumental in Vietnam’s temporary appointment to the UN Security Council on January 1st 2008 which raised Vietnam’s profile in world affairs. Vietnam has an explicit policy of trying to be friends with everybody. Doing so, Vietnam seeks to secure investments and technical help from advanced economies while opening foreign markets to Vietnamese products. In the long term, with its large military force, expanding population and rapid economic development, it is quite possible that Vietnam’s influence will become a more dominant in the Southeast Asian region. However, this new found influence will probably be used to ensure that ASEAN one day functions properly as a single unified market than anything else. There is also talk that Vietnamese soldiers could be assigned to UN peace-keeping missions. 6.5 Legal System Vietnam’s legal framework and system is based on the Civil Law system that does not recognize the principle of precedence. Vietnam’s body of laws is built on various documents that support each other. At the top, the Constitution guides the principles on which laws are construed. Laws are proposed by various political instances, put into writing by the relevant ministries (sometimes more than one, which adds to the complexity), and submitted to the National Assembly. It is normal for clarifying decrees to be issued to supplement the relevant Law and guide the implementation. Circulars are issued to clarify decrees and official letters, usually from the Prime Minister’s office, are issued to clarify any remaining matters. Of note to foreign investors is the Investment Law of 2006 which regulates how investors, both local and foreign, can invest in companies established under Vietnamese laws, whether foreign or locally owned. The Enterprise Law of 2006 is more important to private equity as it describes the functioning of companies, voting rights, and other statutory requirements.
66 Constitutional The 1992 Constitution (as amended in 2001) includes certain protection of foreign guarantees and principles for foreign investors. It provides that: investments • Private sector entities may engage in business and production and may establish enterprises without restriction as to size and scope; • All business enterprises are equal before the law. The legal ownership of capital and assets are protected by the State. Enterprises of all economic sectors are permitted to enter into joint ventures or co-operate with local or foreign individuals and organizations; • The lawful assets of individuals and organisations will not be nationalised. However, the State may purchase or requisition assets with compensation, when necessary, on account of national interests, defence and security; • The State encourages foreign organisations and individuals to invest funds and technology in Vietnam in conformity with Vietnamese law and international law and practices. Business enterprises with foreign invested capital may not be subject to nationalisation; • Citizens enjoy freedom of enterprise as determined by the law and the right of ownership with regard to lawful income, savings, housing, chattels, means of production, funds and other possessions in enterprises or other economic organisations. The State protects the citizen’s right of lawful ownership and inheritance.
A number of the above guarantees and principles are subject to more specific guidance (and in practice, restrictions) provided by Vietnamese law. In addition, the law stipulates that as long as foreign investors pay their tax obligations, they are allowed to repatriate profits and investment capital abroad should they liquidate. Note however that bankruptcy laws are rudimentary at best. To date, there have been no cases of expropriation of foreign assets by the State.
Courts and enforcement The Supreme People’s Court of Vietnam is the highest court and also of rulings the Court of Appeal. It functions under the authority of the National Assembly. Judges are appointed for five year terms. Provincial Municipal Courts are lower level courts, report directly to the central government in Hanoi and deal with a wide range of matters. Local Courts or People’s Courts deal with legal issues at the district levels, report to provincial or municipal governments, and mainly deal with matters related to labour or civil disputes. While Vietnam has modern laws on the surface, with most laws having been rewritten between 2002 and 2006, the main challenge comes from the interpretation of these laws in court and the enforcement of rulings. As a result both local and foreign firms prefer to resort to arbitration or other non-judicial means as Vietnam’s legal system remains underdeveloped.
67 68 7.0 Company Fact Sheets
69 PetroVietnam Ticker Share Price - VND Fertilizer & Chemical DPM 42,400 01 Jul 09 Close/Volume Chart Company Description and Principal Activities VND Mn Shares Petrovietnam Fertilizer and Chemicals Corporation (PVFCCo) trades on the Ho Chi Minh City Stock Exchange and as at July 1st 2009 is the seventh largest company by market- cap in Vietnam. The company primarily engages in prilled urea manufacturing (74% of 2008 revenue), and fertilizer and basic chemicals importing (23% of 2008 revenue). Their core revenue and gross profit amounts reached VND 6,500bn and VND 1,900bn, respectively. They have also traded their byproducts such as liquid ammonia, and surplus electricity generation, which together account for an additional 3% of revenue. They have also added fertilizer bags and will soon add carbon dioxide to their product lines. DPM’s manufacturing capacity is able to satisfy 40% of the country’s demand for urea.
Per Share (VND) FY06A FY07A FY08A Trail 12M FY09E* FY10E* EPS n.a. 3,499 3,645 3,481 3,177 3,848 Relative Performance BVPS n.a. 11,519 12,442 n.a. 14,097 15,876 DPS n.a. n.a. 2,487 n.a. 1,300 2,000 CFPS n.a. n.a. 2,101 3,782 n.a n.a FCFPS n.a. n.a. 1,794 n.a n.a n.a * Bloomberg Consensus Estimates
Key Valuations FY07A Avg +/- 1 s.d. FY08A Avg +/- 1 s.d. FY09E* FY10E* 01 Jul 09 P/E (x) n.a. n.a. 9.7 9.7 / 9.6 13.3 11.0 S&P Vietnam 10 Ho Chi Minh Stock Index P/B (x) n.a. n.a. 3.7 4.5 / 3 3.0 2.7 Dividend Yield (%) n.a. n.a. 3.3 5.2 / 1.4 32.6 21.2 MSCI AC Asia Index DPM P/CFPS (x) n.a. n.a. 25.3 25.8 / 24.9 n.a. n.a. FCF Yield (%) n.a. n.a. n.a. n.a. n.a. n.a. Trading & Liquidity 20Days 100Days 180Days Volume (Reg, Trading) 1,073,741 880,950 692,825 Growth FY06A FY07A FY08A FY09E* FY10E* VND Val. (Reg. Trading, bn) 49.5 34.7 27.7 Revenues 20.2% 23.9% 71.3% n.a. n.a. Percent of market (%) 1.6 2.2 2.5 EBITDA 17.4% -100.0% n.a. n.a. n.a. EBIT 42.6% 37.7% 0.0% n.a. n.a. Shares Outstanding (mn) FY07A FY08A Current Net Income 46.7% 14.5% 4.1% n.a. n.a. Wgt. Avg Issued Shares 380.0 379.6 379.0 EPS n.a. n.a. 4.2% -12.8% 21.1% Fully Dilluted Shares 380.0 379.6 379.0 BVPS n.a. n.a. 8.0% 13.3% 12.6% Foreign Owned (% / Limit) 74.1mn 19.6% 49.0% * Bloomberg Conscencus Estimates Market Values VND (bn) USD (mn) EUR (mn) Market Cap 16,714 939.0 664.7 Growth Indicators FY06A FY07A FY08A Fixed Assets/Assoc -26.2% -18.5% -31.7% Net Debt (936) (52.6) (0.0) Debt -43.6% -100.0% n.a. Minori ties & Others (1,352) (76.0) (53.8) Financial Investments 100.3% -18.4% 741.5% Enterprise Value 14,426 810.4 573.7 Other LT Assets 13128.2% 2774.2% -17.4% Corperate Actions Ex-Date Amt/(ratio) Fiscal Year Cash Dividend 14-Apr-09 500 FY08 Profitability FY06A FY07A FY08A Cash Dividend 16-Dec-08 500 FY08 Gross Margin (%) 36.9 39.2 28.6 Cash Dividend 10-Oct-08 1,000 FY08 EBITDA Margin (%) 61.1 0.0 36.2 Cash Dividend 21-Apr-08 1,000 FY07 EBIT Margin (%) 30.1 33.5 19.6 Pre-Tax Margin (%) 38.1 35.2 23.2 Market Outlook Net Margin (%) 38.1 35.2 21.4 Urea demand in 2009 and onwards is estimated at 1.7 million tonnes per year. The two principal domestic suppliers, PVFCCo Solvency & Liquidity FY06A FY07A FY08A and Ha Bac Nitrogen and Chemicals Company (HANICHEMCO), Acid Test Ratio 26.94 n.a. 4.60 were able to supply 749,000 tonnes and 181,000 tonnes in Current Ratio 2.53 1.79 5.85 2008 respectively, with the balance filled by imported fertilizers. LT Debt/Capital 18.7% 0.0% 0.1% The country’s domestic production is set to increase with HANICHEMCO expanding their coal-based urea production line Net Debt/Equity 5.8% 45.1% 19.8% to 500,000 tonnes per year. PetroVietnam is also building a gas- LT Debt/Fixed Assets 26.2% 0.0% 0.2% based granular urea plant with a capacity of 800,000 tonnes per Total Liab/Total Assets 30.1% 23.7% 8.7% year in Ca Mau province. There will also be two new coal-based urea plants in the northern provinces of Ninh Binh and Thanh Management Company Data Hoa. The domestic market will become much more competitive Office 3rd Floor, 2Bis-4-6 after these projects are completed and commissioned. Chairman Nguyen Xuan Thang Head Office Le Thanh Ton, District 1, HCM city Company History CEO Phan Dinh Duc PVFCCo fertilizer plant, commissioned in September 2004, is CFO/ Chief Accontant Pham Thanh Vinh Website www.dpm.vn located in Phu My I industrial zone, Tan Binh commune, Ba Ria IR Contact Phan Dang Nam Telephone +84838256258 – Vung Tau province. The total capital investment to build the plant was USD397mn. PVFCCo manufactures 740,000 tonnes Major ShareholdersW Shares Insider Holdings Shares of prilled urea per year with ammonia and urea technologies PVN 233.2 mn Nguyen Xuan Thang 35,000 licensed by Haldor Topsoe and Snamprogetti, respectively. BIDV 14 mn Phan Dinh Duc 3,000 Since 2006, the company has been importing fertilizers, raising the company’s supply capacity to 1.0 million tonnes per year, meeting 60% of the country’s demand.
70 Basic Materials / Speciality Chemicals
Revenues by Product, 2008 Profit & Loss (VND bn) FY06A FY07A FY08A Revenue 3,050.8 3,779.0 6,475.4 EBITDA 1,864.5 0.0 2,345.9 EBIT 919.8 1,267.0 1,266.5 Interest & Fx Exp (249.9) (85.4) (31.0) Non Op Inc (Loss) 491.7 148.1 265.4 Pre-Tax 1,161.5 1,329.7 1,500.9 Taxes (0.2) (0.2) (115.6) Minorities & Pref’s 0.0 0.0 (1.4) Net Income to Common 1,161.3 1,329.5 1,383.9
Balance Sheet (VNDbn) FY06A FY07A FY08A Manufactured Urea Cash & Equiv. 1,718.0 1,972.4 942.7 74.0% ST Investments & Mkt. Sec 900.0 0.0 0.0 Receivables 6.9 59.5 510.2 Inventories 248.1 400.7 1,111.3 Other Curr Assets 426.7 35.0 128.2 Net Fixed Assets 3,274.6 2,676.7 1,682.7 Construction in Progress 42.7 27.2 163.6 Invest. in Assoc. 0.0 0.0 0.0 Financial Investments 29.9 24.4 205.5 Other L.T. Assets 18.9 542.6 448.0 Payables (63.8) 0.0 (204.9) Management Strategy and Goals Other Curr Liab. (491.6) (1,361.3) (229.7) Founded as a state-owned company, PVFCCo has retained their mandate ST Debt (579.6) 0.0 (4.0) to provide sufficient urea for agricultural production and meeting market LT Debt (869.5) 0.0 (3.1) demand. PVFCCo also intends to focus on sustainable development and Other LT Liab (1.0) (0.1) (9.2) affirm its market leading position. The Board of Directors has approved the Net Assets 4,660.2 4,377.2 4,741.4 continued operation of the factory to safely produce 750,000 tons of urea Minorities 0.0 0.0 22.0 and import 250,000 tons of fertilizers and chemicals to supply domestic and Book Capital 2,571.2 3,800.0 3,800.0 international markets. Investment projects to diversify PVFCCo’s fertilizers Ret. Earnings 2,089.0 577.2 919.4 and chemical products will be sourced and the distribution network and production system improved to minimize costs and maximize profit. Their Total Liab. & Equity 6,665.8 5,738.5 5,192.4 long-term development goals include targeting to become the leading supplier of fertilizers in the domestic market with 50-60% market share Working Capital Analysis FY06A FY07A FY08A for urea demand, 30% for DAP, 20% for SA and 50% for imported fertilizers Days Receivable 0.8 5.7 28.8 and to become one of the five leading companies in the field of chemical Days Inventory 47.0 63.6 87.7 production and trading. They are also seeking to become the main supplier Days Payable 12.1 0.0 16.2 of basic chemical products to the domestic petrochemical industry. Cash Operating Cycle 58.3 57.9 75.1
Investment Plans Derived Cash Flow (VNDbn)* FY06A FY07A FY08A The company is carrying out a project that when completed will collect EBIT 919.8 1,267.0 1,266.5 and recycle carbon dioxide to make 60,000 more tonnes of urea. They are Depreciation & Amort 944.8 (1,267.0) 1,079.4 also in the final stages of a project to build an NPK plant that is designed to Chgs in Working Cap (343.8) 992.4 (2,181.2) consume up to 100,000 tonnes of urea from the Phu My plant each year. The Operating Cash Flow 1,520.7 992.4 164.7 company has mentioned two other large overseas projects; a DAP plant in Net Interest, Fx & Taxes (250.1) (85.6) (146.6) Morocco and a urea plant in Russia, for which they are currently searching Fixed Asset Capex (57.6) 0.0 (116.5) for partners, sourcing consultants and conducting feasibility studies. Investments (15.0) 5.5 (181.1) Key Success Factors Non Op Inc (Loss) 491.7 148.1 265.4 Other Non Cash Adj. 265.0 358.6 (450.5) A number of factors that translate into business success for DPM. Firstly, Dividends Paid 0.0 (944.3) (572.1) the plant’s location in the Mekong delta as the main rice growing area of Change in Paid in Capital (578.1) 1,228.8 0.0 Vietnam. Secondly, DPM is the only domestic urea producer in the region. Thirdly, DPM receives subsidised natural gas prices and lastly, its ammonia Change in Net Debt (1,122.2) (1,449.1) 7.2 and urea technologies for prilled urea are internationally competitive. Net Cash Flow 254.4 254.4 (1,029.6) * Calculated from Balance Sheet & P&L Key Risk Factors DuPont Analysis FY06A FY07A FY08A As imported urea and fertilizer prices depend upon fluctuating natural gas prices, DPM is exposed to considerable risk. The gas price subsidy will EBIT / Sales 0.30 0.34 0.20 be phased out and eventually scrapped and lastly, the domestic market Sales/Total Assets 0.46 0.66 1.25 will become tougher as domestic supply capacity increases to outweigh less Net Int./Assets 0.04 0.01 0.05 domestic demand. Pre-Tax ROA (%) 17.4% 23.2% 28.9% Assets/Equity 1.43 1.31 1.10 Pre-Tax ROE (%) 24.9% 30.4% 31.7% 1-Tax rate 1.00 1.00 0.92 ROE (%) 24.9% 30.4% 29.2%
Miscelleaneous FY06A FY07A Current Altman Z Score n.m. n.m. 9.1 Asset Growth (%) 28.4% -13.9% -9.5% Capex/Sales (%) 1.9% 0.0% 1.8% Earnings Retention (%) n.a. n.a. 31.8%
71 Dong Phu Rubber Ticker Share Price - VND
DPR 42,600 01 Jul 09 Close/Volume Chart Company Description & Principal Activities VND Mn Shares DPR is primarily involved in the plantation, processing, and exporting of rubber. Their total plantation area is more than 10,000 hectares, about 79% of which is harvestable. The company has two processing plants with a combined capacity of 20,000 tonnes of latex per year each. In 2008, the productivity of the plantation reached 2.22 tonnes of latex per hectare, which was the second highest among all subsidiaries of the Vietnam Rubber Group. DPR has been exporting to European countries such as France, Belgium, the Netherlands, UK, Korea, and Australia. DPR is the largest listed natural rubber planta- tion company by market capitalization followed by TRC.
Per Share (VND) FY06A FY07A FY08A Trail 12M FY09E* FY10E* EPS n.a. 5,756 5,851 5,497 3,255 3,204 BVPS n.a. 16,703 17,021 n.a. 17,300 18,203 Relative Performance DPS n.a. n.a. 4,995 n.a. n.a. n.a. CFPS n.a. 3,676 2,005 n.a. n.a. n.a. FCFPS n.a. 2,797 371 n.a. n.a. n.a. * Bloomberg Consensus Estimates
Key Valuations FY07A Avg +/- 1 s.d. FY08A Avg +/- 1 s.d. FY09E* FYE* P/E (x) n.a. n.a. 5.2 5.2 / 5.1 13.1 13.3 01 Jul 09 S&P Vietnam 10 Ho Chi Minh Stock Index P/B (x) 4.7 4.9 / 4.5 3.1 4.1 / 2.2 2.5 2.3 Dividend Yield (%) n.a. n.a. 6.4 10.5 / 2.2 n.a. n.a. MSCI AC Asia Index DPR P/CFPS (x) n.a. n.a. n.a. n.a. n.a. n.a. FCF Yield (%) n.a. n.a. n.a. n.a. n.a. n.a. Trading & Liquidity 20Days 100Days 180Days Volume (Reg, Trading) 139,187 84,097 67,125 Growth FY06A FY07A FY08A FY09E* FY10E* VND Val. (Reg. Trading, bn) 6.9 3.4 2.6 Revenues n.a. 16.9% 3.6% n.a. n.a. Percent of market (%) 0.2 0.2 0.2 EBITDA n.a. 19.2% 4.6% n.a. n.a. EBIT n.a. 20.0% -9.5% n.a. n.a. Shares Outstanding (mn) FY07A FY08A Current Net Income n.a. 51.4% 0.9% n.a. n.a. Wgt. Avg Issued Shares 40.3 40.0 40.0 EPS n.a. n.a. 1.7% -44.4% -1.6% Fully Dilluted Shares 40.3 40.0 40.0 BVPS n.a. n.a. 1.9% 1.6% 5.2% Foreign Owned (% / Limit) 6.9mm 17.2% of 49.0% * Bloomberg Conscencus Estimates Market Values VND (bn) USD (mn) EUR (mn) Market Cap 1,792 100.7 72.4 Growth Indicators FY06A FY07A FY08A FY08A Net Debt (68) (3.8) (0.0) Fixed Assets/Assoc n.a. 51.2% 10.1% Minorities & Others (54) (3.1) (2.2) Debt n.a. -45.3% 61.8% Enterprise Value 1,669 93.8 67.5 Financial Investments n.a. n.a. -10.0% Other LT Assets n.a. -84.1% 100.5% Corperate Actions Ex-Date Amt/(ratio) Fiscal Year Cash Dividend 8-Dec-08 2,000 FY08 Profitability FY06A FY07A FY08A FY08A FY08A Cash Dividend 14-May-08 1,500 FY08 Gross Margin (%) 39.0 36.3 34.6 Cash Dividend 12-Feb-08 1,500 FY07 EBITDA Margin (%) 30.4 31.0 31.3 EBIT Margin (%) 30.1 30.9 27.0 Market Outlook Pre-Tax Margin (%) 35.4 33.1 0.0 According to FAO, more than 60% of natural rubber is used Net Margin (%) 25.5 33.0 32.1 for tyres. Therefore, automakers are major customers behind changes in natural rubber demand. Due to the ongoing global Solvency & Liquidity FY06A FY07A FY08A FY08A financial crisis, automakers have experienced declining sales Acid Test Ratio 45.24 66.82 10.98 and consequently natural rubber exporters around the world Current Ratio 0.39 1.00 0.79 have suffered plunging demand and prices. Thailand and LT Debt/Capital 21.8% 6.0% 5.6% Malaysia, two of the world’s major natural rubber exporters, have Net Debt/Equity 12.1% 22.6% -10.6% implemented output cuts to bolster export prices. LT Debt/Fixed Assets 34.5% 7.7% 7.5% China consumes the most natural rubber and imports enough Total Liab/Total Assets 72.1% 41.1% 34.6% to represent the export market. It is projected that demand from China will grow 5.1% annually to reach nearly 1.6 million tonnes Management Company Data by 2010. Thuan Phu commune, Dong Chairman Nguyen Thanh Hai Head Office Phu District, Binh Phuoc Company History province DPR started as a rubber plantation for the Michelin Company, CEO Nguyen Thanh Hai France in 1927. It was incorporated in 1981, equitized in 2006, CFO/ Chief Accontant Nguyen Thanh Binh Website http://doruco.com.vn/ and listed on the HOSE in late 2007. IR Contact Nguyen Thanh Hai Telephone +846513819786
Major Shareholders Shares Insider Holdings Shares Vietnam Rubber Group 24 mn
72 Basic Materials / Commodity Chemicals
Revenues by Product, 2008 Profit & Loss (VND bn) FY06A FY07A FY08A Revenue 602.1 703.8 728.8 EBITDA 183.0 218.1 228.0 EBIT 181.0 217.2 196.5 Interest & Fx Exp (3.7) (8.8) 2.0 Non Op Inc (Loss) 35.6 24.3 35.6 Pre-Tax 212.9 232.7 234.0 Taxes (59.6) (0.7) 0.0 Minorities & Pref’s 0.0 0.0 0.0 Net Income to Common 153.3 232.0 234.0 Latex 31.6% Balance Sheet (VNDbn) FY06A FY07A FY08A Cash & Equiv. 182.3 219.3 38.8 ST Investments & Mkt. Sec 170.1 122.6 140.2 Receivables 33.8 45.9 14.3 Inventories 45.8 34.4 60.0 Other Curr Assets 658.2 25.1 19.9 Net Fixed Assets 232.9 427.2 411.8 Construction in Progress 65.9 90.8 95.5 Invest. in Assoc. 50.4 10.0 73.8 Financial Investments 0.0 118.3 106.5 Other L.T. Assets 252.2 40.0 80.3 Management Strategy and Goals Payables (4.0) (3.3) (3.5) DPR executives have indicated that they are looking for and will seize any Other Curr Liab. (1,090.0) (392.5) (243.8) promising opportunities to expand the company’s plantation area. They ST Debt (22.4) (28.4) (72.9) will also focus on research for sustained development such as enhancing LT Debt (103.1) (40.1) (38.1) intensive farming techniques to increase the productivity of the existing Other LT Liab (0.6) (1.1) (2.0) area, and constructing an optimum plantation area-recycling schedule. DPR Net Assets 471.7 668.1 680.8 is accumulating financial resources for their planned projects to ensure the Minorities 0.0 0.0 0.0 outlined progress schedule will be achieved. Book Capital 400.0 400.0 400.0 Ret. Earnings 71.7 268.1 280.8 Investment Plans Total Liab. & Equity 1,691.7 1,133.6 1,041.1 DPR co-established a joint-stock company with a 40% interest to execute the plantation of 10,000 hectares of rubber trees in Cambodia. They Working Capital Analysis FY06A FY07A FY08A planted 72 hectares in 2008 and targeted to plant 1,300 and 2,000 hectares Days Receivable 20.5 23.8 7.1 in 2009 and 2010, respectively. Dong Phu – Dak Nong Rubber JSC, with Days Inventory 45.5 28.0 45.9 90% of chartered capital financed by DPR, was established to develop a 4,100 hectares plantation in Cu Jut commune, Dak Nong province. They Days Payable 4.0 2.7 2.7 have planted rubber on 15% of the total area and planned to complete an Cash Operating Cycle 29.1 6.9 41.5 additional 12% in 2009. They also have investments in BOT projects to build the highways from Dong Xoai provincial town to Phuoc Long, Binh Phuoc Derived Cash Flow (VNDbn)* FY06A FY07A FY08A province, and from Tan Lap, Binh Phuoc province to Cong Xanh three- EBIT n.a. 217.2 196.5 way intersection in Binh Duong, province. The company has been paid Depreciation & Amort n.a. 0.9 31.5 dividends from the toll fee collection from these two projects. Chgs in Working Cap n.a. (65.7) (137.2) DPR invested in 40% of the chartered capital in Dong Phu Rubber Operating Cash Flow n.a. 152.3 90.8 Technology JSC, which will specialize in the manufacture of latex pillows Net Interest, Fx & Taxes n.a. (9.4) 2.0 and mattresses using DPR latex. The construction has completed. The first Fixed Asset Capex n.a. (35.4) (65.4) batch of products is anticipated to be available for export in 2009. Investments n.a. (77.8) (52.0) DPR also has a 51% interest in North Dong Phu Industrial Zone JSC, which Non Op Inc (Loss) n.a. 24.3 35.6 is expected to come into operation mid 2009, and investments in several of Other Non Cash Adj. n.a. 239.8 (233.8) VRG’s joint stock subsidiaries and projects. Dividends Paid n.a. (199.8) (0.0) Key Success Factors Change in Paid in Capital n.a. 0.0 0.0 Change in Net Debt n.a. (56.9) 42.4 The company is active in expanding the total plantation area and DPR’s Net Cash Flow n.a. 37.0 (180.5) personnel are highly experienced in rubber plantation development and * Calculated from Balance Sheet & P&L management.
Key Risk Factors DuPont Analysis FY06A FY07A FY08A EBIT / Sales 0.30 0.31 0.27 Natural rubber is an exported commodity and Vietnam’s volumes, although Sales/Total Assets 0.36 0.62 0.70 growing rapidly, are still small compared to Thailand, Malaysia and less Net Int./Assets 0.02 0.01 (0.19) Indonesia. Vietnam is therefore a price taker in international markets. The weather also plays an important role in plantation productivity. Pre-Tax ROA (%) 12.6% 20.5% 22.5% Assets/Equity 3.59 1.70 1.53 Pre-Tax ROE (%) 45.1% 34.8% 34.4% 1-Tax rate 0.72 1.00 1.00 ROE (%) 32.5% 34.7% 34.4%
Miscelleaneous FY06A FY07A Current Altman Z Score n.m. n.m. n.a. Asset Growth (%) 62.5% -33.0% -8.2% Capex/Sales (%) n.m. 5.0% 9.0% Earnings Retention (%) n.a. n.a. 14.6%
73 Tay Ninh Rubber Ticker Share Price - VND
TRC 43,900 01 Jul 09 Close/Volume Chart Company Description & Principal Activities VND Mn Shares Southern-based TRC’s production include planting, harvesting, processing, and export- ing natural rubber, manufacturing steel tanks, importing and exporting wood products, and cultivating rubber seedlings. They are also involved in fuel and materials trading, and residential, industrial, and electrical construction contracting. TRC is the second largest listed natural rubber plantation company by market capitalization, preceded by DPR and followed by HRC. Their current plantation production area is 5900 hectares.
Per Share (VND) FY06A FY07A FY08A Trail 12M FY09E* FY10E* EPS n.a. n.a. 6,607 6,759 7,645 n.a. BVPS n.a. 15,679 16,816 n.a. n.a. n.a. DPS n.a. 1,500 4,000 n.a. n.a. n.a. CFPS n.a. n.a. 1,411 n.a. n.a. n.a. FCFPS n.a. n.a. 93 n.a. n.a. n.a. Relative Performance * Bloomberg Consensus Estimates
Key Valuations FY07A Avg +/- 1 s.d. FY08A Avg +/- 1 s.d. FY09E* FY10E* P/E (x) n.a. n.a. 7.9 9.2 / 6.6 5.7 n.a. P/B (x) 8.7 9.8 / 7.6 3.9 5.3 / 2.4 n.a. n.a. Dividend Yield (%) 1.3 1.4 / 1.2 6.3 10.8 / 1.7 n.a. n.a. P/CFPS (x) n.a. n.a. n.a. n.a. n.a. n.a. 01 Jul 09 FCF Yield (%) n.a. n.a. n.a. n.a. n.a. n.a. S&P Vietnam 10 Ho Chi Minh Stock Index Growth FY06A FY07A FY08A FY09E* FY10E* MSCI AC Asia Index TRC Revenues n.a. n.a. 11.6% n.a. n.a. EBITDA n.a. n.a. -4.5% n.a. n.a. Trading & Liquidity 20Days 100Days 180Days EBIT n.a. n.a. -4.0% n.a. n.a. Volume (Reg, Trading) 124,726 95,847 82,775 Net Income n.a. n.a. 11.7% n.a. n.a. VND Val. (Reg. Trading, bn) 6.4 3.6 3.0 EPS n.a. n.a. n.a. 15.7% n.a. Percent of market (%) 0.2 0.2 0.3 BVPS n.a. n.a. 7.3% n.a. n.a.
Shares Outstanding (mn) FY07A FY08A Current * Bloomberg Conscencus Estimates Wgt. Avg Issued Shares n.a. 30.0 30.0 Fully Dilluted Shares n.a. 30.0 30.0 Growth Indicators FY06A FY07A FY08A Foreign Owned (% / Limit) 7.4mn 24.6% 49.0% Fixed Assets/Assoc n.a. n.a. 3.2% Debt n.a. n.a. -25.3% Market Values VND (bn) USD (mn) EUR (mn) Financial Investments n.a. n.a. 16.9% Market Cap 1,344 75.5 53.9 Other LT Assets n.a. n.a. -9.7% Net Debt (119) (6.7) (0.0) Minorities & Others 48 2.7 1.9 Profitability FY06A FY07A FY08A Enterprise Value 1,272 71.5 51.0 Gross Margin (%) n.a. 40.9 37.6 EBITDA Margin (%) n.a. 37.3 31.9 Corperate Actions Ex-Date Amt/(ratio) Fiscal Year EBIT Margin (%) n.a. 33.2 28.6 Final 12-Mar-09 500 FY09 Pre-Tax Margin (%) n.a. 36.1 36.1 Interim 2-Dec-08 2,500 FY08 Net Margin (%) n.a. 36.1 36.1 Final 11-Apr-08 1,500 FY08 Interim 23-Nov-07 1,500 FY07 Solvency & Liquidity FY06A FY07A FY08A Acid Test Ratio n.a. 180.51 115.49 Market Outlook Current Ratio n.a. 1.21 1.52 LT Debt/Capital n.a. 8.4% 5.3% According to the FAO, more than 60% of natural rubber production is used for tyres. Automotive sales are therefore the Net Debt/Equity n.a. 52.5% 22.0% primary determinant of changes in demand for natural rubber LT Debt/Fixed Assets n.a. 12.7% 8.5% which, due the ongoing global recession, has impacted rubber Total Liab/Total Assets n.a. 42.4% 23.6% demand and pricing. Thailand and Malaysia, two world major natural rubber exporters, have consequently implemented Management Company Data output cuts to bolster export prices while China’s import Hiep Thanh commune, demand is sufficient to represent the export market. It is Chairman Trinh Van Vinh Head Office Go Dau district, Tay Ninh projected that demand from China will grow 5.1% annually to province reach nearly 1.6 million tonnes by 2010. CEO Trinh Van Vinh CFO/ Chief Accontant Vuong Thi Rang Website http://taniruco.com/ Company History IR Contact Truong Van Minh Telephone +84663853606 TRC was established as a French rubber plantation. It was nationalized in 1945 and named as the Tay Ninh State Rubber Major Shareholders Shares Insider Holdings Shares Farm. In 1981, the farm was incorporated as the Tay Ninh Rubber Vietnam Rubber Group 18 mn Company and was listed on the HOSE in July 2007 following SCIC 0.047 mn several further transformations and equitisation in 2006.
74 Basic Materials / Commodity Chemicals
Revenues by Source, 2008 Profit & Loss (VND bn) FY06A FY07A FY08A Revenue 0.0 491.9 549.1 EBITDA 0.0 183.6 175.4 EBIT 0.0 163.4 156.9 Interest & Fx Exp 0.0 (4.4) 1.2 Non Op Inc (Loss) 0.0 18.4 40.2 Pre-Tax 0.0 177.4 198.2 Taxes 0.0 (0.0) 0.0 Minorities & Pref's 0.0 0.0 0.0 Net Income to Common 0.0 177.4 198.2
Balance Sheet (VNDbn) FY06A FY07A FY08A Cash & Equiv. 0.0 299.7 150.1 ST Investments & Mkt. Sec 0.0 18.0 8.7 Receivables 0.0 34.1 7.8 Inventories 0.0 19.3 27.2 Other Curr Assets 0.0 16.0 16.0 Net Fixed Assets 0.0 266.5 256.4 Construction in Progress 0.0 41.9 60.5 Invest. in Assoc. 0.0 0.0 1.4 Financial Investments 0.0 86.2 100.7 Other L.T. Assets 0.0 35.5 32.1 Payables 0.0 (1.7) (1.3) Other Curr Liab. 0.0 (291.5) (113.4) ST Debt 0.0 (13.3) (12.4) LT Debt 0.0 (39.3) (26.9) Other LT Liab 0.0 (1.1) (2.2) Net Assets 0.0 470.4 504.5 Minorities 0.0 0.0 0.0 Management Strategy and Goals Book Capital 0.0 300.0 300.0 TRC’s strategies and goals include ensuring sustained development, Ret. Earnings 0.0 170.4 204.5 increase plantation areas, developing new markets, and developing value- Total Liab. & Equity 0.0 817.2 660.7 added rubber latex processing to reduce the volume of raw latex rubber exported. Working Capital Analysis FY06A FY07A FY08A Days Receivable n.a. 25.3 5.2 Investment Plans Days Inventory n.a. 24.2 29.0 TRC are planning to install eight centrifugal rubber processing machines in Days Payable n.a. 2.1 1.4 2009 and expand skim latex beating equipment and building structure that Cash Operating Cycle n.a. 1.0 25.2 houses the equipment (this line was 76% overloaded last year). They will also explore the investment opportunity in a rubber company in Phu Tho province and develop the Hiep thanh Industrial zone. TRC is also seeking Derived Cash Flow (VNDbn)* FY06A FY07A FY08A approval to invest US$3.2 million into a medical glove production line in the EBIT n.a. 163.4 156.9 Exported Medical Gloves Company based in Long Thanh Industrial Zone. Depreciation & Amort n.a. 20.1 18.5 If successful, this production line will require 6,000 tonnes of TRC latex per Chgs in Working Cap n.a. 223.7 (159.9) year. Operating Cash Flow n.a. 407.2 15.5 Net Interest, Fx & Taxes n.a. (4.4) 1.2 Key Success Factors Fixed Asset Capex n.a. (23.0) (39.5) TRC exported latex will be used to produce products other than tyres as Investments n.a. (86.2) (15.9) such the demand for their product will not be affected by the downturn Non Op Inc (Loss) n.a. 18.4 40.2 in the automotive sector. TRC’s personnel are experienced in the rubber Other Non Cash Adj. n.a. (216.6) 16.4 plantation business. Dividends Paid n.a. (148.4) (154.2) Change in Paid in Capital n.a. 300.0 0.0 Key Risk Factors Change in Net Debt n.a. 52.6 (13.3) Natural rubber is an exported commodity, which although is growing Net Cash Flow n.a. 299.7 (149.6) rapidly in volume remains at only a fraction of the volumes from Thailand, * Calculated from Balance Sheet & P&L Malaysia and Indonesia. Vietnam is therefore a price taker. Weather also plays an important role in plantation productivity. DuPont Analysis FY06A FY07A FY08A EBIT / Sales n.a. 0.33 0.29 Sales/Total Assets n.a. 0.60 0.83 less Net Int./Assets n.a. 0.02 0.06 Pre-Tax ROA (%) n.a. 21.7% 30.0% Assets/Equity n.a. 1.74 1.31 Pre-Tax ROE (%) n.a. 37.7% 39.3% 1-Tax rate n.a. 1.00 1.00 ROE (%) n.a. 37.7% 39.3%
Miscelleaneous FY06A FY07A Current Altman Z Score n.m. n.m. n.a. Asset Growth (%) n.m. n.a. -19.2% Capex/Sales (%) n.m. 4.7% 7.2% Earnings Retention (%) n.a. n.a. 39.5%
75 An Giang Fisheries Ticker Share Price - VND
AGF 21,900 01 Jul 09
Close/Volume Chart Company Description and Principle Activities VND Mn Shares AGF is engaged in Tra-fish processing and exporting to world markets and also processes value added Tra-fish products for both domestic and foreign markets. AGF has three factories with a total processing capacity of 450 tonnes of raw fish input per day. Not owning any farming areas directly, AGF has established the Agifish Pure Pangasius Union (APPU) comprising 32 members owning a combined 130 hectares of farming area who are contracted to supply AGF with up to 180 tonnes of safe, hygienic Tra-fish per day, equivalent to 60% to 70% of current production demand. AGF has also commenced operations on a five tonne per day line producing frozen battered Tra-fish in 2008. AGF‘s exports peaked at USD88.6mn in 2008 (46,370 tonnes of fish fillet equivalent), becoming the country’s fourth largest Tra-fish exporter.
Per Share (VND) FY06A FY07A FY08A Trail 12M FY09E* FY10E* EPS 6,861 3,477 1,143 1,124 908 n.a. Relative Performance BVPS 44,216 48,350 48,273 n.a. n.a. n.a. DPS 1,004 432 1,592 0 n.a. n.a. CFPS (6,427) (2,722) (7,769) (12,961) n.a. n.a. FCFPS (22,096) (18,128) (19,380) (24,777) n.a. n.a. * Bloomberg Consensus Estimates
Key Valuations FY07A Avg +/- 1 s.d. FY08A Avg +/- 1 s.d. FY09E* FY10E* 01 Jul 09 P/E (x) 17.0 18.7 / 15.3 16.2 16.3 / 16.1 24.1 n.a. S&P Vietnam 10 Ho Chi Minh Stock Index P/B (x) 2.6 3.3 / 2 0.6 0.8 / 0.3 n.a. n.a. MSCI AC Asia Index AGF Dividend Yield (%) 1.0 1.5 / 0.6 4.9 6.7 / 3.1 n.a. n.a. P/CFPS (x) n.a. n.a. n.a. 5.2 n.a. n.a. Trading & Liquidity 20Days 100Days 180Days FCF Yield (%) n.a. n.a. n.a. n.a. n.a. n.a. Volume (Reg, Trading) 288,250 154,383 96,549 VND Val. (Reg. Trading, bn) 7.5 3.4 2.1 Growth FY06A FY07A FY08A FY09E* FY10E* Percent of market (%) 0.2 0.2 0.2 Revenues 51.5% 3.6% 68.7% n.a. n.a. EBITDA 51.2% 6.0% 18.3% n.a. n.a. Shares Outstanding (mn) FY07A FY08A Current EBIT 67.6% -15.8% -5.6% n.a. n.a. Wgt. Avg Issued Shares 10.9 12.9 12.9 Net Income 108.5% -18.4% -61.3% n.a. n.a. Fully Dilluted Shares 10.9 12.9 12.9 EPS n.a. -49.3% -67.1% -20.6% n.a. Foreign Owned (% / Limit) 1.7mn 13.1% 49.0% BVPS 153.8% 9.3% -0.2% n.a. n.a. * Bloomberg Consensus Estimates Market Values VND (bn) USD (mn) EUR (mn) Market Cap 296 16.6 11.8 Growth Indicators FY06A FY07A FY08A Net Debt 477 26.8 0.0 Fixed Assets/Assoc 93.1% 74.2% 67.9% Minorities & Others (22) (1.2) (0.9) Debt 33.6% 42.7% 223.7% Enterprise Value 751 42.2 29.9 Financial Investments -97.4% 130075.0% 20.7% Other LT Assets 475.1% 263.7% -56.9% Corperate Actions Ex-Date Amt/(ratio) Fiscal Year Cash Dividend 29-Dec-08 600 FY08 Profitability FY06A FY07A FY08A Cash Dividend 2-Jan-08 1,200 FY08 Gross Margin (%) 12.1 13.2 15.3 Bonus 8-Jun-07 1/5 FY07 EBITDA Margin (%) 5.4 5.5 3.8 Cash Dividend 31-Jan-07 500 FY06 EBIT Margin (%) 4.3 3.5 1.9 Cash Dividend 13-Nov-06 500 FY06 Pre-Tax Margin (%) 4.3 3.5 0.8 Rights Issue 2-Aug-06 1/5 FY06 Net Margin (%) 3.9 3.1 0.7
Market Outlook Solvency & Liquidity FY06A FY07A FY08A Tra-fish (Pangasius) export revenues reached US$1.45bn in Acid Test Ratio 0.51 0.31 0.19 FY08 and are expected to decline to USD1.3bn in FY09 due to Current Ratio 1.62 1.47 0.89 weaker demand and credit constraints as a result of the global LT Debt/Capital 0.3% 0.0% 7.2% economic recession. The Russian market, accounting for 12% of Pangasius exports by value in 2008, reopened to selected Net Debt/Equity -33.7% -24.0% -81.8% Vietnamese companies in June 2009 after temporarily closing LT Debt/Fixed Assets 0.5% 0.0% 8.8% in December 2008, boosting the expected full year export Total Liab/Total Assets 35.9% 26.4% 52.5% revenues higher than the previously forecast USD1.0bn. Management Company Data Company History 1234 Tran Hung Dao, Long Chairman Ngo Phuoc Hau Head Office Agifish was established as a state-owned company in 1985 in An Xuyen City, Giang province in the Mekong Delta. It was converted to a joint CEO Ngo Phuoc Hau An Giang Provice stock company in 2001 and listed on the Ho Chi Minh City Stock CFO/ Chief Accountant Vo Thanh Thong Website www.agifish.com.vn Exchange in April 2002. IR Contact Vo Thanh Thong Telephone +84763857782
Major Shareholders Shares Insider Holdings Shares State 8.19% Ngo Phuoc Hau 1.17% PXP Vietnam Asset Management 5.84% Duong Ngoc Minh 21.60% Nguyen Dinh Huan 0.91% Phu Thanh Dang 0.78%
76 Consumer Goods / Food Producers
Export Markets by Value, 2008 Profit & Loss (VND bn) FY06A FY07A FY08A Revenue 1,190.9 1,233.7 2,081.1 EBITDA 63.9 67.7 80.1 EBIT 50.7 42.7 40.3 Interest & Fx Exp (4.4) (12.0) (26.7) Non Op Inc (Loss) 4.4 12.4 3.6 Pre-Tax 50.7 43.0 17.1 Taxes (4.1) (5.0) (2.1) Minorities & Pref’s 0.0 0.0 (0.4) Net Income to Common 46.6 38.0 14.7
Balance Sheet (VNDbn) FY06A FY07A FY08A Cash & Equiv. 13.0 13.7 20.1 ST Investments & Mkt. Sec 24.5 22.8 30.5 Receivables 135.8 112.8 272.8 Inventories 96.6 176.3 265.3 Other Curr Assets 5.0 34.7 53.1 Net Fixed Assets 87.7 229.8 439.6 Construction in Progress 96.6 91.2 87.9 Invest. in Assoc. 0.0 0.0 11.6 Financial Investments 0.1 130.2 157.1 Other L.T. Assets 9.0 32.7 14.1 Payables (25.3) (43.7) (107.0) Other Curr Liab. (28.0) (15.1) (74.3) ST Debt (113.2) (163.0) (481.4) LT Debt (1.0) 0.0 (46.3) Other LT Liab (0.4) (0.7) (0.8) Net Assets 300.3 621.7 642.3 Minorities 0.0 0.0 21.5 Management Strategy and Goals Book Capital 203.6 514.1 514.1 Following Agifish’ suspension from the Russia market in December 2008, Ret. Earnings 96.7 107.6 106.7 management worked to developed additional markets, particularly in the Total Liab. & Equity 468.3 844.2 1,352.0 US, motivated by the US Department of Commerce decision to lower the antidumping tax imposed on Agifish to from more than 47% to 0.52% on Working Capital Analysis FY06A FY07A FY08A 17 March 2009. Additionally, the company will focus on selling value added Days Receivable 41.6 33.4 47.8 products to Europe, South America, and Australia, and simultaneously Days Inventory 33.7 60.1 54.9 target domestic sales of VND140bn, up 62% from VND86.1bn in 2008. The company has also streamlined its management board, cutting the Days Payable 8.8 14.9 22.2 number of directors to five from the previous number of 11 persons with Cash Operating Cycle 0.9 41.6 29.2 shareholder agreement in April 2009 in order to be more efficient in strategic planning and decision-making. Derived Cash Flow (VNDbn)* FY06A FY07A FY08A EBIT 50.7 42.7 40.3 Investment Plans Depreciation & Amort 13.2 25.0 39.8 Due to a foreseeable shortage of raw fish supply in 2009 AGF plans to invest Chgs in Working Cap (80.5) (80.9) (144.9) VN270bn into the APPU, of which VND240bn will be used for fish feed Operating Cash Flow (16.6) (13.2) (64.8) supplies and the remaining amount for other facilities needed for farming Net Interest, Fx & Taxes (8.4) (17.0) (28.8) processes. No further construction projects are in place in 2009. Fixed Asset Capex (106.4) (168.4) (149.3) Investments 3.8 (130.1) (38.5) Key Success Factors Non Op Inc (Loss) 4.4 12.4 3.6 AGF has modern facilities and a stable source of supply through the Other Non Cash Adj. (61.7) (21.7) (69.3) APPU, which ensures a high quality product and stable production. AGF’s Dividends Paid (4.7) (20.5) (11.2) value added products have also gained a dominant position in the local Change in Paid in Capital 161.8 310.5 0.0 market, which promises long-term growth potential despite the current Change in Net Debt 28.7 48.8 364.7 lower sales level, accounting for only 4.3% of total revenue in FY08 due to Net Cash Flow 0.7 0.7 6.4 increased exports, from an average of under 8%. AGF has always sought improvements to meet diversified customer demand. Its new powder * Calculated from Balance Sheet & P&L soaking and automatic frying production line will support its value added sales to high-end markets. DuPont Analysis FY06A FY07A FY08A EBIT / Sales 0.04 0.03 0.02 Key Risk Factors Sales/Total Assets 2.54 1.46 1.54 less Net Int./Assets 0.00 0.00 (0.02) The company is currently sourcing up to 40% of raw Tra-fish from external suppliers, raising food safety and quality control concerns. Despite its Pre-Tax ROA (%) 10.8% 5.1% 1.3% cooperation with the APPU, the company is susceptible to input price Assets/Equity 1.56 1.36 2.11 fluctuations due to a lack of complete control over the supply source. Pre-Tax ROE (%) 16.9% 6.9% 2.7% Sales of value added products in the local market have tremendous 1-Tax rate 0.92 0.88 0.88 growth potential but will take time to develop due to traditionally fresh ROE (%) 15.5% 6.1% 2.3% eating habits as opposed to ready-made foods. Exports to high-end markets is a challenge and requires the company to maintain a high level Miscelleaneous FY06A FY07A Current of organizational competence due to more stringent food enforcement Altman Z Score n.m. n.m. 2.1 standards in importing countries that could continue increasing operating Asset Growth (%) -65.4% 80.3% 60.2% expenses. Capex/Sales (%) 8.9% 13.7% 7.2% Earnings Retention (%) 85.4% 87.6% -39.3%
77 Minh Phu Seafood Ticker Share Price - VND
MPC 22,500 01 Jul 09
Close/Volume Chart Company Description & Principle Activities
VND Mn Shares Shrimp farming and processing are MPC’s core business. The company has established a vertically integrated production line including shrimp breeding to ensure high input quality. They have also invested in R&D and farmed White Leg shrimp, accounting for 20% of the total export volume in 2008. MPC owns a 150ha farming area supplying around 10% of its input demand. MPC is one of four Vietnamese seafood exporters exempted from the US’ anti-dumping tax and is also engaged in real estate developments.
