VIETNAM COMPANY LIMITED November 4, 2014

PRE-IPO NOTE

Vietnam Airlines is offering 49 million shares or 3.475% to the Auction time 8:30 AM November 14, 2014 public auction at an initial price of VND22,300 per share on Number of offering shares 49,009,008 to public auction November 14, 2014. Initial price per share VND22,300 We have concerns that the offer price may be too high: Proposed chartered capital VND14.10tn (USD0.66bn) Market capital VND31.45tn (USD1.48bn)  Weak 9M2014 results: The company’s management Planned ownership structure estimated 9M2014 net income of parent company at around

State-owned 75% VND100 billion (USD4.7 million). This amount is much less than the company’s whole year target of VND341 billion Strategic investors* 20% (USD16.0 million). Employees, Unions 1.525%  Aggressive management targets: The 2014-2018 business Public 3.475% plan for parent company is quite optimistic although the *Strategic investor has not yet been identified. company faces many challenges. For the next five years, 2008-13 2014F 2014-18

CAGR (VNDbn) CAGR management targets net income to grow with a CAGR of Parent company 83.8% although earnings were highly volatile and recorded a Revenues 15.8% 59,008 16.7% CAGR of only 0.8% from 2008 to 2013. Net income 0.8% 341 83.8% Management believes the company will achieve these Consolidation aggressive targets by improving its facilities and equipment, Revenues 12.6% n/a n/a investing in modern wide body aircraft to increase its Net income -28.0% n/a n/a market share in the region and improve efficiency. The Vietnam Peers impact to profits is quite uncertain. 2013 Airlines (median) VN-Index  Challenging industry: During the past five years, according P/E 730.7 17.0 12.3 to data compiled by Bloomberg, six of ten initial public P/B 3.1 1.0 1.8 offerings by Asian airlines are trading below their sale EV to EBITDAR 5.2 4.5 n/a prices, due to the overcapacity and unprofitability of the Net margin 0.1% 5.2% 0.3% industry. ROE 0.4% 5.2% 2.2%  Peer comparison: At its initial auction price, a share of ROA 0.1% 1.6% 0.3% is relatively higher than the regional peers. Company’s description: In addition, investors have to face liquidity risk since the Vietnam Airlines was established in 1995 and is the company has not yet made any plan for listing its shares. national flag carrier. It has the youngest and most modern air fleet among the region. Key advantages include: 1) support from government, The company also invested in low cost carrier – Jetstar 2) largest scale in Vietnam with good reputation, and 3) good to compete in low fare market and contributed 49% of capital of Cambodia Angkor Air- aviation supply chain from associates and subsidiaries Cambodian flag carrier. Key risks include: 1) fluctuation of oil price, 2) depreciation of Main business lines comprise air transport, commerce, and ancillary activities. VND, 3) airport service expense hikes, and 4) fiercer Address: 200 Nguyen Son Street, Long Bien District, competition from low cost carriers and Middle Eastern airlines. Telephone: +844 3827 2289 Fax: +844 3872 2375 Website: www.vietnamairlines.com Please see important disclosure information at the end of this report.

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CONTENT

OVERVIEW OF VIETNAM AIRLINES INDUSTRY ...... 3 OVERVIEW OF THE COMPANY ...... 5 Market share ...... 6 Subsidiaries and associates...... 6 Route network ...... 7 Fleet structure ...... 9 BUSINESS PERFORMANCE ...... 10 KEY OPERATIONAL DRIVERS ...... 14 EQUITIZATION PLAN ...... 15 BUSINESS PLAN AFTER EQUITIZATION ...... 17 PEER COMPARISON ...... 18 CONCLUSION ...... 19 Consolidated financial statements ...... 20

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OVERVIEW OF VIETNAM AIRLINES INDUSTRY