Per Share (VND) FY06A FY07A FY08A Trail 12M FY09E* FY10E* EPS 1,168 3,033 (596) 442 709 n.a. BVPS 10,386 15,571 13,432 n.a. n.a. n.a. DPS n.a. 16 1,547 n.a. n.a. n.a. Relative Performance CFPS 4,422 (2,484) 5,131 (1,437) n.a. n.a. FCFPS 3,814 (7,412) 3,900 (2,874) n.a. n.a. * Bloomberg Consensus Estimates
Key Valuations FY07A Avg +/- 1 s.d. FY08A Avg +/- 1 s.d. FY09E* FY10E* P/E (x) 36.2 45.4 / 27 343.5 343.7 / 343.4 31.7 n.a. P/B (x) 4.6 5.3 / 3.8 1.3 1.9 / 0.8 n.a. n.a. 01 Jul 09 Dividend Yield (%) n.a. n.a. 10.3 12.8 / 7.8 n.a. n.a. S&P Vietnam 10 Ho Chi Minh Stock Index P/CFPS (x) n.a. n.a. n.a. n.a. n.a. n.a. MSCI AC Asia Index MPC FCF Yield (%) n.a. n.a. (44.8) n.a. n.a. n.a.
Trading & Liquidity 20Days 100Days 180Days Growth FY06A FY07A FY08A FY09E* FY10E* Volume (Reg, Trading) 205,862 150,073 119,900 Revenues 32.6% 74.3% 22.0% n.a. n.a. VND Val. (Reg. Trading, bn) 4.8 2.6 1.9 EBITDA 30.7% 125.5% 10.8% n.a. n.a. Percent of market (%) 0.2 0.2 0.2 EBIT 33.7% 128.1% 7.1% n.a. n.a. Net Income 41.2% 146.2% -122.0% n.a. n.a. EPS n.a. 159.6% -119.7% -219.0% n.a. Shares Outstanding (mn) FY07A FY08A Current BVPS n.a. 49.9% -13.7% n.a. n.a. Wgt. Avg Issued Shares 62.6 70.0 70.0 * Bloomberg Consensus Estimates Fully Dilluted Shares 62.6 70.0 70.0 Foreign Owned (% / Limit) 6.4mn 9.2% 49.0% Growth Indicators FY06A FY07A FY08A Fixed Assets/Assoc 328.6% 240.2% -26.1% Market Values VND (bn) USD (mn) EUR (mn) Debt -19.3% 269.0% 16.8% Market Cap 1,631 91.6 64.9 Financial Investments 28.7% 933.4% -4.9% Net Debt 805 45.2 0.0 Other LT Assets 924.5% 43.6% 176.9% Minorities & Others (32) (1.8) (1.3) Enterprise Value 2,404 135.1 95.6 Profitability FY06A FY07A FY08A Gross Margin (%) 10.7 13.5 15.8 EBITDA Margin (%) 7.9 10.2 9.3 Corperate Actions Ex-Date Amt/(ratio) Fiscal Year EBIT Margin (%) 7.2 9.4 8.3 Cash Dividend 26-Mar-08 1,500 FY07 Pre-Tax Margin (%) 6.5 9.0 (1.1) Stock Dividend 4-Jun-07 1/10 FY07 Net Margin (%) 5.7 8.0 (1.5)
Market Outlook Solvency & Liquidity FY06A FY07A FY08A Acid Test Ratio 1.59 0.41 1.63 Shrimp are Vietnam’s top-earning seafood export with revenues Current Ratio 2.58 1.68 1.40 reaching USD1.6bn in 2008, up from USD1.5bn in 2007, and LT Debt/Capital 3.0% 19.5% 21.3% accounting for 35% of total seafood exports. The US and Japan are the largest consumers of Vietnam’s tiger prawns although Net Debt/Equity -33.6% -87.0% -109.3% Vietnam has now begun farming the White Leg shrimp (Penaeus LT Debt/Fixed Assets 15.8% 51.1% 69.3% vannamei) variety in efforts to improve competiveness. Total Liab/Total Assets 32.5% 48.0% 56.4%
Company History Management Company Data Industrial Zone, Ward 8, Founded in 1992 as a small private enterprise located in Ca Mau Chairman Le Van Quang Head Office Ca mau City Province, dealing with trading and processing seafood to supply to the local exporters, MPC has had several capital raisings and CEO Le Van Quang expanded its business to become a direct seafood exporter. CFO/ Chief Accontant Luu Minh Trung Website www.minhphu.com Converted to a Joint Stock Company in May 2006, MPC was IR Contact Nguyen Xuan Toan Telephone +84783838262 listed on the HNX in December 2006 and transferred to the HOSE in December 2007. MPC has seven subsidiaries including Major Shareholders Shares Insider Holdings Shares MSeafood established in the US for distribution in this market. Vietnam Investment Fund 4.68% Chu Thi Binh 17,475,010 It has become the country’s third largest seafood exporter and VIF II (Vietnam Investment 5.00% Le Van Quang 15,661,000 the leader in shrimp exports in 2008, earning USD156mn (13,878 Fund II limited) tonnes), equivalent to 10% of the country’s total shrimp export value Chu Van An 1,109,400 Le Thi Diu Minh 6,600,000 Le Van Diep 1,965,445
78 Consumer Goods / Food Producers
Revenues by Market, 2008 Profit & Loss (VND bn) FY06A FY07A FY08A Revenue 1,352.5 2,357.5 2,876.4 EBITDA 106.6 240.3 266.3 EBIT 97.6 222.6 238.5 Interest & Fx Exp (15.6) (47.3) (147.6) Non Op Inc (Loss) 6.4 35.6 (122.7) Pre-Tax 88.4 211.0 (31.8) Taxes (10.3) (17.8) (6.3) Minorities & Pref’s (1.1) (3.5) (3.6) Net Income to Common 77.1 189.8 (41.7)
Balance Sheet (VNDbn) FY06A FY07A FY08A Cash & Equiv. 31.1 16.3 99.7 ST Investments & Mkt. Sec 0.0 192.8 222.5 Receivables 640.0 875.1 448.5 Inventories 140.1 260.2 717.6 Other Curr Assets 51.5 51.3 152.3 Net Fixed Assets 76.2 191.7 267.1 Construction in Progress 57.1 230.0 36.2 Invest. in Assoc. 0.0 32.0 32.0 Financial Investments 24.5 253.4 240.9 Other L.T. Assets 12.6 18.1 50.1 Payables (19.5) (39.4) (61.2) Other Curr Liab. (54.8) (13.4) (86.5) ST Debt (240.4) (749.1) (916.8) LT Debt (21.0) (215.6) (210.2) Other LT Liab 0.0 0.0 (3.9) Net Assets 697.4 1,103.3 988.2 Minorities 12.0 13.3 47.9 Management Strategy and Goals. Book Capital 600.0 877.9 877.9 MPC aims to achieve high quality food safety certification to sustain its Ret. Earnings 85.5 212.1 62.4 foothold in the established markets and further expand to other areas, Total Liab. & Equity 1,033.2 2,120.8 2,266.9 and to continue to be a leading shrimp exporter. MPC will enforce hygiene and food safety requirements throughout its production processes and Working Capital Analysis FY06A FY07A FY08A gradually complete its integration process to ensure consistently high Days Receivable 172.7 135.5 56.9 quality products. Simultaneously, the company will further improve its Days Inventory 42.3 46.5 108.2 value added products to strengthen its competiveness in high-end markets including the US, Japan and Korea. Days Payable 5.9 7.0 9.2 Cash Operating Cycle (124.4) (81.9) 60.5 Investment Plans Derived Cash Flow (VNDbn)* FY06A FY07A FY08A The company plans to double its production capacity to 30,000 TPA by EBIT 97.6 222.6 238.5 investing in a new 15,000 TPA shrimp-processing factory in Hau Giang Depreciation & Amort 8.9 17.6 27.8 province, which is scheduled for completion in late 2010. The capital required is estimated to be USD20mn with 55% from external borrowing. Chgs in Working Cap (369.9) (376.5) (36.8) Operating Cash Flow (263.3) (136.3) 229.5 Key Success Factors Net Interest, Fx & Taxes (25.9) (65.0) (153.9) Fixed Asset Capex (40.1) (308.4) (86.2) MPC has been granted ACC Certification by The Accreditation Committee of the Aquaculture Certification Council Inc., allowing access to US Investments (5.5) (260.9) 12.4 supermarkets. MPC has strived to meet the stringent quality requirements Non Op Inc (Loss) 6.4 35.6 (122.7) in its target markets and management also maintains several active market Other Non Cash Adj. (43.0) (152.8) 42.0 research and business development projects to strengthen its penetration Dividends Paid (1.0) (108.3) (0.0) in international markets. Change in Paid in Capital 420.0 277.9 0.0 Change in Net Debt (62.5) 703.3 162.3 Key Risk Factors Net Cash Flow (14.9) (14.9) 83.4 Shrimp farming is inherently vulnerable to aquatic disease and * Calculated from Balance Sheet & P&L environmental pollutants thus requiring a stringent and consistent quality control process. Rising feed costs also impact margins and discourage DuPont Analysis FY06A FY07A FY08A farming production as Vietnam imports a significant portion of feed product EBIT / Sales 0.07 0.09 0.08 and is susceptive to commodity price volatilities. The US is currently MPC’s Sales/Total Assets 1.31 1.11 1.27 major market and receivables from this market are expected to rise which less Net Int./Assets (0.01) (0.01) (0.12) may cause difficulties in working capital and an increased exposure to rising Pre-Tax ROA (%) 8.6% 10.0% -1.4% interest rates. Assets/Equity 1.48 1.92 2.29 Pre-Tax ROE (%) 12.7% 19.1% -3.2% 1-Tax rate 0.88 0.92 1.20 ROE (%) 11.2% 17.5% -3.9%
Miscelleaneous FY06A FY07A Current Altman Z Score n.m. n.m. 2.7 Asset Growth (%) -54.4% 105.3% 6.9% Capex/Sales (%) 3.0% 13.1% 3.0% Earnings Retention (%) n.a. 99.5% 359.6%
79 Tuong An Ticker Share Price - VND Vegetable Oil TAC 33,000 01 Jul 09
Close/Volume Chart Company Description & Principle Activities VND Mn Shares Tuong An primarily focuses on edible vegetable oil processing and distribution. As the largest processor of bottled vegetable oil, Tuong An is proud of its diversified product range including 11 brands ranging from cooking oil, high quality oil, infant and elderly nutritional oils, and solid fats including margarine and shortening. The company is headquartered in HCMC, with two factories in the north and south having an annual throughput capacity of 9,000 tonnes and 243,000 tonnes respectively.
Per Share (VND) FY06A FY07A FY08A Trail 12M FY09E* FY10E* EPS 2,407 6,623 624 (1,598) 1,385 n.a. BVPS 13,915 19,043 16,294 n.a. n.a. n.a. DPS 1,200 1,200 2,000 n.a. n.a. n.a. CFPS 4,298 11,520 (12,478) n.a. n.a. n.a. FCFPS 1,497 6,333 (15,536) n.a. n.a. n.a. Relative Performance * Bloomberg Consensus Estimates
Key Valuations FY07A Avg +/- 1 s.d. FY08A Avg +/- 1 s.d. FY09E* FY10E* P/E (x) 23.8 28.4 / 19.2 11.6 11.8 / 11.3 23.8 n.a. P/B (x) 7.3 10.1 / 4.5 4.4 16.8 n.a. n.a. Dividend Yield (%) 1.3 1.8 / 0.8 4.0 1.9 n.a. n.a. P/CFPS (x) n.a. n.a. n.a. 7.1 n.a. n.a. 01 Jul 09 FCF Yield (%) n.a. n.a. n.a. n.a. n.a. n.a. S&P Vietnam 10 Ho Chi Minh Stock Index MSCI AC Asia Index TAC Growth FY06A FY07A FY08A FY09E* FY10E* Revenues n.a. 68.5% 15.9% n.a. n.a. Trading & Liquidity 20Days 100Days 180Days EBITDA n.a. 320.3% -79.4% n.a. n.a. Volume (Reg, Trading) 259,712 236,828 188,768 EBIT n.a. 793.5% -98.5% n.a. n.a. VND Val. (Reg. Trading, bn) 10.1 6.7 5.3 Net Income n.a. 175.1% -90.6% n.a. n.a. Percent of market (%) 0.3 0.4 0.5 EPS n.a. 175.2% -90.6% 122.0% n.a. BVPS n.a. 36.9% -14.4% n.a. n.a. Shares Outstanding (mn) FY07A FY08A Current * Bloomberg Consensus Estimates Wgt. Avg Issued Shares 19.0 19.0 19.0 Fully Dilluted Shares 19.0 19.0 19.0 Growth Indicators FY06A FY07A FY08A Foreign Owned (% / Limit) 3.3mn 17.4% 49.0% Fixed Assets/Assoc n.a. 61.3% 13.2% Debt n.a. 225.0% -1.9% Market Values VND (bn) USD (mn) EUR (mn) Financial Investments n.a. -98.5% -18.8% Market Cap 647 36.4 25.7 Other LT Assets n.a. -33.9% 198.0% Net Debt 21 1.2 0.0 Minorities & Others (42) (2.4) (1.7) Profitability FY06A FY07A FY08A Enterprise Value 626 35.2 24.9 Gross Margin (%) 8.8 8.3 5.2 EBITDA Margin (%) 1.5 3.9 0.7 Corperate Actions Ex-Date Amt/(ratio) Fiscal Year EBIT Margin (%) 0.6 3.4 0.0 Cash Dividend 20-May-08 500 FY08 Pre-Tax Margin (%) 0.0 0.0 0.5 Cash Dividend 12-Mar-08 1,500 FY07 Net Margin (%) 3.0 4.9 0.4 Cash Dividend 28-Mar-07 1,200 FY06 Solvency & Liquidity FY06A FY07A FY08A Market Outlook Acid Test Ratio 0.61 1.15 0.34 Vietnam’s per capita consumption of vegetable oil was Current Ratio 1.01 1.45 1.25 estimated at 6.7kg in FY08, amounting to only 35% of the LT Debt/Capital 12.0% 28.6% 25.3% global average of 18.8kg and half of the recommended intake Net Debt/Equity 31.6% 72.2% -6.9% for Vietnamese consumers. Vegetable oil production and LT Debt/Fixed Assets 22.7% 45.8% 30.7% consumption has grown by a CAGR of 6.7% in the past five years from 410,000 tonnes in FY03 to 581,000 tonnes in FY08. Total Liab/Total Assets 51.8% 56.8% 55.0% The sector is estimated to grow strongly given its current low rate of consumption, weakening palm oil input prices, and Management Company Data broader economic recovery that is expected to pick up towards Chairman Doan Tan Nghiep Head Office 48/5 Phan Huy Ich, Ward 15 the end of FY09. Local production capacity has also increased CEO Ha Binh Son Tan Binh District, Hochiwwminh city substantially to 1.1 million tonnes in anticipation of increasing CFO/ Chief Accontant Vu Duc Thinh Website www.tuongan.com.vn demand for vegetable oil. IR Contact Nguyen Khac Hanh Telephone +84838153972
Company History Major Shareholders Shares Insider Holdings Shares Tuong An Vegetable Oil Company (TAC) is Vietnam’s second State 51% Management 160,000 largest processor of edible vegetable oil. Founded more than Lion Global Investor 2.73% 30 years ago, TAC was nationalized in 1975, converted to a joint SGAM Vietnam 3.74% stock company in 2004, and subsequently listed on the HOSE in Opportunities Fund December 2006. Vegetable Oil Extract JSC 0.87% Deutsche Bank London 1.33% Tongyang Trust Fund 1.84% Indochina Capital Vietnam 1.84% Holdings
80 Consumer Goods / Food Products
Revenues by Product Group, 2008 Profit & Loss (VND bn) FY06A FY07A FY08A Revenue 1,515.5 2,554.2 2,959.7 EBITDA 23.4 98.5 20.3 EBIT 9.7 86.8 1.3 Interest & Fx Exp (3.7) 5.3 (42.8) and Non Op Inc (Loss) 39.7 33.6 55.9 Pre-Tax 0.0 0.0 14.3 Taxes 0.0 0.0 (2.5) Minorities & Pref’s 0.0 0.0 0.0 Net Income to Common 45.7 125.7 11.8
Balance Sheet (VNDbn) FY06A FY07A FY08A Cash & Equiv. 115.3 364.2 80.1 ST Investments & Mkt. Sec 0.0 0.0 0.0 Receivables 22.4 23.5 24.7 Inventories 115.1 151.9 269.5 Other Curr Assets 10.3 61.8 31.3 Net Fixed Assets 73.1 65.6 135.3 Construction in Progress 66.7 159.7 119.7 Invest. in Assoc. 0.0 0.0 0.0 Financial Investments 132.0 2.0 1.6 Other L.T. Assets 12.6 8.3 24.8 Payables (188.0) (316.2) (238.1) Other Curr Liab. (63.4) (55.9) (38.0) Management Strategy and Goals ST Debt 0.0 0.0 (23.1) Tuong An intends to focus on the retail bottled segment, subordinating LT Debt (31.8) (103.3) (78.2) industrial sales, with aggressive promotional campaigns, brand awareness Other LT Liab (0.1) (0.2) (0.3) enhancement, new product development, and reinforcement of its Net Assets 264.1 361.4 309.3 penetration to increasingly wealthy provincial towns in western and central Minorities 0.0 0.0 0.0 Vietnam in addition to its traditional markets in urban cities in the south and southeast. The company is also eyeing export opportunities in neighboring Book Capital 189.8 189.8 189.8 Cambodia. Tuong An has over 116 distribution agents throughout the Ret. Earnings 74.3 171.6 119.5 country and aims to sustain its current 23% domestic market share. Total Liab. & Equity 547.4 837.1 687.0
Investment Plans Working Capital Analysis FY06A FY07A FY08A Tuong An has completed its major capex cycle with a recently constructed Days Receivable 5.4 3.4 3.0 VND278bn Phu My Factory in late FY08, tripling its production capacity Days Inventory 30.4 23.7 35.1 to 252,000 from 72,000 tonnes per year. We therefore expect capex to Days Payable 49.7 49.3 31.0 moderate in the near term. The company also plans to invest in a bottling Cash Operating Cycle 74.7 69.6 63.0 line valued at VND12bn in FY09E. Derived Cash Flow (VNDbn)* FY06A FY07A FY08A Key Success Factors EBIT n.a. 86.8 1.3 Strong brand equity, an experienced managerial team and a well- Depreciation & Amort n.a. 11.6 19.0 established distribution network with a deep understanding of the local Chgs in Working Cap n.a. 31.4 (184.3) market are Tuong An’s key strengths. Recent aggressive promotional Operating Cash Flow n.a. 129.9 (164.1) campaigns have also enhanced and widened brand awareness throughout Net Interest, Fx & Taxes n.a. 5.3 (45.3) the country. Tuong An will also save input costs and leverage economies of Fixed Asset Capex n.a. (98.4) (58.1) scale with the implementation of new production lines. Investments n.a. 130.0 0.4 Non Op Inc (Loss) n.a. 33.6 55.9 Key Risk Factors Other Non Cash Adj. n.a. 15.1 (71.0) TAC imports nearly all of its raw materials, primarily Palm Olein and Dividends Paid n.a. (38.0) 0.0 soyabean oil, which it processes domestically into edible vegetable Change in Paid in Capital n.a. 0.0 0.0 oils and other end-use products. In addition to having to purchase raw material through its controlling parent company, Vocarimex, the company Change in Net Debt n.a. 71.5 (2.0) is exposed to rising costs on a weaker local currency, as well as generally Net Cash Flow n.a. 249.0 (284.1) rising input prices on agricultural commodities. The sector has become * Calculated from Balance Sheet & P&L highly concentrated and competitive. Major players have entered Vietnam and gained a foothold in the industrial sales market, including Calofic and DuPont Analysis FY06A FY07A FY08A GoldenHope, who will not ignore the retail segment for much longer. EBIT / Sales 0.01 0.03 0.00 Sales/Total Assets 2.77 3.05 4.31 less Net Int./Assets (0.02) (0.10) 0.02 Pre-Tax ROA (%) 0.0% 0.0% 2.1% Assets/Equity 2.07 2.32 2.22 Pre-Tax ROE (%) 0.0% 0.0% 4.6% 1-Tax rate n.a. n.a. 0.83 ROE (%) n.a. n.a. 3.8%
Miscelleaneous FY06A FY07A Current Altman Z Score n.m. n.m. 5.3 Asset Growth (%) -20.3% 52.9% -17.9% Capex/Sales (%) n.m. 3.9% 2.0% Earnings Retention (%) 50.2% 81.9% -220.5%
81 Vinh Hoan Corp Ticker Share Price - VND
VHC 28,400 01 Jul 09
Close/Volume Chart Company Description & Principle Activities VND Mn Shares Vinh Hoan is a Vietnam-based aquaculture company engaged in the export of frozen Tra-fish fillets and value added products and by-products such as fish-oil and bone- powder. The company was ranked as the third largest Pangasius exporter and fourth largest seafood exporter in 2008 with foreign revenues of USD0.1bn, accounting for 6% of Vietnam’s total Pangasius export. The US is the company’s largest export market, followed by Europe and the company also engages in feed processing, trading fish vaccines, and third-party exporting.
Per Share (VND) FY06A FY07A FY08A Trail 12M FY09E* FY10E* EPS n.a. 4,525 2,668 3,401 2,536 n.a. BVPS n.a. 13,136 13,064 n.a. n.a. n.a. DPS n.a. 1,000 1,700 0 n.a. n.a. CFPS n.a. (300) (6,037) (3,421) n.a. n.a. Relative Performance FCFPS n.a. (9,160) (14,393) (12,456) n.a. n.a. * Bloomberg Consensus Estimates
Key Valuations FY07A Avg +/- 1 s.d. FY08A Avg +/- 1 s.d. FY09E* FY10E* P/E (x) n.a. n.a. 6.2 6.2 / 6.1 11.2 n.a. P/B (x) 3.7 3.8 / 3.7 1.9 2.5 / 1.4 n.a. n.a. Dividend Yield (%) n.a. n.a. 7.0 10.5 / 3.5 n.a. n.a. 01 Jul 09 P/CFPS (x) n.a. n.a. n.a. n.a. n.a. n.a. S&P Vietnam 10 Ho Chi Minh Stock Index FCF Yield (%) n.a. n.a. (79.7) n.a. n.a. n.a. MSCI AC Asia Index VHC Growth FY06A FY07A FY08A FY09E* FY10E* Trading & Liquidity 20Days 100Days 180Days Revenues 199.1% -6.0% 71.3% n.a. n.a. Volume (Reg, Trading) 48,146 23,917 22,685 EBITDA 540.6% 6.0% 57.2% n.a. n.a. VND Val. (Reg. Trading, bn) 1.6 0.7 0.6 EBIT 1326.2% 8.6% 45.6% n.a. n.a. Percent of market (%) 0.1 0.0 0.1 Net Income 18597.9% 22.3% -16.8% n.a. n.a. EPS n.a. n.a. -41.0% -4.9% n.a. Shares Outstanding (mn) FY07A FY08A Current BVPS n.a. n.a. -0.6% n.a. n.a. Wgt. Avg Issued Shares 21.3 30.0 30.0 * Bloomberg Consensus Estimates Fully Dilluted Shares 21.3 30.0 30.0 Foreign Owned (% / Limit) 4.1mn 13.7% 49.0% Growth Indicators FY06A FY07A FY08A Fixed Assets/Assoc 64.1% 293.7% 70.9% Market Values VND (bn) USD (mn) EUR (mn) Debt -24.7% 113.6% 328.4% Market Cap 894 50.2 35.5 Financial Investments 0.0% -99.9% 0.0% Net Debt 656 36.9 0.0 Other LT Assets 98.4% 746.9% 378.7% Minorities & Others 9 0.5 0.4 Enterprise Value 1,560 87.6 62.0 Profitability FY06A FY07A FY08A Gross Margin (%) 9.8 12.9 11.8 Corperate Actions Ex-Date Amt/(ratio) Fiscal Year EBITDA Margin (%) 7.3 8.2 7.6 Cash Dividend 2-Dec-08 1,200 FY08 EBIT Margin (%) 6.5 7.5 6.4 Cash Dividend 7-May-08 500 FY08 Cash Dividend 28-Feb-08 1,000 FY07 Pre-Tax Margin (%) 5.8 7.8 3.5 Net Margin (%) 5.2 6.7 3.3 Market Outlook Vietnam is the sixth largest seafood exporting country in Solvency & Liquidity FY06A FY07A FY08A the world with exports valued at US$4.5bn in 2008, up from Acid Test Ratio 0.24 0.26 0.22 US$3.8bn in 2007, with access to 125 foreign markets. Vietnam Current Ratio 1.21 1.39 1.07 farmed 1.65mn tonnes of Tra-fish (Pangasius) in FY08, equivalent LT Debt/Capital 13.4% 14.7% 51.1% to 0.64mn tonnes of fillets, which accounted for US$1.45bn or Net Debt/Equity -60.4% -34.8% -167.6% 32.1% of total export value in 2008, increasing by 48% in value LT Debt/Fixed Assets 19.5% 20.6% 42.5% and 66% in volume compared to 2007. Total Liab/Total Assets 54.4% 39.5% 65.8%
Company History Management Company Data Vinh Hoan was founded as a private company in 1997 and is National Road 30, Ward 11, Chairman Truong Thi Le Khanh Head Office located in Dong Thap Province in the Mekong Delta. It was listed Cao Lanh City on the HOSE in December 2007. Vinh Hoan currently owns three CEO Truong Thi Le Khanh Dong Thap Province, Vietnam Tra-fish factories with a total processing capacity of 560 tonnes CFO/ Chief Accontant Nguyen Thi Kim Dao Website www.vinhhoan.com.vn of raw fish input per day. It also owns 136.5 ha of farming area, IR Contact Tran Thi Kim Loan Telephone +84673891166 providing 34% of the company’s product requirement for raw material inputs. Major Shareholders Shares Insider Holdings Shares Foreigners 13.73% Truong Thi Le Khanh 59.88%
82 Consumer Goods / Food Producers
Revenues by Product Group, 2008 Profit & Loss (VND bn) FY06A FY07A FY08A Revenue 1,516.2 1,425.4 2,442.4 EBITDA 110.6 117.3 184.4 EBIT 98.5 106.9 155.7 Interest & Fx Exp (7.8) 0.9 (85.1) Non Op Inc (Loss) (3.1) 3.4 14.1 Pre-Tax 87.5 111.2 84.7 Taxes (8.9) (15.2) (2.4) Minorities & Pref’s 0.0 0.2 (2.2) Net Income to Common 78.6 96.1 80.0
Balance Sheet (VNDbn) FY06A FY07A FY08A Cash & Equiv. 9.2 20.9 20.8 ST Investments & Mkt. Sec 0.0 0.0 0.4 Receivables 92.3 174.9 272.6 Inventories 35.8 92.4 333.8 Other Curr Assets 14.2 92.3 70.0 Net Fixed Assets 58.1 95.8 486.2 Construction in Progress 16.2 196.4 13.1 Invest. in Assoc. 0.0 0.0 0.0 Financial Investments 9.7 0.0 0.0 Other L.T. Assets 0.4 3.8 18.2 Management Strategy and Goals Payables (38.8) (81.3) (96.8) Vinh Hoan plans to secure the traditional US market and expand in Europe Other Curr Liab. (15.5) (27.7) (24.9) by focusing on the lucrative German and UK markets. It is targeting 5% ST Debt (59.6) (98.0) (465.2) to 10% of total revenues to be derived from the hugely potential Russian LT Debt (14.5) (60.2) (212.3) market in 2009. To achieve this goal the company is committed to ensure food safety standards and high quality products, enhance its vertically Other LT Liab 0.0 (0.4) (0.7) integrated production with world-standard quality and stable supply Net Assets 107.5 409.0 415.3 sources to achieve a 40% self-supply rate of raw fish in 2009 and 70% Minorities 0.0 14.9 23.4 onwards. Book Capital 17.3 300.0 300.0 Ret. Earnings 90.2 94.1 91.9 Investment Plans Total Liab. & Equity 235.8 676.5 1,215.2 Vinh Hoan plans to expand its farming area to 186.5ha in 2009 to ensure 40% raw Tra-catfish input supply for its own production. They will also Working Capital Analysis FY06A FY07A FY08A double their Tra-feed factory capacity to 140,000 tonnes per year to cater Days Receivable 22.2 44.8 40.7 for their farming requirements and for market sale, which is due to be Days Inventory 9.6 27.1 56.6 operational by the end of 2009. The total capital required for these projects Days Payable 10.4 23.9 16.4 is VND25bn and VND20bn, respectively. Cash Operating Cycle (2.3) 6.3 32.2
Key Success Factors Derived Cash Flow (VNDbn)* FY06A FY07A FY08A Vinh Hoan has access to a stable and plentiful supply of raw materials, EBIT 98.5 106.9 155.7 given the well developed fish farming industry in the Mekong Delta and Depreciation & Amort 12.2 10.4 28.7 vertical integration of it’s Tra-fish farming business. To ensure long term Chgs in Working Cap (47.1) (162.5) (304.2) access to high end markets, Vinh Hoan has invested intensively in quality Operating Cash Flow 63.5 (45.2) (119.8) control and achieved AQUAGAP accreditation granted by Switzerland’s IMO, Net Interest, Fx & Taxes (16.8) (14.4) (87.5) becoming one of a very few Vietnamese seafood suppliers gaining access to supermarket chains in developed countries. Fixed Asset Capex (41.9) (188.3) (250.7) Investments 0.0 9.6 0.0 Key Risk Factors Non Op Inc (Loss) (3.1) 3.4 14.1 Other Non Cash Adj. 34.2 (39.3) (38.8) The company is currently sourcing up to 60% raw Tra-fish from external suppliers, raising food safety and quality concerns. Rising awareness and Dividends Paid 0.0 (80.9) (36.8) more stringent food enforcement standards in importing countries could Change in Paid in Capital 0.0 282.7 0.0 continue increasing operating expenses and will require the company Change in Net Debt (24.3) 84.1 519.4 to maintain a high level or organizational competence. Concerns of a Net Cash Flow 11.7 11.7 (0.1) narrowing US market if the Farm Bill is passed would hurt Vinh Hoan’s * Calculated from Balance Sheet & P&L revenue for a period of time while it seeks expansion in other markets. Due to a heavy reliance on working capital borrowing, net margins will be DuPont Analysis FY06A FY07A FY08A sensitive to rising interest rates and falling export prices due to intensified EBIT / Sales 0.06 0.08 0.06 competition. Sales/Total Assets 6.43 2.11 2.01 less Net Int./Assets (0.05) 0.01 (0.06) Pre-Tax ROA (%) 37.1% 16.4% 7.0% Assets/Equity 2.19 1.65 2.93 Pre-Tax ROE (%) 81.5% 27.2% 20.4% 1-Tax rate 0.90 0.86 0.97 ROE (%) 73.2% 23.5% 19.8%
Miscelleaneous FY06A FY07A Current Altman Z Score n.m. n.m. 3.0 Asset Growth (%) -80.6% 186.9% 79.6% Capex/Sales (%) 2.8% 13.2% 10.3% Earnings Retention (%) n.a. n.a. -1.1%
83 Viet Nam Dairy Ticker Share Price - VND Products (Vinamilk) VNM 92,000 01 Jul 09
Close/Volume Chart Company Description & Principle Activities VND Mn Shares Vietnam Dairy Products JSC (Vinamilk) is engaged in the food manufacturing sector. The company manufactures and distributes dairy products, including liquid, condensed and powdered milk, nutritional supplements, infant formulas and related products, coffee, and non-alcoholic drinks. Its minor activities include packaging, logistics and warehousing services, as well as the trading of industrial supplies and machinery. The company is developing a head office property development project through a subsidiary and has recently acquired another company engaged in fresh milk production and cattle husbandry, currently farming a total of 2,400 head.
Per Share (VND) FY06A FY07A FY08A Trail 12M FY09E* FY10E* EPS 3,964 5,587 7,132 n.a. 8,340 8,078 BVPS 16,449 24,623 27,168 n.a. 31,266 35,932 DPS 1,748 3,082 3,884 n.a. 3,124 3,319 Relative Performance CFPS 3,400 2,398 7,760 n.a. n.a. n.a. FCFPS (262) (1,862) 5,221 n.a. n.a. n.a. * Bloomberg Consencus Estimates
Key Valuations FY07A Avg +/- 1 s.d. FY08A Avg +/- 1 s.d. FY09E* FY10E* P/E (x) 35.6 39 / 32.1 15.5 16.2 / 14.8 11.0 11.4 P/B (x) 8.3 9.4 / 7.3 3.9 4.7 / 3.1 2.9 2.6 Dividend Yield (%) 1.4 1.7 / 1.1 2.4 3.6 / 1.2 29.4 27.7 01 Jul 09 S&P Vietnam 10 Ho Chi Minh Stock Index P/CFPS (x) 33.4 43.4 / 23.5 26.9 40.5 / 13.3 n.a. n.a. FCF Yield (%) (2.8) -0.7 / -4.8 n.a. n.a. n.a. n.a. MSCI AC Asia Index VNM
Trading & Liquidity 20Days 100Days 180Days Growth FY06A FY07A FY08A FY09E* FY10E* Volume (Reg, Trading) 169,702 128,750 137,485 Revenues 10.8% 4.7% 25.6% n.a. n.a. VND Val. (Reg. Trading, bn) 16.4 11.4 11.7 EBITDA n.a. 3.2% 101.6% n.a. n.a. Percent of market (%) 0.5 0.7 1.1 EBIT 4.8% -1.6% 117.2% n.a. n.a. Net Income 9.0% 46.0% 29.8% n.a. n.a. Shares Outstanding (mn) FY07A FY08A Current EPS 8.8% 41.0% 27.7% 16.9% -3.1% Wgt. Avg Issued Shares 174.6 175.3 175.3 BVPS 21.6% 49.7% 10.3% 15.1% 14.9% Fully Dilluted Shares 174.6 175.3 175.3 * Bloomberg Conscencus Estimates Foreign Owned (% / Limit) 84.4mn 48.2% 49.0% Growth Indicators FY06A FY07A FY08A Fixed Assets/Assoc 59.6% 43.0% 14.9% Market Values VND (bn) USD (mn) EUR (mn) Debt 24.2% 18.4% 171.0% Market Cap 16,739 940.4 667.0 Financial Investments -51.2% 10.8% 69.2% Net Debt (378) (21.3) (0.0) Other LT Assets -18.4% 83.0% 25.0% Minorities & Others (1,234) (69.3) (49.2) Enterprise Value 15,126 849.8 602.7 Profitability FY06A FY07A FY08A Gross Margin (%) 25.1 26.0 31.6 Corperate Actions Ex-Date Amt/(Ratio) Fiscal Year EBITDA Margin (%) 10.5 10.4 16.6 Cash Dividend 26-Nov-08 1,900 FY08 EBIT Margin (%) 8.9 8.4 14.5 Cash Dividend 18-Aug-08 1,000 FY08 Pre-Tax Margin (%) 10.6 14.6 16.7 Cash Dividend 17-Apr-08 1,000 FY07 Net Margin (%) 10.6 14.7 15.2 Cash Dividend 27-Jun-07 1,900 FY07 Cash Dividend 31-Jan-07 955 FY06 Solvency & Liquidity FY06A FY07A FY08A Rights Issue 31-Jan-07 1/20 FY07 Acid Test Ratio 0.36 0.19 0.69 Current Ratio 2.42 3.16 3.10 Market Outlook LT Debt/Capital 3.2% 2.6% 3.0% Vietnam’s dairy consumption rate of only 11.6 kg per capita Net Debt/Equity 1.9% -0.1% 0.1% in 2008 contrasts with 38kg in Thailand, 20.9 kg in China and LT Debt/Fixed Assets 8.1% 7.0% 7.5% a world average consumption rate of 103kg per capita. It is Total Liab/Total Assets 23.9% 19.8% 19.3% estimated that 10% of the population, principally urban dwellers, consume 78% of total dairy products in the country, driving Management Company Data industry growth by a CAGR of 3.2% in volume and over 25% in 184-188 Nguyen Dinh Chieu Chairman Mai Kieu Lien Head Office revenue per year during the past five years. Increasing rates of Street, District 3 urbanization and income growth provide tremendous organic CEO Mai Kieu Lien Hochiminh City growth potential in both the short and long term. CFO/ Chief Accontant Ngo Thi Thu Trang Website www.vinamilk.com.vn Company History IR Contact Tran Chi Son Telephone +84839300358 The company was founded as the Southern Dairy-Coffee Company as a subsidiary of the General Food Directorate in Major Shareholders Shares Insider Holdings Shares 1976 with six factories in operation. Becoming the Vietnam Dairy States 47.64% Mai Kieu Lien 0.097% Company in 1992, the company began to focus exclusively on Dragon Capital’s Funds 8.46% Ngo Thi ThuTrang 0.045% dairy products. Vietnam Dairy Products became a joint stock F&N Dairy Investment 10.08% Nguyen Thi Nhu Hang 0.038% company (JSC) in 2003 and listed on the HOSE in January 2006.
84 Consumer Goods / Food Producers
Revenues by Product Group, 2008 Profit & Loss (VND bn) FY06A FY07A FY08A Revenue 6,245.6 6,538.0 8,209.0 EBITDA 656.9 677.6 1,366.1 EBIT 555.7 546.9 1,187.6 Interest & Fx Exp (42.3) (17.6) (28.2) Non Op Inc (Loss) 149.4 426.1 211.9 Pre-Tax 662.8 955.4 1,371.3 Taxes (2.9) 8.0 (122.6) Minorities & Pref’s 0.0 0.1 1.4 Net Income to Common 659.9 963.4 1,250.1
Balance Sheet (VNDbn) FY06A FY07A FY08A Cash & Equiv. 156.9 117.8 338.7 ST Investments & Mkt. Sec 306.7 654.5 374.0 Receivables 393.9 505.2 530.1 Inventories 965.8 1,675.2 1,775.3 Other Curr Assets 173.0 225.0 169.5 Net Fixed Assets 755.0 1,030.9 1,580.8 Construction in Progress 316.2 598.3 356.9 Invest. in Assoc. 122.7 78.2 23.7 Financial Investments 292.1 323.6 547.4 Other L.T. Assets 118.3 216.4 270.5 Payables (436.9) (621.4) (492.6) Other Curr Liab. (299.6) (302.0) (291.7) ST Debt (17.9) (10.0) (188.2) LT Debt (86.3) (113.4) (146.0) Management Strategy and Goals Other LT Liab (21.5) (26.5) (35.9) Net Assets 2,738.4 4,351.9 4,812.5 Production capacity was 504,000 tonnes per year in FY08 and Vinamilk Minorities 0.0 36.0 50.6 intends to continue to raise production capacity by between 5% to 10% per year as dairy food consumption increases. Vinamilk will also focus on Book Capital 1,644.2 2,817.7 2,817.7 strengthening its distribution network in 2009 particularly in the cold Ret. Earnings 1,094.2 1,498.2 1,944.2 products segments. They are also investing heavily in product innovation Total Liab. & Equity 3,600.5 5,425.1 5,967.0 and marketing campaigns to develop new products suitable with more sophisticated consumer tastes and to expand its powder milk market Working Capital Analysis FY06A FY07A FY08A share to 20% from 15% in FY08. Vinamilk currently has 220 distributors Days Receivable 23.0 28.2 23.6 and 140,000 points of sale throughout the country. Vinamilk plans to Days Inventory 75.4 126.4 115.5 progressively enhance domestic raw milk supplies by providing seed capital Days Payable 34.1 46.9 32.0 and technical support to independent dairy farms in exchange for long term off-take agreements. Cash Operating Cycle 86.4 145.1 124.0
Investment Plans Derived Cash Flow (VNDbn)* FY06A FY07A FY08A EBIT 555.7 546.9 1,187.6 Capital expenditure is budgeted at VND1,208bn for FY09, of which half is Depreciation & Amort 101.2 130.8 178.4 slated for new projects in FY09 and the balance in FY10. The capex to sales ratio has been historically consistent at 10%. The company also issued Chgs in Working Cap 1,181.3 (685.7) (208.6) 386,840 shares in June 2009 (0.23% capital increase) as part of their 2009 Operating Cash Flow 1,838.2 (8.1) 1,157.4 employee share bonus scheme and Vinamilk will begin construction of Net Interest, Fx & Taxes (45.2) (9.6) (150.9) its new head office property development in HCMC with a total capital Fixed Asset Capex (609.5) (744.0) (445.1) requirement of VND386bn, of which VND158bn has been disbursed in Investments 183.6 13.0 (169.4) 2008 and is scheduled for completion in 4QFY10. Cash flow generation is Non Op Inc (Loss) 149.4 426.1 211.9 significant and there are no plans to increase long-term leverage. Vinamilk’s Other Non Cash Adj. (1,037.7) (228.5) (88.7) Singapore listing plans were postponed in FY08 due to unfavorable market Dividends Paid (538.2) (680.7) (505.5) conditions. Change in Paid in Capital 0.0 1,173.5 0.0 Key Success Factors Change in Net Debt 20.3 19.2 210.9 Net Cash Flow (39.1) (39.1) 220.8 Vinamilk continues to sustain its best-known brands in Vietnam, * Calculated from Balance Sheet & P&L maintaining brand dominance with a wide product range, intensive marketing campaigns, and a nationwide distribution network provides a stable 37% market share. Vinamilk has diversified into yoghurts, fruit juices, DuPont Analysis FY06A FY07A FY08A coffee, specialized infant formulas, adult and elderly supplements and body EBIT / Sales 0.09 0.08 0.14 weight control powders. They are also consistently investing in R&D and Sales/Total Assets 1.73 1.21 1.38 launching new products with plans to expand into the health drink sector, less Net Int./Assets 0.03 0.08 0.03 although recently disposed of their stake in the SAB Miller brewing joint Pre-Tax ROA (%) 18.4% 17.6% 23.0% venture to focus on core businesses and fully exploit the growth potential in Assets/Equity 1.31 1.25 1.24 the dairy industry. Pre-Tax ROE (%) 24.2% 22.0% 28.5% 1-Tax rate 1.00 1.01 0.91 Key Risk Factors ROE (%) 24.1% 22.1% 25.9% Vinamilk imports almost all of its raw material product, primarily powdered milk and juice concentrate which it recombines domestically into liquid Miscelleaneous FY06A FY07A Current milk and other end-use products. As such, the company is exposed to rising Altman Z Score n.m. n.m. 10.5 costs on a weaker currency, as well as generally rising commodities input Asset Growth (%) -39.7% 50.7% 10.0% prices. Vietnam’s retail dairy market is highly competitive particularly in the powdered milk sector where foreign invested enterprises and brands Capex/Sales (%) 9.8% 11.4% 5.4% control 80% of that market. Major players to have entered Vietnam more Earnings Retention (%) 55.9% 44.8% 45.5% recently include F&N, Nestle, and Meiji Milk although no single company matches Vinamilk in product breadth. 85 PetroVietnam Ticker Share Price - VND General Services PET 19,000 01 Jul 09
Close/Volume Chart Company Description and Principle Activities VND Mn Shares PET is engaged in three business lines including general trading, oil and gas services and LPG cylinder manufacturing. The company is the official distributor of Nokia handsets and laptop computers including Dell, Acer, Lenovo and HP through its eight branch outlets and more than 1,000 distribution agents throughout the country. It also trades imported fertilizer and agricultural products. Under oil and gas services, PET provides offshore and onshore services at construction sites and provides living, maintenance, labour, and security services and real estate developments.
Per Share (VND) FY06A FY07A FY08A Trail 12M FY09E* FY10E* EPS n.a. 1,965 1,828 1,420 1,617 n.a. BVPS n.a. 11,216 12,090 n.a. n.a. n.a. DPS n.a. n.a. 608 n.a. n.a. n.a. CFPS n.a. (22,016) (3,129) n.a. n.a. n.a. Relative Performance FCFPS n.a. (24,697) (4,316) n.a. n.a. n.a. * Bloomberg Consensus Estimates
Key Valuations FY07A Avg +/- 1 s.d. FY08A Avg +/- 1 s.d. FY09E* FY10E* P/E (x) n.a. n.a. 10.0 10 / 9.9 11.8 n.a. P/B (x) 7.4 9.9 / 5 1.8 2.6 / 1.1 n.a. n.a. Dividend Yield (%) n.a. n.a. 3.3 4.2 / 2.5 n.a. n.a. P/CFPS (x) n.a. n.a. n.a. n.a. n.a. n.a.
01 Jul 09 FCF Yield (%) n.a. n.a. n.a. n.a. n.a. n.a. S&P Vietnam 10 Ho Chi Minh Stock Index Growth FY06A FY07A FY08A FY09E* FY10E* MSCI AC Asia Index PET Revenues 45.2% 264.3% 96.1% n.a. n.a. Trading & Liquidity 20Days 100Days 180Days EBITDA 13.1% 372.9% 164.4% n.a. n.a. Volume (Reg, Trading) 493,525 301,798 213,145 EBIT -13.8% 1021.6% 204.9% n.a. n.a. VND Val. (Reg. Trading, bn) 11.9 5.9 4.0 Net Income 15.4% 777.1% 69.5% n.a. n.a. Percent of market (%) 0.4 0.4 0.4 EPS n.a. n.a. -7.0% -11.6% n.a. BVPS n.a. n.a. 7.8% n.a. n.a. Shares Outstanding (mn) FY07A FY08A Current * Bloomberg Consensus Estimates Wgt. Avg Issued Shares 26.5 48.3 48.0 Growth Indicators FY06A FY07A FY08A Fully Dilluted Shares 26.5 48.3 48.0 Fixed Assets/Assoc 359.4% -2.8% 26.5% Foreign Owned (% / Limit) 4.6mn 9.6% 49.0% Debt -45.6% 22115.4% 60.2% Market Values VND (bn) USD (mn) EUR (mn) Financial Investments -50.6% 49.8% 117.7% Market Cap 961 54.0 38.2 Other LT Assets -98.5% 150.4% -21.5% Net Debt 685 38.5 0.0 Minorities & Others 102 5.7 4.1 Profitability FY06A FY07A FY08A Gross Margin (%) 10.0 7.4 7.3 Enterprise Value 1,748 98.2 69.5 EBITDA Margin (%) 1.9 2.5 3.4 EBIT Margin (%) 0.7 2.0 3.2 Corperate Actions Ex-Date Amt/(ratio) Fiscal Year Pre-Tax Margin (%) 1.1 1.9 0.0 Cash Dividend 6-May-09 1,000 FY08 Cash Dividend 8-May-08 600 FY07 Net Margin (%) 0.8 1.9 1.7 Rights Issue 29-Oct-07 8/9 FY07 Solvency & Liquidity FY06A FY07A FY08A Market Outlook Acid Test Ratio 1.31 0.08 0.89 Current Ratio 0.94 1.25 0.97 Vietnam’s demographic profile and positive economic outlook LT Debt/Capital 0.4% 0.2% 1.8% offers strong growth potential for the key high-tech and Net Debt/Equity 6.4% -81.3% -118.7% energy sectors targeted by PET. A recent survey by ACNielsen revealed that 25% of Vietnamese consumers would spend their LT Debt/Fixed Assets 0.5% 0.4% 3.5% spare cash purchasing new technological devices, ranking Total Liab/Total Assets 53.5% 54.0% 63.6% Vietnam tenth in the world ahead of Japan, which provides an opportunity for PET to develop its high-tech distribution Management Company Data business. In oil and gas, Vietnam has begun investing in oil Chairman Tran Cong Tao Head Office 12 AB Thanh Da Str., Ward 27, refineries, including associated sectors and related services. The VBinh Thanh Distr, Ho Chi CEO Nguyen Huu Thanh annual growth rate in LPG consumption has been around 10% Minh City for the past five years and, given increasing safety awareness and http://www.petrosetco. CFO/ Chief Accontant Dao Van Dai Website the infeasibility of piped gas for residential use, the demand for com.vn LPG cylinders will remain high. IR Contact Dao Van Dai Telephone +84835566186 Company History Petrosetco (PetroVietnam General Services Joint Stock Major Shareholders Shares Insider Holdings Shares Corporation) was founded in 1980 as the PetroVietnam Service State 50.16% Management 700,000 and Tourism Company. It later acquired related PeteroVietnam Group divisions, established new business subsidiaries, and diversified its operations before equitising in 2005 and listing on the Ho Chi Minh City Stock Exchange in August 2007. PET ranked 116th among the top 500 largest companies in Vietnam in 2008 according to a VNR Club 500 survey, up from 449th in 2007, and currently operates through its eight subsidiaries.
86 Consumer Services / Travel & Tourism
Revenues by Business Line, 2008 Profit & Loss (VND bn) FY06A FY07A FY08A Revenue 739.8 2,695.3 5,286.4 EBITDA 14.2 67.2 177.6 EBIT 4.9 55.2 168.3 Interest & Fx Exp (1.3) (15.8) (89.5) Non Op Inc (Loss) 4.6 12.8 9.5 Pre-Tax 8.3 52.3 0.0 Taxes (2.4) (0.2) 0.0 Minorities & Pref’s 0.0 0.0 0.0 Net Income to Common 5.9 52.1 88.3
Balance Sheet (VNDbn) FY06A FY07A FY08A Cash & Equiv. 19.0 38.7 77.6 ST Investments & Mkt. Sec 180.0 16.5 5.0 Receivables 41.1 234.5 272.2 Inventories 43.3 501.9 623.4 Other Curr Assets 35.7 144.6 315.7 Net Fixed Assets 223.3 203.7 200.1 Construction in Progress 4.8 31.3 92.5 Invest. in Assoc. 13.7 0.0 4.6 Financial Investments 1.0 1.4 3.1 Management Strategy and Goals Other L.T. Assets 1.7 4.3 3.4 Payables (14.5) (476.1) (87.5) PET targets to become the leading distributor of mobile telephone Other Curr Liab. (284.5) 319.1 (161.9) handsets and laptops in Vietnam and will further expand into rural areas. ST Debt (1.0) (477.8) (756.9) Laptop sales are a key target with an estimated growth potential of 30% per year. PET will also provide services to PetroVietnam’s ongoing projects, LT Debt (1.2) (1.0) (10.3) particularly residential and real estate services catering to the Dung Quat Other LT Liab (0.2) (0.0) (0.2) refinery and economic zone. Net Assets 262.2 541.1 580.9 Minorities 0.0 0.0 0.0 Investment Plan Book Capital 255.3 482.6 490.7 Due to the broader economic downturn, PET will focus on its traditional Ret. Earnings 6.9 58.6 90.2 businesses in 2009. The capex plan this year will moderate to VND80bn, of Total Liab. & Equity 563.6 1,176.9 1,597.7 which VND50bn towards an ethanol project, and VND30bn for feasibility and architectural planning for the 2.1ha Thanh Da Real Estate development Working Capital Analysis FY06A FY07A FY08A project. The company also plans to increase chartered capital to VND555bn Days Receivable 20.3 31.7 18.8 from the current VND255.3bn by the end of the current year by issuing an Days Inventory 23.8 73.4 46.4 additional six million shares. The capital raising is estimated to meet 30% Days Payable 7.9 69.6 6.5 of the company’s investment requirements for 2010 onwards with the remaining portion to be funded by external borrowings. Cash Operating Cycle 11.4 111.2 34.1
Key Success Factors Derived Cash Flow (VNDbn)* FY06A FY07A FY08A EBIT 4.9 55.2 168.3 An extensive national distribution network including both rural and urban Depreciation & Amort 9.3 12.0 9.2 areas has been a key success factor critical to PET’s hold on a 40% share of the distribution of Nokia handsets and in becoming their official distributor. Chgs in Working Cap (330.7) (902.9) (237.9) As a member of PetroVietnam group and with a large land bank of over Operating Cash Flow (316.5) (835.7) (60.4) 34,000m2 in prime locations, PET also has exploitable advantages in real Net Interest, Fx & Taxes (3.6) (15.9) (89.5) estate related services and in securing participation in oil and petrochemical Fixed Asset Capex (83.7) (71.1) (57.3) projects. Investments (12.7) 13.2 (6.3) Non Op Inc (Loss) 4.6 12.8 9.5 Key Risk Factors Other Non Cash Adj. 400.5 241.8 (53.6) Business diversification will be a challenge due to their heavy involvement Dividends Paid 0.0 (29.4) (0.0) in real estate projects in the near term and raising sufficient capital will also Change in Paid in Capital 33.0 227.3 8.1 be a major task. Overreliance on borrowing will also lead to more exposure Change in Net Debt (1.8) 476.6 288.4 to rising interest rates. Despite their intensive distribution coverage, the Net Cash Flow 19.7 19.7 39.0 company will face increasing competition when foreign entrants are also * Calculated from Balance Sheet & P&L permitted to establish wholly owned subsidiaries. DuPont Analysis FY06A FY07A FY08A EBIT / Sales 0.01 0.02 0.03 Sales/Total Assets 1.31 2.29 3.31 less Net Int./Assets 0.01 (0.00) (0.11) Pre-Tax ROA (%) 1.5% 4.4% 0.0% Assets/Equity 2.15 2.17 2.75 Pre-Tax ROE (%) 3.2% 9.7% 0.0% 1-Tax rate 0.72 1.00 n.a. ROE (%) 2.3% 9.6% n.a.
Miscelleaneous FY06A FY07A Current Altman Z Score n.m. n.m. 4.2 Asset Growth (%) -64.7% 108.8% 35.8% Capex/Sales (%) 11.3% 2.6% 1.1% Earnings Retention (%) n.a. n.a. 66.8%
87 Phu Nhuan Jewelry Ticker Share Price - VND
PNJ 69,500 01 Jul 09
Close/Volume Chart Company Description and Principle Activities VND Mn Shares PNJ manufactures jewellery, and trades in gemstones and gold through its extensive network of 89 stores and more than 3,000 distributors throughout the country. In addition to boosting export sales to major customers in the U.S, Denmark and Germany, PNJ also aims to diversify its customer base to new markets including Australia, France and Middle East. PNJ is also diversifying into other business lines including retail LPG and fuel distribution, LPG cylinder production, investments in properties, and seafood processing and supply for the domestic market.
Per Share (VND) FY06A FY07A FY08A Trail 12M FY09E* FY10E* EPS n.a. 54,650 4,185 4,185 n.a. n.a. BVPS n.a. n.a. 30,452 n.a. n.a. n.a. DPS n.a. 7,119 4,328 n.a. n.a. n.a. Relative Performance CFPS n.a. (64,794) 12,064 12,064 n.a. n.a. FCFPS n.a. (73,443) 2,037 2,037 n.a. n.a. * Bloomberg Consensus Estimates
Key Valuations FY07A Avg +/- 1 s.d. FY08A Avg +/- 1 s.d. FY09E* FY10E* P/E (x) n.a. n.a. n.a. n.a. n.a. n.a. P/B (x) n.a. n.a. n.a. n.a. n.a. n.a. Dividend Yield (%) n.a. n.a. n.a. n.a. n.a. n.a. 23 Mar 09 P/CFPS (x) n.a. n.a. n.a. n.a. n.a. n.a. S&P Vietnam 10 Ho Chi Minh Stock Index FCF Yield (%) n.a. n.a. n.a. n.a. n.a. n.a. MSCI AC Asia Index PNJ Growth FY06A FY07A FY08A FY09E* FY10E* Trading & Liquidity 20Days 100Days 180Days Revenues n.a. n.a. 75.6% n.a. n.a. Volume (Reg, Trading) 351,188 218,709 218,709 EBITDA n.a. n.a. 85.0% n.a. n.a. VND Val. (Reg. Trading, bn) 28.3 14.6 14.6 EBIT n.a. n.a. 61.0% n.a. n.a. Percent of market (%) 0.9 0.9 1.3 Net Income n.a. n.a. 9.8% n.a. n.a. EPS n.a. n.a. -92.3% n.a. n.a. Shares Outstanding (mn) FY07A FY08A Current BVPS n.a. n.a. n.a. n.a. n.a. Wgt. Avg Issued Shares 2.1 30.0 30.0 * Bloomberg Consensus Estimates Fully Dilluted Shares 2.1 30.0 30.0 Foreign Owned (% / Limit) 5.8mn 19.4% 49.0% Growth Indicators FY06A FY07A FY08A Fixed Assets/Assoc n.a. n.a. 498.8% Market Values VND (bn) USD (mn) EUR (mn) Debt n.a. n.a. 54.7% Market Cap 2,085 117.1 84.3 Financial Investments n.a. n.a. 11.5% Net Debt (97) (5.4) (0.0) Other LT Assets n.a. n.a. 18.3% Minorities & Others 99 5.6 4.0 Enterprise Value 2,087 117.2 84.3 Profitability FY06A FY07A FY08A Gross Margin (%) n.a. 8.5 8.4 Corperate Actions Ex-Date Amt/(ratio) Fiscal Year EBITDA Margin (%) n.a. 3.7 3.9 Cash Dividend 7-Apr-09 400 FY08 EBIT Margin (%) n.a. 3.3 3.0 Pre-Tax Margin (%) n.a. 5.5 4.0 Market Outlook Net Margin (%) n.a. 4.8 3.0 Vietnam ranks among the world’s top ten countries in spending on gold, more than 95% of which is imported, with an estimated Solvency & Liquidity FY06A FY07A FY08A 77.5 tonnes brought into the country in 2007 and 115 tonnes Acid Test Ratio n.a. 2.81 8.10 in 2008. Gold and jewellery trading is a lucrative enterprise in Current Ratio n.a. 1.89 1.15 Vietnam as the precious metal is often used as currency in real LT Debt/Capital n.a. 6.5% 7.6% estate transactions and for wealth preservation. Underpinned Net Debt/Equity n.a. -17.2% 8.1% by a young population, strong economic growth, and rising LT Debt/Fixed Assets n.a. 130.4% 23.6% disposable incomes the demand for luxury products will also Total Liab/Total Assets n.a. 30.5% 42.7% drive the long-term demand for fine jewellery. Management Company Data Company History 170 Phan Dang Luu, ward 3, Chairman Cao Thi Ngoc Dung Head Office Founded in 1988 as a small jewellery trading store belonging to Phu Nhuan District, HCMC the Phu Nhuan District People’s Committee, PNJ was rebranded as the Phu Nhuan Jewellery Company and converted to a Joint CEO Cao Thi Ngoc Dung Stock Company in January 2004 before listing on the Ho Chi CFO/ Chief Accontant Dang Thi Lai Website http://www.pnj.com.vn Minh City Stock Exchange in May 2008. IR Contact Nguyen Thi Cuc Telephone +848 3995 1703
Major Shareholders Shares Insider’s Holdings Shares Vietnam Azalea Fund (VAF) 6.67% Cao Thi Ngoc Dung 6.39% VOF Investment Ltd (VOF) 4.00% Vietnam Investment Ltd (VIL) 4.15% Asia Value Investment Ltd(AVIL) 3.67%
88 Consumer Services / Apparel Retailers
Revenues by Business Line, 2008 Profit & Loss (VND bn) FY06A FY07A FY08A Revenue n.a. 2,379.6 4,178.8 EBITDA n.a. 87.0 160.9 EBIT n.a. 77.5 124.8 Interest & Fx Exp n.a. (23.7) (47.2) Non Op Inc (Loss) n.a. 76.8 88.9 Pre-Tax n.a. 130.6 166.5 Taxes n.a. (15.5) (34.6) Minorities & Pref’s n.a. (0.6) (6.3) Net Income to Common n.a. 114.4 125.6
Balance Sheet (VNDbn) FY06A FY07A FY08A Cash & Equiv. n.a. 180.5 617.5 ST Investments & Mkt. Sec n.a. 16.9 23.0 Receivables n.a. 18.8 27.3 Inventories n.a. 504.3 68.3 Other Curr Assets n.a. 180.7 50.2 Net Fixed Assets n.a. 49.3 286.4 Construction in Progress n.a. 1.8 25.1 Invest. in Assoc. n.a. 1.0 0.0 Financial Investments n.a. 382.7 426.7 Other L.T. Assets n.a. 134.0 158.6 Payables n.a. (64.2) (76.3) Other Curr Liab. n.a. (31.8) (95.6) Management Strategy and Goal ST Debt n.a. (284.9) (470.2) Gold trading remains PNJ’s core business and the company will develop LT Debt n.a. (66.5) (73.4) their PNJ brand to become a leading bullion and jewellery brand. PNJ will Other LT Liab n.a. (1.7) (3.3) merge their two existing factories into a fully equipped modern facility to enable production of world-class products and further expand its export Net Assets n.a. 1,020.8 964.3 markets. In addition, the company will restart its motorcycle trading Minorities n.a. 30.0 50.8 business in 2010 in anticipation of a broader economic recovery at that Book Capital n.a. 825.0 825.0 time. Ret. Earnings n.a. 165.9 88.6 Total Liab. & Equity n.a. 1,469.8 1,686.1 Investment Plan PNJ plans to expand its distribution network in four major cities throughout Working Capital Analysis FY06A FY07A FY08A the country including Ho Chi Minh City, Hanoi, Danang and Can Tho, and Days Receivable n.a. 2.9 2.4 consolidate its stores within higher profile shopping malls and business Days Inventory n.a. 84.5 6.5 centres to enhance brand awareness. PNJ’s capex plan totals VND125.4bn in Days Payable n.a. 10.8 7.3 FY09, including investments in Dong A Real Estate joint venture company Cash Operating Cycle n.a. 92.4 11.4 (VND50bn), machinery and equipment (VND6.8bn), Saigon Fuel Co. (VND12bn) and the remaining amount allocated to store construction and Derived Cash Flow (VNDbn)* FY06A FY07A FY08A refurbishment. EBIT n.a. 77.5 124.8 Depreciation & Amort n.a. 9.4 36.1 Key Success Factors Chgs in Working Cap n.a. (607.8) 634.0 PNJ is the country’s leading mass-production jeweller with a fashionable Operating Cash Flow n.a. (520.9) 794.9 and diverse product range targeting different customer segments. They also Net Interest, Fx & Taxes n.a. (39.3) (81.9) possess an active management team with intensive experience and strong business relationships open to opportunities. Fixed Asset Capex n.a. (18.1) (300.8) Investments n.a. (383.7) (43.0) Key Risk Factors Non Op Inc (Loss) n.a. 76.8 88.9 Other Non Cash Adj. n.a. 483.1 (54.2) PNJ imports nearly all of its raw gold materials, thus is exposed to rising Dividends Paid n.a. 129.8 (159.1) import costs on a weaker domestic currency as well as generally fluctuating global gold prices. Additionally, a business diversification strategy will Change in Paid in Capital n.a. 0.0 0.0 require extra effort from management to cope with a challenging and Change in Net Debt n.a. 351.4 192.2 more competitive business environment not only from local players but Net Cash Flow n.a. 180.5 437.0 also qualified international companies entering Vietnam following WTO * Calculated from Balance Sheet & P&L accession. DuPont Analysis FY06A FY07A FY08A EBIT / Sales n.a. 0.03 0.03 Sales/Total Assets n.a. 1.62 2.48 less Net Int./Assets n.a. 0.04 0.02 Pre-Tax ROA (%) n.a. 8.9% 9.9% Assets/Equity n.a. 1.44 1.75 Pre-Tax ROE (%) n.a. 12.8% 17.3% 1-Tax rate n.a. 0.88 0.79 ROE (%) n.a. 11.3% 13.7%
Miscelleaneous FY06A FY07A Current Altman Z Score n.m. n.m. n.a. Asset Growth (%) n.a. n.a. 14.5% Capex/Sales (%) n.m. 0.8% 7.2% Earnings Retention (%) n.a. 87.0% -3.4%.
89 Asia Commercial Ticker Share Price - VND Bank ACB 49,000 01 Jul 09
Close/Volume Chart Company Description and Principal Activities VND Mn Shares ACB is the largest Joint Stock Bank by assets and is generally regarded as the best- managed domestic bank. In addition to banking, ACB has a real estate development division, through ACB Real, a securities business through ACB Securities as well as asset management activities and a gold trading subsidiary. Standard Chartered maintains a 15% stake as strategic shareholder. The bank’s main activities include taking deposits and making loans to retail and corporate customers in VND, gold and foreign currencies. Other services include payment services, treasury services, foreign exchange trading and gold trading, credit card and debit card issuance services. Finally, ACB has an in-the-money convertible bond that should be treated as a common stock equivalent for EPS calculations.
Per Share (VND) FY06A FY07A FY08A Trail 12M FY09E* FY10E* Relative Performance EPS 1,644 4,190 3,894 n.a. 2,945 2,770 BVPS 5,511 11,679 12,285 n.a. n.a. n.a. DPS n.a. n.a. 2,710 n.a. n.a. n.a. Gross OPPS 2,278 5,064 4,510 * Bloomberg Consensus Estimates
01 Jul 09 Key Valuations FY07A Avg +/- 1 s.d. FY08A Avg +/- 1 s.d. FY09E* FY10E* S&P Vietnam 10 Ho Chi Minh Stock Index P/E (x) 14.6 15.8 / 13.4 9.6 10.4 / 8.8 16.6 17.7 P/B (x) 8.1 11.5 / 4.7 2.8 3.5 / 2 n.a. n.a. MSCI AC Asia Index ACB Dividend Yield (%) n.a. n.a. 6.2 2.8 n.a. n.a. Trading & Liquidity 20Days 100Days 180Days P/Gross Op Profit (x) 5.0 5.9 / 4.1 1.8 6.9 n.a. n.a. Volume (Reg, Trading) 5,631,160 3,423,074 2,409,789 Op Profit Yield (%) 20.5 20.6 / 20.5 62.2 62.4 / 62 n.a. n.a. VND Val. (Reg. Trading, bn) 289.1 143.9 95.4 Percent of market (%) 9.3 9.0 8.6 Growth (P&L) FY06A FY07A FY08A FY09E* FY10E* Revenues 82.1% 153.8% 40.3% n.a. n.a. Net Interest 59.6% 59.8% 108.1% n.a. n.a. Shares Outstanding (mn) FY07A FY08A Current Commissions 52.6% 82.8% 123.6% n.a. n.a. Wgt. Avg Issued Shares 420.0 567.8 635.6 Net Income 69.0% 248.1% 25.6% n.a. n.a. Fully Dilluted Shares 420.0 752.0 752.0 EPS 68.9% 248.2% -26.5% -24.4% -5.9% Foreign Owned (% / Limit) 311.4mn 30.0% of 30.0% BVPS 28.9% 278.3% -48.6% n.a. n.a. Market Values VND (bn) USD (mn) EUR (mn) Growth (Bal. Sheet) FY06A FY07A FY08A Market Cap 31,143 1,749.4 1,244.1 Deposits 47.1% 88.1% 16.2% Corperate Actions Ex-Date Amt/(ratio) Fiscal Year Loans 81.4% 87.0% 9.5% Cash Dividend 11-Jun-09 900 FY09 Financial Investments 150.0% 81.5% 71.6% Cash Dividend 17-Mar-09 880 FY08 Other LT Assets 325.4% 128.8% 82.3% Bonus 4-Dec-08 11/30 FY08 Cash Dividend 13-Nov-08 1,830 FY08 Profitability FY06A FY07A FY08A Stock Dividend 11-Sep-08 11/20 FY08 Revenues/Assets 3% 4% 4% Net Interest/Assets 2% 2% 3% Market Outlook Cost/Income ratio 39% 27% 38% Vietnam is one of the most un-banked markets in the world with Gross Op Margin 61% 73% 62% an estimated penetration rate of less than 10%. There is thus Net Margin 42% 58% 52% significant potential for consumer lending, mortgages, and cards of which many commercial banks have focused on consumer Solvency & Liquidity FY06A FY07A FY08A lending as a key sector in 2009 due to the government’s 4% Liquid Assets/Deposits -13.1% -18.2% -17.8% interest subsidy program. Loosening credit policies however Trading Sec./Deposits -2.2% -0.6% -0.4% flags concerns over loan quality and risk management. Interest Loans/Deposits -57.9% -57.5% -54.2% margins appear thin due to tough competition and the recovery NPL's 1.0% 0.1% 0.9% of other investment alternatives such as equity investments and gold trading. CAR 16.2% 10.9% 12.6%
Company History Management Company Data Chairman Tran Xuan Gia Head Office 442 Nguyen Thi Minh Khai Asia Commercial Bank (ACB) was established in 1993 and CEO Ly Xuan Hai District 3, HCMC listed on the Ho Chi Minh City Stock Exchange in 2006. ACB is a leading retail bank in Vietnam considered to have the CFO/ Chief Accontant Nguyen Van Hoa Website www.acb.com.vn widest range of services and most advanced technological IR Contact Nguyen Thanh Toai Telephone +84839290999 capability. Headquartered in Ho Chi Minh City, the Bank has two wholly owned subsidiaries operating in securities and asset Major Shareholders Shares Insider Holdings Shares management. Connaught Investors Ltd 46.1 mn Tran Mong Hung n.a
Dragon Financial Holdings 43.2 mn Nguyen Duc Kien n.a
Standard Chartered Bank 55.6 mn Ly Xuan Hai n.a
90 Financials / Banks
Loan Book, 2008 Profit & Loss (VND bn) FY06A FY07A FY08A Net Interest Income 820.6 1,311.1 2,728.3 Commission Income 148.3 271.2 606.5 Trading Income 167.6 500.1 648.8 Other income 53.7 938.4 255.9 Total Revenues 1,190.2 3,020.8 4,239.5 Provissions (40.6) (89.4) (88.0) Operating Costs (462.4) (804.7) (1,590.9) Pre-Tax Inocme 687.2 2,126.8 2,560.6 Taxes (181.6) (366.8) (349.9) Net Income 505.5 1,760.0 2,210.7 Balance Sheet (VNDbn) FY06A FY07A FY08A Cash & SBV Deposits 3,847.8 10,071.6 11,429.8 Loans 17,014.4 31,810.9 34,832.7 Provisions (56.2) (134.5) (228.6) Trading Securities 641.3 313.9 264.7 Investment Securities 4,228.6 9,132.8 24,441.5 Net Fixed Assets 591.6 554.7 789.0 Invest. in Assoc. 131.0 195.4 205.1 Financial Investments 312.5 764.5 973.0 Other LT Assets 1,537.5 3,517.5 6,411.0 Net Interbank 13,151.9 22,170.9 16,286.0 Deposits (29,394.7) (55,283.1) (64,216.9) Management Strategy and Goals Certificates (5,861.4) (11,688.8) (16,755.8) Principal objectives in 2009 are to maintain a high but sustainable growth Other LT Liab (4,447.7) (5,167.9) (6,665.0) rate given Vietnam’s slowing GDP growth and to enhance risk monitoring Net Assets 1,696.5 6,257.8 7,766.5 and control, which is the cornerstone of any bank. In order to achieve high Capital 1,100.0 2,630.1 6,355.8 profitability, the bank is also focusing on maintaining an optimal financial Reserves 187.7 2,192.0 713.6 structure and has used convertible bonds as a source of funding. In human Minorities 42.5 0.0 0.0 resources, the bank will continue training and instilling a distinct corporate culture throughout the company. Retained Earnings 366.2 1,435.8 697.1 Total Liab. & Equity 44,650.2 85,391.7 105,306.1 Recent News Revenue Analysis FY06A FY07A FY08A ACB has recently received approval to trade on the Dubai Gold Exchange Interest/Revenues 68.9% 43.4% 64.4% in accordance with its strategy to gain direct access foreign commodities Commission/Revenues 12.5% 9.0% 14.3% markets. ACB has also been licensed by the State Securities Commission Trading/Revenues 14.1% 16.6% 15.3% to raise a closed-end fund (ACBGF1) valued at around VND200-300 billion. Provission/Revenues 3.4% 3.0% 2.1% Financially, the bank disclosed that it has achieved pre-tax profit above VND900bn for the first five months of 2009, being 33.3% of its full year Credit Quality FY06A FY07A FY08A guidance. Assets have grown 42% YTD and loan growth is 47% YTD. NPL's 176.3 26.6 308.7 Special Mention 13.0 71.0 398.9 Key Success Factors Overdue Loans 189.3 97.5 707.6 The country’s low banking penetration will be the medium to long- Overdure Loans/Loans 1.04% 0.08% 0.89% term growth driver. Manage this growth sustainably however, especially Specific Provisisons 5.9 4.8 21.9 in new areas such as cards and consumer banking will be a challenge General Provissions 50.3 129.7 206.7 and this is where the expertise and knowledge that its strategic partner Total Provissions 56.2 134.5 228.6 Standard Chartered, with many years in emerging markets, will become invaluable. Longer term, we some industry consolidation is inevitable. By General Provisons/Loans 0.30% 0.41% 0.59% size comparison with other countries, Vietnam is saturated with banking Specific Provisons/Loans 0.07% 0.03% 0.02% institutions. Such rationalisation would be beneficial to the sector in terms Spec. Prov./Total Provisions 10.6% 3.6% 9.6% of better pricing power and increasing profitability, given significant savings Provision Charge/Loans 0.32% 0.35% 0.26% that in-market bank mergers bring. NPL Covergae 31.9% 506.4% 74.1% Off BS & Contigencies 1,366.0 3,899.0 1,726.9 Key Risk Factors Off BS & Contigencies/Assets 3.10% 4.60% 1.63% The main challenges for ACB are to achieve healthy growth in its balance sheet and at the same time control loan quality and achieve sound profitability. Intensified competition from both local and foreign banks and DuPont Analysis FY06A FY07A FY08A the depressed economic outlook are the key obstacles to meeting their PreTax/Revenues 0.58 0.70 0.60 ambitious objectives. Revenues/Assets 0.03 0.04 0.04 Pre-Tax ROA 0.02 0.02 0.02 Assets/Equity 26.32 13.65 13.56 1 - Tax Rate 0.74 0.83 0.86 Year End ROE (%) 29.8% 28.1% 28.5% ROE (Avg Equity) 46.8% 53.8% 36.5%
Miscelleaneous FY06A FY07A FY08A Altman Z Score n.m. n.m. n.a. Asset Growth (%) n.a 91.2% 23.3% Provision Growth (%) n.a 139.4% 69.9% Earnings Retention (%) n.m. n.m. n.m.
91 Bao Viet Securities Ticker Share Price - VND
BVS 50,900 01 Jul 09
Close/Volume Chart Company Description & Principal Activities VND Mn Shares Bao Viet Securities is one of the largest brokerage houses in Vietnam providing a full range of services including institutional & retail brokerage, advisory & underwriting, proprietary trading, and fund management. BVS held 18% of the market share in foreign brokerage in 2008 due to its strong foreign customer base.
Per Share (VND) FY06A FY07A FY08A Trail 12M FY09E* FY10E* EPS 1,258 5,277 (10,053) (10,600) 625 n.a. BVPS 10,418 13,423 23,724 n.a. n.a. n.a. DPS 371 1,871 0 n.a. n.a. n.a. GOPS n.a. 5,850 (10,038) n.a. n.a. n.a. Rev/Share n.a. 9,835 4,749 n.a. n.a. n.a. * Bloomberg Consensus Estimates
Relative Performance Key Valuations FY07A Avg +/- 1 s.d. FY08A Avg +/- 1 s.d. FY09E* FY10E* P/Revenues (x) 18.4 20 / 16.8 7.6 11.1 / 4.2 n.a. n.a. P/E (x) 33.7 36.7 / 30.8 22.9 n.a. 81.4 n.a. P/B (x) 11.9 13.9 / 9.9 3.4 1.4 n.a. n.a. Dividend Yield (%) 0.4 0.5 / 0.2 4.1 4.1 n.a. n.a. P/GOPS (x) 16.6 20.2 / 13 14.0 24 / 3.9 n.a. n.a.
Growth FY06A FY07A FY08A FY09E* FY10E* 01 Jul 09 Revenues n.a. 333.9% -46.6% n.a. n.a. S&P Vietnam 10 Ho Chi Minh Stock Index Commission n.a. 665.3% -77.7% n.a. n.a.
MSCI AC Asia Index BVS Advisory n.a. 146.5% 121.1% n.a. n.a. Net Income n.a. 321.6% -310.8% n.a. n.a. Trading & Liquidity 20Days 100Days 180Days EPS n.a. 319.5% -290.5% -106.2% n.a. Volume (Reg, Trading) 698,750 694,585 455,413 BVPS n.a. 28.8% 76.7% n.a. n.a. VND Val. (Reg. Trading, bn) 40.1 26.6 16.6 * Bloomberg Consensus Estimates Percent of market (%) 1.3 1.7 1.5 Growth Indicators FY06A FY07A FY08A Shares Outstanding (mn) FY07A FY08A Current Trading Securities n.a. 665.3% -77.7% Wgt. Avg Issued Shares 40.7 45.0 45.0 Debt n.a. 9713.2% -90.7% Fully Dilluted Shares 40.7 45.0 45.0 Financial Investments n.a. 32.2% 28.8% Foreign Owned (% / Limit) 5.2mn 11.7% 49.0% Equity n.a. 43.3% 76.7%
Market Values VND (bn) USD (mn) EUR (mn) Profitability FY06A FY07A FY08A Market Cap 2,389,500 134.2 95.0 Rev/Assets (%) 7.1 22.1 14.7 (Rev-Trading)/Assets (%) 5.6 14.2 12.5 Corperate Actions Ex-Date Amt/(Ratio) Fiscal Year Operating Margin (%) 68.3 59.5 n.m. Cash Dividend 13-May-08 500 FY07 Pre-Tax Margin (%) 68.4 59.5 n.m. Cash Dividend 21-Jan-08 1,000 FY07 Net Margin (%) 55.2 53.7 n.m. Rights Issue 14-Dec-07 2/1 FY07 Cash Dividend 6-Sep-07 371 FY07 Solvency & Liquidity FY06A FY07A FY08A Cash Dividend 2-Mar-07 371 FY06 ST Invetsments/Assets 31.3 26.0 38.3 LT Debt/Capital - - - Market Outlook Debt/Equity 0.2 15.0 0.8 The recovery of the equity market in 2009 has fuelled growth Equity/Total Assets 32.4 33.3 73.2 in key business areas including brokerage, investment banking and proprietary trading. With more than 100 licensed brokers Management Company Data participated in the industry, competition remains fierce as 94 Ba Trieu, Hoan Kiem, Chairman Nguyen Thi Phuc Lam Head Office new players are striving to gain a stronger foothold based on Ha Noi advanced technological systems, product innovation, and better CEO Nguyen Quang Vinh customer services. Securities companies remain heavily reliant CFO/ Chief Accontant Bui Quang Ky Website www.bvsc.com.vn on proprietary trading as key source of income, which is a risky IR Contact Nguyen Quang Vinh Telephone +8449433016 approach to sustainable growth. Major Shareholders Shares Insider Holdings Shares Company History Bao Viet Holdings 27.1 mn Nguyen Thi Phuc Lam 50,000 Bao Viet Securities was established in 1999 as a subsidiary to Nguyen Quang Vinh 22,000 Bao Viet Insurance Group with chartered capital of VND43 bn. The company then grew quickly to become one of the top five securities companies in Vietnam with more than 30,000 trading accounts at the end of 2008. BVS was transformed into a joint stock company in 2005 and listed on the HaSTC in December 2006.
92 Financials / Investment Services
Revenues by Source, 2008 Profit & Loss (VND bn) FY06A FY07A FY08A Commissions 56.2 214.0 87.8 Prop. Trading 18.7 143.5 32.0 Advisory, Underwritting 17.2 42.5 93.9 & Other Income Total Revenues 92.2 400.0 213.7 Operating Costs (29.2) (162.1) (665.4) Others (0.0) (0.0) (0.0) Pre-Tax 63.0 237.9 (451.7) Taxes (12.1) (23.3) (0.7) Net Income to Common 50.9 214.6 (452.4)
Balance Sheet (VNDbn) FY06A FY07A FY08A Cash & Client Cash in Trust 677.0 876.2 409.5 ST Investments & Mkt. Sec 408.0 471.3 558.1 Receivables 80.0 178.5 102.0 Other Curr Assets 5.2 42.1 19.4 Total Loans 0.0 0.0 0.0 Long Term Invest. & Others 0.0 0.0 0.0 Net Fixed Assets 2.7 6.2 13.0 Other LT Assets & Defered Charges 128.7 238.4 355.9 ShortTerm Borrowings (0.9) (90.6) (8.4) Other ShortTerm Liab (726.3) (1,076.0) (362.5) Long Term Debt 0.0 0.0 0.0 Other Long Term Liab (147.7) 0.0 0.0 Net Assets 426.7 646.1 1,086.9 Preferred Equity 0.0 0.0 0.0 Minority Interest 0.0 0.0 0.0 Paid in Capital 370.3 370.3 1,332.6 Management Strategy and Goals Retained Earnings 51.2 233.7 (265.0) BVS’s management aims to attract institutional investors through various Total Liab. & Equity 1,301.6 1,812.7 1,457.9 marketing campaigns, enhanced customer services and quality research products. The company will also continue to leverage its strong relationship Revenue Analysis FY06A FY07A FY08A with SOEs and private companies to grow their underwriting and advisory Commission/Revenue 61.0 53.5 41.1 business. Additionally, management has paid special attention to the Trading/Revenue 20.3 35.9 15.0 development of advanced technology in brokerage trading systems and Advissory, Underwritting/Revenues 18.7 10.6 44.0 customer services to improve service quality and customer satisfaction. Other Metrics FY06A FY07A FY08A Recent News Revenue less Trading (VND bn) 73.4 256.5 181.7 In the first quarter of 2009, BVS reported a marginal pre-tax profit of Growth (%) n.a. 249.3 (29.2) VND3.69 billion after suffering a significant loss of VND451.7 billion in Op Profit 63.0 237.9 (451.7) 2008, mainly due to a heavy provision for investment losses. The company Growth (%) n.a. 277.7 (289.9) however expects a positive contribution from proprietary trading as the recent strong market rally may allow the reversal of provisions for Cost/Income 31.7 40.5 311.4 investment losses. Growth (%) n.a. 27.9 668.4 Investments/Assets (%) 41.2 39.2 62.7 Key Success Factors Investments/Capital (%) 144.9 191.7 68.6 Long Term Investments/ Stock ownership in Vietnam is still low and retail trading will pick up once 34.7 64.4 26.7 the market improves as it has been recently. With a dominant position and Capital (%) a large capital base, BVS is going to be able to weather the storm better and * Calculated from Balance Sheet P&L longer than some of the smaller and less well capitalized competitors when times are bad. A move towards more technologically advanced company Proprietary Trading Assets FY06A FY07A FY08A will help it to counter some of the new entrants targeting sophisticated, Prop Book - Listed Equity (%) 52.1% 74.6% 60.6% well educated middle-class customers. Also, in the medium—long term, we Prop Book - OTC Equity (%) 44.5% 25.3% 31.2% believe there will be a consolidation in the sector with many weak securities Prop Book - Bonds (%) 3.4% 0.1% 8.2% companies being taken over or ceasing operations. This should bode well for large, remaining players such as BVS. DuPont Analysis FY06A FY07A FY08A Op Profit / Revenues 0.68 0.59 (2.11) Key Risk Factors Revenues/Total Assets 0.07 0.22 0.15 Vietnam is still a frontier market but already foreign financial institutions less Net Int./Assets 0.00 0.00 0.00 such as Morgan Stanley and JP Morgan have established operations. With Pre-Tax ROA (%) 4.8% 13.1% -31.0% almost 100 securities companies in Vietnam, many are lowering brokerage Assets/Equity 3.52 4.90 1.09 and advisory fees to gain market share. BVS will therefore face increasing competition from both local and overseas players. Large proprietary trading Pre-Tax ROE (%) 17.0% 64.3% -33.9% books also expose BVS to potential asset write-downs due to the stock 1-Tax rate 0.81 0.90 1.00 market slump as seen in 2008. Year End ROE (%) 13.7% 58.0% -33.9%
Miscelleaneous FY06A FY07A Current Asset Growth (%) n.a. 39.3% -19.6% Earnings Retention (%) n.a. 64.5% 100.0%
93 Tan Tao Investment Ticker Share Price - VND Industry ITA 34,200 01 Jul 09
Close/Volume Chart Company Description & Principal Activities VND Mn Shares Tan Tao Investment Industrial Corporation (ITA) builds and manages industrial zones in Vietnam, including infrastructure and facilities in the Tan Tao Industrial Park and other commercial and industrial buildings. It is also involved in supporting activities, including rentals for corporate clients, construction and electricity works, warehousing and other telecommunication related services, including data transmission and internet provision. The company has developed nine industrial parks throughout Vietnam with a combined area of 9,033 hectares.