Vietnam has a strategic location in the North-South and East-West route among the region, hence, it has a huge potential in developing transportation and air cargo. From 2009 to 2013, the compound annual growth rate (CAGR) of air cargo throughput and passengers was 12.5% and 18.4%, respectively. According to IATA, in 2014, Vietnam should become the world’s third-fastest growing market for international passengers and freight and the second-fastest growing market for domestic passengers. The market share of domestic airline corporations in terms of cargo throughput and passengers in 2013 was 28.6% and 47.0%, respectively. There are four airline corporations: Vietnam Airlines Corporation (Vietnam Airlines), Jetstar Pacific Airlines, Vietnam Air Service Company (VASCO) and Vietjet Aviation Joint Stock Company, of which, Vietnam Airlines – the national flag carrier – is the market leader with the broadest air routes. In terms of cargo terminal, the most active one is Tan Son Nhat Airport with two cargo terminals: Tan Son Nhat Cargo Services (TCS) – a joint venture of Vietnam Airlines, Singapore Airport Terminal Services Ltd. and Southern Airports Services Company Ltd. and Saigon Cargo Service Corporation (SCSC) – joint venture of Gemadept Corporation (GMD – HSX), Southern Airport Corporation, Vietnamese Military and Asia Commercial Bank. In Noi Bai Airport, the terminal is also owned by Vietnam Airlines. According to a survey the World Bank conducted with beneficial cargo owners and logistics services providers, the stated-owned terminals are perceived to be inefficient and costly. Additionally, the lack of skillful air cargo operators and the limitations on private enterprises to operate in the air freight market have made the Vietnamese market less attractive than its peer countries.

Vietnam air freight market of cargo throughput Vietnam air freight market of passengers thousand Domestics Foreigners Transists million Domestics Foreigners Transists tons 800 50 141 40 600 122 14 121 126 30 12 12 400 128 409 76 11 9 326 272 279 20 5 7 8 8 7 212 255 200 6 5 21 10 17 18 188 195 201 221 15 12 141 118 12 0 0 2009 2010 2011 2012 2013 1H2014 2009 2010 2011 2012 2013 1H2014

Source: CAAV Source: CAAV

Geographic advantages

The factors that have contributed to the highest growth rate of Vietnam’s airline industries are as follows:

 Strategic location: Vietnam has a strategic location in the North-South and East- West route among the region.  Long distance between two main cities: Hanoi and HCMC (the two main economic centers of Vietnam) are separated by 1,760km, meanwhile, the less developed road and rail infrastructure have pushed up demand for airlines.

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 Geographic advantages: Vietnam has many beautiful places, which encourage tourism and attracts a huge number of international tourists.  Cheap labor cost and open investment policy: these are among the factors that attract investment from multinational firms such as Intel, Samsung, Honda, etc.

Master plan

Akin to the ports planning process, there is a government master plan for the development of the aviation industry. The Decision No. 21/QD-TTg, dated January 8, 2009, approved the master plan for aviation transportation to 2020 with an orientation to 2030 with some of the main points as follows:

 CAGR air cargo throughput: targets to achieve 16% from 2010 to 2015; 18% from 2015 to 2020 and 14% toward 2030.  Airstrips: develop cargo fleets for routes to Europe, Japan, America and China before 2015 and develop Airport as an international goods transshipment port during 2010 to 2020.  Airports: invest in five new airports and classify them into three regions: northern region (nine airports), central region (seven airports) and southern region (ten airports).  Aviation industry: establish joint venture or 100% foreign investors to invest in manufacturing aircraft components.  Investment capital: the investment capital for priority projects until 2020 and 2030 is estimated at USD14.2 billion and USD20.5 billion, respectively.

According to the Civil Aviation Authority of Vietnam (CAAV), there are currently 21 airports throughout the country, including seven international airports (Noi Bai, Tan Son Nhat, Danang, Cam Ranh, Phu Bai, Phu Quoc and Can Tho) and 14 domestic airports. On average, there is one airport per 100km. In fact, the top three largest and most active airports in Vietnam are Tan Son Nhat Airport, Noi Bai Airport and Danang Airport, meanwhile the others operate under-capacity. However, based on the above master plan, in 2020, there will be 26 airports with capacity to handle up to 123 million passengers and 3.1 million tons of goods per year. With our assumption of a high growth rate of 20% each year and knowing the actual number in 2013, the current airports will still operate under-capacity and are unlikely to generate desirable profits for their investors.

Obstacle from road sector

In terms of transportation structure, volume of goods of air transport ranked last among transport types. According to the forecast of the World Bank, through 2030, the market share of air transport will increase to 0.03%, with a CAGR of ton.km from 2008 to 2030 of 6.5%. The fact that Vietnam’s transportation market depends heavily on the road sector (accounting for more than 70%) is also an obstacle for developing the airline industry.