Per Share (VND) FY06A FY07A FY08A Trail 12M FY09E* FY10E* EPS 1,355 2,558 1,511 1,225 1,407 n.a. BVPS 4,622 18,058 23,320 n.a. n.a. n.a. DPS 455 n.a. n.a. n.a. n.a. n.a. CFPS 1,798 3,399 n.a. n.a. n.a. n.a. FCFPS 1,490 (1,121) n.a. n.a. n.a. n.a. Relative Performance * Bloomberg Consensus Estimates
Key Valuations FY07A Avg +/- 1 s.d. FY08A Avg +/- 1 s.d. FY09E* FY10E* P/E (x) 29.3 30.6 / 28.1 17.6 20.1 / 15 24.3 n.a. P/B (x) 6.8 8.7 / 4.8 1.8 2.5 / 1.1 n.a. n.a. Dividend Yield (%) n.a. n.a. n.a. n.a. n.a. n.a. P/CFPS (x) n.a. n.a. 35.8 37.6 / 34 n.a. n.a. 01 Jul 09 FCF Yield (%) n.a. n.a. n.a. n.a. n.a. n.a. S&P Vietnam 10 Ho Chi Minh Stock Index
MSCI AC Asia Index ITA Growth FY06A FY07A FY08A FY09E* FY10E* Revenues n.a. 162.2% 14.3% n.a. n.a. EBITDA n.a. 124.8% -100.0% n.a. n.a. EBIT n.a. 126.8% -38.8% n.a. n.a. Net Income n.a. 146.9% -19.2% n.a. n.a. Trading & Liquidity 20Days 100Days 180Days EPS n.a. 88.8% -40.9% -6.9% n.a. Volume (Reg, Trading) 504,441 737,850 530,438 BVPS n.a. 290.7% 29.1% n.a. n.a. VND Val. (Reg. Trading, bn) 19.8 19.3 13.1 * Bloomberg Consensus Estimates Percent of market (%) 0.7 1.2 1.2 Growth Indicators FY06A FY07A FY08A Shares Outstanding (mn) FY07A FY08A Current Fixed Assets/Assoc n.a. 801.6% -97.2% Wgt. Avg Issued Shares 143.6 196.3 203.8 Debt n.a. 53.1% -100.0% Fully Dilluted Shares 143.6 196.3 203.8 Financial Investments n.a. 0.2% 350.9% Foreign Owned (% / Limit) 72.7mn 35.7% 49.0% Other LT Assets n.a. 56102.6% -92.4%
Market Values VND (bn) USD (mn) EUR (mn) Profitability FY06A FY07A FY08A Market Cap 7,337 412.2 291.8 Gross Margin (%) 59.2 57.3 33.6 Net Debt n.a. n.a. n.a. EBITDA Margin (%) 54.5 46.8 0.0 Minorities & Others n.a. n.a. n.a. Enterprise Value 7,746 435.2 308.1 EBIT Margin (%) 53.6 46.3 24.8 Pre-Tax Margin (%) 52.4 49.9 36.2 Corperate Actions Ex-Date Amt/(ratio) Fiscal Year Net Margin (%) 42.2 39.7 28.1 Stock Dividend 1-Oct-08 1/7 FY08 Stock Dividend 30-Jan-08 1/7 FY08 Solvency & Liquidity FY06A FY07A25.571 FY08A25.571 Rights Issue 21-Jun-07 1/6 FY07 Acid Test Ratio 31.03 50.95 n.a. Stock Dividend 2-Mar-07 1/5 FY07 Current Ratio 0.09 1.17 2.00 LT Debt/Capital 31.1% 9.7% 0.0% Market Outlook Net Debt/Equity -43.4% 17.6% 2.5% Industrial zone development is one of the key planks of LT Debt/Fixed Assets 201.6% 48.1% 0.0% Vietnam’s industrial policy, with targeted production from Total Liab/Total Assets 61.0% 29.1% 23.9% industrial zones expected to contribute 25%-36% of total of industrial output by 2010, and exports to increase from 19% to Management Company Data 32% in 2010. Tan Tao industrial zone’s rental price is considered Tan Tao Industrial Zone Tan Tao A Chairman Dang Thi Hoang Yen Head Office high in comparison with other industrial zones in Ho Chi Minh Ward Binh Tan District HCMC City but it is well-managed, strategically located, and well CEO Thai Van Men serviced with comprehensive infrastructure thus attaining its position as the top industrial park in Ho Chi Minh City. CFO/ Chief Accontant Nguyen Thi Suong Website http://www.tantaocity.com/ IR Contact Nguyen Thi Suong Telephone +84837505171 Company History ITACO, known as ITA Group has been in operation for more than Major Shareholders Shares (mn) Insider Holdings Shares Tan Dong Phuong Invest, 11 years, with over 20 subsidiaries in various industries. The 36.36 Dang Thi Hoang Yen 15.83 company was established in November 1996 and later changed Construct and Develop Ltd., its name to Tan Tao Investment – Industry Corporation – ITACO. VOF INVESTMENT LTD 16.41 ITA’s first project involved transforming an area 12 kilometres Vietnam Infrastructure Strategic 2.93 west of Ho Chi Minh City into the biggest industrial park in Limited southern Vietnam. ITACO listed on the Ho Chi Minh City Stock Rickluck International Limited 5.71 Exchange in November 2006. Dang Quang Hanh 2.30
94 Financials / Real Estate Holdings & Development
Revenues by Type, 2008 Profit & Loss (VND bn) FY06A FY07A FY08A Revenue 352.8 924.9 1,057.6 EBITDA 192.4 432.6 0.0 EBIT 189.0 428.7 262.4 Interest & Fx Exp (34.5) (29.6) (57.0) Non Op Inc (Loss) 30.2 62.7 177.6 Pre-Tax 184.7 461.8 383.0 Taxes (35.9) (85.3) (86.3) Minorities & Pref’s 0.0 (9.2) 0.0 Net Income to Common 148.8 367.4 296.7
Balance Sheet (VNDbn) FY06A FY07A FY08A Cash & Equiv. 30.5 1,004.7 116.3 ST Investments & Mkt. Sec 0.0 151.0 7.5 Receivables 31.0 44.6 622.9 Inventories 0.7 21.3 1,390.4 Other Curr Assets 350.5 517.8 22.2 Net Fixed Assets 85.8 43.1 49.5 Construction in Progress 2.2 631.5 0.6 Invest. in Assoc. 113.7 1,144.0 0.0 Financial Investments 849.2 851.0 3,837.3 Other L.T. Assets 0.5 289.1 21.9 Management Strategy and Goals Payables (1.0) (19.7) 0.0 Management will focus on the core business of developing industrial Other Curr Liab. (613.9) (920.7) (1,066.5) parks up to the year 2010. ITA aims to develop high-quality structures and ST Debt (100.8) (101.4) 0.0 cooperate with foreign and domestic partners in developing infrastructure. LT Debt (177.5) (324.7) 0.0 In addition, ITA also seeks to be involved in other sectors such as power, Other LT Liab 0.0 0.0 (384.6) port and telecommunications projects under its subsidiaries ITA Power, ITA Net Assets 570.9 3,331.7 4,617.5 Port, and ITA – Tel. Minorities 0.0 36.0 (7.2) Investment Plans Book Capital 450.0 2,907.8 3,880.3 Ret. Earnings 120.9 387.8 744.4 - Industrial - Science and Hi-tech Parks including Kien Luong Industrial Park, Total Liab. & Equity 1,464.1 4,698.1 6,068.6 Agrita Industrial Park, Tan Duc Industrial - Urban - Services Area - New City and Township including Tan Duc Resettlement, ITA Paradise New Working Capital Analysis FY06A FY07A FY08A Town, Tan Tao New City, Tan Duc New City Days Receivable 32.1 17.6 215.0 - Infrastructure development for Kien Luong and Nam Du deep sea port, Days Inventory 1.9 19.7 723.2 Long An 2x600 MW Power Plant Days Payable 2.5 18.2 0.0 - Office buildings such as ITA Sky, Tan Tao Sky, ITA Mart and ITA Bank Building Cash Operating Cycle (27.7) 20.3 508.2 and ITA Office Building in Tan Tao IP - Tan Tao University Derived Cash Flow (VNDbn)* FY06A FY07A FY08A EBIT n.a. 428.7 262.4 Key Success Factors Depreciation & Amort n.a. 3.9 (262.4) With the overwhelming success of Tan Tao Industrial Park (TTIP), ITA has Chgs in Working Cap n.a. 124.2 (1,325.8) embarked on several industrial park projects and is expanding into other Operating Cash Flow n.a. 556.8 (1,325.8) related infrastructure and urban township projects. Marketing is one of the Net Interest, Fx & Taxes n.a. (114.9) (143.3) company’s key strengths and the company has attracted many foreign as Fixed Asset Capex n.a. (649.3) 0.0 well as local investors to its industrial park. ITA will leverage its marketing Investments n.a. (1,032.2) (1,842.3) skills to bring investors to its other projects. Non Op Inc (Loss) n.a. 62.7 177.6 Other Non Cash Adj. n.a. (454.4) 1,698.9 Key Risk Factors Dividends Paid n.a. 0.0 0.0 A contraction in economic growth and exports due to the ongoing Change in Paid in Capital n.a. 2,457.8 972.5 economic crisis internationally, will have an adverse effect on the level of Change in Net Debt n.a. 147.7 (426.0) foreign and domestic investment in industrial parks. This will consequently Net Cash Flow n.a. 974.2 (888.4) harm ITA’s near term revenue and earnings outlook. In addition, ITA plans * Calculated from Balance Sheet & P&L several highly capital intensive investments in power and ports which will require equity issuance at some point in the dutire. Finally, transparency on DuPont Analysis FY06A FY07A FY08A financial and operational disclosure by management is not very robust. EBIT / Sales 0.54 0.46 0.25 Sales/Total Assets 0.24 0.20 0.17 less Net Int./Assets (0.00) 0.01 0.02 Pre-Tax ROA (%) 12.6% 9.8% 6.3% Assets/Equity 2.56 1.41 1.31 Pre-Tax ROE (%) 32.4% 13.9% 8.3% 1-Tax rate 0.81 0.82 0.77 ROE (%) 26.1% 11.3% 6.4%
Miscelleaneous FY06A FY07A Current Altman Z Score n.m. n.m. 1.8 Asset Growth (%) -75.9% 220.9% 29.2% Capex/Sales (%) n.m. 70.2% 0.0% Earnings Retention (%) 66.4% n.a. n.a.
95 PetroVietnam Ticker Share Price - VND Finance PVF 41,500 01 Jul 09
Close/Volume Chart Company Description & Principal Activities VND Mn Shares PVF is one of the bluechip stocks listed on the HoSE with a total market capitalization in excess of VND20 trillion. PVF’s main products include personal financial services, cor- porate lending, project investment, money markets and foreign exchange trading, and M&A services.
Per Share (VND) FY06A FY07A FY08A Trail 12M FY09E* FY10E* EPS n.a. n.a. 101 101 n.a. n.a. BVPS n.a. n.a. 12,213 n.a. n.a. n.a. DPS n.a. n.a. n.a. n.a. n.a. n.a. Gross OPPS n.a. n.a. 9 n.a. n.a. n.a. * Bloomberg Conscencus Estimates
Relative Performance Key Valuations FY07A Avg +/- 1 s.d. FY08A Avg +/- 1 s.d. FY09E* FY10E* P/E (x) n.a. n.a. 188.4 188.4 / 188.3 n.a. n.a. P/B (x) n.a. n.a. 1.6 1.6 / 1.5 n.a. n.a. Dividend Yield (%) n.a. n.a. n.a. 1.9 n.a. n.a. P/Gross Op Profit (x) n.a. n.a. 3.6 n.a. n.a. n.a. Op Profit Yield (%) n.a. n.a. 28.0 28 / 27.9 n.a. n.a.
01 Jul 09 Growth (P&L) FY06A FY07A FY08A FY09E* FY10E* S&P Vietnam 10 Ho Chi Minh Stock Index Revenues n.a. n.a. n.a. n.a. n.a. Net Interest n.a. n.a. n.a. n.a. n.a. MSCI AC Asia Index PVF Commissions n.a. n.a. n.a. n.a. n.a. Trading & Liquidity 20Days 100Days 180Days Net Income n.a. n.a. n.a. n.a. n.a. Volume (Reg, Trading) 1,215,525 593,804 529,139 EPS n.a. n.a. n.a. n.a. n.a. VND Val. (Reg. Trading, bn) 54.2 19.3 15.0 BVPS n.a. n.a. n.a. n.a. n.a. Percent of market (%) 1.7 1.2 1.4 Growth (Bal. Sheet) FY06A FY07A FY08A Shares Outstanding (mn) FY07A FY08A Current Deposits n.a. n.a. n.a. Wgt. Avg Issued Shares n.a. 500.0 500.0 Loans n.a. n.a. n.a. Fully Dilluted Shares n.a. 500.0 500.0 Financial Investments n.a. n.a. n.a. Foreign Owned (% / Limit) 159.4mn 12.9% 30.0% Other LT Assets n.a. n.a. n.a.
Market Values VND (bn) USD (mn) EUR (mn) Profitability FY06A FY07A FY08A Trial 12M Market Cap 20,750 1,165.7 833.1 Revenues/Assets n.a. n.a. 1.7% n.a. Net Interest/Assets n.a. n.a. 1.3% n.a. Corperate Actions Ex-Date Amt/(ratio) Fiscal Year Cost/Income ratio n.a. n.a. 36.7% n.a. n.a. n.a. n.a. n.a. Gross Op Margin n.a. n.a. 0.0% n.a. Net Margin n.a. n.a. 6.5% n.a. Market Outlook Vietnam is one of the most un-banked markets in the world Solvency & Liquidity FY06A FY07A FY08A with an account-holder penetration rate of less than 10%, which Liquid Assets/Deposits n.a. n.a. (0.09) offers huge potential for consumer lending and mortgages. Trading Sec./Deposits n.a. n.a. (0.18) Financial institutions including banks and finance companies Loans/Deposits n.a. n.a. -8362.7% aim to push consumer lending as a key business segment in NPL’s n.a. n.a. 2.5% 2009 due to the government’s 4% interest subsidy program. Loosening credit policies however raise concerns regarding loan CAR n.a. n.a. n.a. quality and risk management. Management Company Data 72F Tran Hung Dao, Hoan Chairman Nguyen Dinh Lam Head Office Company History Kiem, Ha Noi PVF was established in 2000 and quickly became the largest CEO Tong Quoc Truong non-banking financial institution in Vietnam with chartered CFO/ Chief Accontant Pham Quang Huy Website www.pvfc.com.vn capital of VND5 trillion at the end of 2008. PVF has successfully IR Contact Ha Thai Son Telephone +8449426800 made its IPO in October 2007 and listed their shares on HoSE in October 2008. Morgan Stanley is PVF’s second strategic partner with a 10% stake (50 million shares) in addition to PetroVietnam Major Shareholders Shares Insider Holdings Shares PetroVietnam 78% Nguyen Dinh Lam 30,000 Tong Quoc Truong 12,300
96 Financials / Specialty Finance
Loan Book, 2008 Profit & Loss (VND bn) FY06A FY07A FY08A Net Interest Income n.a n.a 587.6 Commission Income n.a n.a 23.0 Trading Income n.a n.a (835.6) Other income n.a n.a 988.0 Total Revenues n.a n.a 763.0 Provissions n.a n.a (479.2) Operating Costs n.a n.a (280.1) Pre-Tax Income n.a n.a 3.7 Taxes n.a n.a 46.2 Net Income n.a n.a 49.9
Balance Sheet (VNDbn) FY06A FY07A FY08A Cash & SBV Deposits n.a n.a 17.9 Loans n.a n.a 17,500.3 Provisions n.a n.a (291.5) Trading Securities n.a n.a 36.8 Investment Securities n.a n.a 592.2 Net Fixed Assets n.a n.a 68.6 Invest. in Assoc. n.a n.a 391.8 Financial Investments n.a n.a 479.8 Other LT Assets n.a n.a 12,790.5 Management Strategy and Goals Net Interbank n.a n.a 8,108.7 PVF’s management aims for average annual revenue growth of 30% on Central Bank n.a n.a 0.0 the basis of tight risk management procedures. PVF is also planning to Deposits n.a n.a (209.3) gain access to international financial markets in Asia, Europe and the US Certificates n.a n.a (3,609.5) by leveraging strategic partner Morgan Stanley’s strong networks and Other LT Liab n.a n.a (29,770.6) customer base. Finally, PVF will be investing heavily on IT infrastructure to Net Assets n.a n.a 6,105.9 automate its operating activities to ensure secure and fast transactions. Capital n.a n.a 5,000.0 Recent News Reserves n.a n.a 1,056.0 Minorities n.a n.a 0.0 In the first 5 months of 2009, PVF has sourced funding for a number of Retained Earnings n.a n.a 49.9 large-scale projects including Nhon Trach 2 Electricity Plant, PVTex Dinh Total Liab. & Equity n.a n.a 45,104.1 Vu, and PVEP oil exploration. In the first quarter of 2009, PVF reported net revenues of VND724 billion and pre-tax profit of VND25.4 billion, or 18.56% and 7.34% of the 2009 guidance respectively. The company however Revenue Analysis FY06A FY07A FY08A expects strong investment income due to the recent strong market rally Interest/Revenues n.a n.a 77.0% and investment gains by reducing its holdings in PetroVietnam affiliate Commission/Revenues n.a n.a 3.0% stocks such as DPM, PVS, PVT, and PET. Trading/Revenues n.a n.a -109.5% Provission/Revenues n.a n.a 62.8% Key Success Factors Strategic alliances with PetroVietnam remain one of the key catalysts to Credit Quality FY06A FY07A FY08A support PVF’s growth. PVF remains active in lending at competitive rates NPL’s n.a n.a 438.2 due to PetroVietnam’s favourable funding costs while PetroVietnam’s Special Mention n.a n.a 751.2 expansion in the oil and gas sector allow PVF to boost income from project Overdue Loans n.a n.a 1,189.4 funding activities. The government’s interest subsidy programs also support Overdure Loans/Loans n.a n.a 6.8% PVF’s growth in consumer lending, which is one of the company’s key lines Specific Provisisons n.a n.a 173.8 of business. General Provissions n.a n.a 117.8 Total Provissions n.a n.a 291.5 Key Risk Factors General Provisons/Loans n.a n.a 0.7% The global economic crisis continues to have a negative impact on the Specific Provisons/Loans n.a n.a 1.0% Vietnamese financial industry. Consumer finance growth raises concerns Spec. Prov./Total Provisions n.a n.a 60% over loan quality and risk management while the economic slowdown Provision Charge/Loans n.a n.a 2.7% may cause delay in government’s projects. Competition will continue to NPL Covergae n.a n.a 67% squeeze interest margins while network expansion and competition for well-qualified staff will add an extra cost burden. Off BS & Contigencies n.a n.a 9,620.4 Off BS & Contigencies/Assets n.a n.a 21%
DuPont Analysis FY06A FY07A FY08A PreTax/Revenues n.a n.a 0.00 Revenues/Assets n.a n.a 0.02 Pre-Tax ROA n.a n.a 0.00 Assets/Equity n.a n.a 7.39 1 - Tax Rate n.a n.a 1.00 Year End ROE (%) n.a n.a 0.1%
ROE (Avg Equity) n.a n.a n.a
Miscelleaneous FY06A FY07A FY08A Asset Growth (%) n.a. n.a. n.a. Provision Growth (%) n.a. n.a. n.a. Earnings Retention (%) n.a. n.a. n.a.
97 PetroVietnam Ticker Share Price - VND Insurance PVI 30,100 01 Jul 09
Close/Volume Chart Company Description and Principal Activities VND Mn Shares PVI is the second largest non-life insurance company in Vietnam and is the leading oil and energy insurance provider. In addition to oil and gas, the company provides a wide range of non-life insurance to sectors such as construction, transportation, aviation, motor vehicle, and agricultural industries. PVI also provides shipping insurance to the marine fleets of PetroVietnam, Vosco and Vitranschart.
Per Share (VND) FY06A FY07A FY08A Trail 12M FY09E* FY10E* EPS n.a. 3,652 1,760 1,938 3,399 n.a. BVPS n.a. 19,156 22,096 n.a. n.a. n.a. DPS n.a. 648 1,000 n.a. n.a. n.a. GOPS n.a. 3,585 1,754 n.a. n.a. n.a. Rev/Share n.a. 10,231 10,298 n.a. n.a. n.a. * Bloomberg Conscencus Estimates
Relative Performance Key Valuations FY07A Avg +/- 1 s.d. FY08A Avg +/- 1 s.d. FY09E* FY10E* P/Revenues (x) n.a. n.a. 2.9 3.6 / 2.2 n.a. n.a. P/E (x) n.a. n.a. 8.7 11.9 8.9 n.a. P/B (x) 3.1 3.6 / 2.7 1.5 1.3 n.a. n.a. Dividend Yield (%) n.a. n.a. 2.6 2.7 n.a. n.a. P/GOPS (x) n.a. n.a. 3.5 4.8 / 2.1 n.a. n.a.
01 Jul 09 Growth FY06A FY07A FY08A FY09E* FY10E* S&P Vietnam 10 Ho Chi Minh Stock Index Revenues n.a. 94.3% 43.4% n.a. n.a. Commission n.a. 267.3% -15.7% n.a. n.a. MSCI AC Asia Index PVI Advissory n.a. 97.4% 29.6% n.a. n.a. Net Income n.a. 467.8% -31.3% n.a. n.a. Trading & Liquidity 20Days 100Days 180Days EPS n.a. n.a. -51.8% 93.1% n.a. Volume (Reg, Trading) 463,135 303,805 329,199 BVPS n.a. n.a. 15.3% n.a. n.a. VND Val. (Reg. Trading, bn) 16.7 9.6 9.6 * Bloomberg Conscencus Estimates Percent of market (%) 0.5 0.6 0.9 Growth Indicators FY06A FY07A FY08A Shares Outstanding (mn) FY07A FY08A Current Trading Securities n.a. 267.3% -15.7% Wgt. Avg Issued Shares 68.5 97.6 103.6 Debt n.a. n.a. n.a. Fully Dilluted Shares 68.5 97.6 103.6 Financial Investments n.a. 165.0% 4.5% Foreign Owned (% / Limit) 11.8mn 11.4% 49.0% Equity n.a. 144.3% 30.4%
Market Values VND (bn) USD (mn) EUR (mn) Profitability FY06A FY07A FY08A Market Cap 3,251,470 182.7 129.3 Rev/Assets (%) 30.2 15.5 20.4 (Rev-Trading)/Assets (%) 25.7 11.1 17.0 Corperate Actions Ex-Date Amt/(Ratio) Fiscal Year Operating Margin (%) 121.3 127.4 141.9 Cash Dividend 21-Nov-08 700 FY08 Pre-Tax Margin (%) 16.7 35.7 17.1 Stock Dividend 11-Jul-08 2/25 FY08 Net Margin (%) 12.2 35.7 17.1
Market Outlook Solvency & Liquidity FY06A FY07A FY08A The Vietnam insurance market has grown by 39% in 2008 and ST Invetsments/Assets 49.0 48.1 46.0 we believe that the long-term potential remains strong with life LT Debt/Capital - - - insurance expected to grow 20-25% per year and the non-life Debt/Equity - - - sector set to grow 17% per year until 2012. Growth is derived Equity/Total Assets 60.1 38.8 46.5 from the country’s low insurance penetration and insurance density rate and the increasing awareness of insurance benefits. Management Company Data However, competition is getting tougher following the market Chairman Nguyen Anh Tuan Head Office 154 Nguyen Thai Hoc, Ha Noi deregulation and the entrance of new foreign insurers, which are CEO Bui Van Thuan expected to stimulate product diversity and enhance customer services. CFO/ Chief Accontant Phung Tuan Kien Website www.pvi.com.vn IR Contact Pham Hoai Nam Telephone +84437335588 Company History Major Shareholders Shares Insider Holdings Shares PVI is a member of the PetroVietnam Group and was established PetroVietnam 61.56 mn Nguyen Anh Tuan 160,748 in 1996. In 2002, the company successfully applied for the ISO 9001:2000 certification, raising the quality of its services. PVI was PVFC 11.65 mn Bui Van Thuan 65,396 listed on the Hanoi Stock Exchange in 2007. The state remains PVI’s major shareholder 59.4% interest.
98 Financials / Property & Casualty Insurance
Premium Breakdown, 2008 Profit & Loss (VND bn) FY06A FY07A FY08A Net Premiums 275.3 440.9 758.0 Investment & Trading Income 53.8 197.6 166.5 Other Op Income 31.4 62.0 80.4 Total Revenues 360.5 700.5 1,004.9 Insurance Claims & Underwriiting Exps 76.7 192.2 421.4 SG&A, Depreciation & Others 223.7 262.9 412.3 Pre-Tax 60.2 250.1 171.7 Taxes (16.2) 0.0 0.0 Net Income to Common 44.0 250.1 171.7
Balance Sheet (VNDbn) FY06A FY07A FY08A Cash & Equivalents 59.7 1,158.7 833.6 ST Investments & Mkt. Sec 585.7 2,173.0 2,260.7 Receivables 98.7 332.1 414.7 Long Term Invest. & Others 69.4 531.4 1,061.4 Net Fixed Assets 48.9 62.9 64.9 Other LT Assets & Deferred Charges 333.0 261.2 283.0 ShortTerm Borrowings 0.0 0.0 0.0 Other ShortTerm Liab (129.0) (198.7) (1,970.6) Long Term Debt 0.0 0.0 0.0 Other Long Term Liab 0.0 (2,566.2) (659.7) Key Risk Factors Net Assets 1,066.3 1,754.4 2,288.0 Within five years of WTO accession (by 2011) non-life branches of foreign Preferred Equity 0.0 0.0 0.0 insurance companies will be permitted to operate in Vietnam with full Minority Interest 0.0 0.0 0.0 national treatment. New entrants are expected to enter the non-life Paid in Capital 447.3 1,553.0 2,085.5 insurance sector with progressive market deregulation, some of which have Retained Earnings 270.9 201.4 202.5 already gained a firm foothold such as AAA (1.87%), BIC (2.43%) and Liberty Total Liab. & Equity 1,195.3 4,519.3 4,918.4 (0.42%). Revenue Analysis FY06A FY07A FY08A Key Success Factors Premiums/Revenue 76.4 62.9 75.4 Vietnam is still a largely untapped insurance market with long-term Invest Inc/Revenue 14.9 28.2 16.6 potential in the non-life market with growth estimated to achieve 17% Other Op Income/Revenues 8.7 8.9 8.0 per annum in the next three years. PVI is the second largest player in the sector and should be well positioned to benefit from this industry growth. Other Metrics FY06A FY07A FY08A Their strategic relationship with PetroVietnam allows PVI to cement its Revenue less Trading (VND bn) 306.8 503.0 838.4 dominance in the oil and gas and technical insurance sectors while its Growth (%) n.a. 64.0 66.7 diversified portfolio and experienced management team should shelter Op Profit 437.2 892.7 1,426.3 investment risk. Growth (%) n.a. 104.2 59.8 Recent News Cost/Income (21.3) (27.4) (41.9) Growth (%) n.a. 29.0 52.9 Many international businesses operating in Vietnam have become Investments/Assets (%) 76.9 53.9 51.7 PVI’s clients and partners, including BP, KNOC, GVPC, Conoco Philips, Vietgazprom, Talisman and Petronas, to name a few. Particularly, PVI has Investments/Capital (%) 205.4 156.7 122.0 recently underwritten oil and gas policy to Vietgazprom valued at US$250 Long Term Investments/Capital (%) 74.4 16.8 13.6 million for the period 2009-2010. As at the end of Q1 2009, PVI had achieved revenues of VND709bn and net profit growth of 13.7% YOY to VND68.9bn. * Calculated from Balance Sheet & P&L
Management Strategy and Goals DuPont Analysis FY06A FY07A FY08A The company aims to apply a modern corporate governance model and Op Profit / Revenues 1.21 1.27 1.42 attract talented staff, focusing on training and customer service. PVI aims to Revenues/Total Assets 0.30 0.16 0.20 be the first non-life insurance company in Vietnam to obtain international less Net Int./Assets (0.32) (0.14) (0.26) recognition. It also aims to establish a presence in the ASEAN region Pre-Tax ROA (%) 5.0% 5.5% 3.5% and write potential business in countries where its parent, PetroVietnam Assets/Equity 2.67 2.91 2.36 undertakes oil and gas exploration and production activities. The company Pre-Tax ROE (%) 13.5% 16.1% 8.2% intends to increase its revenues from reinsurance focusing in particular on 1-Tax rate 0.73 1.00 1.00 energy, marine, property, and construction. Investment income is expected Year End ROE (%) 9.8% 16.1% 8.2% to make a more significant revenue contribution while PVI intends to follow operational standards of some of the well-known European insurance companies. Miscelleaneous FY06A FY07A Current Asset Growth (%) n.a. 278.1% 8.8% Earnings Retention (%) n.a. 82.3% 43.2%
99 Saigon Securities Inc Ticker Share Price - VND
SSI 64,000 01 Jul 09
Close/Volume Chart Company Description & Principal Activities VND Mn Shares SSI is one of the largest securities company in Vietnam and is the only large broker not wholly owned by one of the local financial institutions. The company’s scope of business includes institutional & retail brokerage, advisory & underwriting, proprietary trading and fund management. The company is a leader in brokerage with a 17% share of the market and derives a large part of its revenues from trading and underwriting. SSI also has the largest foreign customer base with over 100 institutions and over 30,000 individual accounts as at year-end 2008. ANZ and Daiwa Securities are the strategic shareholders.
Per Share (VND) FY06A FY07A FY08A Trail 12M FY09E* FY10E* EPS n.a. 8,378 1,890 1,256 1,745 2,668 BVPS 13,414 33,804 28,879 n.a. n.a. n.a. DPS 1,389 2,555 1,000 n.a. n.a. n.a. GOPS 0 9,298 2,332 n.a. n.a. n.a. Relative Performance Rev/Share 0 13,112 10,432 n.a. n.a. n.a. * Bloomberg Conscencus Estimates
Key Valuations FY07A Avg +/- 1 s.d. FY08A Avg +/- 1 s.d. FY09E* FY10E* P/Revenues (x) 16.2 17.6 / 14.9 5.9 9 / 2.8 n.a. n.a. P/E (x) 23.9 26.4 / 21.5 21.1 27.2 36.7 24.0 P/B (x) 8.5 10.9 / 6 1.6 1.4 n.a. n.a. Dividend Yield (%) 0.7 1 / 0.3 5.0 7.0 n.a. n.a. 01 Jul 09 P/GOPS (x) 9.9 11.8 / 7.9 5.6 9 / 2.1 n.a. n.a. S&P Vietnam 10 Ho Chi Minh Stock Index MSCI AC Asia Index SSI Growth FY06A FY07A FY08A FY09E* FY10E* Revenues n.a. 257.3% 2.2% n.a. n.a. Commission n.a. 257.7% -34.8% n.a. n.a. Trading & Liquidity 20Days 100Days 180Days Advisory n.a. 411.7% 153.5% n.a. n.a. Volume (Reg, Trading) 2,916,739 2,021,096 1,409,003 Net Income n.a. 257.1% -71.0% n.a. n.a. VND Val. (Reg. Trading, bn) 202.1 102.6 66.1 EPS n.a. n.a. -77.4% -7.7% 52.9% Percent of market (%) 6.5 6.4 6.0 BVPS n.a. 152.0% -14.6% n.a. n.a. * Bloomberg Conscencus Estimates Shares Outstanding (mn) FY07A FY08A Current Wgt. Avg Issued Shares 103.1 132.5 150.3 Growth Indicators FY06A FY07A FY08A Fully Dilluted Shares 103.1 132.5 150.3 Trading Securities n.a. 257.7% -34.8% Foreign Owned (% / Limit) 64.7mn 43.0% 49.0% Debt n.a. 328.0% -84.4% Financial Investments n.a. 192.1% -37.5% Market Values VND (bn) USD (mn) EUR (mn) Equity n.a. 236.0% -3.9% Market Cap 10,071,587 565.8 400.7
Corperate Actions Ex-Date Amt/(Ratio) Fiscal Year Profitability FY06A FY07A FY08A Cash Dividend 26-Nov-08 1,000 FY08 Rev/Assets (%) 10.0 14.4 24.6 Cash Dividend 15-May-08 2,000 FY07 (Rev-Trading)/Assets (%) 4.9 7.0 16.5 Bonus 24-Dec-07 1/2 FY07 Operating Margin (%) 80.0 70.9 22.4 Rights Issue 24-May-07 1/5 FY07 Pre-Tax Margin (%) 80.0 71.1 20.1 Bonus 24-May-07 1/5 FY07 Net Margin (%) 63.9 63.9 18.1 Cash Dividend 23-Apr-07 556 FY06 Cash Dividend 20-Jul-06 556 FY06 Solvency & Liquidity FY06A FY07A FY08A Market Outlook ST Invetsments/Assets 47.4 28.4 15.3 LT Debt/Capital 41.4 13.7 10.0 The recovery of the equities market in 2009 has fuelled brokers’ Debt/Equity 62.0 79.0 12.8 growth in their key businesses including brokerage, investment Equity/Total Assets 32.0 43.2 69.3 banking and proprietary trading. With more than 100 licensed brokers participating in the industry, competition remains fierce Management Company Data as new players are striving to gain stronger foothold using 72 Nguyen Hue, District advanced technology systems, product innovation and a higher Chairman Nguyen Duy Hung Head Office standard of customer service. Securities companies remain 1, HCMC heavily reliant on proprietary trading as key source of income, CEO Nguyen Duy Hung which is a risky approach to sustainable growth. CFO/ Chief Accontant Hoang Thi Minh Thuy Website www.ssi.com.vn IR Contact Nguyen Hong Nam Telephone +84838242897 Company History Saigon Securities Incorporation (SSI) was one of the first three Major Shareholders Shares Insider holdings Shares securities companies in Vietnam. Established in 2000 with ANZ 18.0% Nguyen Duy Hung 14.2 mn charter capital of VND 6.0bn, SSI is regarded one of the top Daiwa Securities 10.5% Nguyen Hong Nam 7.8 mn five players with the strongest financial base among existing and newly established securities companies in Vietnam. The Nguyen Duy Hung 9.3% company first listed on the Hanoi stock exchange (HNX) in December 2006 and later shifted to the more liquid HOSE in October 2007.
100 Financials / Investment Services
Revenues by Source, 2008 Profit & Loss (VND bn) FY06A FY07A FY08A Commissions 126.7 363.4 183.8 Prop. Trading 194.4 695.4 453.7 Advisory, Underwritting & Other 57.4 293.6 744.5 Income Total Revenues 378.5 1,352.4 1,382.0 Operating Costs (75.8) (393.4) (1,073.1) Others (0.0) (2.4) 31.1 Pre-Tax 302.7 961.5 277.8 Taxes (60.7) (97.3) (27.3) Net Income to Common 242.0 864.2 250.5
Balance Sheet (VNDbn) FY06A FY07A FY08A Cash & Client Cash in Trust 1,415.1 2,142.3 1,611.0 ST Investments & Mkt. Sec 1,786.2 2,668.0 860.5 Receivables 325.7 1,394.3 355.7 Other Curr Assets 38.1 24.0 5.3 Total Loans 0.0 0.0 0.0 Long Term Invest. & Others 0.0 0.0 0.0 Net Fixed Assets 7.3 37.7 38.1 Other LT Assets & Defered Charges 195.3 3,119.4 2,755.6 ShortTerm Borrowings (249.0) (2,650.0) (110.0) Other ShortTerm Liab (1,421.2) (1,695.2) (832.3) Long Term Debt (500.0) (555.6) (388.9) Other Long Term Liab (352.0) (404.4) (392.8) Net Assets 1,245.4 4,080.6 3,902.2 Preferred Equity 0.0 0.0 0.0 Minority Interest 0.0 0.0 0.0 Paid in Capital 1,010.5 3,195.8 3,362.7 Management Strategy and Goals Retained Earnings 196.7 860.8 534.2 Management’s strategy is to improve customer service and maintain market Total Liab. & Equity 3,767.7 9,385.7 5,626.1 share of around 14.5% for trading on the HOSE and 7% for the HNX, with an aim of increasing the number of accounts by 30%. One of the goals Revenue Analysis FY06A FY07A FY08A of brokerage is to increase the number of foreign accounts through road Commission/Revenue 33.5 26.9 13.3 shows and in partnership with banks. In advisory, SSI aims to target large Trading/Revenue 51.4 51.4 32.8 IPOs of state-owned enterprises belonging to VNPT, EVN and PetroVietnam. Advissory, Underwritting/Revenues 15.2 21.7 53.9 Another area of focus is to increase underwriting, especially in FDI companies and to give clients an all in one package including advisory, underwriting and listing services. SSI’s financial targets for 2009 are revenues Other Metrics FY06A FY07A FY08A and profit before tax of VND461bn (excluding proprietary trading revenue) Revenue less Trading (VND bn) 184.1 657.1 928.3 and VND261bn respectively. Growth (%) n.a. 257.0 41.3 Op Profit 302.7 959.1 309.0 Recent News Growth (%) n.a. 216.9 (67.8) In Q1, SSI achieved revenues and pretax profit of VND351bn and VND128bn Cost/Income 20.0 29.1 77.6 which represents 37% and 23% of full year’s targets respectively. Growth (%) n.a. 45.2 166.9 Investments/Assets (%) 52.6 61.7 64.3 Key Success Factors Investments/Capital (%) 196.1 181.1 107.5 Stock ownership in Vietnam is still low and retail trading will pick up once Long Term Investments/Capital (%) 19.3 97.6 81.9 the market improves as it has been recently. With a dominant position and * Calculated from Balance Sheet & P&L a large capital base, SSI is going to be able to weather the storm better and longer than some of the smaller and less well-capitalized competitors when Proprietary Trading Assets FY06A FY07A FY08A times are bad. The company has overcome some of the earlier periods Prop Book - Listed Equity (%) 35.7% 16.2% 3.9% of weakness in the markets (2001-2002) without the backing of strong Prop Book - OTC Equity (%) 16.4% 24.4% 25.4% institutional shareholders, unlike some of its competitors. A move towards Prop Book - Bonds (%) 48.0% 59.5% 70.6% a more technologically advanced platform will also assist countering some of the new entrants targeting sophisticated, well-educated middle-class DuPont Analysis FY06A FY07A FY08A customers. In the medium to long term, we see some likely consolidation in Op Profit / Revenues 0.80 0.71 0.22 the sector with many securities companies being bought or closing shop. This should bode well for the large, remaining players such as SSI. Revenues/Total Assets 0.10 0.14 0.25 less Net Int./Assets 0.00 0.00 (0.01) Key Risk Factors Pre-Tax ROA (%) 8.0% 10.2% 4.9% Vietnam is still a frontier market but already foreign financial institutions Assets/Equity 3.73 2.94 1.67 such as Morgan Stanley, JP Morgan have set up operations. With almost 100 Pre-Tax ROE (%) 30.0% 30.1% 8.3% securities companies in Vietnam, SSI is going to face increasing competition 1-Tax rate 0.80 0.90 0.90 from both local and overseas players in lower brokerage and advisory fees. Year End ROE (%) 24.0% 27.0% 7.4% Proprietary trading still accounts for an overwhelming proportion of SSI’s revenues and there is a risk that concentration in certain sectors and OTC Miscelleaneous FY06A FY07A Current stocks as well as a weak market could adversely affect earnings. Asset Growth (%) n.a. 149.1% -40.1% Earnings Retention (%) n.a. 69.5% 47.1%
101 Saigon Thuong Tin Ticker Share Price - VND Commercial Bank STB 34,900 01 Jul 09
Close/Volume Chart Company Description & Principal Activities VND Mn Shares Sacombank is one of the largest Joint Stock Banks by assets in Vietnam. Apart from traditional banking business, STB also has a real estate arm through SacomReal, securities business through Sacombank Securities. Their scope of business includes taking deposits; providing loans to retail and corporate customers, trading in securities and stock brokerage, corporate finance advisory and underwriting as well as real estate advisory/investments.
Per Share (VND) FY06A FY07A FY08A Trail 12M FY09E* FY10E* EPS 1,147 2,792 1,869 3,048 2,340 3,085 BVPS 5,888 14,366 15,727 n.a. 18,230 21,741 DPS n.a. n.a. n.a. n.a. n.a. n.a. Gross OPPS 1,366 3,159 2,173 n.a. n.a. n.a. * Bloomberg Conscencus Estimates Relative Performance Key Valuations FY07A Avg +/- 1 s.d. FY08A Avg +/- 1 s.d. FY09E* FY10E* P/E (x) 34.7 41 / 28.4 11.0 11.8 / 10.2 14.9 11.3 P/B (x) 7.2 9.8 / 4.6 1.9 2.6 / 1.2 1.9 1.6 Dividend Yield (%) n.a. n.a. n.a. n.a. n.a. n.a. P/Gross Op Profit (x) 6.0 6.8 / 5.3 1.7 n.a. n.a. n.a. Op Profit Yield (%) 16.8 16.9 / 16.8 64.8 65 / 64.6 n.a. n.a. 01 Jul 09 S&P Vietnam 10 Ho Chi Minh Stock Index Growth (P&L) FY06A FY07A FY08A FY09E* FY10E* Revenues 37.1% 129.8% 0.5% n.a. n.a. MSCI AC Asia Index STB Net Interest 2.5% 69.3% -0.5% n.a. n.a. Trading & Liquidity 20Days 100Days 180Days Commissions 7.4% 61.6% 190.8% n.a. n.a. Volume (Reg, Trading) 8,307,926 5,180,054 3,699,800 Net Income 97.2% 197.4% -31.7% n.a. n.a. VND Val. (Reg. Trading, bn) 297.3 137.2 93.3 EPS 1,638 3,820 1,831 25.2% 31.9% Percent of market (%) 9.6 8.6 8.4 BVPS 10,000 16,518 12,980 15.9% 19.3%
Shares Outstanding (mn) FY07A FY08A Current Growth (Bal. Sheet) FY06A FY07A FY08A Wgt. Avg Issued Shares 500.7 510.8 493.3 Deposits -267.3% 152.6% 4.3% Fully Dilluted Shares 500.7 510.8 510.8 Loans 69.8% 145.8% -1.0% Foreign Owned (% / Limit) 141.8mn 28.7% 30.0% Financial Investments 524.5% 81.3% -21.0% Other LT Assets 122.5% 107.1% 59.3% Market Values VND (bn) USD (mn) EUR (mn) Market Cap 17,217 967.1 687.8 Profitability FY06A FY07A FY08A Trial 12M Revenues/Assets 4.3% 3.8% 3.6% Corperate Actions Ex-Date Amt/(ratio) Fiscal Year Net Interest/Assets 2.7% 1.8% 1.7% Stock Dividend 23-Jul-08 3/20 FY08 Cost/Income ratio 38.4% 30.4% 51.7% Stock Dividend 7-Jun-07 3/25 FY07 Pretax Margin 0.0% 0.0% 0.0% Rights Issue 7-Jun-07 1/1 FY07 Net Margin 44.2% 57.3% 38.9% Bonus 13-Oct-06 1/10 FY06 Solvency & Liquidity FY06A FY07A FY08A Market Outlook Liquid Assets/Deposits -21.8% -16.3% -25.3% Vietnam is one of the most un-banked markets in the world with Trading Sec./Deposits -1.5% -9.4% -0.8% a penetration rate of less than 10%. There is huge potential for Loans/Deposits -82.2% -80.0% -75.9% consumer lending, mortgages, and card services. Most banks NPL’s 0.6% 0.4% 0.6% have concentrated on consumer lending as a key business CAR 11.82 11.07 10.56 segment in 2009 due to the government’s 4% interest subsidy program. Loosening credit policies however raise concerns over Management Company Data loan quality and risk management. Interest margins appear thin Chairman Dang Van Thanh Head Office 278 Nam Ky Khoi Nghia due to tough competition and the recovery of other investment CEO Tran Xuan Huy District 3, HCMC alternatives such as equity investments, and gold trading. CFO/ Chief Accontant Le Hung Cuong Website www.sacombank.com.vn IR Contact Dang Van Thanh Telephone +84839320420 Company History Major Shareholders Shares Insider Holdings Shares Saigon Thuong Tin Commercial Joint Stock Bank (Sacombank) (STB) was established in 1991 by the merging of four credit IFC 5.25% Dang Van Thanh 20.01 mn organizations in Ho Chi Minh City. Its initial charter capital was Dragon Financial Holdings 8.73% Dang Hong Anh 20.8 mn VND3 billion. In 2002, Sacombank’s charter capital increased ANZ 10.00% Nguyen Thi Mai Thanh 20.02 mn when the International Financial Corporation (IFC) became the second major foreign shareholder, after Dragon Financial Holdings (UK). In Aug-05, ANZ bank acquired a 10% stake and became the third largest shareholder.
102 Financials/ Banks
Loan Book, 2008 Profit & Loss (VND bn) FY06A FY07A FY08A Net Interest Income 680.4 1,151.9 1,146.7 Commission Income 119.7 193.4 562.3 Trading Income 11.6 909.3 508.6 Other income 250.8 187.0 236.3 Total Revenues 1,062.5 2,441.6 2,454.0 Provissions (43.0) (118.4) (74.1) Operating Costs (408.3) (741.2) (1,269.9) Pre-Tax Inocme 611.3 1,582.0 1,109.9 Taxes (141.2) (184.1) (155.2) Net Income 470.1 1,397.9 954.8
Balance Sheet (VNDbn) FY06A FY07A FY08A Cash & SBV Deposits 3,821.1 7,213.9 11,683.2 Loans 14,394.3 35,378.1 35,008.9 Provisions (81.4) (177.6) (251.8) Trading Securities 264.6 4,147.0 377.0 Investment Securities 2,065.0 9,173.8 8,969.6 Net Fixed Assets 708.1 1,019.8 1,696.3 Invest. in Assoc. 0.0 80.6 135.8 Financial Investments 780.6 1,414.9 1,118.4 Other LT Assets 804.2 1,665.8 2,653.6 Net Interbank 1,204.1 147.5 2,559.2 Central bank (107.0) (750.2) (52.2) Deposits (17,511.0) (44,231.9) (46,128.8) Certificates (2,529.3) (5,197.4) (7,659.1) Other LT Liab (942.5) (2,534.7) (2,351.5) Net Assets 2,870.8 7,349.6 7,758.6 Management Strategy and Goals Capital 2,248.7 5,662.5 5,977.6 Management’s strategy is to maintain operational prudence and strengthen Reserves 185.5 452.6 796.7 corporate governance. The bank aims to diversify its revenue stream with Minorities 0.0 0.0 0.0 a focus on fees and commissions while credit growth will be monitored Retained Earnings 436.2 1,234.5 984.3 closely to keep NPLs at below 2%. STB is already targeting untapped Total Liab. & Equity 24,776.2 64,572.9 68,438.6 markets such as Laos, Cambodia, and China and has become the first Vietnamese bank to win approval to establish branches in these countries. Revenue Analysis FY06A FY07A FY08A Financially, the bank aims for a pre-tax profit of VND1.6tn this year (an Interest/Revenues 64.0% 47.2% 46.7% increase of 47%) with an overall target for a 20-23% ROE and ROA of 1.5- Commission/Revenues 11.3% 7.9% 22.9% 2.0%. Trading/Revenues 1.1% 37.2% 20.7% Recent News Provission/Revenues 4.0% 4.8% 3.0% In the first 5 months of 2009, STB earned a pre-tax profit of VND660bn, Credit Quality FY06A FY07A FY08A or 41.25% of the full year target. Total deposits reached VND69.1 trillion; NPL’s 92.8 127.4 208.4 outstanding loans reached VND44.8 trillion in the period while total assets Special Mention 44.7 5.9 129.2 amount to nearly VND78.5 trillion, up 14.76% year-to-date. STB is now the leader among commercial joint stock banks in its operational network Overdue Loans 137.6 133.4 337.6 with over 225 transaction offices nationwide. The IFC recently reduced its Overdure Loans/Loans 0.96% 0.38% 0.96% holdings in STB while another strategic partner ANZ has registered to divest Specific Provisisons 21.9 27.7 40.5 its holding after setting up a 100% foreign owned subsidiary. General Provissions 59.5 149.8 211.3 Total Provissions 81.4 177.6 251.8 Key Success Factors General Provisons/Loans 0.41% 0.42% 0.60% STB is one of the largest joint stock banks by assets and is regarded as Specific Provisons/Loans 0.15% 0.08% 0.12% one of the most well managed banks in Vietnam. The country’s low Spec. Prov./Total Provisions 26.9% 15.6% 16.1% banking penetration will be the medium to long term driver of growth. Provision Charge/Loans 0.30% 0.33% 0.21% An experienced management team with a clear vision on development NPL Covergae 87.7% 139.3% 120.8% strategies is also one of the key success factors. STB’s achievements are Off BS & Contigencies 3,434.0 8,751.0 11,580.9 also founded on its credible reputation, intensive distribution network and Off BS & Contigencies/Assets 13.9% 13.6% 16.9% enhanced information technology. DuPont Analysis FY06A FY07A FY08A Key Risk Factors PreTax/Revenues 0.58 0.65 0.45 The global economic crisis continues to have a negative impact on Revenues/Assets 0.04 0.04 0.04 Vietnam’s financial industry in which STB is a key player. Credit growth Pre-Tax ROA 0.02 0.02 0.02 pressure raises concerns over loan quality while interest margins remain Assets/Equity 8.63 8.79 8.82 thin due to intensified competition. Moreover, similar to other banks, expanding networks and competition for well-qualified staff will add an 1 - Tax Rate 0.77 0.88 0.86 extra cost burden at a time when net interest margins are falling. Year End ROE (%) 16.4% 18.9% 12.4% ROE (Avg Equity) 19.8% 27.4% 12.6%
Miscelleaneous FY06A FY07A FY08A Asset Growth (%) 6755.4% 160.6% 6.0% Provision Growth (%) 77.4% 118.1% 41.8% Earnings Retention (%) n.m. n.m. n.m.