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Investments in Vietnam’s aviation sector

There are comparatively few foreign investors in Vietnam’s airport development industry due to many hindrances. Firstly, the profits are low. The global airline corporation has not generated high profit for their investors. While in Vietnam, some airlines have gone bankrupt, such as or , requested cessation of operations with no date scheduled for resumption. Even the largest company, Vietnam Airlines, has had to ask the Government to keep guaranteeing its loans for new aircraft purchases. Further obfuscating the picture, the business results of ground handling agents, other than SCSC, have not been fully disclosed. Secondly, the government is reluctant to use foreign-invested capital for projects of this kind. According to current legislation, foreign investors must cooperate with Vietnamese investors but with a maximum ownership ratio of 49%. With the huge capital needs for airports projects, however, the government can only sponsor a minor part and the government is calling for private investors under build-operate-transfer (BOT) or joint-venture investment approaches. Additionally, according to Decision No. 59/ND-CP, Vietnam Airlines will be equitized during this year and list its initial public offering (IPO) shares for strategic investors as well as other investors – another vehicle for securing investment. In our opinion, although the airline industry in Vietnam is quite small, its prospects are bright given its expansion will stem from the growth in its population, tourism and the economy itself.

OVERVIEW OF THE COMPANY

Vietnam Airlines Company Limited (Vietnam Airlines) was established in 1995 as a national flag carrier with 2013 market share of 51.8% in the Vietnamese passenger transportation market. The company became the tenth official member of global alliance SkyTeam in 2010. Vietnam Airlines provides air transport and ancillary activities. Of which, passenger air transport is the main service (95% of transportation revenues).

Vietnam Airlines’ trademarks and rights Viet Air Stork Logo Vietnam Airlines Golden Lotus Plus Brand & Patented in Brand & Logo Brand & Logo Logo Vietnam and Patented in 46 Patented in 18 Patented in China countries countries Taiwan until 12/31/2020

Vasco Brand & Logo Heritage Brand & Heritage fashion Industrial Patented in Logo Brand & Logo design of Vietnam Patented in Patented in inflight Vietnam Vietnam cutlery Patented in Vietnam

Source: Company’s prospectus

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Market share

In terms of passengers, the total market share of the parent company was reduced from 56% in 2008 to 52% in 2013. During the past six years, the parent company had the highest domestic passenger market share of 79% in 2010, and then reduced gradually to a 63% market share in 2013, due to the entry of low-cost carriers such as Vietjet Air and Air Mekong. Meanwhile, the international passenger market share was increased from 2010 and reached 41% in 2013. Vietnam Airlines remains as the only non-low-cost carrier in Vietnam. With regards to cargo, both domestic and international market share experienced a downtrend due to fiercer competition. After consolidation with Jetstar Pacific Airlines in 2012, the company had 2013 market share of 57.5% and 30.7% in terms of passengers and cargo, respectively.

Passenger market share of parent company Cargo market share of parent company

Domestic International Total market share Domestic International Total market share 100% 100%

80% 80% 59% 58% 56% 54% 54% 60% 52% 60% 38% 40% 40% 37% 34% 40% 40% 29%

20% 20%

0% 0% 2008 2009 2010 2011 2012 2013 2008 2009 2010 2011 2012 2013 Source: Company’s prospectus Source: Company’s prospectus

Subsidiaries and associates

Currently, Vietnam Airlines has 18 subsidiaries and eight associates. These entities participate directly or indirectly in the company’s aviation supply chain in order to provide and integrate a set of aviation solutions that culminate in their products. As of December 31, 2013, the company owned 68.46% capital of Jetstar Pacific Airlines (JPA) – one of Vietnam’s low-cost carriers, which helps the company compete with other low-cost carriers. Moreover, by the end of 3Q2014, the company owns a 49% stake in Cambodia Angkor Air – the national flag carrier of Cambodia.

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Subsidiaries of Vietnam Airlines

Registered Contributed Registered Contributed Vietnam capital of capital of Subsidiary name Currency share share Airlines' Main lines of business Vietnam Vietnam capital capital ownership Airlines Airlines Vietnam Air Petrol Company VNDbn 400 400 400 400 100.0% Aviation fuel trading Limited (VINAPCO) (*) Vietnam Airlines Engineering VNDbn 1,059 1,059 1,059 1,059 100.0% Aircraft repair maintenance Company Ltd (VAECO) (*) Abacus Distribution Systems USDmn 0.18 0.18 0.18 0.18 90.0% Automated reservation service (Vietnam) Ltd Cambodia Angkor Air (**) USDmn 100 75 59 59 78.7% Air transportation

Jetstar Pacific Airlines JSC (JPA) VNDbn 1,867 1,867 1,267 1,267 67.8% Air transportation Vinako Forwarding Co., Ltd Forwarding, ground handling and VNDbn 9 9 6 6 65.1% (VINAKO) warehousing services Aviation Construction JSC(AVICON) VNDbn 27 27 17 17 64.5% Civil construction

Noi Bai Catering Services JSC (NCS) VNDbn 50 50 30 30 60.0% In-flight catering Vietnam Airlines Caterers Ltd VNDbn 85 85 85 45 100.0% In-flight catering (VACS) (***) Noi Bai Cargo Terminal Services VNDbn 96 96 53 53 55.1% Cargo services JSC (NCTS) (****) Tan Son Nhat Cargo Services VNDbn 94 94 52 52 55.0% Cargo services Company Limited (TCS) Air Services Supply JSC VNDbn 28 28 15 15 53.0% General aviation services (AIRSERCO) Aviation Information and VNDbn 56 58 31 31 52.7% IT services Telecommunications JSC (AITS) (*) Viet Flight Training (VFT) VNDbn 100 66 34 34 51.5% Pilot training Tan Son Nhat Cargo Services and VNDbn 51 51 26 26 51.0% Cargo, forwarding services Forwarding Co., LTD(TECS) Noibai Airport Services JSC VNDbn 83 83 42 42 51.0% Air transportation support services (NASCO) Aviation labor supply and import - Aviation Labor import-export and VNDbn 10 10 5.1 5.1 51.0% export JSC (ALSIMEXCO) tourism service Aviation Printing JSC (AVIPRINT) VNDbn 21 21 11 11 51.0% Printing and packaging services

Note: (*): These companies have not changed their business registration according to new contributed capital as of 9/30/2014 (**): As of 9/30/2014: the ownership of Vietnam Airlines is 49%. (***):The difference between the registered share capital and share capital of the VNA by (i) the difference between exchange rate at the time of conversion and (ii) the purchase price when VNA bought the joint venture is lower than par value. (****): Contributed capital of NCTS as of 9/30/ 2014 was VND249.21 million, in which Vietnam Airlines contributed 55.13%. Source: Company’s prospectus

Route network

One of the key advantages of airline companies is their route network. Vietnam Airlines is operating a high frequent hub and spoke network, connecting the gateway airports in Hanoi and . Domestic: Vietnam Airlines is the only airline company that operates routes to all 21 airports of Vietnam. Therefore, Vietnam Airlines enjoys a monopoly in some routes such as: Ho Chi Minh City to Dong Hoi – Quang Binh City or Hanoi to Dien Bien.

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Domestic fly network from Hanoi and Ho Chi Minh City

Source: Vietnam Airlines International: Total number of destinations of Vietnam Airlines is 66 cities. Most of the destinations of Vietnam Airlines are active and busy cities, which has high tourist attractions and huge travelling demand. By the end of 2013, the company had codeshare partnership with 20 airlines and French National Railway Company; special prorate agreement (SPA) with 80 airlines and Deutsche Bahn – a German railway company. In 2013, regarding the structure of international routes, Northeast Asia was the largest contributor to the outbound transportation of Vietnam Airlines by 46.4% thanks to the solid economic relationship between Vietnam and this region. The second contributor was Southeast Asia – the fastest growth region among the world. The proportion of this region was 21.9% and Vietnam Airlines accounted for about 5% in this regional market share. The Cambodia – Laos – Myanmar – Vietnam (CLMV) region ranked third with 14.6%. Vietnam Airlines is also the leading airlines in the CLMV region. Ranking fourth was Europe by 12.1% and 70% of European tourists come from France, United Kingdom, Germany and Russia. The company expects that this region will increase its proportion in the future based on the stronger economic relationship between Vietnam and Europe. The smallest proportion came from Australia although Vietnam Airlines is the sole airline that connects Vietnam directly to Australia due to the competition of high quality indirect routes from Singapore Airlines, Thai Airways and Malaysia Airlines. With regards to the tourist structure, Chinese and Russian tourists comprise a significant amount of Vietnam Airlines’ passengers. Since these countries are reporting slowing economic growth, and so is Europe, revenues from these markets might go down in 2014 and 2015. Currently, Vietnam Airlines owns more than 400 slots in 29 destinations around the world, even in some airports that are hard to penetrate due to highly dense concentration such as: Narita (Japan), Haneda (Japan), Shanghai, etc.