103 Bank for Foreign Ticker Share Price - VND Trade of Vietnam VCB 60,500 01 Jul 09
Close/Volume Chart Company Description & Principal Activities VND Mn Shares Vietcombank is the second largest bank in Vietnam by total assets (VND221 tn) as at 31 December 2008. The bank’s main activities include taking deposits and making loans to retail and corporate customers in VND, gold and foreign currencies. Other services include payment services, treasury services, foreign exchange trading, and credit card and debit card services. Vietcombank is the sole shareholder in Vietcombank Securities (100%), Vietcombank Leasing Company (100%), Vietnam Finance Company Limited (100%), Vietcombank Asset Management Company (100%), and holds significant stakes in Vietcombank Fund Management (51%), Vietcombank Cardif Life Insurance (45%), and Shinhan Vina Bank (50%).
Per Share (VND) FY06A FY07A FY08A Trail 12M FY09E* FY10E* EPS n.a. 1,989 2,096 n.a. 2,667 3,299 Relative Performance BVPS n.a. 9,341 11,249 n.a. 14,053 17,352 DPS n.a. n.a. n.a. n.a. n.a. n.a. Gross OPPS n.a. n.a. n.a. n.a. n.a. n.a. * Bloomberg Conscencus Estimates
Key Valuations FY07A Avg +/- 1 s.d. FY08A Avg +/- 1 s.d. FY09E* FY10E* P/E (x) n.a. n.a. n.a. n.a. 22.7 18.3 P/B (x) n.a. n.a. n.a. n.a. 4.3 3.5 01 Jul 09 Dividend Yield (%) n.a. n.a. n.a. n.a. n.a. n.a. P/Gross Op Profit (x) n.a. n.a. n.a. n.a. n.a. n.a. S&P Vietnam 10 Ho Chi Minh Stock Index Op Profit Yield (%) n.a. n.a. n.a. n.a. n.a. n.a. MSCI AC Asia Index VCB Growth (P&L) FY06A FY07A FY08A FY09E* FY10E* Revenues 24.1% 9.1% 54.5% n.a. n.a. Trading & Liquidity 20Days 100Days 180Days Net Interest 17.3% 5.5% 61.6% n.a. n.a. Volume (Reg, Trading) 3,271,230 3,271,230 3,271,230 Commissions 22.5% 9.7% 31.5% n.a. n.a. VND Val. (Reg. Trading, bn) 203.7 203.7 203.7 Net Income 123.0% -16.3% 5.4% n.a. n.a. Percent of market (%) 6.6 12.5 18.3 EPS 6,659 5,458 3,049 27.2% 23.7% BVPS 25,540 30,595 11,396 24.9% 23.5% Shares Outstanding (mn) FY07A FY08A Current Wgt. Avg Issued Shares 1,210.1 1,210.1 1,210.1 Growth (Bal. Sheet) FY06A FY07A FY08A Fully Dilluted Shares 1,210.1 1,210.1 1,210.1 Deposits -1169.2% 26.5% 10.9% Foreign Owned (% / Limit) 29.7mn 2.5% of 30.0% Loans 698.9% 44.1% 15.5% Financial Investments 281.6% 175.3% 35.7% Market Values VND (bn) USD (mn) EUR (mn) Other LT Assets 270.2% 57.3% 33.6% Market Cap 72,605 4,078.5 2,900.5 Profitability FY06A FY07A FY08A Trial 12M Corperate Actions Ex-Date Amt/(Ratio) Fiscal Year Revenues/Assets 3.2% 2.9% 4.0% Cash Dividend 23-Jul-08 1,000 FY08 Net Interest/Assets 2.3% 2.1% 3.0% Cash Dividend 16-May-08 400 FY08 Cost/Income ratio 23.0% 28.2% 30.3% Cash Dividend 8-Aug-07 675 FY07 Gross Op Margin 0.0% 0.0% 0.0% Rights Issue 8-Aug-07 2/5 FY07 Net Margin 54.5% 41.8% 28.5% Cash Dividend 7-Feb-07 975 FY06 Solvency & Liquidity FY06A FY07A FY08A Market Outlook Liquid Assets/Deposits -12.7% -10.5% -21.7% Vietnam is one of the most un-banked markets in the world Trading Sec./Deposits -0.5% -1.1% -0.2% with an account-holder penetration rate of less than 10%. There Loans/Deposits -60.5% -69.0% -71.8% is huge potential for consumer lending, mortgages as well NPL’s 2.7% 3.7% 4.6% as cards. Most banks concentrated on consumer lending as CAR n.a 11.20% 8.9% a key business segment in 2009 due to the government’s 4% interest subsidy program. Loosening credit controls however Management Company Data raises concerns over loan quality and risk management. Interest Chairman Nguyen Hoa Binh Head Office 198 Tran Quang Khai, Hanoi margins appear thin due to tough competition and the recovery of other investment alternatives such as equity investments and CEO Nguyen Phuoc Thanh gold trading. CFO/ Chief Accontant Nguyen Thi Hoa Website www.vietcombank.com.vn IR Contact Nguyen Thi Hoa Telephone +84439343137 Company History
Vietcombank was established in 1963 as a spin-off from the Major Shareholders Shares Insider Holdings Shares Foreign Exchange unit of the State Bank of Vietnam. In 1990, SCIC 90.72% Nguyen Hoa Binh 3,500 Vietcombank became a full-service bank from its previously specialized function as a foreign exchange dealer, extending Nguyen Phuoc Thanh 2,500 their business lines into commercial lending, card activities, and treasury services. The bank was transformed into a joint stock bank following its IPO at the end of 2007 and is set to list on the HoSE in June 2009.
104 Financials / Banks
Loan Book, 2008 Profit & Loss (VND bn) FY06A FY07A FY08A Net Interest Income 3,884.3 4,099.9 6,623.6 Commission Income 548.3 601.4 790.9 Trading Income 426.9 790.4 678.2 Other income 422.0 271.8 809.8 Total Revenues 5,281.4 5,763.4 8,902.5 Provissions (174.2) (943.5) (2,883.9) Operating Costs (1,213.6) (1,627.7) (2,694.1) Pre-Tax Income 3,893.7 3,192.1 3,324.5 Taxes (1,016.6) (785.1) (788.1) Net Income 2,877.1 2,407.1 2,536.3
Balance Sheet (VNDbn) FY06A FY07A FY08A Cash & SBV Deposits 14,266.7 14,866.9 34,043.6 Loans 67,742.5 97,631.5 112,793.0 Provisions (1,491.6) (2,102.9) (4,264.2) Trading Securities 568.6 1,575.3 271.7 Investment Securities 30,394.5 41,158.7 41,604.5 Net Fixed Assets 1,109.9 1,049.2 1,360.9 Invest. in Assoc. 487.7 586.6 1,180.1 Financial Investments 477.0 1,313.1 1,781.5 Other LT Assets 1,337.8 2,104.6 2,811.6 Net Interbank 40,064.2 21,240.7 6,467.3 Central bank (16,791.4) (12,685.3) (9,515.6) Deposits (111,916.3) (141,589.1) (157,067.0) Certificates (8,778.8) (3,221.1) (2,922.0) Other LT Liab (6,167.5) (8,316.1) (14,651.8) Net Assets 11,303.2 13,612.1 13,893.4 Capital 4,356.7 4,429.3 12,100.9 Management Strategy and Goals Reserves 6,606.1 8,643.6 830.5 Vietcombank aims to purse deposit and credit growth while maintaining Minorities 75.1 84.3 103.4 a tight control on loan quality and risk management procedures. Retained Earnings 265.2 454.8 858.7 Vietcombank will continue to focus on the bank’s key strengths in foreign Total Liab. & Equity 166,952.0 197,363.4 221,950.4 exchange dealings, international settlements and trade finance to fuel growth. The bank also seeks to diversify its loan portfolio to SMEs and Revenue Analysis FY06A FY07A FY08A individual customers, and is placing great emphasis on retail banking. Interest/Revenues 73.5% 71.1% 74.4% Management is also set to make substantial investments in IT infrastructure and distribution networks to support its retail banking strategies. Commission/Revenues 10.4% 10.4% 8.9% Trading/Revenues 8.1% 13.7% 7.6% Recent News Provission/Revenues 3.3% 16.4% 32.4%
Vietcombank has recently been approved to list 112 million shares on the Credit Quality FY06A FY07A FY08A HoSE and they are expected to make their bourse debut at the end of June NPL’s 1,860.7 3,616.6 5,202.0 2009. The bank is still in the process to searching for a strategic partner with a global presence and in-depth expertise to strengthen its competitiveness. Special Mention 398.9 1,666.0 3,061.3 Financially, in Q1 2009, VCB reported pre-tax profit of VND1.39 trillion or 42% Overdue Loans 2,259.6 5,282.6 8,263.4 of 2009 guidance. Overdure Loans/Loans 3.34% 5.41% 7.33% Specific Provisisons 1,116.5 763.5 3,509.6 Key Success Factors General Provissions 0.0 1,954.0 807.8 VCB is one of the largest banks by assets and is also regarded as one of Total Provissions 1,116.5 2,717.4 4,317.4 the most well managed banks in Vietnam. The country’s low banking General Provisons/Loans 0.00% 2.00% 0.72% penetration will be the medium to long term driver of growth. The Specific Provisons/Loans 1.65% 0.78% 3.11% experienced management team with a clear vision and development Spec. Prov./Total Provisions 100.0% 28.1% 81.3% strategy is one of the key factors driving the bank’s success. The Provision Charge/Loans 0.26% 0.97% 2.56% achievement of VCB is also founded on its credible reputation, intensive NPL Covergae 60.0% 75.1% 83.0% distribution network and enhanced information technology. Off BS & Contigencies 33,505.9 45,039.0 38,270.5 Off BS & Contigencies/Assets 20.1% 22.8% 17.2% Key Risk Factors The global economic crisis continues to have a negative impact on DuPont Analysis FY06A FY07A FY08A Vietnam’s financial sector, in which VCB is one of the key players. Easing PreTax/Revenues 0.74 0.55 0.37 credit growth restrictions raise concerns over loan quality while net interest Revenues/Assets 0.03 0.03 0.04 margins remain thin due to intense competition. Similar to other banks, an Pre-Tax ROA 0.02 0.02 0.01 expanding network and competition for well-qualified staff will add an extra cost burden at a time when net interest margins are falling. Assets/Equity 14.77 14.50 15.98 1 - Tax Rate 0.74 0.75 0.76 Year End ROE (%) 25.5% 17.7% 18.3% ROE (Avg Equity) 29.4% 19.4% 18.4%
Miscelleaneous FY06A FY07A FY08A Asset Growth (%) 1055.0% 18.2% 12.5% Provision Growth (%) 3149.5% 41.0% 102.8% Earnings Retention (%) n.m. n.m. n.m.
105 Vietnam National Ticker Share Price - VND Reinsurance VNR 29,800 01 Jul 09
Close/Volume Chart Company Description & Principal Activities VND Mn Shares VNR provides reinsurance services, both life and non life to direct insurers in Vietnam. It also writes reinsurance on a non-compulsory basis from various Asian markets, including Japan, South Korea, Thailand, China, and Singapore. Its main operations are providing reinsurance services for foreign and domestic life and non-life insurers, investing in government bonds, corporate stocks and bonds, trading real estate and making capital investments. VinaRe recorded an annual average growth rate of 32.7 percent in revenues during its first ten years of operation.
Per Share (VND) FY06A FY07A FY08A Trail 12M FY09E* FY10E* EPS 1,322 1,567 2,508 2,741 n.a. n.a. BVPS 9,042 12,784 28,428 n.a. n.a. n.a. DPS n.a. n.a. n.a. n.a. n.a. n.a. GOPS n.a. 1,596 3,047 n.a. n.a. n.a. Relative Performance Rev/Share n.a. 7,608 9,706 n.a. n.a. n.a. * Bloomberg Conscencus Estimates
Key Valuations FY07A Avg +/- 1 s.d. FY08A Avg +/- 1 s.d. FY09E* FY10E* P/Revenues (x) n.a. n.a. 3.7 4.6 / 2.7 n.a. n.a. P/E (x) n.a. n.a. 16.5 13.8 n.a. n.a. P/B (x) 6.2 7.3 / 5 1.4 1.1 n.a. n.a. 01 Jul 09 Dividend Yield (%) 2.1 2.7 / 1.5 3.8 5.2 n.a. n.a. S&P Vietnam 10 Ho Chi Minh Stock Index P/GOPS (x) 9.0 9.7 / 8.3 3.7 4.8 / 2.5 n.a. n.a. MSCI AC Asia Index VNR Growth FY06A FY07A FY08A FY09E* FY10E* Trading & Liquidity 20Days 100Days 180Days Revenues 20.0% 18.6% 74.0% n.a. n.a. Volume (Reg, Trading) 221,670 60,426 42,788 Commission 18.1% -13.6% 325.2% n.a. n.a. VND Val. (Reg. Trading, bn) 8.5 2.2 1.5 Advissory n.a. 32.0% 18.3% n.a. n.a. Percent of market (%) 0.3 0.1 0.1 Net Income 41.7% 20.9% 118.3% n.a. n.a. EPS 41.7% 18.5% 60.1% n.a. n.a. Shares Outstanding (mn) FY07A FY08A Current BVPS n.a. 41.4% 122.4% n.a. n.a. Wgt. Avg Issued Shares 46.6 63.6 67.2 * Bloomberg Conscencus Estimates Fully Dilluted Shares 46.6 63.6 67.2 Foreign Owned (% / Limit) 20.1mn 29.9% of 49.0% Growth Indicators FY06A FY07A FY08A Trading Securities -20.3% -13.6% 325.2% Market Values VND (bn) USD (mn) EUR (mn) Debt 15.9% n.a. -100.0% Market Cap 2,050,162 115.2 82.1 Financial Investments n.a. -28.9% 292.8% Equity -29.3% 48.5% 211.3% Corperate Actions Ex-Date Amt/(Ratio) Fiscal Year Cash Dividend 23-Jul-08 1,000 FY08 Profitability FY06A FY07A FY08A Cash Dividend 16-May-08 400 FY08 Rev/Assets (%) 34.3 29.3 22.7 Cash Dividend 8-Aug-07 675 FY07 (Rev-Trading)/Assets (%) 27.9 25.3 15.1 Rights Issue 8-Aug-07 2/5 FY07 Operating Margin (%) 155.2 160.5 147.9 Cash Dividend 7-Feb-07 975 FY06 Pre-Tax Margin (%) 23.9 23.6 33.2 Net Margin (%) 20.2 20.6 25.8 Market Outlook The Vietnam insurance market has grown by 39% in 2008 and Solvency & Liquidity FY06A FY07A FY08A the long-term potential remains optimistic with life insurance ST Invetsments/Assets 35.8 18.2 34.3 expected to grow by 20% to 25% per year and non-life LT Debt/Capital - - - insurance by 17% per year until 2012. This will drive reinsurance Debt/Equity - 48.4 - volumes and VinaRe, being the largest reinsurance company Equity/Total Assets 47.4 50.6 70.2 in Vietnam will be well positioned to benefit from the trend. However, as most major insurers in Vietnam now have large Management Company Data financial institutions as foreign strategic shareholders or have increased their capital bases, their ability to take on more Chairman Trinh Quang Tuyen Head Office 7 Floor, 141 Le Duan St, Hanoi underwriting/reinsurance is enhanced. As such, the amount of CEO Trinh Quang Tuyen business available to VinaRe will reduce over time. Moreover, as CFO/ Chief Accontant Luu Thi Viet Hoa Website www.vinare.com.vn competition has increased, pricing and underwriting standards IR Contact Nguyen Thi Minh Chau Telephone +84439422365 may have declined, resulting in lower risk adjusted returns. Major Shareholders Shares Insider Holdings Shares Company History SCIC 40.30% Trinh Quang Tuyen n.a The Vietnam National Reinsurance Corporation (VinaRe) was SwissRe 25% Pham Cong Tu n.a established in Hanoi in 1994. The company was equitized in Bao Viet 8.40% Tran Trong Phuc n.a 2004 and converted to a joint stock company from January 2005. SwissRe became a strategic shareholder in January 2008, taking a 25% stake for USD79m. VNR was officially listed on HASTC in March 2006.
106 Financials / Reinsurance
Investment Portfolio, 2008 Profit & Loss (VND bn) FY06A FY07A FY08A Net Premiums 151.0 184.6 267.9 Investment & Trading Income 55.9 48.3 205.3 Other Op Income 92.3 121.9 144.2 Total Revenues 299.3 354.8 617.4 Insurance Claims & Underwriiting Exps 165.1 214.5 295.8 SG&A, Depreciation & Others 62.6 65.9 127.7 Pre-Tax 71.5 83.8 205.1 Taxes (11.0) (10.7) (45.5) Net Income to Common 60.5 73.1 159.6
Balance Sheet (VNDbn) FY06A FY07A FY08A Cash & Equivalents 32.1 99.3 426.0 ST Investments & Mkt. Sec 312.6 221.1 933.8 Receivables 143.8 263.6 535.6 Long Term Invest. & Others 316.6 570.6 775.0 Net Fixed Assets 39.1 37.3 35.3 Other LT Assets & Deferred Charges 28.2 21.2 18.1 ShortTerm Borrowings 0.0 (297.4) 0.0 Other ShortTerm Liab (225.5) (13.9) (409.9) Long Term Debt 0.0 0.0 0.0 Other Long Term Liab (0.0) (0.6) (1.0) Net Assets 646.9 901.1 2,313.1 Preferred Equity 0.0 0.0 0.0 Management Strategy and Goals Minority Interest 0.0 0.0 0.0 Management’s goal is to build VNR into a leader in reinsurance in Vietnam Paid in Capital 343.0 549.7 1,776.3 and the region. The company wants to be known as the centre for insurance Retained Earnings 70.5 64.2 134.5 services with a strong IT platform and staff that are knowledgeable and skilled in the reinsurance industry. VNR aims to have a strong capital base Total Liab. & Equity 872.5 1,213.0 2,723.9 to take on reinsurance contracts both domestically and regionally, maintain liquidity and increase financial investments. Its slogan is “Safety, Profitability Revenue Analysis FY06A FY07A FY08A and Stability”. Financially, the company targets revenues of VND 1,000 bn Premiums/Revenue 50.5 52.0 43.4 with retained premium grow by 5.4% to VND 300 bn in 2009. Pretax profit Invest Inc/Revenue 18.7 13.6 33.3 target for 2009 is VND210bn. Other Op Income/Revenues 30.9 34.4 23.4
Recent News Other Metrics FY06A FY07A FY08A The company has invested in local insurance companies including PJICO Revenue less Trading (VND bn) 243.4 306.5 412.1 (8.8%), a leading non life insurer in Vietnam with a 10% market share; PTI Growth (%) n.a. 26.0 34.4 (7.5%), a smaller non-life insurer, and in newly formed insurance companies Op Profit 464.4 569.3 913.2 such as ABIC Insurance (10%), Bao Tin Insurance (10%) and Samsung-Vina Growth (%) n.a. 22.6 60.4 (50%), a joint-venture with Samsung Fire & Marine and one of the top global Cost/Income (55.2) (60.5) (47.9) non-life insurance companies in the world. The company has also taken a Growth (%) n.a. 9.6 (20.7) 12.5% stake in a newly established bank, Tien Phong Bank, jointly with VMS Investments/Assets (%) 39.1 20.0 34.9 Mobile and FPT. Investments/Capital (%) 99.3 44.1 53.6 Key Success Factors Long Term Investments/Capital (%) 8.2 3.9 1.0 * Calculated from Balance Sheet & P&L With a strong capital base and being the only reinsurer in Vietnam, VinaRe is in a unique position to benefit from the growth in the insurance sector DuPont Analysis FY06A FY07A FY08A in general. The company has a reliable customer base due to the fact that many of VNR’s shareholders and investee companies are also clients and Op Profit / Revenues 1.55 1.60 1.48 partners. As Vietnam opens its door to the world through the WTO, more Revenues/Total Assets 0.34 0.29 0.23 foreign companies are entering Vietnam and more Vietnamese companies less Net Int./Assets (0.45) (0.40) (0.26) are doing business overseas. As such there is an opportunity for VinaRe to Pre-Tax ROA (%) 8.2% 6.9% 7.5% take on more underwriting contracts outside Vietnam, especially within Assets/Equity 2.54 2.21 1.53 Asia. With SwissRe, a world renowned reinsurer, on board, it is natural to Pre-Tax ROE (%) 20.9% 15.2% 11.5% assume that VinaRe’s technical capability in underwriting and investing will 1-Tax rate 0.85 0.87 0.78 improve, leveraging on its partner’s experience and expertise. Year End ROE (%) 17.6% 13.3% 9.0%
Key Risk Factors Miscelleaneous FY06A FY07A Current As most major insurance companies in Vietnam have now either secured Asset Growth (%) n.a. 39.0% 124.6% foreign strategic shareholders who are large financial institutions or Earnings Retention (%) n.a. n.a. n.a. increased their capital bases, their ability to take on more underwriting will be greatly enhanced. As such, VinaRe potential market will be less than otherwise. Moreover, as the number of insurance companies has increased, underwriting standards and pricing have declined, resulting in lower risk adjusted returns. In addition, VinaRe’s strategy of relying on shareholders as customers presents an inherent conflict of interest as the business that these shareholders bring may not necessarily be in the best interests for the company.
107 Imexpharm Ticker Share Price - VND Pharmaceutical IMP 61,000 01 Jul 09
Close/Volume Chart Company Description & Principle Activities VND Mn Shares IMP is well-known for production and distribution of generic drugs and is also involved in several licensing contracts with foreign companies such as Sanofi Aventis, GSK Pharmascience, Innotech and Robinson. Its two pharmaceutical factories producing both Betalactam and non-Betalactam products have been accredited with GMP-WHO certification and have a total production capacity of 250 million units per year. IMP is also engaged in the production and plantation of traditional medicines and has acquired access to 1,041ha of national reservation forest in Long An Province through the purchase of the Remedica Center which supports its research and production of herbal raw materials.
Per Share (VND) FY06A FY07A FY08A Trail 12M FY09E* FY10E* EPS 4,770 5,472 4,997 5,359 4,731 6,685 BVPS 23,904 42,672 44,239 n.a. n.a. n.a. DPS 728 843 2,740 n.a. n.a. n.a. Relative Performance CFPS 8,079 (1,115) 6,439 10,158 n.a. n.a. FCFPS 5,932 (2,889) (995) 5,310 n.a. n.a. * Bloomberg Consensus Estimates
Key Valuations FY07A Avg +/- 1 s.d. FY08A Avg +/- 1 s.d. FY09E* FY10E* P/E (x) 35.9 39.8 / 32.1 20.1 20.8 / 19.3 12.9 9.1 P/B (x) 5.7 7.2 / 4.2 2.4 3.2 / 1.7 n.a. n.a. Dividend Yield (%) 0.6 0.7 / 0.4 2.2 3.5 / 0.9 n.a. n.a. 01 Jul 09 P/CFPS (x) n.a. n.a. 6.3 6.5 / 6 n.a. n.a. S&P Vietnam 10 Ho Chi Minh Stock Index FCF Yield (%) n.a. n.a. 3.7 4 / 3.5 n.a. n.a. MSCI AC Asia Index IMP Growth FY06A FY07A FY08A FY09E* FY10E* Revenues 55.8% -14.0% 24.4% n.a. n.a. EBITDA 19.6% 20.8% 11.7% n.a. n.a. EBIT 21.0% 17.1% 10.3% n.a. n.a. Trading & Liquidity 20Days 100Days 180Days Net Income 59.6% 29.0% 6.9% n.a. n.a. Volume (Reg, Trading) 44,146 33,574 23,091 EPS -4.1% 14.7% -8.7% -5.3% 41.3% VND Val. (Reg. Trading, bn) 3.1 2.0 1.4 BVPS 5.7% 78.5% 3.7% n.a. n.a. Percent of market (%) 0.1 0.1 0.1 * Bloomberg Consensus Estimates Shares Outstanding (mn) FY07A FY08A Current Wgt. Avg Issued Shares 10.0 11.7 11.6 Growth Indicators FY06A FY07A FY08A Fully Dilluted Shares 10.0 11.7 11.6 Fixed Assets/Assoc 54.3% 64.9% 160.3% Foreign Owned (% / Limit) 4.5mn 39.2% 49.0% Debt -94.8% -0.4% 23.8% Financial Investments 65.5% 517.4% 125.2% Market Values VND (bn) USD (mn) EUR (mn) Other LT Assets 77.3% 317.8% -13.3% Market Cap 714 40.1 28.4 Net Debt (131) (7.4) (0.0) Profitability FY06A FY07A FY08A Minorities & Others 23 1.3 0.9 Gross Margin (%) 30.1 42.7 43.1 Enterprise Value 605 34.0 24.1 EBITDA Margin (%) 10.0 14.0 12.6 EBIT Margin (%) 8.7 11.9 10.5 Corperate Actions Ex-Date Amt/(ratio) Fiscal Year Pre-Tax Margin (%) 9.0 14.0 12.6 Cash Dividend 27-Apr-09 1,000 FY08 Net Margin (%) 8.0 12.1 10.4 Cash Dividend 10-Nov-08 1,000 FY08 Cash Dividend 29-Apr-08 2,000 FY07 Solvency & Liquidity FY06A FY07A FY08A Rights Issue 19-Sep-07 1/10 FY07 Acid Test Ratio 2.12 1.29 2.42 Cash Dividend 17-Apr-07 857 FY06 Current Ratio 3.50 5.59 4.71 Stock Dividend 17-Apr-07 1/10 FY07 LT Debt/Capital 0.0% 0.0% 0.2% Net Debt/Equity 26.2% 9.1% 20.5% Market Outlook LT Debt/Fixed Assets 0.3% 0.3% 0.9% Pharmaceutical consumption in Vietnam is still at an early stage Total Liab/Total Assets 23.1% 12.5% 13.5% of development although annual per capita expenditure is rising rapidly from USD7.60 in 2003 to USD16.45 in 2008, at a Management Company Data CAGR of 16.7%. The total consumer market size was estimated at 4 , 30 April Street, Cao Lanh, Chairman Tran Thi Dao Head Office, USD1.43bn in 2008 compared with USD0.61bn five years ago (a Dong Thap Province CAGR of 18.6%), of which imported drugs accounted for 49.8%. Economic growth, increasing urbanization rates, rising per capita CEO Tran Thi Dao income, and increasing health awareness are expected to drive a CFO/ Chief Accontant Phan Hoang Minh Tri Website www.imexpharm.com minimum annual growth rate of 15% in the next five years. IR Contact Phan Hoang Minh Tri Telephone +84673851941
Company History Major Shareholders Shares Insider Holdings Shares IMP was founded in September 1983 as the Pharmaceutical State 26.04% Tran Thi Dao 0.93% Cooperative Company of Dong Thap by the Health Department Vietnam Holding Ltd 6.88% of the Dong Thap Province. It was the first state owned pharmaceutical company to be equitized in 2001 and was listed on the HOSE in December 2006. It is considered one of top three domestic pharmaceutical companies.
108 Health Care / Pharmaceuticals
Revenues by Business Line, 2008 Profit & Loss (VND bn) FY06A FY07A FY08A Revenue 525.4 451.6 561.8 EBITDA 52.4 63.2 70.6 Food EBIT 45.7 53.6 59.1 Interest & Fx Exp (3.4) (0.5) (1.5) Non Op Inc (Loss) 4.7 10.2 13.2 Pre-Tax 47.1 63.2 70.8 Taxes (4.8) (8.7) (12.5) Minorities & Pref’s 0.0 0.0 0.0 Net Income to Common 42.3 54.5 58.3
Balance Sheet (VNDbn) FY06A FY07A FY08A Cash & Equiv. 65.6 49.2 110.9 ST Investments & Mkt. Sec 0.0 155.3 25.7 Receivables 49.8 50.1 85.8 Inventories 129.8 137.8 148.3 Other Curr Assets 15.2 77.5 27.5 Net Fixed Assets 31.1 40.5 116.9 Construction in Progress 4.0 3.2 14.6 Invest. in Assoc. 0.2 14.5 19.8 Financial Investments 1.4 8.6 19.4 Other L.T. Assets 7.6 31.8 27.6 Payables (30.9) (38.2) (45.8) Other Curr Liab. (35.0) (28.0) (28.8) ST Debt (4.1) (4.0) (4.0) LT Debt (0.1) (0.1) (1.1) Other LT Liab (0.4) (0.6) (0.8) Net Assets 234.2 497.6 515.8 Minorities 0.0 0.0 0.0 Management Strategy and Goals Book Capital 164.9 394.7 394.7 Management has focused on expanding into hospitals with historical sales Ret. Earnings 69.2 102.8 121.1 growth achieving 40% per year. Instead of relying on only one current Total Liab. & Equity 304.7 568.4 596.4 distribution agent, IMP also plans to expand and reinforce its distribution network by establishing a subsidiary that will be responsible for expanding Working Capital Analysis FY06A FY07A FY08A its distribution network in targeted markets. Days Receivable 34.6 40.5 55.8 Days Inventory 129.0 194.5 169.2 Investment Plans Days Payable 30.7 54.0 52.3 IMP’s total production capacity will increase to 600 million units upon Cash Operating Cycle 125.1 208.0 165.7 the commencement of the new Cephalosporin factory in Binh Duong by end-FY09E. IMP will also relocate the existing antibiotics Betalactam Derived Cash Flow (VNDbn)* FY06A FY07A FY08A (Cephalosporin) production line in Dong Thap to the new factory. The entire EBIT 45.7 53.6 59.1 project will cost VND110bn, half of which will be debt funded. Depreciation & Amort 6.6 9.7 11.6 Chgs in Working Cap 35.9 (70.3) 12.3 Key Success Factors Operating Cash Flow 88.3 (7.1) 82.9 IMP’s key success factors include their modern and efficient production Net Interest, Fx & Taxes (8.2) (9.2) (14.0) facilities, long-term partnerships with foreign counterparts, and a strong Fixed Asset Capex (19.0) (17.7) (86.7) management team with extensive industry experience and ability to obtain strong government support. Investments (0.6) (21.5) (16.1) Non Op Inc (Loss) 4.7 10.2 13.2 Key Risk Factors Other Non Cash Adj. (46.4) (168.9) 93.0 Dividends Paid (8.4) (31.9) (11.7) IMP’s current distribution network is thinly allocated, with reliance on a Change in Paid in Capital 49.3 229.8 0.0 single distributor, and in the early stages of expansion. Vietnam’s accession to the WTO in January 2007 and the full liberalization of the pharmaceuticals Change in Net Debt (76.1) (0.0) 1.0 market in January 2009 has opened greater opportunities for direct Net Cash Flow (16.4) (16.4) 61.6 foreign access that will see increasing competition between giant foreign * Calculated from Balance Sheet & P&L companies and domestic enterprises, many of which are still in the early stages of development. The company will therefore face greater challenges DuPont Analysis FY06A FY07A FY08A in quality maintenance, product diversification and cost control. EBIT / Sales 0.09 0.12 0.11 Sales/Total Assets 1.72 0.79 0.94 less Net Int./Assets 0.00 0.02 0.02 Pre-Tax ROA (%) 15.5% 11.1% 11.9% Assets/Equity 1.30 1.14 1.16 Pre-Tax ROE (%) 20.1% 12.7% 13.7% 1-Tax rate 0.90 0.86 0.82 ROE (%) 18.1% 11.0% 11.3%
Miscelleaneous FY06A FY07A Current Altman Z Score n.m. n.m. 7.3 Asset Growth (%) -48.9% 86.6% 4.9% Capex/Sales (%) 3.6% 3.9% 15.4% Earnings Retention (%) 84.7% 84.6% 45.2%
109 Binh Minh Plastic Ticker Share Price - VND
BMP 64,500 01 Jul 09
Close/Volume Chart Company Description and Principal Activities VND Mn Shares The Ho Chi Minh City based BMP is the only other listed company in addition to NTP that is primarily engaged in plastic pipe production. The manufacture and sale of uPVC, HDPE pipes and their respective fittings accounts for 90% of BMP’s revenue with the remaining 10% derived from sales of pesticide sprayers, PVC pipe adhesives, and protective construction helmets.
Per Share (VND) FY06A FY07A FY08A Trail 12M FY09E* FY10E* EPS 5,805 5,743 5,709 6,600 7,240 n.a. BVPS 22,576 25,022 28,984 n.a. n.a. n.a. DPS n.a. 2,507 1,009 n.a. n.a. n.a. CFPS (803) 3,347 5,700 10,565 n.a. n.a. FCFPS (947) (2,749) (534) 1,617 n.a. n.a. * Bloomberg Consensus Estimates Relative Performance Key Valuations FY07A Avg +/- 1 s.d. FY08A Avg +/- 1 s.d. FY09E* FY10E* P/E (x) 22.0 24 / 19.9 8.9 9.4 / 8.4 8.9 n.a. P/B (x) 6.6 7.6 / 5.7 1.9 6.7 n.a. n.a. Dividend Yield (%) 1.4 1.8 / 1 2.0 1.4 n.a. n.a. P/CFPS (x) n.a. n.a. 135.3 3.8 n.a. n.a. 138.1 / FCF Yield (%) (2.0) n.a. (12.7) n.a. n.a. 01 Jul 09 -163.5 S&P Vietnam 10 Ho Chi Minh Stock Index
MSCI AC Asia Index BMP Growth FY06A FY07A FY08A FY09E* FY10E* Revenues n.a. 35.1% 20.7% n.a. n.a. EBITDA n.a. 2.5% 39.6% n.a. n.a. Trading & Liquidity 20Days 100Days 180Days EBIT n.a. 1.0% 36.1% n.a. n.a. Volume (Reg, Trading) 79,898 54,062 37,919 Net Income n.a. 13.0% -0.1% n.a. n.a. VND Val. (Reg. Trading, bn) 5.4 2.7 1.7 EPS n.a. -1.1% -0.6% 26.8% n.a. Percent of market (%) 0.2 0.2 0.2 BVPS n.a. 10.8% 15.8% n.a. n.a. Shares Outstanding (mn) FY07A FY08A Current * Bloomberg Consensus Estimates Wgt. Avg Issued Shares 16.7 16.8 17.1 Growth Indicators FY06A FY07A FY08A Fully Dilluted Shares 16.7 16.8 17.1 Fixed Assets/Assoc n.a. 194.5% 41.6% Foreign Owned (% / Limit) 7.5mn 43.9% of 49.0% Debt n.a. 5.7% 955.1% Financial Investments n.a. -99.8% 21450.0% Market Values VND (bn) USD (mn) EUR (mn) Other LT Assets n.a. -2.3% 83.8% Market Cap 1,152 64.7 45.8 Net Debt 17 1.0 0.0 Profitability FY06A FY07A FY08A Minorities & Others (120) (6.7) (4.8) Gross Margin (%) 25.6 20.9 22.8 Enterprise Value 1,049 58.9 41.7 EBITDA Margin (%) 23.4 17.8 20.5 EBIT Margin (%) 19.2 14.3 16.2 Corperate Actions Ex-Date Amt/(ratio) Fiscal Year Pre-Tax Margin (%) 19.6 16.4 13.9 Cash Dividend 26-Nov-08 1,000 FY08 Net Margin (%) 16.9 14.1 11.7 Stock Dividend 16-Jun-08 1/5 FY08 Cash Dividend 18-Jul-07 833 FY07 Solvency & Liquidity FY06A FY07A FY08A Cash Dividend 22-Feb-07 1,667 FY06 Acid Test Ratio 5.43 0.15 1.37 Rights Issue 15-Sep-06 3/20 FY06 Current Ratio 6.92 3.40 3.92 Market Outlook LT Debt/Capital 0.0% 0.0% 0.0% Net Debt/Equity 25.9% 0.8% -6.2% Vietnam’s plastics market is geographically segmented, with LT Debt/Fixed Assets 0.0% 0.0% 0.0% northern Vietnam dominated by NTP and southern Vietnam Total Liab/Total Assets 9.7% 15.3% 13.7% by Binh Minh Plastics and several smaller private companies. The pipe industry typically grows as fast as the nationwide construction growth, which is currently at twice the pace of the Management Company Data 240 Hau Giang Street, Ward national GDP growth rate. Vietnam is a developing economy Chairman Le Quang Doanh Head Office and there are therefore plentiful growth opportunities for pipe 9, District 6, HCM city companies to exploit. CEO Le Quang Doanh http://www. CFO/ Chief Accontant Trang Thi Kieu Hau Website Company History binhminhplastic.com/ BMP was established in 1977 as Binh Minh Plastics joint state- IR Contact Nguyen Thanh Hai Telephone +84839690973 private factory. It began manufacturing pipes in 1986 and in 1990, the then Ministry of Light Industries reformed Binh Major Shareholders Shares (mn) Insider Holdings Shares Minh Plastics joint state-private factory to become the Binh Citigroup Global Markets Ltd & Citigroup Global 0.768 Trang Thi Kieu Hau 97422 Minh Plastics Production Science Enterprise. Four years later, Markets Financial Products Ltd the enterprise was nationalized and became a state-owned Nguyen Thi Kim Yen 78400 company. The company was equitized in early 2004 and listed in 2006.
110 Industrials / Building Materials & Fixtures
Revenues by Product, 2005 Profit & Loss (VND bn) FY06A FY07A FY08A Revenue 503.4 680.0 821.0 EBITDA 117.8 120.8 168.6 EBIT 96.5 97.5 132.7 Interest & Fx Exp (0.6) 2.3 (11.6) Non Op Inc (Loss) 2.8 11.5 (6.9) Pre-Tax 98.8 111.3 114.1 Taxes (13.8) (15.3) (18.2) Minorities & Pref's 0.0 0.0 0.0 Net Income to Common 84.9 96.0 95.9
Balance Sheet (VNDbn) FY06A FY07A FY08A Cash & Equiv. 102.3 8.1 18.1 ST Investments & Mkt. Sec 0.0 22.2 13.4 Receivables 56.7 88.9 81.5 Inventories 123.3 138.3 188.8 Other Curr Assets 58.9 91.7 40.1 Net Fixed Assets 44.7 80.2 186.6 Construction in Progress 0.0 51.7 0.0 Invest. in Assoc. 0.0 0.0 0.0 Financial Investments 15.0 0.0 6.5 Other L.T. Assets 17.2 16.8 31.0 Payables (18.8) (54.9) (13.2) Other Curr Liab. (17.6) (16.1) (15.1) Management Strategy and Goals ST Debt (4.4) (4.6) (48.5) The board of management have vowed to adhere to the company’s core LT Debt 0.0 0.0 0.0 business, which is the manufacture of plastic pipes and fittings, but also Other LT Liab 0.0 (0.5) (0.8) indicated the company’s interests in developing new products if favorable Net Assets 377.5 421.6 488.4 conditions are presented. Regarding short-term goals, if GDP is less than Minorities 0.0 0.0 0.0 6.5%, the company will adjust their production volume target to 90% of Book Capital 243.4 244.4 273.6 production volume achieved in 2008, and 100%, otherwise. Ret. Earnings 134.1 177.2 214.8 Investment Plans Total Liab. & Equity 418.2 497.7 566.0 No new investment plans have been announced. The company is likely to Working Capital Analysis FY06A FY07A FY08A focus their attention on making the new northern-based plant profitable. Days Receivable 41.1 47.7 36.2 Days Inventory 120.1 93.8 108.7 Key Success Factors Days Payable 18.3 37.3 7.6 BMP is the second largest plastic pipe producer in Vietnam in terms of Cash Operating Cycle 97.3 83.3 80.1 production volume. BMP’s name is well established in their home market. Plastic pipe technology is simple enough for BMP not to face threats Derived Cash Flow (VNDbn)* FY06A FY07A FY08A from new plastic pipe plants. Plastic pipes are also bulky and thus not EBIT n.a. 97.5 132.7 economically transportable. Unlike other industries that face threats from cheaper Chinese products being imported into Vietnam, plastic pipe Depreciation & Amort n.a. 23.3 35.9 companies in general and BMP in particular therefore have a solid market Chgs in Working Cap n.a. (45.2) (34.3) base. BMP is also active in marketing activities. Operating Cash Flow n.a. 75.5 134.3 Net Interest, Fx & Taxes n.a. (13.0) (29.8) Key Risk Factors Fixed Asset Capex n.a. (101.9) (104.7) Most established private plastic pipe companies are southern-based and Investments n.a. 15.0 (6.4) hence competing directly against BMP. In addition, NTP has invested 51% Non Op Inc (Loss) n.a. 11.5 (6.9) in a plastics plant in the south to penetrate the southern market. The Other Non Cash Adj. n.a. (65.7) (32.5) economic recession also impacts construction growth and hence, plastic Dividends Paid n.a. (17.0) (17.0) pipe demand. Fluctuations in the crude oil price due to the economic crisis Change in Paid in Capital n.a. 1.1 29.2 also affect the prices of plastic resins, the input materials for plastic pipe Change in Net Debt n.a. 0.3 43.9 production. Net Cash Flow n.a. (94.2) 10.1 * Calculated from Balance Sheet & P&L
DuPont Analysis FY06A FY07A FY08A EBIT / Sales 0.19 0.14 0.16 Sales/Total Assets 1.20 1.37 1.45 less Net Int./Assets 0.01 0.03 (0.03) Pre-Tax ROA (%) 23.6% 22.4% 20.2% Assets/Equity 1.11 1.18 1.16 Pre-Tax ROE (%) 26.2% 26.4% 23.4% 1-Tax rate 0.86 0.86 0.84 ROE (%) 22.5% 22.8% 19.6%
Miscelleaneous FY06A FY07A Current Altman Z Score n.m. n.m. 7.7 Asset Growth (%) -26.1% 19.0% 13.7% Capex/Sales (%) n.m. 15.0% 12.8% Earnings Retention (%) n.a. 56.3% 82.3% 111 Hoa Phat Group Ticker Share Price - VND
HPG 54,000 01 Jul 09
Close/Volume Chart Company Description & Principal Activities
VND Mn Shares Hoa Phat Group Joint Stock Company (HPG) comprises ten member subsidiaries and three alliances. The company has developed into a multi-industry manufacturing corporation across sectors such as steel, cement, piping, furniture, refrigeration and mineral exploitation.
Per Share (VND) FY06A FY07A FY08A Trail 12M FY09E* FY10E* EPS n.a. 3,760 4,461 3,692 3,652 4,195 BVPS n.a. 17,005 20,936 n.a. 22,418 n.a. DPS n.a. 1,282 2,297 n.a. n.a. n.a. CFPS n.a. (1,777) 3,792 n.a. n.a. n.a. FCFPS n.a. (2,826) 1,370 n.a. n.a. n.a. * Bloomberg Consensus Estimates
Key Valuations FY07A Avg +/- 1 s.d. FY08A Avg +/- 1 s.d. FY09E* FY10E* Relative Performance P/E (x) 19.1 19.9 / 18.2 8.3 8.7 / 7.9 14.8 12.9 P/B (x) 4.1 4.3 / 4 2.2 3 / 1.5 2.4 n.a. Dividend Yield (%) 1.0 1.1 / 1 3.0 5.2 / 0.8 n.a. n.a. P/CFPS (x) n.a. n.a. n.a. n.a. n.a. n.a. FCF Yield (%) n.a. n.a. n.a. n.a. n.a. n.a.
Growth FY06A FY07A FY08A FY09E* FY10E* Revenues 45.1% 327.9% 48.2% n.a. n.a. 01 Jul 09 EBITDA n.a. n.a. 24.6% n.a. n.a. S&P Vietnam 10 Ho Chi Minh Stock Index EBIT 2101.4% 550.8% 20.4% n.a. n.a. MSCI AC Asia Index HPG Net Income 2536.4% 792.7% 33.0% n.a. n.a. EPS n.a. n.a. 18.6% -18.1% 14.9% BVPS n.a. n.a. 23.1% 7.1% n.a. Trading & Liquidity 20Days 100Days 180Days Volume (Reg, Trading) 2,138,965 1,145,872 821,919 * Bloomberg Consensus Estimates VND Val. (Reg. Trading, bn) 122.1 54.2 36.3 Growth Indicators FY06A FY07A FY08A Percent of market (%) 4.1 3.4 3.3 Fixed Assets/Assoc -6.7% 144.1% 73.7% Shares Outstanding (mn) FY07A FY08A Current Debt -9.4% 183.8% -33.7% Wgt. Avg Issued Shares 170.8 191.5 196.4 Financial Investments n.a. n.a. -100.0% Fully Dilluted Shares 170.8 191.5 196.4 Other LT Assets -92.7% 18098.5% 291.2% Foreign Owned (% / Limit) 56.8mn 28.9% 49.0% Profitability FY06A FY07A FY08A Market Values VND (bn) USD (mn) EUR (mn) Gross Margin (%) 9.6 17.1 15.0 Market Cap 11,095 623.3 441.5 EBITDA Margin (%) 0.0 15.4 13.0 Net Debt (647) (36.3) (0.0) EBIT Margin (%) 8.8 13.4 10.9 Minorities & Others (54) (3.1) (2.2) Pre-Tax Margin (%) 5.6 13.5 12.2 Enterprise Value 10,393 583.9 413.6 Net Margin (%) 5.5 11.4 10.2
Corperate Actions Ex-Date Amt/(ratio) Fiscal Year Solvency & Liquidity FY06A FY07A FY08A Cash Dividend 14-Apr-09 1,000 FY08 Acid Test Ratio 0.17 1.21 1.73 Cash Dividend 5-Dec-08 1,000 FY08 Current Ratio 0.99 2.22 2.82 Cash Dividend 11-Sep-08 1,000 FY08 LT Debt/Capital 21.2% 7.7% 0.2% Stock Dividend 11-Jul-08 2/5 FY08 Net Debt/Equity -93.3% -16.0% -2.1% Cash Dividend 17-Dec-07 714 FY07 LT Debt/Fixed Assets 17.9% 26.0% 0.7% Total Liab/Total Assets 53.3% 32.2% 22.9% Market Outlook Due to the government’s economic stimulus package, Management Company Data the construction sector has driven a recovery in the steel 34 Dai Co Viet St, Hai Ba Trung Chairman Tran Dinh Long Head Office industry. Steel factories have reopened and steel production District, Hanoi has increased in recent months. The government has also CEO Tran Tuan Duong implemented measures to assist local firms by raising the steel CFO/ Chief Accontant Nguyen Thi Thanh Van Website http://www.hoaphat.com.vn import tax from 0% to 10%. IR Contact Nguyen Thi Thanh Van Telephone (84)-(0)43.6282011 Company History Major Shareholders Shares (mn) Insider holdings Shares The first member company of HPG was the established in Tran Dinh Long 50.96 Tran Tuan Duong 5.6 August 1992 after the implementation of the Enterprise Law. VOF Investment Limited 11.92 Nguyen Manh Tuan 5.6 HPG became a group to adapt with the expansion of operations Bank Invest 10.25 Nguyen Ngoc Quang 4.2 and in early 2007 and was listed on the HOSE in November of that year. Doan Gia Cuong 4.2 Hoang Quang Viet 1.12
112 Industrials / Diversified Industrials
Revenues by Segment, 2008 Profit & Loss (VND bn) FY06A FY07A FY08A Revenue 1,318.9 5,642.9 8,364.8 EBITDA 0.0 871.5 1,086.0 EBIT 116.0 755.2 909.2 Interest & Fx Exp (41.7) (35.9) (136.4) Non Op Inc (Loss) 0.2 40.2 245.8 Pre-Tax 74.5 759.4 1,018.6 Taxes (2.6) (115.5) (159.2) Minorities & Pref’s 0.0 (1.9) (5.2) Net Income to Common 71.9 642.1 854.2
Balance Sheet (VNDbn) FY06A FY07A FY08A Cash & Equiv. 9.2 399.3 510.2 ST Investments & Mkt. Sec 0.0 266.0 734.4 Receivables 107.7 570.1 472.9 Inventories 186.6 1,580.1 1,820.2 Other Curr Assets 11.8 320.0 311.3 Net Fixed Assets 392.0 928.8 1,171.6 Construction in Progress 0.0 28.2 110.4 Invest. in Assoc. 0.0 0.0 380.6 Management Strategy and Goals Financial Investments 0.0 631.7 0.1 HPG still focus on their key business – the steel industry, while Other L.T. Assets 0.2 32.6 127.6 diversifying to other sectors. They will be focusing their resources to Payables (53.6) (328.7) (295.8) maintain production timelines and continue developing their extensive Other Curr Liab. (5.4) (286.5) (372.2) distribution network into the central and the southern regions. HPG is ST Debt (247.6) (653.1) (588.3) also strengthening their export lines and overseas exports and sales, and LT Debt (70.2) (248.9) (9.2) improving their human resources capacity. Other LT Liab 0.0 (16.1) (28.5) Net Assets 330.8 3,223.4 4,345.3 Investment Plans Minorities 0.0 80.9 234.2 The first phase of their 1.0 million tonnes/year cement factory and the Book Capital 300.0 2,635.0 3,584.5 350,000 tonnes/year steel complex will commence operations this year, Ret. Earnings 30.8 507.6 526.5 providing an important top-line catalyst. Hoa Phat Group also established Total Liab. & Equity 707.6 4,756.8 5,639.4 Hoa Phat Lao Company Ltd., in order to promote investments in mineral exploitation through investment contracts and iron ore exploitation in Hua Working Capital Analysis FY06A FY07A FY08A Phan province with the Laos P.D.R. government. Days Receivable 29.8 36.9 20.6 Key Success Factors Days Inventory 57.1 123.3 93.5 Days Payable 16.4 25.7 15.2 HPG is a leading producer of black steel pipes and zinc - plated steel pipes Cash Operating Cycle 43.7 112.1 88.0 in Vietnam, and one of the largest office furniture suppliers in Vietnam. HPG’s products are high quality with a good brand name and a widespread distribution network and they have applied advanced technologies with Derived Cash Flow (VNDbn)* FY06A FY07A FY08A strong R&D support. Going forward the company will need to ensure that EBIT 116.0 755.2 909.2 Depreciation & Amort (116.0) 116.3 176.8 Key Risk Factors Chgs in Working Cap 2.7 (1,607.8) (81.5) Although the economy has sluggishly recovered, the construction sector Operating Cash Flow 2.7 (736.3) 1,004.6 is still experiencing some difficulties. HPG is heavily invested in cement Net Interest, Fx & Taxes (44.3) (151.3) (295.6) and steel production, both of which are exposed to near-term declining Fixed Asset Capex (0.5) (179.1) (463.6) demand. HPG also requires a substantial capital injection to finance for their Investments 0.0 (631.7) 251.0 projects (particularly cement) and may face difficulties raising funds in the Non Op Inc (Loss) 0.2 40.2 245.8 slowing economy. Other Non Cash Adj. 683.7 (430.9) (1,274.7) Dividends Paid (219.0) (439.9) (1.7) Change in Paid in Capital 0.0 2,335.0 949.5 Change in Net Debt (32.8) 584.2 (304.4) Net Cash Flow 390.1 390.1 110.9 * Calculated from Balance Sheet & P&L
DuPont Analysis FY06A FY07A FY08A EBIT / Sales 0.09 0.13 0.11 Sales/Total Assets 1.86 1.19 1.48 less Net Int./Assets (0.06) 0.00 0.02 Pre-Tax ROA (%) 10.5% 16.0% 18.1% Assets/Equity 2.14 1.48 1.30 Pre-Tax ROE (%) 22.5% 23.6% 23.4% 1-Tax rate 0.97 0.85 0.84 ROE (%) 21.7% 20.0% 19.8%
Miscelleaneous FY06A FY07A Current Altman Z Score n.m. n.m. 5.2 Asset Growth (%) -87.5% 572.2% 18.6% Capex/Sales (%) 0.0% 3.2% 5.5% Earnings Retention (%) n.a. 65.9% 48.5%
113 Tien Phong Plastic Ticker Share Price - VND
NTP 64,000 01 Jul 09
Close/Volume Chart Company Description & Principal Activities VND Mn Shares NTP, based in Hai Phong city, is a well-known brand name in the Vietnamese northern pipe market. They specialise in the production of PVC pipes (around 85% of tonne- measured pipe and conduit production volume), HDPE pipes (10%), PPR pipes, fittings and conduits (3%).
Per Share (VND) FY06A FY07A FY08A Trail 12M FY09E* FY10E* EPS 6,278 5,755 7,126 7,902 7,000 8,647 BVPS n.a. 15,570 18,912 n.a. n.a. n.a. DPS 1,714 1,333 3,202 n.a. n.a. n.a. CFPS 8,917 72 1,975 n.a. n.a. n.a. FCFPS 8,010 (2,136) (211) n.a. n.a. n.a. * Bloomberg Consensus Estimates
Relative Performance Key Valuations FY07A Avg +/- 1 s.d. FY08A Avg +/- 1 s.d. FY09E* FY10E* P/E (x) 17.7 18.9 / 16.6 7.9 8.3 / 7.4 9.1 7.4 P/B (x) 8.8 10.2 / 7.4 3.0 4.3 / 1.7 n.a. n.a. Dividend Yield (%) 1.0 1.4 / 0.6 5.3 8.5 / 2.2 n.a. n.a. P/CFPS (x) n.a. n.a. 109.5 6.9 n.a. n.a. FCF Yield (%) n.a. n.a. (5.8) 26.2 / -37.9 n.a. n.a.
01 Jul 09 Growth FY06A FY07A FY08A FY09E* FY10E* S&P Vietnam 10 Ho Chi Minh Stock Index Revenues n.a. 26.1% 21.2% n.a. n.a. MSCI AC Asia Index NTP EBITDA n.a. -4.4% 41.5% n.a. n.a. EBIT n.a. -0.4% 48.0% n.a. n.a. Trading & Liquidity 20Days 100Days 180Days Net Income n.a. 4.8% 23.8% n.a. n.a. Volume (Reg, Trading) 422,760 233,862 180,338 EPS n.a. -8.3% 23.8% -1.8% 23.5% VND Val. (Reg. Trading, bn) 29.1 13.0 9.4 BVPS n.a. n.a. 21.5% n.a. n.a. Percent of market (%) 0.9 0.8 0.8 * Bloomberg Conscencus Estimates Shares Outstanding (mn) FY07A FY08A Current Growth Indicators FY06A FY07A FY08A Wgt. Avg Issued Shares 21.7 21.7 21.7 Fixed Assets/Assoc n.a. 43.1% 31.4% Fully Dilluted Shares 21.7 21.7 21.7 Debt n.a. 109.4% 121.0% Foreign Owned (% / Limit) 2.9mn 13.4% 49.0% Financial Investments n.a. 32.6% 0.0% Market Values VND (bn) USD (mn) EUR (mn) Other LT Assets n.a. n.a. 104.1% Market Cap 1,463 82.2 58.1 Profitability FY06A FY07A FY08A Net Debt 203 11.4 0.0 Gross Margin (%) 28.2 23.9 27.4 Minorities & Others (155) (8.7) (6.2) EBITDA Margin (%) 21.3 16.1 18.8 Enterprise Value 1,511 84.9 60.0 EBIT Margin (%) 17.3 13.7 16.7 Corperate Actions Ex-Date Amt/(ratio) Fiscal Year Pre-Tax Margin (%) 0.0 0.0 0.0 Final 8-May-09 1,800 FY09 Net Margin (%) 16.6 13.8 14.1 Interim 8-May-09 1,200 FY09 Solvency & Liquidity FY06A FY07A FY08A Interim 12-Nov-08 1,200 FY08 Acid Test Ratio 8.45 0.38 1.34 Final 14-May-08 2,000 FY08 Current Ratio 2.96 1.92 1.58 Interim 13-Jul-07 1,000 FY07 LT Debt/Capital 0.0% 0.0% 0.0% Stock Dividend 16-May-07 1/2 FY07 Net Debt/Equity 2.0% -26.6% -49.6% Final 16-May-07 333 FY07 LT Debt/Fixed Assets 0.0% 0.0% 0.0% Market Outlook Total Liab/Total Assets 26.8% 37.9% 44.2% The Vietnamese pipe market is geographically segmented with northern Vietnam dominated by NTP (31.2% of the country sup- Management Company Data ply, 2005) and southern Vietnam by Binh Minh Plastics (26%). 2 An Da Street, Ngo Quyen Chairman Tran Ba Phuc Head Office Four other private plastic pipe companies account for the re- District, Hai Phong City maining share (42.8%). The pipe industry grows generally as fast CEO Pham Van Vien as nationwide construction growth, which has historically been http://nhuatienphong-tifoplast. CFO/ Chief Accontant Nguyen Trung Kien Website at twice the pace of overall GDP growth. Vietnam is a developing com.vn economy; therefore, there is plentiful growth potential for pipe companies to keep up with. IR Contact Nguyen Trung Kien Telephone +84313640973
Company History Major Shareholders Shares Insider Holdings Shares n.a. Tran Ba Phuc 18,172 NTP was established in 1960 as a factory specialized in products for teenagers. After transforming into a company following a decision by the Ministry of Light Industry, the company aban- doned their existing product lines and switched to producing PVC pipes. NTP was equitized in 2004 and has listed on the HNX in June 2006.
114 Industrials / Building Materials & Fixtures
Revenues by Product, 2005 Profit & Loss (VND bn) FY06A FY07A FY08A Revenue 716.5 903.3 1,094.5 EBITDA 152.4 145.6 206.1 EBIT 124.3 123.8 183.3 Interest & Fx Exp (7.3) (5.3) (36.8) Non Op Inc (Loss) 1.9 6.1 7.9 Pre-Tax 0.0 0.0 0.0 Taxes 0.0 0.0 0.0 Minorities & Pref’s 0.0 0.0 0.0 Net Income to Common 118.9 124.7 154.4
Balance Sheet (VNDbn) FY06A FY07A FY08A Cash & Equiv. 58.0 21.7 42.6 ST Investments & Mkt. Sec 0.0 0.0 0.0 Receivables 113.5 220.3 199.1 Inventories 95.8 153.3 271.7 Other Curr Assets 6.6 21.6 29.0 Net Fixed Assets 55.3 61.9 84.0 Construction in Progress 1.0 18.6 22.6 Invest. in Assoc. 1.6 2.4 2.4 Financial Investments 4.6 6.1 6.1 Other L.T. Assets 0.0 37.7 76.9 Payables (6.9) (57.2) (31.8) Other Curr Liab. (30.3) (37.7) (46.8) Management Strategy and Goals ST Debt (53.1) (111.3) (245.9) Shareholder approved goals and strategies include maintaining their LT Debt 0.0 0.0 0.0 leading position in pipe and fitting production in Vietnam, securing the Other LT Liab 0.0 0.0 0.0 home market (northern Vietnam) and progressively penetrating new Net Assets 246.1 337.4 409.8 domestic and overseas markets. Minorities 0.0 0.0 0.0 Book Capital 144.5 216.7 216.7 Investment Plans Ret. Earnings 101.6 120.7 193.1 NTP hopes to have their VND23bn plant in Vientiene, Laos commissioned in Total Liab. & Equity 336.4 543.5 734.3 Q3 2009 and are currently moving one of their production lines to the new and more spacious VND45bn plant. Working Capital Analysis FY06A FY07A FY08A Days Receivable 57.8 89.0 66.4 Key Success Factors Days Inventory 68.0 81.3 124.8 NTP is an established brand name in the north of Vietnam. Plastic pipe Days Payable 4.9 30.4 14.6 technologies are simple enough that NTP will not face significant Cash Operating Cycle 15.1 22.7 73.1 threats from new plastic pipe plants. Plastic pipes are bulky and thus not economically freighted over long distances. Therefore, unlike other Derived Cash Flow (VNDbn)* FY06A FY07A FY08A industries which face threats from cheaper Chinese imports, plastic pipe EBIT n.a. 123.8 183.3 companies in general and NTP in particular have a solid market base. Depreciation & Amort n.a. 21.8 22.8 Chgs in Working Cap n.a. (121.6) (120.9) Key Risk Factors Operating Cash Flow n.a. 24.1 85.3 The economic recession causes a downturn in construction growth and Net Interest, Fx & Taxes n.a. (5.3) (36.8) hence plastic pipe demand. Fluctuations in the crude oil price also affect Fixed Asset Capex n.a. (47.8) (47.4) the prices of plastic resins, which are the input materials for plastic pipe Investments n.a. (2.3) 0.0 production. BMP, the second biggest plastic pipe manufacturer in the Non Op Inc (Loss) n.a. 6.1 7.9 country in terms of production volume, has built a plant in the North, obviously to invade NTP’s home market although this plant has yet to Other Non Cash Adj. n.a. (72.1) (122.7) become profitable. Dividends Paid n.a. (69.4) 0.0 Change in Paid in Capital n.a. 72.2 0.0 Change in Net Debt n.a. 58.1 134.7 Net Cash Flow n.a. (36.3) 20.9 * Calculated from Balance Sheet & P&L
DuPont Analysis FY06A FY07A FY08A EBIT / Sales 0. 17 0.14 0.17 Sales/Total Assets 2.13 1.66 1.49 less Net Int./Assets (0.37) (0.23) (0.25) Pre-Tax ROA (%) 0.0% 0.0% 0.0% Assets/Equity 1.37 1.61 1.79 Pre-Tax ROE (%) 0.0% 0.0% 0.0% 1-Tax rate n.a. n.a. n.a. ROE (%) n.a. n.a. n.a.
Miscelleaneous FY06A FY07A Current Altman Z Score n.m. n.m. n.a. Asset Growth (%) -54.2% 61.6% 35.1% Capex/Sales (%) n.m. 5.3% 4.3% Earnings Retention (%) 72.7% 76.8% 55.1%
115 Petroleum Ticker Share Price - VND Technical Services PVS 33,900 01 Jul 09
Close/Volume Chart Company Description & Principal Activities VND Mn Shares Petroleum Technical Services Corporation (PVS) provides a variety of technical services to oil & gas operators in Vietnam. The company is primarily involved in leasing and chartering specialized ship services, owning and operating FSO & FPSO (floating, production, storage and offloading) vessels as well as port & supply base services and mechanical & construction services. The leasing and chartering business engages in chartering specialized and commercial AHTS vessels (anchoring-handling-tug-supply) for exploration and logistics with a dominant market share of 87%. Within the current port system, PVS also claims a market share of 90% in its oil & gas supply base business. Other services offered include: operations and maintenance, manpower provision, oil & gas materials, equipment and tools provision. The group’s non-core businesses cover property management, mineral water production and gasoline trading. PVS is a 60% owned subsidiary of PetroVietnam and the company has 10 wholly owned subsidiaries and three affiliates. Relative Performance Per Share (VND) FY06A FY07A FY08A Trail 12M FY09E* FY10E* EPS n.a. 2,166 3,576 2,048 5,894 n.a. BVPS n.a. 8,008 13,681 n.a. n.a. n.a. DPS n.a. n.a. 1,474 n.a. n.a. n.a. CFPS n.a. (3,283) 8,476 n.a. n.a. n.a. FCFPS n.a. (7,853) (8,715) n.a. n.a. n.a. 01 Jul 09 * Bloomberg Consensus Estimates S&P Vietnam 10 Ho Chi Minh Stock Index Key Valuations FY07A Avg +/- 1 s.d. FY08A Avg +/- 1 s.d. FY09E* FY10E* MSCI AC Asia Index PVS P/E (x) n.a. n.a. 12.1 12.1 / 12.1 5.8 n.a. P/B (x) 9.7 11.6 / 7.9 3.5 14.0 n.a. n.a. Trading & Liquidity 20Days 100Days 180Days Dividend Yield (%) n.a. n.a. 3.9 2.7 n.a. n.a. Volume (Reg, Trading) 1,170,325 704,080 577,485 P/CFPS (x) n.a. n.a. 2.8 3.7 n.a. n.a. VND Val. (Reg. Trading, bn) 47.6 24.8 19.4 FCF Yield (%) n.a. n.a. (4.9) -4.8 / -5.1 n.a. n.a. Percent of market (%) 1.6 1.6 1.8 Growth FY06A FY07A FY08A FY09E* FY10E* Shares Outstanding (mn) FY07A FY08A Current Revenues n.a. n.a. 50.1% n.a. n.a. Wgt. Avg Issued Shares 147.3 150.2 173.8 EBITDA n.a. n.a. 42.7% n.a. n.a. Fully Dilluted Shares 147.3 150.2 173.8 EBIT n.a. n.a. 71.7% n.a. n.a. Foreign Owned (% / Limit) 16.0mn 9.2% 49.0% Net Income n.a. n.a. 68.3% n.a. n.a. EPS n.a. n.a. 65.1% 64.8% n.a. Market Values VND (bn) USD (mn) EUR (mn) BVPS n.a. n.a. 70.8% n.a. n.a. Market Cap 6,187 347.6 246.0 * Bloomberg Consensus Estimates Net Debt 1,190 66.9 0.0 Growth Indicators FY06A FY07A FY08A Minorities & Others n.a. n.a. n.a. Fixed Assets/Assoc n.a. n.a. 121.4% Enterprise Value n.a. n.a. n.a. Debt n.a. n.a. 450.3% Financial Investments n.a. n.a. -5.5% Corperate Actions Ex-Date Amt/(ratio) Fiscal Year Other LT Assets n.a. n.a. -68.5% Cash Dividend 18-Nov-08 679 FY08 Rights Issue 18-Nov-08 7/10 FY08 Profitability FY06A FY07A FY08A Cash Dividend 12-Mar-08 950 FY07 Gross Margin (%) n.a. 9.4 10.2 Market Outlook EBITDA Margin (%) n.a. 8.7 8.3 EBIT Margin (%) n.a. 4.3 4.9 Vietnam is the third largest oil producer in Southeast Asia Pre-Tax Margin (%) n.a. 0.0 6.2 after Malaysia and Indonesia. PetroVietnam has stepped up its exploration program both locally and abroad, including Net Margin (%) n.a. 5.5 6.2 pending contracts in Iran, Iraq, Kazakhstan and Southeast Asia. Solvency & Liquidity FY06A FY07A FY08A The increased capital spending by PetroVietnam for its E&P Acid Test Ratio n.a. 0.90 0.72 program could potentially increase the market value of oil Current Ratio n.a. 0.99 1.05 and gas services in Vietnam to US$1.8-2.0bn per year which would benefit players such as PVS. Vietnam has progressively LT Debt/Capital n.a. 18.4% 87.1% liberalized the oil and gas sector to allow foreign participation Net Debt/Equity n.a. 45.1% -51.3% in E&P activities through production sharing contracts (PSC), LT Debt/Fixed Assets n.a. 15.4% 64.2% joint operating companies (JOC), and joint ventures (JV), with Total Liab/Total Assets n.a. 75.5% 70.9% production ratios open to negotiation. Management Company Data Company History Chairman Thai Quoc Hiep Head Office Floor 5, PetroVietnamTower 1-5 Le Duan Street District The company originated from two entities, Geophysics CEO Nguyen Hung Dung 1 Ho Chi Minh City, Vietnam Company which was established in 1976, and Petroleum Service Company which was established in 1986. The geophysics entity CFO/ Chief Accontant Nguyen Van Mau Website http://www.ptsc.com.vn added a technical service entity in 1989 and in February 1993 IR Contact Le Phuc Yen Telephone +84839102828 merged with Petroleum Services Company. In 1989, Geophysics Company and Petroleum Technical Services were established Major Shareholders Shares Insider Holdings Shares and subsequently in 1993 a merger of Petroleum Service PetroVietnam Holdings 60 mn Thai Quoc Hiep 52,100 Company and Geophysics and Petroleum Technical Services PVFC 12.32 mn Pham Hung Cuong 7,800 created the current entity. PVS was equitised in July 2006 and Jaccar Fund 4.00 mn Nguyen Tan Hoa 8,000 subsequently listed on Hanoi Stock Exchange in September BIDV Securities Company 1.47mn Nguyen Tran Toan 31,600 2007. In 2007 PVS revamped its organizational structure establishing seven representative offices and branches, and ten KITMC Fund Management 1.08 mn Nguyen Hung Dung 11,600 subsidiary companies. The group also has three joint ventures Phung Tuan Ha 23,400 with foreign partners primarily in the FSO/FPSO division. Nguyen Huu Hai 7,700
116 Industrials / Transportation Services
Revenues by Division, 2008 Profit & Loss (VND bn) FY06A FY07A FY08A Revenue n.a. 5,775.7 8,671.3 EBITDA n.a. 504.6 720.1 EBIT n.a. 246.3 422.8 Interest & Fx Exp n.a. (91.2) (70.5) Non Op Inc (Loss) n.a. 164.0 187.6 Pre-Tax n.a. 0.0 539.9 Taxes n.a. 0.0 (2.6) Minorities & Pref’s n.a. 0.0 0.0 Net Income to Common n.a. 319.1 537.2
Balance Sheet (VNDbn) FY06A FY07A FY08A Cash & Equiv. n.a. 939.8 1,047.9 ST Investments & Mkt. Sec n.a. 3.9 3.9 Receivables n.a. 1,699.5 2,436.6 Inventories n.a. 131.9 304.2 Other Curr Assets n.a. 46.0 450.5 Net Fixed Assets n.a. 711.3 1,077.4 Construction in Progress n.a. 694.0 2,075.9 Invest. in Assoc. n.a. 97.6 174.3 Financial Investments n.a. 408.6 386.2 Management Strategy and Goals Other L.T. Assets n.a. 79.7 25.1 Payables n.a. (1,042.1) (1,451.4) PVS seeks to progressively displace leased vessels with company-owned Other Curr Liab. n.a. (1,579.2) (1,957.5) vessels in the specialised ship services division as margins are substantially higher for owned ships. In addition, PVS seeks to become an owner- ST Debt n.a. (190.5) (216.3) operator of FPSO and FSO vessels operating offshore. As new fields are LT Debt n.a. (216.9) (2,025.6) developed or existing vessels replaced PVS seeks to join consortia to Other LT Liab n.a. (603.8) (5.5) develop and operate these vessels. Over time management is seeking to Net Assets n.a. 1,179.8 2,325.7 monetise their non-core businesses and focus on specialized ship, FSO/ Minorities n.a. 0.0 0.0 FPSO, port and M&S services. In the longer run, the company aims to Book Capital n.a. 1,000.0 1,750.0 become a leading regional petroleum technical services company. Ret. Earnings n.a. 179.8 575.7 Investment Plans Total Liab. & Equity n.a. 4,812.2 7,982.1 PVS has substantial capex plans, budgeting to spend USD250mn in FY09, Working Capital Analysis FY06A FY07A FY08A followed by about USD400mn in FY10. The capex plan includes: USD100mn Days Receivable n.a. 107.4 102.6 to acquire FSO5 which will be leased to VietsovPetro, two additional FSO/ Days Inventory n.a. 9.2 14.3 FPSOs under joint-venture with Malaysia’s MISC Bhd, two AHTS vessels and Days Payable n.a. 72.7 68.0 the remaining portion for expanding its port base services including the a fertilizer port and petroleum service center in Phu My. Future capex will Cash Operating Cycle n.a. (25.5) (20.3) be centered on the acquisition of three to five AHTS ships annually, further Derived Cash Flow (VNDbn)* FY06A FY07A FY08A provisioning for FPSO/FSO’s, and developing port systems for planned oil refineries such as Nghi Son and Long Son and port systems, in new E&P EBIT n.a. 246.3 422.8 exploration areas, like Kien Giang, southern Vietnam and Hon La – Quang Depreciation & Amort n.a. 258.3 297.3 Binh. Chgs in Working Cap n.a. 743.8 (526.3) Operating Cash Flow n.a. 1,248.5 193.8 Key Success Factors Net Interest, Fx & Taxes n.a. (91.2) (73.1) PVS’s growth is linked to substantial capex and displacing leased assets Fixed Asset Capex n.a. (673.3) (2,582.8) with owned assets. Delivering projects on-time and on-budget is key to Investments n.a. (506.1) (54.3) financial performance and the company’s ability to expand ROE’s in the Non Op Inc (Loss) n.a. 164.0 187.6 medium term. PVS will need to focus on core businesses to not be seen as a Other Non Cash Adj. n.a. (1507.9) (147.4) conglomerate going forward. Dividends Paid n.a. (221.5) (0.2) PVS also needs to maintain its leadership in providing oil and gas technical Change in Paid in Capital n.a. 0 750.0 services in Vietnam to both local and foreign contractors. In addition, the company has built a strong reputation in South-east Asia through many Change in Net Debt n.a. 407.4 1,834.5 large scale EPCI contracts. Finally, the market will look to margin expansion Net Cash Flow n.a. (1,180.1) 108.0 as a measure of how well PVS is executing its business plans. * Calculated from Balance Sheet & P&L
Key Risk Factors DuPont Analysis FY06A FY07A FY08A Falling oil prices could potentially reduce E&P and field development EBIT / Sales n.a. 0.04 0.05 activities. It is estimated that worldwide investments in E & P activities shall Sales/Total Assets n.a. 1.20 1.09 be cut by 12% in 2009. Although the 2009 E&P budget of PetroVietnam less Net Int./Assets n.a. (0.05) 0.01 has increased by 33% to USD4.0bn , the day-rates and fees for services Pre-Tax ROA (%) n.a. 0.0% 6.8% rendered depend heavily on regional markets and are competitive. Low oil Assets/Equity n.a. 4.08 3.43 prices may lead to decreasing demand/fees for PVS’ services while falling Pre-Tax ROE (%) n.a. 0.0% 23.2% day-rates could adversely affect the company’s near term earnings growth. Given a huge capex plan, PVS will likely issue more equity. The risk of EPS 1-Tax rate n.a. n.a. 1.00 dilution cannot be ignored; especially in case new capital intensive projects ROE (%) n.a. n.a. 23.1% that the company has not yet brought on stream. Finally, PetroVietnam as a controlling shareholder has tarnished reputation in corporate governance. Miscelleaneous FY06A FY07A Current Related party transactions may raise suspicions amongst investors. Altman Z Score n.m. n.m. 2.0 Asset Growth (%) n.a. n.a. 65.9% Capex/Sales (%) n.m. 11.7% 29.8% Earnings Retention (%) n.a. n.a. 58.8%
117 PetroVietnam Ticker Share Price - VND Transportation PVT 19,500 01 Jul 09 Close/Volume Chart VND Mn Shares Company Description & Principal Activities Petro Vietnam Transportation Corporation is a subsidiary of the Vietnam National Oil and Gas Group (PetroVietnam). It has two wholly owned subsidiaries located in Hanoi and Vung Tau cities as well as five associate companies and joint ventures. PVT provides transportation services for crude oil, petroleum products, LPG and petrochemicals products. They also offer FSO/FPSO conversion and supply services, agency services, repairs and maintenance, trading of maritime spare parts and equipments, gasoline, LPG as well as maritime logistics services. In addition, they also provide taxi services and vehicle leasing through some associates with a non-controlling stake.
Per Share (VND) FY06A FY07A FY08A Trail 12M FY09E* FY10E* EPS n.a. 176 609 758 810 n.a. Relative Performance BVPS n.a. 7,536 5,197 n.a. n.a. n.a. DPS n.a. n.a. 49 0 n.a. n.a. CFPS n.a. 1,638 4,635 n.a. n.a. n.a. FCFPS n.a. (402) (13,645) n.a. n.a. n.a. * Bloomberg Consensus Estimates
Key Valuations FY07A Avg +/- 1 s.d. FY08A Avg +/- 1 s.d. FY09E* FY10E* P/E (x) n.a. n.a. 21.7 21.8 / 21.7 24.1 n.a. 01 Jul 09 S&P Vietnam 10 Ho Chi Minh Stock Index P/B (x) 4.9 5.2 / 4.5 2.7 22.6 n.a. n.a. MSCI AC Asia Index PVT Dividend Yield (%) n.a. n.a. 1.0 2.6 n.a. n.a. P/CFPS (x) n.a. n.a. n.a. 0.9 n.a. n.a. Trading & Liquidity 20Days 100Days 180Days Volume (Reg, Trading) 1,076,165 785,024 518,101 FCF Yield (%) n.a. n.a. n.a. n.a. n.a. n.a. VND Val. (Reg. Trading, bn) 24.7 15.1 9.8 Growth FY06A FY07A FY08A FY09E* FY10E* Percent of market (%) 0.8 1.0 0.9 Revenues 103.8% -29.0% 253.3% n.a. n.a. Shares Outstanding (mn) FY07A FY08A Current EBITDA 115.5% -48.9% 219.1% n.a. n.a. Wgt. Avg Issued Shares 106.5 113.5 147.6 EBIT 144.6% -64.9% 314.5% n.a. n.a. Fully Dilluted Shares 106.5 113.5 147.6 Net Income 95.0% -58.3% 268.3% n.a. n.a. Foreign Owned (% / Limit) 8.6mn 5.8% 49.0% EPS n.a. n.a. 245.5% 33.0% n.a. Market Values VND (bn) USD (mn) EUR (mn) BVPS n.a. n.a. -31.0% n.a. n.a. Market Cap 3,026 170.0 120.4 * Bloomberg Consensus Estimates Net Debt 1,192 67.0 0.0 Growth Indicators FY06A FY07A FY08A Minorities & Others 1,785 100.3 71.0 Fixed Assets/Assoc 214.4% 33.8% 134.1% Enterprise Value 6,003 337.2 238.8 Debt 184.6% -25.3% 435.2% Corperate Actions Ex-Date Amt/(ratio) Fiscal Year Financial Investments n.a. n.a. 55.7% Rights Issue 22-Sep-08 1/1 FY08 Other LT Assets -7.6% -93.4% 1557.4% Cash Dividend 15-May-08 143 FY08 Market Outlook Profitability FY06A FY07A FY08A Vietnam is the third largest oil and gas producer in Southeast Gross Margin (%) 31.6 21.2 18.4 Asia producing average of 15 million tons of oil and more EBITDA Margin (%) 42.4 30.5 27.6 than 30 billion cubic meters of natural gas each year. Crude EBIT Margin (%) 22.3 11.0 12.9 oil is typically exported and PVT has been one of the leading Pre-Tax Margin (%) 11.8 8.3 11.1 transport companies in this segment for past five years. Net Margin (%) 10.2 6.0 6.2 With the first refinery now in operation, PVT will see the growth in its market share in crude oil transport. As a subsidiary of Solvency & Liquidity FY06A FY07A FY08A PetroVietnam, PVT is expected to reserve monopoly rights to Acid Test Ratio 16.92 13.81 19.68 transport crude oil input for new refineries: Dung Quat, Nghi Current Ratio 2.73 0.69 0.93 Son, Long Son. Crude oil for the refineries is currently sourced LT Debt/Capital 150.7% 72.1% 118.9% from the Bach Ho oil fields with long term supply contracts being negotiated with Venezuela and Algeria. All of these open Net Debt/Equity -104.9% -47.4% -174.3% up further opportunities for PVT. LT Debt/Fixed Assets 72.9% 38.4% 56.5% Dung Quat, Vietnam’s first refinery with an annual processing Total Liab/Total Assets 63.4% 56.8% 73.0% capacity of 6.5 million tonnes is expected to fulfill 30% of the country’s total petroleum demand. With a population of 86.5 Management Company Data million people and more than 20 million motorbikes, demand Chairman Mr. Do Van Lien Head Office 4th floor, H3 Tower 384 Hoang Dieu, Dist.4, for refined oil products in Vietnam is expected to grow by 13% CEO Mr. Ta Duc Tien to 15% annually by 2010, implying significant ongoing demand HCMC for imported petroleum. CFO/ Chief Accontant Nguyen Thi Kim Anh Website www.pvtrans.com.vn IR Contact Ms. Phan Thi Kim Lien Telephone +84839111301 Company History Major Shareholders Shares Insider Holdings Shares PetroVietnam Transportation Corporation was established in PetroVietnam Holdings 43.20 mn Pham Viet Anh 15,000 2002 as a subsidiary of PetroVietnam Group. The company purchased the first Aframax crude oil transportation ship named PVFC 5.83 mn Thai Ngoc Lan 1,900 Poseidon M in 2003. In 2006, the second Aframax ship named VN Direct 4.13 mn Nguyen Phung Hung 10,800 Hercules also was purchased and entered into operation. In ACB 2.88 mn Tran Tuan Nam 1,200 2007 the company was equitized and converted to a joint Nguyen Anh Minh 3,902 stock company , subsequently the company became the PetroVietnam Transportation Corporation in July 2007. Currently, PVT has four branches & subsidiaries, five associates and joint- ventures.
118 Industrials / Marine Transportation
Revenues by Business Line, 2008 Profit & Loss (VND bn) FY06A FY07A FY08A Revenue 442.4 314.0 1,109.1 EBITDA 187.6 95.8 305.8 EBIT 98.6 34.6 143.3 Interest & Fx Exp (54.4) (33.8) (116.8) Non Op Inc (Loss) 8.1 25.3 96.8 Pre-Tax 52.3 26.1 123.4 Taxes (7.3) (7.3) (39.4) Minorities & Pref’s 0.0 0.0 (14.9) Net Income to Common 45.0 18.8 69.1
Balance Sheet (VNDbn) FY06A FY07A FY08A Cash & Equiv. 284.9 256.2 1,997.1 ST Investments & Mkt. Sec 0.0 0.0 112.3 Receivables 19.8 43.6 110.7 Inventories 11.0 13.4 23.7 Other Curr Assets 5.3 13.3 257.9 Net Fixed Assets 1,064.2 1,192.0 2,543.4 Construction in Progress 0.6 233.1 793.3 Invest. in Assoc. 0.0 0.0 0.0 Financial Investments 0.0 8.1 12.6 Other L.T. Assets 22.2 1.5 24.1 Payables (16.8) (18.6) (101.5) Other Curr Liab. (49.8) (365.4) (886.0) ST Debt (48.9) (68.9) (1,415.6) LT Debt (776.8) (547.9) (1,885.7) Other LT Liab (0.2) (0.2) (0.2) Management Strategy and Goals Net Assets 515.6 760.3 1,586.1 By agreement between PVT and PV Oil (merged from Petechem and PDC, Minorities 0.0 0.0 837.7 the two largest trading and distribution companies in the PetroVietnam Book Capital 448.5 720.0 720.0 Group), PetroVietnam Transportation JSC will transport all crude oil for the Ret. Earnings 67.0 40.3 28.4 refineries as well as all refined oil-products. PVT’s target also show intention of acquiring at least 30% market share in the crude oil exporting segment. Total Liab. & Equity 1,408.1 1,761.2 5,875.1 Through various investments, PVT will expand the capacity of its fleet by building and purchasing ships to meet the transportation demand. Working Capital Analysis FY06A FY07A FY08A Days Receivable 16.3 50.7 36.4 Investment Plans Days Inventory 13.3 19.7 9.6 Days Payable 20.3 27.4 40.9 PVT has a master plan for the 2008-2015 period in which it will invest USD1,400mn in Aframax and VLCC vessels, USD420mn for refined products Cash Operating Cycle 17.3 (3.6) 14.0 ships, USD235mn for LPG and LNG transportation vessels and USD30mn for chemicals transport ships. In addition, it has plans to spend USD240mn for Derived Cash Flow (VNDbn)* FY06A FY07A FY08A other businesses such as FSO/FPSO provisions and ports. EBIT 98.6 34.6 143.3 Depreciation & Amort 88.9 61.3 162.5 Capital expenditure in 2009 of PVT includes USD150mn for one Aframax, two petroleum product ships, one LPG, one FSO for Dai Hung operators. Chgs in Working Cap (55.5) 283.0 281.6 Operating Cash Flow 132.1 378.9 587.4 Key Success Factors Net Interest, Fx & Taxes (61.7) (41.1) (156.1) Fixed Asset Capex (571.1) (217.3) (2,074.3) PetroVietnam has a good performance in oil and gas sector in recent year. Investments 0.0 (8.1) (4.5) PVT is a subsidiary of the PetroVietnam Group which has supported PVT in Non Op Inc (Loss) 8.1 25.3 96.8 financing, and acquiring the transportation rights for its various refineries. Other Non Cash Adj. (316.6) (223.4) 607.6 Key Risk Factors Dividends Paid 0.0 (5.5) (0.5) Change in Paid in Capital 245.1 271.5 0.0 To finance their ambitious capex plan, the company must raise more capital Change in Net Debt 535.5 (208.9) 2,684.5 and, although growth is expected to remain attractive, EPS dilution is still a Net Cash Flow (28.7) (28.7) 1,740.8 concern. Oil price fluctuations affect the operating costs of PVT as fuel cost account for 30-40% in production cost of PVT. The complex organizational * Calculated from Balance Sheet & P&L structure is another risk as the management board may cannot effectively cover all the business areas. DuPont Analysis FY06A FY07A FY08A EBIT / Sales 0.22 0.11 0.13 Sales/Total Assets 0.31 0.18 0.19 less Net Int./Assets (0.03) (0.00) (0.00) Pre-Tax ROA (%) 3.7% 1.5% 2.1% Assets/Equity 2.73 2.32 3.70 Pre-Tax ROE (%) 10.1% 3.4% 7.8% 1-Tax rate 0.86 0.72 0.68 ROE (%) 8.7% 2.5% 5.3%
Miscelleaneous FY06A FY07A Current Altman Z Score n.m. n.m. 0.4 Asset Growth (%) -76.0% 25.1% 233.6% Capex/Sales (%) 129.1% 69.2% 187.0% Earnings Retention (%) n.a. n.a. 92.0%
119 Refrigeration Ticker Share Price - VND Electrical Engineering REE 41,000 01 Jul 09
Close/Volume Chart Company Description & Principal Activities VND Mn Shares Refrigeration and Electrical Engineering Corporation (REE) is engaged in the electrical components and equipment industry. Through its subsidiaries, it manufactures, designs, installs, and repairs electrical and electronic equipment, information and telecommunication systems, and provides construction services to industrial and civil works. It is also involved in developing and operating real estate projects and has substantial financial investments. The company has five subsidiaries, eleven alliances and one joint venture.