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In the future, the company’s strategy is to expand its international flight network, especially in the Northeast Asia route and increasing efficiency within the current domestic network. International transport Vietnam Airlines’ international route network revenue breakdown CLMV Europe Number Frequency Region Destinations Southeast Asia Northeast Asia of routes per week Australia Vientiane, Luang Prabang CLMV 6 73 Phnom Penh, Siem Reap 5% 2 8 Rangoon 15% 4 32 Cao Hung, Taipei Northeast Asia 8 47 Tokyo, Osaka, Fukuoka, Nagoya 5 49 Seoul, Pusan Southeast Asia 7 99 – 120 Thailand, Singapore, Malaysia, Indonesia 12% Australia 2 14 Sydney, Melbourne Hong Kong, Shanghai, Beijing, Guangzhou, China 10 57 46% Chengdu, Hangzhou 10 Paris 22% 8 Frankfurt Europe 9 7 – 8 Moscow 4 London Total 53 29

Source: Vietnam Airlines Source: Company’s prospectus

Fleet structure

In order to serve multiple destinations and enlarge its market share, Vietnam Airlines has a wide range of air fleet through purchasing, finance lease and operating lease. The number of its fleet was increased from 57 in 2009 to 83 in 2013 and the company’s fleet is one of the youngest among the region and world. As of December 31, 2013, the average fleet age was 5.34, which is much lower than that of Japan Airlines (10.2 years), Korean Air (10.1 years) and Thai Airways (12.1 years).

Air fleet Structure of air fleet

100 Purchase Finance lease Operating lease 280-300 seats 150-180 seats 70 seats 100%

80 16 80% 16 49% 48% 45% 16 56% 51% 60 16 60% 13 40 39 45 48 32 40% 27 37% 46% 34% 41% 45% 20 20% 21 17 20 19 19 14% 10% 8% 8% 10% 0 0% 2009 2010 2011 2012 2013 2009 2010 2011 2012 2013

Source: Company’s prospectus Source: Company’s prospectus

In terms of fleet structure, Vietnam Airlines’ fleet is quite homogenous, of which the majority is 180-seat A321 (57%), widebody Boeing B777 and Airbus A330 (23%) and ATR72 and Fokker F70 (20%). This structure is quite similar to Malaysia Airlines and Philippines Airlines, who operate 50% of their aircraft with 150 to 180-seat plane. However, it is less than the proportion of Singapore Airlines and Thai Airways with 90% of its fleet comprised of wide body aircraft.

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The company maintained a low level of purchased airplane and decreased its proportion from 14% in 2009 to 10% in 2013 by mostly 70 seat airplanes. During this period, the company only bought two more A321 airplane, meanwhile the number of its leased aircraft increased by 24 planes. As such, the proportion of leased airplanes (both finance and operating lease) was increased from 86% in 2009 to 90% in 2013, of which, the operating lease proportion was higher than finance lease. This structure help the balance sheet of the company look healthier as the fixed assets and borrowing did not reflect the operating lease amount. In the near future, Vietnam Airlines plans to invest in lighter, more fuel-efficient aircraft Boeing B787-9 and Airbus A350. These planes will be used in intercontinental routes, which are high fare routes of the company. Vietnam Airlines’ air fleet as of December 31, 2013 Ownership Average Operating ATR72 and Type and finance Total fleet age lease Fokker F70 180-seat A321 lease (year) 20% 57% Boeing 777 4 6 10 9.67 Airbus A330 9 9 8.43 Airbus A321 31 17 48 3.28 ATR72 9 5 14 6.17 Widebody Fokker F70 2 2 Boeing B777 (*) and Airbus Total 46 37 83 5.34 A330 23% Note: (*): these aircrafts were retired at the end of May 2014. Source: Company’s prospectus

Vietnam Airlines also owned 957,544.3 sqm of land, of which, 76.6% has annual rental payment. These lands are spread throughout Vietnam. Vietnam Airlines’ land use rights as of December 31, 2013 Type Area (sqm) % Land use right 224,500.5 23.4% Land allocated with collection of land use levy 14,758.6 1.5% Land allocated without the collection of land use levy 209,741.9 21.9% Lease land with annual rental payment 733,043.8 76.6%

Source: Company’s prospectus

BUSINESS PERFORMANCE

Revenue In the period from 2008 to 2013, consolidated net revenues of Vietnam Airlines had a CAGR of 12.9%. Of which, revenue from air transport was the main contributor with the proportion of 65.9% in 2008 to 77.8% in 2013, followed by commerce (17.2% of 2013’s consolidated revenues), ancillary (4.7%) and others (0.3%). However, ancillary revenue had the highest CAGR from 2008 to 2013 by 20.0%, followed by air transport (16.8%) and commerce (0.5%).

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Consolidated net revenues Structure of consolidated revenues Net revenues Growth rate total Commerce Air transport Ancilliary Others Growth rate of commerce Growth rate of air transport VNbn Growth rate of ancilliary 3% 5% 5% 4% 4% 5% 80,000 120%

60,000 80% 66% 69% 75% 78% 77% 78% 40,000 40%

20,000 0% 31% 26% 20% 18% 18% 17% - -40% 2008 2009 2010 2011 2012 2013 2008 2009 2010 2011 2012 2013 Source: Consolidated financial statements Source: Consolidated financial statements

In terms of revenues from the parent company, air transport revenue contributed the most with an average proportion from 2008 to 2013 of 95.8%.

Results of air transportation of parent company 2008 2009 2010 2011 2012 2013 Passenger Revenue passenger kilometer (mn passengers x km) 14,803 14,655 19,169 21,091 22,692 25,098 Domestic 4,283 4,984 6,428 6,906 6,423 6,969 International 10,520 9,671 12,742 14,185 16,269 18,129

Available seat kilometer (mn seats x km ) 19,383 20,046 25,026 28,556 29,740 31,648 Domestic 5,181 6,165 7,974 8,542 8,154 8,604 International 14,202 13,881 17,053 20,014 21,586 23,044

Load factor 76.4% 73.1% 76.6% 73.9% 76.3% 79.3% Domestic 82.7% 80.8% 80.6% 80.8% 78.8% 81.0% International 74.1% 69.7% 74.7% 70.9% 75.4% 78.7%

Passenger volume (mn) 8.9 9.4 12.3 13.6 13.6 15.0 Domestic 5.4 6.3 8.1 8.9 8.3 9.0 International 3.5 3.1 4.2 4.8 5.3 6.0

Market share 55.6% 54.0% 58.5% 57.7% 54.4% 51.8% Domestic 78.7% 74.1% 79.1% 75.5% 70.6% 63.2% International 38.1% 35.0% 39.1% 40.1% 39.9% 40.6%

Cargo Revenue ton kilometer (thousand ton x km) 295,987 292,971 415,618 412,025 479,623 522,074 Domestic 76,704 85,462 109,899 112,806 115,715 100,784 International 219,283 207,509 305,719 299,219 363,908 421,290

Available ton kilometer (thousand ton x km) 547,809 561,479 729,762 846,681 809,383 797,074 Domestic 154,768 190,858 255,829 260,519 204,123 177,499 International 393,041 370,621 473,933 586,162 605,260 619,575

Load factor 54.0% 52.2% 57.0% 48.7% 59.3% 65.5% Domestic 49.6% 44.8% 43.0% 43.3% 56.7% 56.8% International 55.8% 56.0% 64.5% 51.1% 60.1% 68.0%

Cargo volume (ton) 128,411 131,925 181,244 190,885 182,243 184,606 Domestic 77,403 87,310 112,707 119,072 102,260 97,726 International 51,008 44,615 68,537 71,813 79,983 86,880

Market share 37.0% 38.0% 40.0% 40.0% 34.0% 29.0% Domestic 88.0% 84.0% 91.0% 92.0% 91.0% 75.0% International 20.0% 18.0% 21.0% 21.0% 19.0% 17.0%

Source: Company’s prospectus

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Parent company’s load factor of passenger Parent company’s load factor of cargo Domestic International Domestic International Load factor Market share 100% Load factor Market share 100%

79% 76% 77% 76% 80% 73% 74% 80% 66% 57% 59% 60% 60% 54% 52% 49% 59% 56% 58% 54% 54% 52% 40% 40% 40% 40% 37% 38% 34% 20% 20% 29%