Per Share (VND) FY06A FY07A FY08A Trail 12M FY09E* FY10E* EPS 3,630 3,724 (1,912) 472 2,024 3,547 BVPS 16,449 24,623 27,168 n.a. n.a. n.a. DPS 4,749 6,889 8,465 n.a. n.a. n.a. Relative Performance CFPS 946 1,302 1,526 3,541 n.a. n.a. FCFPS (1,654) (19) (385) 2,063 n.a. n.a. * Bloomberg Consensus Estimates
Key Valuations FY07A Avg +/- 1 s.d. FY08A Avg +/- 1 s.d. FY09E* FY10E* P/E (x) 19.4 20.8 / 18 14.9 16.1 / 13.7 20.3 11.6 P/B (x) 4.5 5.4 / 3.6 1.4 2 / 0.8 n.a. n.a. Dividend Yield (%) 0.5 0.6 / 0.4 n.a. n.a. n.a. n.a. P/CFPS (x) n.a. n.a. 16.9 17.7 / 16.1 n.a. n.a. FCF Yield (%) n.a. n.a. n.a. n.a. n.a. n.a. 01 Jul 09 Growth FY06A FY07A FY08A FY09E* FY10E* S&P Vietnam 10 Ho Chi Minh Stock Index Revenues 112.8% 18.6% 18.1% n.a. n.a. MSCI AC Asia Index REE EBITDA 87.0% -4.7% 6.2% n.a. n.a. EBIT 98.8% -11.5% 1.7% n.a. n.a. Net Income 227.8% 30.8% n.m. n.a. n.a. EPS 179.9% 2.6% n.m. n.m. 75.3% Trading & Liquidity 20Days 100Days 180Days Volume (Reg, Trading) 1,132,551 960,884 676,378 BVPS 21.6% 49.7% 10.3% n.a. n.a. VND Val. (Reg. Trading, bn) 55.2 36.0 23.4 * Bloomberg Consensus Estimates Percent of market (%) 1.8 2.2 2.1 Growth Indicators FY06A FY07A FY08A Shares Outstanding (mn) FY07A FY08A Current Fixed Assets/Assoc 59.6% 43.0% 14.9% Wgt. Avg Issued Shares 78.1 80.4 81.0 Debt -41.0% 43.9% 41.9% Fully Dilluted Shares 78.1 80.4 80.4 Financial Investments -51.2% 10.8% 69.2% Foreign Owned (% / Limit) 36.8mn 45.5% 49.0% Other LT Assets -18.4% 83.0% 25.0%
Market Values VND (bn) USD (mn) EUR (mn) Profitability FY06A FY07A FY08A Market Cap 3,493 196.2 139.0 Gross Margin (%) 26.3 30.5 28.6 Net Debt (301) (16.9) (0.0) EBITDA Margin (%) 21.0 16.9 15.2 Minorities & Others (331) (18.6) (13.2) EBIT Margin (%) 18.8 14.0 12.1 Enterprise Value 2,861 160.7 113.8 Pre-Tax Margin (%) 36.3 40.1 n.m. Net Margin (%) 27.0 29.8 n.m. Corperate Actions Ex-Date Amt/(ratio) Fiscal Year Stock Dividend 13-Aug-08 2/5 FY08 Solvency & Liquidity FY06A FY07A FY08A Stock Dividend 8-May-07 1/2 FY07 Acid Test Ratio 0.73 0.97 5.26 Final 20-Dec-06 429 FY06 Current Ratio 5.52 5.56 7.53 Rights Issue 11-Oct-06 1/5 FY06 LT Debt/Capital 5.4% 4.2% 4.4% Market Outlook Net Debt/Equity 3.6% -2.3% 5.7% The prospects for the Machinery & Equipment (M&E) sector are LT Debt/Fixed Assets 5.5% 5.9% 4.8% highly correlated with the domestic construction industry. It is Total Liab/Total Assets 11.9% 11.7% 8.5% estimated that M&E values typically comprise about 20-30% of the total gross development value of construction projects. The Management Company Data penetration rate of air conditioning systems in Vietnam remains 364 Cong Hoa – 13th Ward – Tan Binh Chairman Nguyen Thi Mai Thanh Head Office low and we expect the industry to grow at around 10% per year District - HCMC in the medium term. REE is estimated to have a 30% market CEO Nguyen Thi Mai Thanh share. Average rental rates for prime offices have also increased substantially supported by strong demand that outpaces supply. CFO/ Chief Accontant Ho Tran Dieu Lynh Website http://www.reecorp.com/ IR Contact Luc Chanh Truong Telephone +84838100350 Company History Refrigeration and Electrical Engineering Corporation was founded in 1977 as the state-owned Refrigeration Electrical Major Shareholders Shares (mn) Insider Holdings Shares Company. With a pro-active management, the company is Venner Group Limited 5.37 mn Nguyen Thi Mai Thanh 516,140 considered a pioneer in change and market orientation. REE Veil Holdings Limited. 5.84 mn Nguyen Ngoc Hai 1,164,730 was the first company equitized in 1993; it was also one of two HIFU 4.87 mn Luu Minh Luan 161,740 companies initially listed on Ho Chi Minh City stock exchange in VOF Investment Ltd. 3.96 mn Nguyen Thi Thanh Hoai 140,350 July 2000
120 Industrials / Industrial Machinery
Revenues by Bussiness Unit, 2008 Profit & Loss (VND bn) FY06A FY07A FY08A Revenue 824.1 977.1 1,154.4 EBITDA 173.1 165.0 175.2 EBIT 154.6 136.9 139.1 Interest & Fx Exp (12.8) (6.9) (22.9) Non Op Inc (Loss) 157.1 262.1 (257.9) Pre-Tax 299.0 392.0 (141.7) Taxes (76.5) (100.5) (12.2) Minorities & Pref’s (0.1) (0.5) 0.1 Net Income to Common 222.4 291.0 (153.8)
Balance Sheet (VNDbn) FY06A FY07A FY08A Cash & Equiv. 156.9 117.8 359.0 ST Investments & Mkt. Sec 306.7 654.5 374.0 Receivables 393.9 505.2 530.1 Inventories 965.8 1,675.2 1,775.3 Other Curr Assets 173.0 225.0 169.5 Net Fixed Assets 755.0 1,030.9 1,580.8 Construction in Progress 316.2 598.3 356.9 Invest. in Assoc. 122.7 78.2 23.7 Management Strategy and Goals Financial Investments 292.1 323.6 547.4 Management’s goal is to become an internationally ranked M&E contractor. Other L.T. Assets 118.3 216.4 270.5 The company aims to participate in the large scale, high quality and Payables (213.8) (121.6) (68.3) technology related projects and structure itself as a holding company. REE’s Other Curr Liab. (57.5) (335.7) (187.0) goal is to have a diversified revenue stream from its core business of M&E ST Debt (58.8) (73.8) (148.3) contracting and manufacturing of air conditioning systems as well as equity LT Debt (59.0) (95.8) (92.4) investments, real estate and infrastructure. Due to the difficult economic Other LT Liab (38.1) (8.5) (13.0) period, management refocused on key activities. Net Assets 3,173.3 4,789.7 5,478.4 Investment Plans Minorities 0.8 10.9 10.8 Book Capital 790.3 1,890.6 2,125.9 REE, together with their REE Land subsidiary will develop real estate Ret. Earnings 294.2 354.2 (37.4) investments including offices for rent, and industrial zones in Ho Chi Minh City and Haiphong. The company has contributed funds to establish REE Total Liab. & Equity 3,600.5 5,425.1 5,987.3 Real Estate JSC, REE Electricity JSC, Hap-Ree JSC, Haiphong Industrial Zone JSC, Bach Tuyet Paint JSC, Vietnam Infrastructure and Real Estate JSC. In Working Capital Analysis FY06A FY07A FY08A addition, the company invested in a thermal power project in Vung Anh Days Receivable 174.5 188.7 167.6 with a capacity of 1,200MW, a hydro power project in Laos with a capacity Days Inventory 580.3 900.1 786.1 of 150-180MW and a project to recover methane emitting from the Days Payable 128.5 65.3 30.2 landfill and to generate power according to the UN’s Clean Development Cash Operating Cycle 534.3 776.7 648.7 Mechanism. Finally the company has a substantial investment portfolio, with several listed and OTC holdings primarily in the banking sector. Derived Cash Flow (VNDbn)* FY06A FY07A FY08A EBIT 154.6 136.9 139.1 Key Success Factors Depreciation & Amort 18.5 28.1 36.1 REE is one of the most well-managed companies in Vietnam using a model Chgs in Working Cap 170.9 (686.6) (271.6) advocated by the Asian Development Bank (ADB). The company has Operating Cash Flow 344.0 (521.6) (96.3) diversified revenue streams from its core businesses of M&E contracting and Net Interest, Fx & Taxes (89.2) (107.4) (35.1) manufacturing of air conditioning systems as well as equity investments, real estate and infrastructure. The company focuses on creativity and Fixed Asset Capex (609.5) (744.0) (445.1) training both locally and abroad. For example, REE’s project managers use Investments 183.6 13.0 (169.4) advanced models to follow up the schedule, quality, and cost savings, Non Op Inc (Loss) 157.1 262.1 (257.9) and the company focus on cost-saving measures for customers. As a large Other Non Cash Adj. 202.6 587.5 938.6 company, REE benefits from economies of scale with multi-use warehouses Dividends Paid (538.2) (680.7) 0.0 used to serve several projects at the same time. Change in Paid in Capital 392.4 1,100.3 235.3 Change in Net Debt (81.9) 51.8 71.1 Key Risk Factors Net Cash Flow (39.1) (39.1) 241.2 REE has accumulated a large investment portfolio in financial and banking * Calculated from Balance Sheet & P&L stocks. In addition, the real-estate sector also faced a slowdown in the past year and the recovery in this sector will follows the economic recovery. In DuPont Analysis FY06A FY07A FY08A its core business, the emergence of low cost Chinese contractors and the EBIT / Sales 0.19 0.14 0.12 growing presence of medium size domestic contractors such as Rosaco, Sales/Total Assets 0.23 0.18 0.19 SME, QME, Toan Thinh Phat and Intech may hinder REE’s ability to replenish less Net Int./Assets 0.04 0.05 (0.05) its order book. Moreover, we expect competition in the air conditioning industry to intensify going forward with the growing presence of foreign Pre-Tax ROA (%) 8.3% 7.2% -2.4% manufacturers upon Vietnam’s accession to AFTA and WTO. Assets/Equity 3.32 2.41 2.85 Pre-Tax ROE (%) 27.5% 17.4% -6.7% 1-Tax rate 0.74 0.74 1.09 ROE (%) 20.5% 12.9% -7.3%
Miscelleaneous FY06A FY07A Current Altman Z Score n.m. n.m. 3.1 Asset Growth (%) -39.9% 50.7% 10.4% Capex/Sales (%) 74.0% 76.1% 38.6% Earnings Retention (%) -30.8% -85.0% 542.7%
121 Song Da Urban & Ticker Share Price - VND Industrial Zone Development SJS 96,000 01 Jul 09 Close/Volume Chart Company Description & Principal Activities Song Da Urban & Industrial Zone Investment and Development (SJS) is engaged in real VND estate consultancy. The company provides consultancy services on the investment, development, technical and architecture design of housing residences, industrial Mn Shares zones and other structures. It also sells properties and provides services for urban and industrial zones. In addition, the Company is involved in the construction of properties, the trading of machinery, as well as the manufacture and merchandise of construction materials and interior products. It has two subsidiaries and seven affiliated companies
Per Share (VND) FY06A FY07A FY08A Trail 12M FY09E* FY10E* EPS 3,142 9,055 2,982 3,200 5,475 n.a. BVPS 14,229 29,895 28,893 n.a. n.a. n.a. DPS 327 436 2,991 0 n.a. n.a. CFPS (4,070) 3,031 (3,552) n.a. n.a. n.a. Relative Performance FCFPS (4,110) 3,009 (3,662) n.a. n.a. n.a. * Bloomberg Consensus Estimates
Key Valuations FY07A Avg +/- 1 s.d. FY08A Avg +/- 1 s.d. FY09E* FY10E* P/E (x) 39.9 49.3 / 30.5 10.8 13 / 8.6 17.5 n.a. P/B (x) 12.9 16.7 / 9.1 3.1 14.0 n.a. n.a. Dividend Yield (%) 0.2 0.2 / 0.1 2.7 2.4 n.a. n.a. 01 Jul 09 P/CFPS (x) n.a. n.a. n.a. 4.8 n.a. n.a. S&P Vietnam 10 Ho Chi Minh Stock Index FCF Yield (%) n.a. n.a. n.a. n.a. n.a. n.a. MSCI AC Asia Index SJS Growth FY06A FY07A FY08A FY09E* FY10E* Revenues n.a. 110.7% -55.6% n.a. n.a. EBITDA n.a. 169.5% -50.3% n.a. n.a. Trading & Liquidity 20Days 100Days 180Days EBIT n.a. 180.7% -50.1% n.a. n.a. Volume (Reg, Trading) 433,189 279,377 257,541 Net Income n.a. 137.1% -58.2% n.a. n.a. VND Val. (Reg. Trading, bn) 44.0 20.6 17.2 EPS n.a. 188.2% -67.1% 83.6% n.a. Percent of market (%) 1.5 1.3 1.6 BVPS n.a. 110.1% -3.4% n.a. n.a. * Bloomberg Consensus Estimates Shares Outstanding (mn) FY07A FY08A Current Wgt. Avg Issued Shares 31.4 39.9 39.8 Growth Indicators FY06A FY07A FY08A Fully Dilluted Shares 31.4 39.9 39.8 Fixed Assets/Assoc n.a. 49.1% 30.5% Foreign Owned (% / Limit) 11.9mn 30.0% 49.0% Debt n.a. -81.7% 585.2% Financial Investments n.a. 385.1% 37.0% Market Values VND (bn) USD (mn) EUR (mn) Other LT Assets n.a. 1061.2% -74.8% Market Cap 4,015 225.5 159.7 Net Debt 207 11.6 0.0 Profitability FY06A FY07A FY08A Minorities & Others (140) (7.9) (5.6) Gross Margin (%) 38.9 49.0 61.1 Enterprise Value 4,082 229.3 162.4 EBITDA Margin (%) 35.3 45.1 50.6 EBIT Margin (%) 33.2 44.3 49.8 Corperate Actions Ex-Date Amt/(ratio) Fiscal Year Pre-Tax Margin (%) 35.7 48.3 55.1 Cash Dividend 3-Sep-08 3,000 FY08 Net Margin (%) 35.7 40.1 37.8 Cash Dividend 28-May-07 262 FY07 Rights Issue 28-May-07 1 FY07 Solvency & Liquidity FY06A FY07A FY08A Cash Dividend 15-Jan-07 197 FY06 Acid Test Ratio 0.17 0.90 0.07 Stock Dividend 15-Jan-07 3 FY07 Current Ratio 1.07 1.32 0.56 LT Debt/Capital 31.8% 2.6% 11.3% Market Outlook Net Debt/Equity -27.9% 7.5% -18.1% The difficult period of tight liquidity in Vietnam seems to be over LT Debt/Fixed Assets 29.3% 4.1% 12.6% and the property sector is recovering with the resumption of Total Liab/Total Assets 42.0% 21.9% 27.8% lending growth in the broader economy. In addition, underlying demand for suburban and modern housing is high, given Management Company Data several years of under investment in this segment and a rapidly 1st & 2nd Floor, CT1, My expanding urban middle class. The sector will likely recover Chairman Phan Ngoc Diep Head Office Dinh – Me Tri, Tu Liem, quickly as macro-economic conditions improve. Finally, the Hanoi recent expansion of Hanoi’s city limits will also open up new CEO Vi Viet Dung http://www.sudicosd. opportunities for property developers in the capital. CFO/ Chief Accontant Vu Van Son Website com.vn IR Contact Vu Van Son Telephone (84)-(0)4-37.684.503 Company History Song Da Urban Development Investment and Industrial Zone Major Shareholders Shares Insider Holdings Shares JSC was founded in July 2003. It was later converted into a Song Da Construction 14.52 mn Luu Ngoc Dung 0.067 mn state-owned company belonging to Song Da Corporation. The Deutsche Bank AG London 1.998 mn Phan Ngoc Diep 0.1 mn company is now recognized as one of a few leading developers Vu Hong Su 0.03 mn in the real estate industry, with total assets of VND1.0tn and ownership of a large land bank. The company was listed on the HOSE in June 2006.
122 Industrials / Heavy Construction
Revenues by Type, 2008 Profit & Loss (VND bn) FY06A FY07A FY08A Revenue 336.1 708.1 314.1 EBITDA 118.5 319.5 158.9 EBIT 111.7 313.5 156.4 Interest & Fx Exp 0.0 (0.0) (2.8) Non Op Inc (Loss) 8.1 28.2 19.6 Pre-Tax 119.8 341.7 173.3 Taxes 0.0 (57.6) (54.4) Minorities & Pref’s 0.0 0.0 0.0 Net Income to Common 119.8 284.1 118.9
Balance Sheet (VNDbn) FY06A FY07A FY08A Cash & Equiv. 21.3 121.7 9.2 ST Investments & Mkt. Sec 0.0 35.0 0.0 Receivables 201.3 232.8 141.2 Inventories 12.3 11.8 24.5 Other Curr Assets 52.6 44.1 44.3 Net Fixed Assets 10.2 14.5 18.5 Construction in Progress 578.6 756.4 1,010.6 Invest. in Assoc. 33.2 156.2 180.9 Financial Investments 22.5 109.4 149.9 Other L.T. Assets 4.2 48.6 12.2 Payables (122.2) (134.6) (131.3) Other Curr Liab. (98.3) (168.4) (94.6) ST Debt 0.0 0.0 (86.5) LT Debt (172.8) (31.6) (130.0) Other LT Liab (0.3) (0.1) (0.2) Net Assets 542.7 1,195.8 1,148.5 Minorities 0.0 0.0 0.0 Management Strategy and Goals Book Capital 50.0 599.7 599.7 SJS is a property developer focused on acquiring and developing suburban Ret. Earnings 492.7 596.1 548.8 land banks for infrastructure investment and resale to property developers. Total Liab. & Equity 936.2 1,530.5 1,591.1 Management’s goal is to expand and develop the current land bank and improve the service operation as its primary source of income in the Working Capital Analysis FY06A FY07A FY08A coming years. Days Receivable 218.6 120.0 164.0 Days Inventory 21.8 11.9 73.1 Investment Plans Days Payable 217.0 136.1 392.4 SJS has a lot of projects, of which the biggest includes My Dinh urban Cash Operating Cycle 20.2 28.0 301.5 centre with the total investment of VND 4.5tn, South An Khanh with the Derived Cash Flow (VNDbn)* FY06A FY07A FY08A total investment amounting to VND 2.6tn, Tien Xuan urban centre with the total investment of VND 1.9tn, and La Khe residential area with the EBIT n.a. 313.5 156.4 total investment of VND 1.3tn. The company also invests in other joint Depreciation & Amort n.a. 6.0 2.5 stock companies in other sectors including cement, finance, rubber, and Chgs in Working Cap n.a. 60.0 1.6 insurance. Operating Cash Flow n.a. 379.5 160.5 Net Interest, Fx & Taxes n.a. (57.6) (57.2) Key Success Factors Fixed Asset Capex n.a. (0.7) (4.4) SJS is one of the best known and managed subsidiaries in the Song Da Investments n.a. (209.9) (65.2) Group. Its management team has good relations with the government Non Op Inc (Loss) n.a. 28.2 19.6 which has been a key factor in winning in real-estate contracts and securing Other Non Cash Adj. n.a. (328.5) (350.9) land development rights. The company’s long experience in developing real-estate projects is also another key competitive advantage. Dividends Paid n.a. (119.2) 0.0 Change in Paid in Capital n.a. 549.7 0.0 Key Risk Factors Change in Net Debt n.a. (141.2) 184.9 An adverse change in macroeconomic conditions such as a slowdown in Net Cash Flow n.a. 100.4 (112.5) GDP growth, high interest rates and restrictive lending practices by banks * Calculated from Balance Sheet & P&L will materially affect SJS’s ability to do business. In addition, further rise in raw material and construction costs including construction labor may well DuPont Analysis FY06A FY07A FY08A lead to a delay or even cancellation of projects. Even though the company EBIT / Sales 0.33 0.44 0.50 has good contacts, it is still challenging to acquire real estate projects Sales/Total Assets 0.36 0.46 0.20 as it faces bidding from many competitors. Finally, SJS has made equity less Net Int./Assets 0.01 0.02 0.01 investments in sectors outside its core competencies and this poses risks. Pre-Tax ROA (%) 12.8% 22.3% 10.9% Assets/Equity 1.73 1.28 1.39 Pre-Tax ROE (%) 22.1% 28.6% 15.1% 1-Tax rate 1.00 0.83 0.69 ROE (%) 22.1% 23.8% 10.4%
Miscelleaneous FY06A FY07A Current Altman Z Score n.m. n.m. 3.3 Asset Growth (%) -41.2% 63.5% 4.0% Capex/Sales (%) n.m. 0.1% 1.4% Earnings Retention (%) 89.6% 95.2% -0.3%
123 Vietnam Container Ticker Share Price - VND Shipping VSC 64,500 01 Jul 09
Close/Volume Chart Company Description & Principal Activities VSC’s main businesses are seaport operations, warehousing, container shipping VND Mn Shares agency, and multimodal transport. Its Green Port berth with a 320 meter dock and capacity for a 10,000 DWT ship is a well-known port in central region of Vietnam. VSC’s warehouse services offer space for up to 4,000 TEUs as well as storage, transportation, and goods distribution services. VSC is currently the shipping agent for many reputable international companies including MSC (Switzerland) and TS Lines (Taiwan). Agency services includes warehousing, export packing, port and cargo handling services, stevedoring facilities, bunkering, bonded stores, and a complete range of container logistics, dispositioning, inland transportation, maintenance and repairs, and leasing arrangements. VICONSHIP is also a pioneer in container transportation with its own trucking fleet.
Per Share (VND) FY06A FY07A FY08A Trail 12M FY09E* FY10E* EPS n.a. 6,778 10,926 11,416 12,614 n.a. BVPS n.a. 25,891 30,315 n.a. n.a. n.a. Relative Performance DPS n.a. 1,141 3,499 n.a. n.a. n.a. CFPS n.a. 8,955 13,051 8,835 n.a. n.a. FCFPS n.a. 1,869 10,070 6,728 n.a. n.a. * Bloomberg Consensus Estimates
Key Valuations FY07A Avg +/- 1 s.d. FY08A Avg +/- 1 s.d. FY09E* FY10E* P/E (x) n.a. n.a. 6.1 6.3 / 5.8 5.1 n.a. 01 Jul 09 P/B (x) n.a. n.a. 2.1 5.1 n.a. n.a. S&P Vietnam 10 Ho Chi Minh Stock Index Dividend Yield (%) n.a. n.a. 4.4 1.9 n.a. n.a. MSCI AC Asia Index VSC P/CFPS (x) n.a. n.a. 4.5 7.5 n.a. n.a. FCF Yield (%) n.a. n.a. 11.1 11.9 / 10.4 n.a. n.a.
Growth FY06A FY07A FY08A FY09E* FY10E* Revenues 26.3% 42.3% 33.3% n.a. n.a. EBITDA n.a. 33.9% 21.0% n.a. n.a. Trading & Liquidity 20Days 100Days 180Days EBIT 44.3% 33.2% 25.3% n.a. n.a. Volume (Reg, Trading) 50,733 28,532 24,519 Net Income 42.6% 44.2% 60.3% n.a. n.a. VND Val. (Reg. Trading, bn) 3.6 1.7 1.5 EPS n.a. n.a. 61.2% 15.4% n.a. Percent of market (%) 0.1 0.1 0.1 BVPS n.a. n.a. 17.1% n.a. n.a. * Bloomberg Consensus Estimates Shares Outstanding (mn) FY07A FY08A Current Wgt. Avg Issued Shares 9.6 9.5 9.5 Growth Indicators FY06A FY07A FY08A Fully Dilluted Shares 9.6 9.5 9.5 Fixed Assets/Assoc 27.2% 35.0% 19.6% Foreign Owned (% / Limit) 1.8mn 19.0% 49.0% Debt 41.6% -12.3% -20.2% Financial Investments n.a. n.a. n.a. Market Values VND (bn) USD (mn) EUR (mn) Other LT Assets 33.9% 30.6% 122.1% Market Cap 624 35.0 24.8 Net Debt (136) (7.6) (0.0) Profitability FY06A FY07A FY08A Minorities & Others (4) (0.2) (0.2) Gross Margin (%) 35.9 35.0 36.8 Enterprise Value 484 27.2 19.3 EBITDA Margin (%) 38.7 36.4 33.1 EBIT Margin (%) 27.7 25.9 24.4 Corperate Actions Ex-Date Amt/(ratio) Fiscal Year Pre-Tax Margin (%) 29.9 31.4 37.6 Cash Dividend 17-Dec-08 3,000 FY08 Net Margin (%) 27.4 27.7 33.4 Cash Dividend 6-Aug-08 2,000 FY08 Stock Dividend 5-Jun-08 1/5 FY08 Solvency & Liquidity FY06A FY07A FY08A Acid Test Ratio 1.18 1.72 2.47 Market Outlook Current Ratio 1.10 2.33 1.74 Vietnam has a long coastline and underdeveloped road LT Debt/Capital 19.7% 10.0% 5.9% infrastructure, the country is favorable to sea-based transport Net Debt/Equity 3.0% 5.8% 18.3% and logistics. Real GDP growth has averaged above 7.0% in the past four years and international trade (exports and imports) LT Debt/Fixed Assets 26.4% 17.3% 11.3% has grown at more than 20% annually in recent years. Growth Total Liab/Total Assets 47.7% 30.0% 34.1% in seaborne tonnage has increased by an estimated of 12%- 15% annually. In 2007, total cargo through seaports reached Management Company Data 181.1 million tonnes, up 17.2% against the previous year while Chairman Nguyen Viet Hoa Head Office 11 Vo Thi Sau St throughput at the northern Haiphong port grew by 47.3%. CEO Nguyên Viet Hoa Ngo Quyen, Hai Phong CFO/ Chief Accontant Tran Xuan Bao Website www.viconship.com Company History IR Contact Le The Trung Telephone +84313836705 VICONSHIP (VSC) was established in July 1985 and equitized in April 2002 as the North Vietnam Container Shipping Company Major Shareholders Shares Insider Holdings Shares (VICONSHIP HAI PHONG), a subsidiary of Vietnam National Vinalines 2.26 mn Nguyen Viet Hoa 139,056 Shipping Lines. In June 2002, VICONSHIP HAI PHONG acquired Central Container Shipping Joint Stock Co. Ltd. in Da Nang Vietnam Holding Ltd 0.635 mn Nguyen Van Tien 9,711 and International Freight Forwarder & Container Service Co. to become Vietnam Container Shipping Joint Stock Company. VSC was listed on the Ho Chi Minh City Stock Exchange on 12th December 2007. The company’s organization structure includes five subsidiaries and two joint ventures.
124 Industrials / Transportation Services
Gross Profit Breakdown, 2007 Profit & Loss (VND bn) FY06A FY07A FY08A Revenue 164.9 234.7 312.8 EBITDA 63.8 85.5 103.4 EBIT 45.6 60.8 76.2 Interest & Fx Exp (1.7) (2.5) (6.3) Non Op Inc (Loss) 5.5 15.5 47.9 Pre-Tax 49.4 73.8 117.7 Taxes (4.2) (8.7) (13.4) Minorities & Pref’s 0.0 0.0 0.0 Net Income to Common 45.1 65.1 104.3
Balance Sheet (VNDbn) FY06A FY07A FY08A Cash & Equiv. 42.2 47.7 79.2 ST Investments & Mkt. Sec 25.6 82.2 83.0 Receivables 44.9 57.2 62.8 Inventories 1.6 2.6 3.3 Other Curr Assets 54.2 15.9 27.2 Net Fixed Assets 104.9 134.2 144.6 Construction in Progress 4.5 9.9 6.2 Invest. in Assoc. 0.9 4.7 27.2 Financial Investments 0.0 0.0 0.0 Other L.T. Assets 1.6 2.1 4.6 Payables (35.9) (27.7) (32.1) Other Curr Liab. (59.6) (45.2) (89.9) ST Debt (9.0) (8.3) (9.5) LT Debt (28.9) (24.9) (17.0) Other LT Liab (0.4) (0.7) (1.0) Net Assets 146.6 249.7 288.8 Minorities 0.0 0.0 0.0 Management Strategy and Goals Book Capital 58.9 117.8 133.7 Management’s goal is to fully exploit opportunities within Vietnam where Ret. Earnings 87.7 131.9 155.1 average import and export growth rates can exceed 20% per year. Their Total Liab. & Equity 280.4 356.5 438.2 broad strategy is to concentrate on seaport operations in the future, invest in more capacity in Container Freight Storage (CFS) and Inland Working Capital Analysis FY06A FY07A FY08A Container Depots (ICD), develop a logistics centre in Southern Vietnam, Days Receivable 99.4 88.9 73.3 and modernize its Green Port in Central Vietnam. VSC also has plans for Days Inventory 5.6 6.2 6.0 expanding its business into domestic sea transportation segment. Days Payable 123.7 66.2 59.3 Investment Plans Cash Operating Cycle 29.9 (16.5) (8.0) To implement their strategy, VSC has invested in Green Logistics in Ho Chi Derived Cash Flow (VNDbn)* FY06A FY07A FY08A Minh City with a stake of 33.3%. It has also built one ICD in Da Nang and a EBIT 45.6 60.8 76.2 container storage facility in Hai Phong. The company will spend USD3mn in Depreciation & Amort 18.2 24.7 27.3 2009 to acquire one second hand container ship with 7,000-8,000DWT (300- 350 TEUs equivalent) to penetrate the domestic sea transport business. Chgs in Working Cap (54.8) 2.5 31.4 Operating Cash Flow 9.1 88.0 134.8 Historical Success Factors Net Interest, Fx & Taxes (5.9) (11.2) (19.7) Fixed Asset Capex (32.0) (68.0) (28.5) VSC is one of the more successful companies in maritime services market and container transport sector, with a prevailing market share of 26% in Hai Investments 0.4 (3.8) (22.5) Phong and counting 70% of the industry participants as clients. Container Non Op Inc (Loss) 5.5 15.5 47.9 volumes processed through VSC’s Green Port alone accounts for 26% of Other Non Cash Adj. 26.8 (35.7) (42.6) total container volumes in the central region of Vietnam. Moreover, goods Dividends Paid (11.0) (33.4) (47.1) through VSC’s CFS have market share of 65% in North Vietnam for their Change in Paid in Capital 1.5 58.9 15.9 port and warehousing businesses. The company’s strengths include new Change in Net Debt 11.1 (4.7) (6.7) business expansion (ports), cost control and an average return on equity of Net Cash Flow 5.5 5.5 31.5 30% in each of the past four years. * Calculated from Balance Sheet & P&L
Key Risk Factors DuPont Analysis FY06A FY07A FY08A All VICONSHIP businesses are closely related with export-import activities. EBIT / Sales 0.28 0.26 0.24 The downturn of import and export volumes in the first half of 2009 is Sales/Total Assets 0.59 0.66 0.71 evidence for the economic slowdown which may impact the company less Net Int./Assets 0.01 0.04 0.09 adversely. In accordance with the World Trade Organization commitments, Pre-Tax ROA (%) 17.6% 20.7% 26.9% Vietnam will progressively open its maritime services market including container-shipping agency, brokerage, and forwarding. This will be a great Assets/Equity 1.91 1.43 1.52 challenge for companies like VSC. The company’s operational risks are tied Pre-Tax ROE (%) 33.7% 29.5% 40.8% to the export and import activities of major clients including domestic 1-Tax rate 0.91 0.88 0.89 companies and shipping companies. ROE (%) 30.8% 26.1% 36.1%
Miscelleaneous FY06A FY07A Current Altman Z Score n.m. n.m. 4.0 Asset Growth (%) -36.0% 27.1% 22.9% Capex/Sales (%) 19.4% 29.0% 9.1% Earnings Retention (%) n.a. 83.2% 68.0%
125 Vietnam Tanker Ticker Share Price - VND
VTO 14,100 01 Jul 09
Close/Volume Chart Company Description & Principal Activities VND Mn Shares VTO is one of the principal petroleum transporters in Vietnam operating six ocean- going vessels and five smaller coastal vessels for domestic transportation services. At the end of 2008, VITACO’s total tonnage was 186,607DWT, a 55% increase over 2007. Its main businesses are international/overseas petroleum shipping, domestic petroleum shipping, shipping agency, repairs & maintenance, petroleum & other petrochemical products trading, ship brokering, and ship towing services. VTO has also expanded its business line into new areas including real estate development and office leasing Ship DWT Year of building Petrolimex 04 29,998 1988 Petrolimex 08 37,453 2003 Petrolimex 09 40,019 2007 Petrolimex 11 (SLS 472) 40,000 2007 Petrolimex 12 13,000 2008 Relative Performance Petrolimex 14 13,000 2008 Nha Be 01 3,580 1976 Nha Be 02 2,364 1977 Nha Be 03 4,793 1978 Ap Bac 02 1,200 1986
Per Share (VND) FY06A FY07A FY08A Trail 12M FY09E* FY10E* EPS 1,560 4,695 602 365 597 n.a. 01 Jul 09 BVPS 8,664 10,372 13,079 n.a. n.a. n.a. S&P Vietnam 10 Ho Chi Minh Stock Index DPS n.a. 668 826 n.a. n.a. n.a. MSCI AC Asia Index VTO CFPS 1,944 3,250 3,508 (17,485) n.a. n.a. FCFPS n.a. (14,943) (26,481) n.a. n.a. n.a. Trading & Liquidity 20Days 100Days 180Days * Bloomberg Consensus Estimates Volume (Reg, Trading) 739,799 593,424 426,491 Key Valuations FY07A Avg +/- 1 s.d. FY08A Avg +/- 1 s.d. FY09E* FY10E* VND Val. (Reg. Trading, bn) 11.4 7.7 5.6 P/E (x) n.a. n.a. 6.9 7.1 / 6.7 23.6 n.a. P/B (x) 4.7 5.3 / 4.1 1.6 16.2 n.a. n.a. Percent of market (%) 0.4 0.5 0.5 Dividend Yield (%) 1.3 1.5 / 1.1 5.8 1.0 n.a. n.a. P/CFPS (x) n.a. n.a. n.a. 5.7 n.a. n.a. Shares Outstanding (mn) FY07A FY08A Current FCF Yield (%) n.a. n.a. n.a. n.a. n.a. n.a. Wgt. Avg Issued Shares 40.0 59.8 59.6 Fully Dilluted Shares 40.0 59.8 59.6 Growth FY06A FY07A FY08A FY09E* FY10E* Revenues n.a. 84.4% 3.6% n.a. n.a. Foreign Owned (% / Limit) 4.4mn 7.3% 49.0% EBITDA n.a. 56.7% -9.5% n.a. n.a. EBIT n.a. 70.3% -23.3% n.a. n.a. Market Values VND (bn) USD (mn) EUR (mn) Net Income n.a. 112.6% -80.8% n.a. n.a. Market Cap 817 45.9 32.5 EPS n.a. 201.0% -87.2% -0.8% n.a. Net Debt 2,517 141.4 0.0 BVPS n.a. 19.7% 26.1% n.a. n.a. Minorities & Others (1) (0.0) (0.0) * Bloomberg Consensus Estimates Enterprise Value 3,332 187.2 132.6 Growth Indicators FY06A FY07A FY08A Fixed Assets/Assoc n.a. 94.5% 131.7% Corperate Actions Ex-Date Amt/(ratio) Fiscal Year Debt n.a. 144.2% 144.2% Cash Dividend 20-Apr-09 400 FY08 Financial Investments n.a. n.a. 15.1% Cash Dividend 20-May-08 200 FY08 Other LT Assets n.a. 8.0% 8.0% Cash Dividend 25-Mar-08 300 FY07 Profitability FY06A FY07A FY08A Cash Dividend 24-Dec-07 636 FY07 Gross Margin (%) 33.3 27.8 22.2 Rights Issue 24-Dec-07 1/2 FY07 EBITDA Margin (%) 49.7 42.2 36.9 EBIT Margin (%) 25.4 23.4 17.3 Market Outlook Pre-Tax Margin (%) 0.0 0.0 5.3 Transportation demand for imported petroleum is increasing Net Margin (%) 22.4 25.8 4.8 with energy demand in Vietnam, which is expected to grow Solvency & Liquidity FY06A FY07A FY08A by at least 5% per annum for several years. According to the Acid Test Ratio 0.37 2.27 0.24 Vietnam Ministry of Trade, annual petroleum consumption in Vietnam will increase 7% per year although with the operation Current Ratio 2.37 2.50 0.42 of Dung Quat (2009) and Nghi Son (2012) refineries, imported LT Debt/Capital 103.0% 166.4% 303.4% petroleum demand is still expected to grow at 10%-14% per Net Debt/Equity -101.4% -160.0% -323.0% year for the next few years, accounting for more than 50% of LT Debt/Fixed Assets 71.3% 75.1% 74.1% total consumption. Consequently, total petroleum consumption Total Liab/Total Assets 54.9% 64.3% 77.2% is forecasted by the Government to reach 18mn tonnes in the coming years from 16.3mn tonnes currently. In addition, Management Company Data the commercial operation from all off Vietnam’s three new Chairman Mr. Nguyen Duc Thang Head Office 12 Le Duan, 1 Dist, Ho Chi Minh city petroleum refineries (from 2015) will lead to a high demand CEO Mr. Luu Van Thang for bulk domestic transportation services, especially within the 5,000-10,000 tonnage range. CFO/ Chief Accontant Ms Pham Ly Trang Khanh Website www.viettanker.com.vn IR Contact Ms. Phan Thi Kim Lien Telephone +84838222675 Company History Major Shareholders Shares Insider Holdings Shares VITACO was established in September 1975 as a direct subsidiary Vietnam Petroleum 20.00 mn Mr. Luu Van Thang 102,900 of Vietnam National Petroleum Corporation (Petrolimex). It was Corporation equitized in October 2005 and become a joint stock company with the state retaining a 51% stake. VTO subsequently listed on Sacombank 3.11 mn Mr Dam Xuan Trong 15,000 Life Insurance Prudential the Ho Chi Minh Stock Exchange in January 2007. VTO has two 2.15 mn Mr. Nguyen Cong Dinh 23,600 branches: VITACO Services & Trading Co. Ltd and VITACO Danang Vietnam Co. Ltd both are based in Nha Trang. Amersham Industries Ltd 2.2 mn
126 Industrials / Marine Transportation
Revenues by Business Line, 2008 Profit & Loss (VND bn) FY06A FY07A FY08A Revenue 394.1 726.7 753.1 EBITDA 195.8 306.9 277.8 EBIT 100.0 170.3 130.6 Interest & Fx Exp (41.1) (78.5) (112.1) Non Op Inc (Loss) 29.4 96.0 21.7 Pre-Tax 0.0 0.0 40.2 Taxes 0.0 0.0 (4.2) Minorities & Pref’s 0.0 0.0 0.0 Net Income to Common 88.3 187.8 36.0
Balance Sheet (VNDbn) FY06A FY07A FY08A Cash & Equiv. 7.9 39.9 11.1 ST Investments & Mkt. Sec 174.4 90.2 1.0 Receivables 0.0 48.7 45.0 Inventories 34.6 29.4 54.5 Other Curr Assets 148.8 92.9 37.5 Net Fixed Assets 705.9 1,378.0 3,193.0 Construction in Progress 2.6 0.1 0.1 Invest. in Assoc. 0.0 0.0 0.0 Financial Investments 0.0 50.4 58.0 Other L.T. Assets 13.3 11.7 12.6 Management Strategy and Goals Payables (21.4) (17.6) (46.6) Other Curr Liab. (70.1) (65.6) (57.6) Management’s goal is to meet the shipping demands of its parent company ST Debt 0.0 0.0 (164.0) Petrolimex, penetrate regional markets, and capitalize on the opportunities arising from vessel supply shortage. Ships that do not meet international LT Debt (505.3) (1,035.5) (2,364.7) standards will not be allowed to operate in petroleum transport from 2010 Other LT Liab 0.0 (0.2) (0.5) in Vietnam. VTO’s principle strategy is to concentrate on overseas transport Net Assets 490.6 622.3 779.5 by expanding its international fleet tonnage by 30%. They will continue also Minorities 0.0 0.0 0.0 with their domestic transport operations but without further investment. Book Capital 400.0 400.0 600.0 In addition, VTO will expand shipping agency services for bulk carriers and Ret. Earnings 90.6 222.3 179.5 container ships and may engage in financial investments and property Total Liab. & Equity 1,087.5 1,741.3 3,412.8 development. Working Capital Analysis FY06A FY07A FY08A Investment Plans Days Receivable 0.0 24.5 21.8 •Purchased 13,000 DWT, and 40,000 DWT vessels for USD67mn (completed Days Inventory 48.0 20.4 33.9 in 2008) Days Payable 29.8 12.3 29.0 •Office tower at 236/106/1A Dien Bien Phu St, Binh Thanh Dist, HCM: Cash Operating Cycle 77.7 8.2 41.1 pending investment in 2009 •Office tower and hotel project (JV Petrolimex Land Company). Derived Cash Flow (VNDbn)* FY06A FY07A FY08A •Office leasing (JV An Phu joint-stock company). EBIT n.a. 170.3 130.6 Depreciation & Amort n.a. 136.6 147.2 Key Success Factors Chgs in Working Cap n.a. 4.0 55.0 Operating Cash Flow n.a. 310.9 332.8 VITACO is the largest petroleum transportation company in Vietnam, Net Interest, Fx & Taxes n.a. (78.5) (116.4) accounting for 25% of all petroleum imports into Vietnam in 2006, and 42% of Petrolimex import volumes. The company’s market share of the domestic Fixed Asset Capex n.a. (727.7) (1,793.3) fleet is 40% nationwide and 60% of Petrolimex transportation demand. Investments n.a. (50.4) (7.6) Non Op Inc (Loss) n.a. 96.0 21.7 Key Risk Factors Other Non Cash Adj. n.a. 0.9 (148.7) Plunging oil prices have led to low freight rates for all tanker sizes, affecting Dividends Paid n.a. (49.4) (10.4) VTO’s earnings. A slow recovery in freight rates is the most significant risk Change in Paid in Capital n.a. 0.0 200.0 factor especially since VTO has just put larger ships in operation. Longer-run, Change in Net Debt n.a. 530.2 1,493.1 two more domestic refineries (Nghi Son and Long Son) will lead to lower Net Cash Flow n.a. 32.0 (28.8) volumes of imported petroleum products and as such, VTO may face tough * Calculated from Balance Sheet & P&L competition from PetroVietnam Group transportation companies, which may affect VTOs market share in the medium-term. VTO also runs the risks DuPont Analysis FY06A FY07A FY08A of losses in petroleum trading if fuel prices domestically are subject to price EBIT / Sales 0.25 0.23 0.17 controls if accompanied by rising international prices. Sales/Total Assets 0.36 0.42 0.22 less Net Int./Assets (0.09) (0.10) (0.03) Pre-Tax ROA (%) 0.0% 0.0% 1.2% Assets/Equity 2.22 2.80 4.38 Pre-Tax ROE (%) 0.0% 0.0% 5.2% 1-Tax rate n.a. n.a. 0.89 ROE (%) n.a. n.a. 4.6%
Miscelleaneous FY06A FY07A Current Altman Z Score n.m. n.m. 0.5 Asset Growth (%) -68.1% 60.1% 96.0% Capex/Sales (%) n.m. 100.1% 238.1% Earnings Retention (%) n.a. 85.8% -37.2%
127 PetroVietnam Ticker Share Price - VND Drilling and Well Services PVD 84,000 01 Jul 09 Close/Volume Chart Company Description & Principal Activities VND Mn Shares PetroVietnam Drilling & Well Services Joint Stock Company (PVD) is the only domestic drilling contractor and oil services company in the E&P sector in Vietnam. The company offers drilling and well technical services including high-tech cementing and stimula- tion, well testing, directional drilling, mud logging, wire-line logging, slick-line and low- tech services such as drilling tool rentals and tubular handling services for oil & gas operators in Vietnam. PVD is also involved in the provision of manpower for offshore stations, oil-spill control, workshop services and materials, equipment and spare-parts for offshore companies. During 2007 and 2008 the company formed six subsidiaries and three joint-venture companies engaged in technical and well services, offshore and logging activities, and investment and training programs.
Per Share (VND) FY06A FY07A FY08A Trail 12M FY09E* FY10E* EPS 906 4,395 6,978 7,426 5,887 6,102 Relative Performance BVPS 6,175 14,105 16,142 n.a. 19,702 26,639 DPS n.a. n.a. 2,781 0 n.a. n.a. CFPS (2,689) 1,711 14,451 12,667 n.a. n.a. FCFPS (6,884) (9,782) (11,458) (9,918) n.a. n.a. * Bloomberg Consensus Estimates
Key Valuations FY07A Avg +/- 1 s.d. FY08A Avg +/- 1 s.d. FY09E* FY10E* P/E (x) 44.4 54.7 / 34.2 15.1 16 / 14.3 14.3 13.8 01 Jul 09 P/B (x) 15.0 19.7 / 10.3 5.5 11.1 4.3 3.2 S&P Vietnam 10 Ho Chi Minh Stock Index Dividend Yield (%) n.a. n.a. 2.5 4.5 n.a. n.a. MSCI AC Asia Index PVD 131.6 / P/CFPS (x) 125.9 45.1 3.9 n.a. n.a. 120.2 Trading & Liquidity 20Days 100Days 180Days FCF Yield (%) (11.4) -10.1 / -12.8 (13.9) 20.9 / -48.7 n.a. n.a. Volume (Reg, Trading) 380,552 217,295 201,065 Growth FY06A FY07A FY08A FY09E* FY10E* VND Val. (Reg. Trading, bn) 31.2 15.8 14.8 Revenues n.a. 103.0% 36.2% n.a. n.a. Percent of market (%) 1.0 1.0 1.4 EBITDA n.a. 358.0% 51.1% n.a. n.a. EBIT n.a. 294.0% 57.2% n.a. n.a. Shares Outstanding (mn) FY07A FY08A Current Net Income n.a. 391.2% 61.3% n.a. n.a. Wgt. Avg Issued Shares 130.1 132.2 132.2 EPS n.a. 385.1% 58.8% -15.6% 3.7% Fully Dilluted Shares 130.1 132.2 132.2 BVPS n.a. 128.4% 14.4% 22.1% 35.2% Foreign Owned (% / Limit) 37.8mn 28.6% 49.0% * Bloomberg Consensus Estimates Market Values VND (bn) USD (mn) EUR (mn) Growth Indicators FY06A FY07A FY08A Market Cap 11,102 623.7 441.5 Fixed Assets/Assoc n.a. 71.9% 150.8% Net Debt 3,267 183.5 0.0 Debt n.a. 98.9% 190.4% Minorities & Others 1,462 82.1 58.1 Financial Investments n.a. 3876.5% 190.7% Enterprise Value 15,831 889.4 629.6 Other LT Assets n.a. 194.7% 2.0% Corperate Actions Ex-Date Amt/(ratio) Fiscal Year Profitability FY06A FY07A FY08A Cash Dividend 3-Dec-08 2,500 FY08 Gross Margin (%) 14.5 25.8 32.4 Cash Dividend 8-May-08 1,543 FY07 EBITDA Margin (%) 11.6 26.2 29.1 Stock Dividend 8-May-08 1/5 FY08 EBIT Margin (%) 10.8 20.9 24.1 Stock Dividend 15-Jun-07 7/50 FY07 Pre-Tax Margin (%) 12.0 21.2 24.9 Rights Issue 15-Jun-07 23/50 FY07 Net Margin (%) 8.6 20.9 24.7 Market Outlook Solvency & Liquidity FY06A FY07A FY08A Global demand for drilling rigs is estimated at around 700 rigs Acid Test Ratio 0.40 1.80 0.67 annually for the period 2008 to 2012, approximately 61% (430) Current Ratio 0.94 1.90 0.52 of which are jack-up rigs. Vietnam will require eight to ten jack- LT Debt/Capital 89.1% 54.8% 79.7% up rigs annually, consistent with the number of rigs currently deployed. PetroVietnam, as well as several international E&P Net Debt/Equity -69.8% -47.3% -158.8% companies have articulated an aggressive offshore exploration LT Debt/Fixed Assets 48.2% 51.6% 33.5% program in addition to existing planned gas field developments. Total Liab/Total Assets 63.6% 45.5% 69.6% Overall, this should provide healthy but competitive demand for PVD’s single jack-up rig currently in-service and the two new Management Company Data jack-ups coming into service later this year. Chairman Mr. Do Dinh Luyen Head Office 4th Floor, Sailing Tower 111A Pasteur, Ben Nghe CEO Mr. Do Van Khanh Company History Ward, 1 Dist., HCMC PVD was established in 1994 as a division of PTSC Offshore CFO/ Chief Accontant Ms. Ho Ngoc Yen Phuong Website www.pvdrilling.com.vn Services. In November 2001, PetroVietnam Drilling & Well IR Contact Mr. Do Danh Rang Telephone +84 8 3914 2012 Services Company (PV Drilling) was established as a wholly owned subsidiary of PetroVietnam. In February 2006, it was converted to joint-stock company with PetroVietnam retaining Major Shareholders Shares Insider Holdings Shares 51% of the equity. PVD listed on the HoSE on December 5th of PetroVietnam Holdings 66.59 mn Mr. Van Duc Tong 21,863 that year. In May 2007, the company converted into a holding PVFC 12.42 mn Ms. Tran Thi Quy 53,151 company establishing six subsidiaries, one of which was PVDI, VCB 5.76 mn Mr. Luong Trong Diep 22,346 a 51% owned financing SPV. In June 2009, PVD finally received Deutsche Bank 6.72 mn approval to buy out minorities in PVDI, following a contentious ACBS 2.5 mn shareholder approval process in November 2008. SSI 1 mn
128 Net Profit Breakdown, 2008 Oil & Gas / Oil equipment, Services & Distribution
Profit & Loss (VND bn) FY06A FY07A FY08A Revenue 1,348.8 2,738.6 3,728.7 EBITDA 156.5 717.0 1,083.5 EBIT 145.1 571.7 898.7 Interest & Fx Exp (13.0) (77.3) (165.5) Non Op Inc (Loss) 29.6 85.5 195.6 Pre-Tax 161.6 579.9 928.7 Taxes (45.2) (3.5) 4.3 Minorities & Pref’s 0.0 (4.5) (10.8) Net Income to Common 116.4 571.9 922.3
Balance Sheet (VNDbn) FY06A FY07A FY08A Cash & Equiv. 152.6 521.9 687.8 ST Investments & Mkt. Sec 0.0 0.0 120.0 Management Strategy and Goals Receivables 417.6 711.6 1,043.3 Management’s goal is to expand market share in Vietnam and to become Inventories 64.6 45.7 174.5 the market leader in drilling and drilling related services. Principally PVD Other Curr Assets 45.6 391.3 39.8 hopes to displace rigs leased in country by firms such as Trans-Ocean and Net Fixed Assets 54.2 2,086.9 2,122.5 Sea-Drill. In the longer-run, PVD aims to become a leading regional provider Construction in Progress 1,409.3 420.9 4,113.2 of drilling and well services, creating added value for clients by delivering Invest. in Assoc. 0.0 7.9 75.0 high quality services at competitive prices. In the drilling services segment, Financial Investments 1.5 58.5 170.1 PVD will continue to acquire offshore drilling rigs and invest in advanced Other L.T. Assets 28.9 85.1 86.8 technologies. In drilling engineering services, PVD will invest and develop new services, especially concentrating on higher margin services such Payables (379.0) (289.8) (1,028.0) as mud logging and well-head services. In high-tech services, PVD will Other Curr Liab. (297.1) (273.1) (880.2) continue to strengthen its strategic alliances with existing partners and ST Debt 0.0 (109.2) (1,983.8) develop cooperation with other international service providers to enhance LT Debt (705.5) (1,294.0) (2,091.1) services to clients. The company’s expansion plans for overseas markets Other LT Liab (1.0) (2.5) (25.3) will include countries where PetroVietnam and PVD’s long-term partners Net Assets 791.6 2,361.3 2,624.4 are present. Malaysia in particular looks promising with several jointly Minorities 0.0 497.1 491.0 developed fields already in production Book Capital 680.0 1,302.6 1,522.8 Investment Plans Ret. Earnings 111.6 561.7 610.6 Total Liab. & Equity 2,174.2 4,329.9 8,632.9 The company has invested USD440mn in two additional Jack-up rigs: PV Drilling II and PV Drilling III. These rigs are due for delivery in October 2009 Working Capital Analysis FY06A FY07A FY08A and early 2010, respectively and are fully funded through project-finance Days Receivable 113.0 94.8 102.1 debt and equity issuance to PetroVietnam from PVD. In the future, PVD also has plans to acquire or contract-manage one semi-submersible rig Days Inventory 20.5 8.2 25.3 and one Tender-Assisted drilling rig. Capex on these two rigs could exceed Days Payable 120.0 52.1 148.9 USD600mn. Cash Operating Cycle 27.5 (34.6) 72.0
Key Success Factors Derived Cash Flow (VNDbn)* FY06A FY07A FY08A PVD is a subsidiary of the PetroVietnam Group and as such has had financial EBIT n.a. 571.7 898.7 support from PetroVietnam in securing bridge financing for the investment Depreciation & Amort n.a. 145.3 184.8 in the two new rigs. In addition, PVD hopes for PetroVietnam support in Chgs in Working Cap n.a. (734.0) 1,236.4 securing new rig rental contracts. Given the rapid expansion of PVD’s asset Operating Cash Flow n.a. (17.0) 2,319.9 base, it is critical that PVD’s rigs be quickly contracted and fully utilized from Net Interest, Fx & Taxes n.a. (80.8) (161.1) delivery, otherwise profitability and margins will suffer. A supporting factor Fixed Asset Capex n.a. (1,495.5) (3,424.3) for rig rentals is that given PVD’s proactive engagement in ancillary services, Investments n.a. (64.9) (178.7) the company is well positioned to capitalize on the robust ancillary market Non Op Inc (Loss) n.a. 85.5 195.6 for drilling and well services. Finally, cost control remains important. As day rates and well services are competitively bid, it is important for the company Other Non Cash Adj. n.a. 989.3 (1,313.8) to continue to maintain vigilance in operating costs in order to maintain Dividends Paid n.a. (367.5) (163.6) margins. In FY08, PVD achieved a 13% reduction in cash operating costs Change in Paid in Capital n.a. 622.6 220.3 from improved operating performance on PVD I. consequently, efficient Change in Net Debt n.a. 697.8 2,671.7 operations of PVD II & III are critical for future earnings growth. Net Cash Flow n.a. 369.3 165.8 * Calculated from Balance Sheet & P&L Key Risk Factors PVD is taking delivery of two rigs just as day-rates have weakened globally. DuPont Analysis FY06A FY07A FY08A A slowdown in E&P activities is expected in-line with the weaker oil EBIT / Sales 0.11 0.21 0.24 prices and lower economic growth rates worldwide. Anecdotal evidence Sales/Total Assets 0.62 0.63 0.43 also points to a pending large supply of new-build rigs currently under less Net Int./Assets 0.01 0.00 0.00 construction in the region. Consequently, the day-rate at which PVD Pre-Tax ROA (%) 7.4% 13.4% 10.8% contracts its rigs in 2H09 and 2010 will be a key determinant of PVD’s share- Assets/Equity 2.75 1.83 3.29 price going forward. Corporate governance is also a concern for PVD as the company seeks to continue to use PetroVietnam as a means of finance Pre-Tax ROE (%) 20.4% 24.6% 35.4% new rig investment. In the recent acquisition of PVDI minorities, PVD issued 1-Tax rate 0.72 0.99 1.00 25.7mn shares to its parent and PVDI minorities at a valuation that was not- ROE (%) 14.7% 24.4% 35.6% favorable to PVD minority shareholders. Transactions between PetroVietnam and PVD do not appear to be at arm’s-length and should be examined Miscelleaneous FY06A FY07A Current closely. Finally, much of PVD’s strategy is to displace rigs operating in Altman Z Score n.m. n.m. 1.7 Vietnam and leased-out by global players such as TransOcean and Sea- Asset Growth (%) -74.8% 99.2% 99.4% Drill. Beyond PetroVietnam Group operated fields, rigs leases are subject to Capex/Sales (%) n.m. 54.6% 91.8% competitive tender by international E&P field operators and this may-well Earnings Retention (%) n.a. n.a. 60.1% impair day-rates going forward.
129 FPT Corp Ticker Share Price - VND
FPT 70,000 01 Jul 09
Close/Volume Chart Company Description & Principle Activities VND Mn Shares The Corporation for Financing and Promoting Technology (FPT) is primarily a distributor of telecommunications and IT hardware for several global brands. They are also rapidly diversifying across five core businesses areas: systems integration, software outsourcing, telecommunications, distribution, and education, and are involved in finance and real estate ventures. The company supplies embedded systems, customized software, and outsourcing services. In telecommunications, it provides broadband backbone and resale services, multi-media, entertainment, and advertising. Under distribution, FPT assembles personal computers and distributes imported hand phones. The company is also developing and managing a high-tech industrial park. FPT founded and operates FPT University and two programming and multimedia training centres. It is also engaged as a minority shareholder in a securities brokerage, fund management, and commercial banking arm.
Relative Performance Per Share (VND) FY06A FY07A FY08A Trail 12M FY09E* FY10E* EPS 3,559 5,375 6,020 6,346 6,237 7,255 BVPS 11,444 14,359 17,287 n.a. n.a. n.a. DPS n.a. 2,045 2,802 n.a. n.a. n.a. CFPS n.a. 5,366 9,951 n.a. n.a. n.a. FCFPS n.a. 1,780 4,840 n.a. n.a. n.a. * Bloomberg Consesus Estimates
01 Jul 09 Key Valuations FY07A Avg +/- 1 s.d. FY08A Avg +/- 1 s.d. FY09E* FY10E* S&P Vietnam 10 Ho Chi Minh Stock Index P/E (x) 22.8 24.5 / 21.2 10.4 10.5 / 10.3 11.2 9.6 MSCI AC Asia Index FPT P/B (x) 13.4 16.5 / 10.3 3.8 5.3 / 2.2 n.a. n.a. Dividend Yield (%) 0.6 1.2 / 0.1 4.3 5.8 / 2.8 n.a. n.a. P/CF S (x) 25.0 26.8 / 23.2 11.6 19.5 / 3.6 n.a. n.a. FCF Yield (%) 1.2 n.a. 8.5 16.4 / 0.6 n.a. n.a. Trading & Liquidity 20 Days 100 Days 180 Days Volume (Reg, Trading) 819,467 717,935 585,917 Growth FY06A FY07A FY08A FY09E* FY10E* VND Val. (Reg. Trading, bn) 58.7 42.8 33.5 Revenues -19.2% 18.4% 21.4% n.a. n.a. Percent of market (%) 2.0 2.7 3.1 EBITDA 75.4% 52.9% 45.9% n.a. n.a. EBIT 72.0% 51.7% 46.9% n.a. n.a. Shares Outstanding (mn) FY07A FY08A Current Net Income 60.6% 63.7% 13.4% n.a. n.a. Wgt. Avg Issued Shares 137.2 138.9 141.2 EPS 56.3% 51.0% 12.0% 3.6% 16.3% Fully Dilluted Shares 137.2 138.9 141.2 BVPS 120.6% 25.5% 20.4% n.a. n.a. Foreign Owned (% / Limit) 47.6mn 33.7% 49.0% * Bloomberg Consesus Estimates
Market Values VND (bn) USD (mn) EUR (mn) Growth Indicators FY06A FY07A FY08A Market Cap 10,305 578.9 409.7 Fixed Assets/Assoc 104.0% 182.9% 26.8% Net Debt (3) (0.1) (0.0) Debt -18.3% 67.5% -5.7% Minorities & Others n.a. n.a. n.a. Financial Investments 6750.0% 70.1% 105.7% Enterprise Value n.a. n.a. n.a. Other LT Assets -30.1% 171.8% 242.5%
Corperate Actions Ex-Date Amt/(ratio) Fiscal Year Profitability FY06A FY07A FY08A Interim 4-Jun-09 1,000 FY09 Gross Margin (%) 12.0 14.5 18.2 Stock Dividend 7-Nov-08 1/2 FY08 EBITDA Margin (%) 6.5 8.4 10.1 Final 7-Nov-08 1,067 FY08 EBIT Margin (%) 5.6 7.1 8.6 2nd Interim 28-Jul-08 667 FY08 Pre-Tax Margin (%) 5.3 7.6 7.6 Interim 21-Apr-08 667 FY08 Net Margin (%) 4.0 5.5 5.1 Final 8-Oct-07 1,333 FY07 2nd Interim 24-Jul-07 400 FY07 Solvency & Liquidity FY06A FY07A FY08A Stock Dividend 21-May-07 1/2 FY07 Acid Test Ratio 1.07 0.84 1.17 Interim 6-Mar-07 267 FY07 Current Ratio 1.60 1.29 1.30 Market Outlook LT Debt/Capital 0.4% 2.9% 0.1% Net Debt/Equity -7.4% -21.2% 0.1% Vietnam’s demographics are favorably disposed to the LT Debt/Fixed Assets 2.1% 10.6% 0.3% knowledge-based industries that FPT is targeting. A youthful Total Liab/Total Assets 50.5% 57.8% 51.7% population, high literacy and secondary education rates combined with rising consumerism gives the company enormous mid-term top line growth potential. In addition, Management Company Data Lot B2 – Cau Giay Small Industry and Industrial several high technology business groups and funds such Chairman Truong Gia Binh Head Office as IDG and Intel have focused on Vietnam in recent years, Handicraft making Consortium demonstrating the country’s potential in knowledge-based CEO Nguyen Thanh Nam Cau Giay District, Hanoi City industries. CFO/ Chief Accontant Nguyen The Phuong Website www.fpt.com.vn IR Contact Nguyen Van Thang Telephone +844.3730.1515 Company History FPT was founded in 1998 and has become the largest IT Major Shareholders Shares Insider Holdings Shares conglomerate in Vietnam. The company’s founders and State 7.13% Bui Quang Ngoc 4.18% Citigroup Global Markets employees are significant stakeholders, with the state owning 2.29% Truong Gia Binh 8.82% a minority 7.2% share. FPT was listed on the HOSE in December Financial Products Llc 2006. Deutsche Bank London 4.80% Hoang Minh Chau 2.81% Red River Holding 3.63% Nguyen Thanh Nam 1.89%
130 Telecommunications / Fixed Line Telecommunications
Revenues by Business Line, 2008 Profit & Loss (VND bn) FY06A FY07A FY08A Revenue 11,398.0 13,498.9 16,381.8 EBITDA 740.0 1,131.5 1,650.9 EBIT 633.2 960.6 1,411.3 Interest & Fx Exp (70.8) (39.6) (363.6) Non Op Inc (Loss) 46.9 108.0 192.4 Pre-Tax 609.3 1,029.0 1,240.1 Taxes (73.7) (148.7) (189.0) Minorities & Pref’s (85.2) (142.8) (214.8) Net Income to Common 450.4 737.5 836.3
Balance Sheet (VNDbn) FY06A FY07A FY08A Cash & Equiv. 669.5 895.5 1,242.5 ST Investments & Mkt. Sec 0.0 0.0 0.0 Receivables 1,509.8 1,511.1 1,541.3 Inventories 554.7 1,489.6 1,316.7 Other Curr Assets 310.7 446.4 557.8 Net Fixed Assets 286.7 606.8 694.4 Construction in Progress 36.7 8.8 221.8 Invest. in Assoc. 0.0 299.2 243.6 Financial Investments 13.3 22.6 46.5 Other L.T. Assets 28.0 76.0 260.3 Payables (626.7) (1,060.4) (1,057.5) Other Curr Liab. (308.5) (717.8) (866.1) ST Debt (778.0) (1,249.3) (1,236.8) Management Strategy and Goals LT Debt (6.9) (65.5) (3.0) Management strategy is to become a diversified conglomerate focused Other LT Liab 0.0 (1.1) (1.9) around high growth telecommunications, content services, technology Net Assets 1,689.0 2,262.0 2,959.5 solutions and services, and human capital driven sectors. The company is Minorities 123.2 282.6 526.2 organised and managed around largely independent business units with Book Capital 1,133.0 1,448.4 1,466.5 financial reporting done on a consolidation basis. The company seeks to Ret. Earnings 432.9 531.0 966.8 be the market leader in all business segments in which it operates. FPT Total Liab. & Equity 3,409.2 5,356.1 6,124.8 has ceased retail operations to avoid competition between sub-units and will also focus on restructuring and improving corporate governance and Working Capital Analysis FY06A FY07A FY08A corporate finance, especially as several of FPT’s subsidiaries plan to equitize Days Receivable 48.3 40.9 34.3 and seek listing in the coming years. Days Inventory 20.2 47.1 35.9 Investment Plans Days Payable 22.8 33.5 28.8 Cash Operating Cycle (5.4) 39.8 30.3 FPT’s capex plan for FY09 is relatively moderate due to the subdued economic outlook, the only major expenditure being USD60mn to build Derived Cash Flow (VNDbn)* FY06A FY07A FY08A two office buildings that will serve as a corporate campus, which is EBIT 633.2 960.6 1,411.3 scheduled for completion within three years. Depreciation & Amort 106.8 170.9 239.6 Key Success Factors Chgs in Working Cap (1,132.7) (229.1) 176.8 Operating Cash Flow (392.7) 902.4 1,827.7 FPT has successfully secured the Vietnamese distribution rights for several Net Interest, Fx & Taxes (144.5) (188.3) (552.6) competing global technology brands. IT distribution is the firm’s highest grossing revenue and profit centre, thus FPT will still need to execute well in Fixed Asset Capex (246.6) (492.0) (710.0) this segment in the near term although it is no longer the most profitable Investments (11.8) (308.5) 31.8 business line due to an increasingly competitive environment and the Non Op Inc (Loss) 46.9 108.0 192.4 recently slowdown in growth in this sector. The firm’s systems integration Other Non Cash Adj. 845.6 (251.5) 3.8 depends largely on state spending for substantial portions of their Dividends Paid (280.5) (389.3) (389.1) respective revenue while in software outsourcing, Japanese clients account Change in Paid in Capital 585.7 315.4 18.1 for 50% of the divisional revenue. The telecommunications business growth Change in Net Debt (176.1) 529.9 (75.0) potential remains positive due to the growing demand for ADSLs, media Net Cash Flow 226.1 226.1 347.0 and content services in Vietnam. * Calculated from Balance Sheet & P&L
Key Risk Factors DuPont Analysis FY06A FY07A FY08A FPT and its subsidiaries use of convertible preferred and common EBIT / Sales 0.06 0.07 0.09 shares issued at par value (VND10,000/share) as a means of employee Sales/Total Assets 3.34 2.52 2.67 compensation which exposes public investors to substantial EPS dilution less Net Int./Assets (0.01) 0.01 (0.03) risks. FPT also has a less than 100% economic interest in many growth divisions such as telecommunications, software outsourcing and banking Pre-Tax ROA (%) 17.9% 19.2% 20.2% services. The company also consolidates selected associates (e.g. FPT Assets/Equity 2.02 2.37 2.07 Telecom) where the state as a key shareholder (50.1%) has granted to FPT Pre-Tax ROE (%) 36.1% 45.5% 41.9% rights to act on its behalf. If the State where to seek to exercise its voting 1-Tax rate 0.88 0.86 0.85 rights, FPT would likely have de-consolidate and associate account this ROE (%) 31.7% 38.9% 35.5% company. Vietnam’s WTO ascension will eventually allow foreign companies to establish wholly owned distribution subsidiaries which means that some Miscelleaneous FY06A FY07A Current of FPT’s key contracts may be lost. Finally, the company will face increasing Altman Z Score n.m. n.m. 8.5 challenges in software outsourcing in international markets when Asset Growth (%) -44.3% 57.1% 14.4% competing with established major players from India and China. Capex/Sales (%) 2.2% 3.6% 4.3% Earnings Retention (%) n.a. 62.0% 53.4%
131 Pha Lai Thermal Ticker Share Price - VND Power PPC 26,900 01 Jul 09
Close/Volume Chart Company Description & Principal Activities VND Mn Shares Pha Lai Thermal Power is a coal-based electricity generation company located in Hai Duong province. The company operates two separate plants: Plant I with four 110MW turbines, and Plant II, which was completed in 2002, with two 330 mw turbines. PPC sells electricity to Electricity of Vietnam (EVN), which is also PPC’s controlling shareholder.
Per Share (VND) FY06A FY07A FY08A Trail 12M FY09E* FY10E* EPS 3,002 2,578 (654) (648) 2,591 2,572 BVPS n.a. 11,761 10,568 n.a. n.a. n.a. DPS 1,143 1,992 500 0 n.a. n.a. CFPS 3,935 8,574 4,591 6,042 n.a. n.a. FCFPS 3,918 8,164 3,887 5,268 n.a. n.a. * Bloomberg Consensus Estimates
Relative Performance Key Valuations FY07A Avg +/- 1 s.d. FY08A Avg +/- 1 s.d. FY09E* FY10E* P/E (x) 22.2 23.2 / 21.2 12.3 13.1 / 11.5 10.4 10.5 P/B (x) 5.0 5.4 / 4.6 2.5 3.3 / 1.7 n.a. n.a. Dividend Yield (%) 2.3 3.1 / 1.4 3.9 5.2 / 2.6 n.a. n.a. P/CFPS (x) 6.7 7 / 6.4 4.5 5.4 / 3.5 n.a. n.a. FCF Yield (%) n.a. n.a. 20.4 21.3 / 19.5 n.a. n.a.
Growth FY06A FY07A FY08A FY09E* FY10E* 01 Jul 09 Revenues 147.2% 5.5% 2.0% n.a. n.a. S&P Vietnam 10 Ho Chi Minh Stock Index EBITDA 90.5% -1.1% -17.6% n.a. n.a. MSCI AC Asia Index PPC EBIT 904.5% -7.5% -31.0% n.a. n.a. Net Income 10771.7% -15.8% -125.8% n.a. n.a. EPS n.a. -14.1% -125.4% -496.2% -0.7% BVPS n.a. n.a. -10.1% n.a. n.a. * Bloomberg Conscencus Estimates Trading & Liquidity 20Days 100Days 180Days Volume (Reg, Trading) 1,335,979 711,970 517,007 Growth Indicators FY06A FY07A FY08A VND Val. (Reg. Trading, bn) 40.7 20.3 13.8 Fixed Assets/Assoc -14.6% -12.4% -11.7% Percent of market (%) 1.3 1.3 1.3 Debt 6505.5% -17.8% 23.6% Financial Investments n.a. n.a. -78.2% Shares Outstanding (mn) FY07A FY08A Current Other LT Assets -34.5% 583.5% 270.7% Wgt. Avg Issued Shares 319.7 325.2 325.2 Fully Dilluted Shares 319.7 325.2 325.2 Profitability FY06A FY07A FY08A Foreign Owned (% / Limit) 61.2mn 18.8% 49.0% Gross Margin (%) 33.5 29.3 27.9 EBITDA Margin (%) 56.5 53.0 42.8 Market Values VND (bn) USD (mn) EUR (mn) EBIT Margin (%) 31.6 27.7 18.8 Market Cap 8,942 502.3 355.6 Pre-Tax Margin (%) 26.8 20.4 (12.1) Net Debt 3,448 193.7 0.0 Net Margin (%) 27.2 21.7 (5.5) Minorities & Others (946) (53.2) (37.6) Enterprise Value 11,444 642.9 455.1 Solvency & Liquidity FY06A FY07A FY08A Acid Test Ratio 6.78 2.98 3.85 Corperate Actions Ex-Date Amt/(ratio) Fiscal Year Current Ratio 5.75 3.25 4.69 Cancelled 28-Oct-08 300 FY08 LT Debt/Capital 169.3% 134.7% 184.9% Final 5-Mar-08 500 FY08 Net Debt/Equity -163.3% -133.5% -180.0% Interim 26-Sep-07 1,000 FY07 LT Debt/Fixed Assets 89.0% 83.4% 116.4% Bonus 18-Jun-07 1/20 FY07 Total Liab/Total Assets 65.0% 60.5% 68.2% Cash Dividend 16-Mar-07 952 FY06 Management Company Data Market Outlook Phao Son Village, Pha Lai town, Chairman Pham Kim Lan Head Office Vietnam has been barely able to cope up with the country’s Chi Linh, Hai Duong power demand growth which will remain the case for many CEO Nguyen Khac Son years. Every single unit of electricity generated within Vietnam CFO/ Chief Accontant Le The Son Website http://www.ppc.evn.vn territory will be purchased by EVN. IR Contact Le The Son Telephone +84-0320 88 1126
Company History Major Shareholders Shares Insider Holdings Shares Pha Lai thermal power plant was established in April 1982, EVN 221.81 mn Pham Kim Lan 105,840 reporting to Power Company I. In April 1995, the plant became PVFC 7.53 mn Nguyen Khac Son 107,310 a direct member of the EVN. In March 2005, the then Ministry Vietnam International Bank 2.04 mn of Industry issued a decision to upgrade the plant to a member (VIB) company of EVN. The company was equitized in January 2006 Ngan Ha Investment & and listed on the Hanoi Stock Exchange in May 2006. The Contruction Joint Stock 2 mn company was relisted on the HOSE in January 2007. company
132 Utilities / Electricity
Revenues by Source, 2008 Profit & Loss (VND bn) FY06A FY07A FY08A Revenue 3,607.1 3,807.1 3,881.9 EBITDA 2,039.6 2,017.5 1,662.4 EBIT 1,141.0 1,055.9 728.8 Interest & Fx Exp (187.0) (397.6) (1,738.2) Non Op Inc (Loss) 11.4 119.5 541.3 Pre-Tax 965.4 777.8 (468.1) Taxes 13.9 46.5 255.3 Minorities & Pref’s 0.0 0.0 0.0 Net Income to Common 979.3 824.4 (212.8)
Balance Sheet (VNDbn) FY06A FY07A FY08A Cash & Equiv. 528.6 312.8 512.8 ST Investments & Mkt. Sec 0.0 1,030.0 2,735.6 Receivables 2,632.4 468.8 915.4 Inventories 353.0 469.4 557.2 Other Curr Assets 20.4 26.0 17.6 Net Fixed Assets 7,028.2 6,040.4 5,114.4 Construction in Progress 27.8 139.0 343.6 Invest. in Assoc. 0.0 0.0 0.0 Financial Investments 0.0 1,098.4 239.2 Other L.T. Assets 14.3 97.5 361.5 Management Strategy and Goals Payables (77.9) (104.9) (133.3) The company’s goals include maintenance of the stability and reliability of Other Curr Liab. (227.3) (332.7) (529.4) turbines and generators, achieve targeted generation output, ensure proper ST Debt (306.4) (264.3) (343.4) overhaul and maintenance for the turbines and generators, manage cash LT Debt (6,281.6) (5,153.6) (6,353.3) reserves profitably by investing soundly, and determine options to reduce Other LT Liab (1.0) (1.9) (1.6) the risk from the company’s JPY36.2bn debt. Net Assets 3,710.6 3,825.0 3,436.3 Investment Plans Minorities 0.0 0.0 0.0 Book Capital 3,107.0 3,262.4 3,262.4 PPC has already found a customer who is interested in collecting fly ash Ret. Earnings 603.6 562.6 173.9 from its Plant I and is cooperating with the customer to expedite the project. PPC has decided to invest VND 747 bn, or equivalently a 15% stake, Total Liab. & Equity 10,604.8 9,682.3 10,797.3 in the recently-commissioned Quang Ninh Thermal Power Plant and is also interested in investing in Hai Phong Thermal Plant with a similar stake, Working Capital Analysis FY06A FY07A FY08A although the details have yet to be finalised. Days Receivable 266.4 44.9 86.1 Days Inventory 53.8 63.6 72.7 Key Success Factors Days Payable 11.9 14.2 17.4 The base-case PPA price is VND581 per KWh, which is comparable to Cash Operating Cycle (200.8) 32.9 4.0 other major power companies in Vietnam and can be adjusted to offset the effects caused by fluctuations in the price of coal and FO, two main Derived Cash Flow (VNDbn)* FY06A FY07A FY08A input materials. The plant is located advantageously not too distant from EBIT 1,141.0 1,055.9 728.8 coal mines and close to a six-way river junction. The Plant II is financed by Depreciation & Amort 898.6 961.5 933.7 Japanese ODA and therefore has favourable conditions and low interest Chgs in Working Cap 6,936.4 2,173.9 (300.9) terms. Operating Cash Flow 8,975.9 4,191.4 1,361.6 Net Interest, Fx & Taxes (173.1) (351.0) (1,482.9) Key Risk Factors Fixed Asset Capex (5.6) (131.1) (229.2) Aside from the fact that thermal turbines and generators in general are not Investments 0.0 (1,098.4) 859.2 as stable and reliable as hydroelectric plants, plant I is about 20 years old, Non Op Inc (Loss) 11.4 119.5 541.3 almost fully depreciated, and thus requires more attentive maintenance, Other Non Cash Adj. (14,911.0) (1,768.8) (2,128.8) causing some disruption in 2008. No hedging strategies for the Japanese Dividends Paid (636.8) (162.6) 0.0 yen-denominated debt are available for PPC, which derived an overall net Change in Paid in Capital 35.0 155.4 0.0 loss in 2008 due to the unrealized translation loss associated with this debt. Change in Net Debt 6,488.3 (1,170.1) 1,278.8 Net Cash Flow (215.8) (215.8) 200.0 * Calculated from Balance Sheet & P&L
DuPont Analysis FY06A FY07A FY08A EBIT / Sales 0.32 0.28 0.19 Sales/Total Assets 0.34 0.39 0.36 less Net Int./Assets (0.02) (0.03) (0.11) Pre-Tax ROA (%) 9.1% 8.0% -4.3% Assets/Equity 2.86 2.53 3.14 Pre-Tax ROE (%) 26.0% 20.3% -13.6% 1-Tax rate 1.01 1.06 0.45 ROE (%) 26.4% 21.6% -6.2%
Miscelleaneous FY06A FY07A Current Altman Z Score n.m. n.m. 1.9 Asset Growth (%) -1.8% -8.7% 11.5% Capex/Sales (%) 0.2% 3.4% 5.9% Earnings Retention (%) 61.9% 22.7% 176.5%
133 Vinh Son - Song Hinh Ticker Share Price - VND Hydropower VSH 33,000 01 Jul 09
Close/Volume Chart Company Description & Principal Activities VND Mn Shares Vinh Son – Song Hinh’s main business is hydroelectricity generation, which accounted for more than 99% of gross revenue in 2008. With the combined turbine generating capacities of 136 MW and 66MW in the Vinh Son plant and an additional 70MW in the Song Hinh plant, the company has been able to generate up to 860 GWh of electricity in 2008 of which Electricity of Vietnam (EVN) is the sole purchaser. VSH is also pursuing ambitious hydropower plant projects in and around its home province of Binh Dinh and is currently the largest market-cap hydroelectric company on the Ho Chi Minh City stock exchange.
Per Share (VND) FY06A FY07A FY08A Trail 12M FY09E* FY10E* EPS 2,146 1,984 2,698 2,836 2,397 2,432 BVPS 10,598 14,709 15,582 n.a. n.a. n.a. DPS 1,873 579 1,800 n.a. n.a. n.a. CFPS 2,968 2,420 3,623 n.a. n.a. n.a. Relative Performance FCFPS 2,616 2,101 3,512 n.a. n.a. n.a. * Bloomberg Consensus Estimates
Key Valuations FY07A Avg +/- 1 s.d. FY08A Avg +/- 1 s.d. FY09E* FY10E* P/E (x) 33.9 40.7 / 27.2 12.6 14.5 / 10.7 13.8 13.6 P/B (x) 5.1 6.3 / 4 2.0 2.3 / 1.7 n.a. n.a. Dividend Yield (%) 1.6 2.2 / 0.9 4.3 5.9 / 2.6 n.a. n.a. 01 Jul 09 P/CFPS (x) n.a. n.a. n.a. n.a. n.a. n.a. S&P Vietnam 10 Ho Chi Minh Stock Index FCF Yield (%) n.a. n.a. n.a. n.a. n.a. n.a. MSCI AC Asia Index VSH Growth FY06A FY07A FY08A FY09E* FY10E* Revenues 123.0% -15.2% 30.7% n.a. n.a. EBITDA n.a. -11.3% 30.7% n.a. n.a. EBIT 158.8% -18.0% 52.1% n.a. n.a. Net Income 207.1% -5.1% 44.4% n.a. n.a. Trading & Liquidity 20Days 100Days 180Days EPS n.a. -7.5% 36.0% -11.2% 1.5% Volume (Reg, Trading) 231,454 184,936 164,261 BVPS n.a. 38.8% 5.9% n.a. n.a. VND Val. (Reg. Trading, bn) 8.4 6.0 5.0 * Bloomberg Conscencus Estimates Percent of market (%) 0.3 0.4 0.5 Growth Indicators FY06A FY07A FY08A Shares Outstanding (mn) FY07A FY08A Current Fixed Assets/Assoc -5.1% -5.8% -8.4% Wgt. Avg Issued Shares 129.4 137.5 137.5 Debt n.a. -23.6% -20.7% Fully Dilluted Shares 129.4 137.5 137.5 Financial Investments -100.0% n.a. n.a. Foreign Owned (% / Limit) 40.2mn 29.3% of 49.0% Other LT Assets 514.7% -80.9% 28.8% Market Values VND (bn) USD (mn) EUR (mn) Market Cap 4,537 254.9 180.5 Profitability FY06A FY07A FY08A Net Debt (545) (30.6) (0.0) Gross Margin (%) 55.8 54.6 63.3 Minorities & Others (122) (6.8) (4.8) EBITDA Margin (%) 88.3 92.4 92.4 Enterprise Value 3,871 217.5 154.0 EBIT Margin (%) 54.3 52.5 61.2 Pre-Tax Margin (%) 0.0 69.2 76.5 Corperate Actions Ex-Date Amt/(ratio) Fiscal Year Net Margin (%) 62.0 69.4 76.7 Final 4-Mar-09 800 FY09 Interim 12-Nov-08 1,000 FY08 Solvency & Liquidity FY06A FY07A FY08A Final 12-Mar-08 800 FY08 Acid Test Ratio 9.63 17.90 36.70 Rights Issue 15-Aug-07 1/10 FY07 Current Ratio 1.25 6.70 8.24 Interim 15-Aug-07 591 FY07 LT Debt/Capital 31.4% 15.5% 10.5% Cash Dividend 3-Nov-06 788 FY06 Net Debt/Equity -36.6% -9.2% -13.1% LT Debt/Fixed Assets 24.5% 19.4% 15.2% Total Liab/Total Assets 29.2% 17.8% 13.7% Market Outlook Vietnam’s electricity output has barely kept pace with growth Management Company Data in demand – a situation that will remain in the short to medium 21 Nguyen Hue Street, Chairman Nguyen Van Thanh Head Office term as every unit of electricity generated within Vietnam Quy Nhon city, Binh Dinh province territory will be consumed. CEO Vo Thanh Trung Company History CFO/ Chief Accontant Huynh Cong Ha Website http://www.vshpc.evn.com.vn VSH was established as the Vinh Son hydroelectric plant, IR Contact Vo Thanh Trung Telephone +84-(0)56 89 2792 commissioned by EVN in 1994 in Binh Dinh province in Vietnam’s central region. Five years later the plant was assigned by EVN to Major Shareholders Shares Insider Holdings Shares operate the newly constructed Song Hinh plant, located in the EVN 42.01 mn Nguyen Van Thanh 12,342 neighboring Phu Yen province. It was incorporated following SCIC 32.99 mn Nguyen Duc Doi 432,500 equitization in 2005 and approved to list on the HOSE in 2007. SSI 6.15 mn Vo Thanh Trung 173,580
134 Utilities / Electricity
Revenues by Market, 2008 Profit & Loss (VND bn) FY06A FY07A FY08A Revenue 436.6 370.2 483.7 EBITDA 385.6 342.0 447.1 EBIT 237.2 194.5 295.8 Interest & Fx Exp (26.8) (15.8) (26.5) Non Op Inc (Loss) 60.4 77.5 100.8 Pre-Tax 0.0 256.3 370.2 Taxes 0.0 0.6 0.7 Minorities & Pref’s (0.3) 0.0 0.0 Net Income to Common 270.6 256.8 370.9
Balance Sheet (VNDbn) FY06A FY07A FY08A Cash & Equiv. 53.5 228.8 48.0 ST Investments & Mkt. Sec 57.9 510.7 825.7 Receivables 26.2 62.6 60.3 Inventories 25.8 23.4 20.8 Other Curr Assets 3.3 8.0 39.1 Net Fixed Assets 1,581.3 1,572.5 1,422.0 Construction in Progress 143.4 42.0 56.1 Invest. in Assoc. 0.0 10.4 10.0 Financial Investments 0.0 0.0 0.0 Other L.T. Assets 5.3 1.0 1.3 Payables (5.6) (12.8) (1.3) Other Curr Liab. (4.2) (9.1) (10.3) ST Debt (121.2) (101.3) (104.2) LT Debt (421.9) (313.9) (224.8) Other LT Liab (0.1) (0.1) (0.2) Net Assets 1,343.6 2,022.3 2,142.4 Minorities 7.3 0.0 0.0 Management Strategy and Goals Book Capital 1,250.0 545.6 1,745.6 For 2009, the company will seek to meet electricity output targets and Ret. Earnings 86.3 1,476.7 396.8 achieve targeted revenues, implement the ISO 9001-2008 quality control for Total Liab. & Equity 1,896.5 2,459.4 2,483.3 electricity generating enterprises, and accelerate progress on key projects. Working Capital Analysis FY06A FY07A FY08A Investment Plans Days Receivable 21.9 61.7 45.5 VSH has announced 4 hydropower plant projects but only three are certain: Days Inventory 48.8 50.7 42.8 Construction Construction Days Payable 10.5 27.8 2.7 Location MW E[GWh] starts ends Cash Operating Cycle 37.4 16.8 (0.0) Binh Dinh Vinh Son 3 Later 2009 2011 30 91 province Derived Cash Flow (VNDbn)* FY06A FY07A FY08A Vinh Son 2 Later 2009 2013 Gia Lai province 105 309 EBIT 237.2 194.5 295.8 Depreciation & Amort 148.4 147.5 151.3 Kon Tum Upper Kon Tum Later 2009 2014 220 1056 province Chgs in Working Cap 170.8 (26.6) (36.5) Operating Cash Flow 556.4 315.4 410.6 Not yet Phu Yen Dong Cam TBC 130 430 determined province Net Interest, Fx & Taxes (26.8) (15.2) (25.7) Fixed Asset Capex (44.4) (41.3) (15.3) Vinh Son 2 and Kon Tum projects are included in the government’s power Investments 60.8 (10.4) 0.5 development master plan. Non Op Inc (Loss) 60.4 77.5 100.8 Other Non Cash Adj. (899.3) 929.1 (1,765.5) Key Success Factors Dividends Paid (74.9) (247.4) 0.0 The water supply is relatively plentiful and stable thanks to consider- Change in Paid in Capital 0.0 (704.4) 1,200.0 able rainfall in the reservoir regions. The steep topography translates into Change in Net Debt 543.1 (127.9) (86.1) high water pressure at the turbine intake, thus enhancing the electricity- Net Cash Flow 175.3 175.3 (180.8) generating efficiency for each unit of water passing through the turbines. * Calculated from Balance Sheet & P&L This will also be the case for the Vinh Son and Kon Tum dams. Compared to other hydro power companies, VSH have had a long-term Power Purchas- DuPont Analysis FY06A FY07A FY08A ing Agreement (PPA) with favourable pricing. Much of the debt associated EBIT / Sales 0.54 0.53 0.61 with the construction of existing plants has been repaid and the remaining portion is negligible. Sales/Total Assets 0.23 0.15 0.19 less Net Int./Assets (0.13) 0.03 0.03 Key Risk Factors Pre-Tax ROA (%) 0.0% 10.4% 14.9% Assets/Equity 1.41 1.22 1.16 Hydro power plant project developments, while creating enormous growth for the company in the future, place a huge current financial burden on Pre-Tax ROE (%) 0.0% 12.7% 17.3% the company. VSH is also negotiating a new PPA with EVN, the outcome of 1-Tax rate n.a 1.00 1.00 which will be crucial especially when VSH is in need of cash to implement ROE (%) n.a. 12.7% 17.3% at least two large hydropower projects. Miscelleaneous FY06A FY07A Current Altman Z Score n.m. n.m. 6.8 Asset Growth (%) -23.6% 29.7% 1.0% Capex/Sales (%) 10.2% 11.2% 3.2% Earnings Retention (%) 12.7% 70.8% 33.3%
135 References
ADB Statistical Database System https://sdbs.adb.org/sdbs/index.jsp ADB Asian Bonds Online http://asianbondsonline.adb.org/ CIA World Factbook https://www.cia.gov/library/publications/the-world-factbook/index.html GSO – General Statistic Office of Vietnam http://www.gso.gov.vn HNX – Hanoi Stock Exchange http://www.hnx.vn HOSE – Ho Chi Minh City Stock Exchange http://www.hsx.vn IMF World Economic Outlook http://www.imf.org/external/pubs/ft/weo/2009/01/weodata/index.aspx Mayer Brown JSM, Vietnam Investor’s Guide to Business Law http://www.mayerbrown.com/hochiminhcity/ Ministry of Foreign Affairs, Vietnam Political System http://www.mofa.gov.vn/en/tt_vietnam/nr040810155159/ Vietnam Embassy in the USA http://vietnamembassy.us/learn_about_vietnam/politics/overview/ Wikipedia, Politics of Vietnam http://en.wikipedia.org/wiki/Politics_of_Vietnam More Vietnam on the Web http://www.gksoft.com/govt/en/vn.html
136 ADB Statistical Database System https://sdbs.adb.org/sdbs/index.jsp ADB Asian Bonds Online http://asianbondsonline.adb.org/ CIA World Factbook https://www.cia.gov/library/publications/the-world-factbook/index.html GSO – General Statistic Office of Vietnam http://www.gso.gov.vn HNX – Hanoi Stock Exchange http://www.hnx.vn HOSE – Ho Chi Minh City Stock Exchange http://www.hsx.vn IMF World Economic Outlook http://www.imf.org/external/pubs/ft/weo/2009/01/weodata/index.aspx Mayer Brown JSM, Vietnam Investor’s Guide to Business Law http://www.mayerbrown.com/hochiminhcity/ Ministry of Foreign Affairs, Vietnam Political System http://www.mofa.gov.vn/en/tt_vietnam/nr040810155159/ Vietnam Embassy in the USA http://vietnamembassy.us/learn_about_vietnam/politics/overview/ Wikipedia, Politics of Vietnam http://en.wikipedia.org/wiki/Politics_of_Vietnam More Vietnam on the Web http://www.gksoft.com/govt/en/vn.html SunWah Tower, 5F, 115 Nguyen Hue Blvd., Dist.1, Ho Chi Minh City, Vietnam T: +848 3827 8278 F: +848 3827 8368 E: [email protected] W: vinasecurities.com
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