0% 0% 2008 2009 2010 2011 2012 2013 2008 2009 2010 2011 2012 2013

Source: Company’s prospectus Source: Company’s prospectus

Cost From 2008 to 2013, the consolidated costs (including cost of goods sold and services, financial expenses and other expenses) accounted for 99% of total consolidated revenues and income from other activities. Of which, the highest proportion was cost of goods sold at 89.5%; interest expenses increased gradually from VND881.5 billion (USD41.4 million) in 2008 to VND1,260.7 billion (USD59.3 million) in 2013. In terms of cost structure of the parent company, the proportion of raw material cost in total expenses was reduced from 43% in 2008 to 38% in 2013. The jet fuel cost is the main component in raw material cost and is affected by the trend of global crude oil prices. According to the company, from 2008 to 2012, jet fuel costs increased gradually, except 2009 due to the plunge of oil prices. In 2013, the fuel cost decreased 4.2% y-o-y thanks to the decrease of oil price. Moreover, the jet fuel cost of the company is also affected by the foreign exchange of USD versus VND, import tax duty and environment tax duty. In order to minimize the effect of oil price fluctuation, since 2010, Vietnam Airlines has engaged with some big banks such as Citibank, Techcombank, ANZ, etc. to hedge from 35% to 45% of consumed fuel price. As such, the company saved total VND214 billion (USD10.1 million) over the last three years. Net profit margin of parent company and jet fuel price

Net margin Jet fuel price USD/barrel 1.0% 150

0.8% 120

0.6% 90

0.9% 0.4% 60 0.6% 0.6% 0.2% 30 0.3% 0.3% 0.1% 0.0% 0 2008 2009 2010 2011 2012 2013 Source: IATA, parent company’s financial statements

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In terms of type of expenses, outsource expenses accounted for the highest proportion of total expenses due to the increment of aircraft leasing expenses with a CAGR of 21.1% from 2008 to 2013. Additionally, depreciation expense (including depreciation expenses of owning fixed assets and amortization expenses from finance leased fixed assets) remained at around 6% throughout the period. The depreciation period of Vietnam Airlines’ fleet is from 12 to 15 years, shorter than the average of the industry (from 15 to 20 years), resulting in higher costs.

Breakdown of total expenses of the parent company

100% Others 80% Financial expenses 33% 42% 44% 43% 42% 43% Other operational 60% 6% expenses 6% Outsource expenses 8% 6% 5% 5% 6% 8% 8% 7% 40% 8% 7% Depreciation

Labour cost 20% 43% 34% 36% 37% 38% 38% Raw material

0% 2008 2009 2010 2011 2012 2013

Source: Company’s prospectus

Profitability From 2008 to 2013, net income of the company fluctuated significantly due to the impact of the economic downturn, leading to the dramatic instability of ROE. We saw that net margin during the period was quite in line with the movement of the net post-tax profit margin of worldwide airline industry. Profitability ratios

VNDbn Net income Owners' equity ROA ROE Net margin 12,000 7.0%

9,000 5.0%

6,000 3.0%

3,000 1.0% 1.2% 0.6% 0.6% 0.0% -0.1% 0.1% - -1.0% 2008 2009 2010 2011 2012 2013

Source: Consolidated financial statements

1H2014 results of the parent company

In the first half of 2014, the parent company achieved VND27,135.8 billion (USD1.3 billion) of net revenues, representing 45.9% of its business plan for the whole year. Net income was VND108.6 billion (USD5.1 million), equivalent to 31.8% of its plan.

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The dispute with Vietnam and China in May 2014 has negatively impacted the revenue and net income of the company as the number of Chinese tourists to Vietnam and Vietnamese tourists to China declined. Recently, the management disclosed that the parent company achieved around VND100 billion (USD4.7 million) of 9M2014 net profits, which is quite similar with the results of 1H2014; or in other words, the parent company did not generate profits during 3Q2014. This was because of the impact from Ukraine’s political crisis, leading to the significant reduction in the number of Russian passengers and the annually low travelling period from September to middle of October. The management projects to accommodate up to 16.2 million passengers by the end of 2014, up 8% y-o-y.

KEY OPERATIONAL DRIVERS

Advantages

 Economy of scales Thanks to being a national flag carrier, Vietnam Airlines has received much support from the government. As we mentioned above, the company holds a monopoly in some domestic routes and also co-operates with other airlines to provide an extensive international flight network. Having a young and large fleet, Vietnam Airlines has many advantages to expand its services.

 Domestic monopoly Vietnam Airlines is currently the only non-low-cost carrier (non-LCC) in Vietnam. This is particularly an advantage for the HN – HCMC route, which carries many business travelers, who don’t want to use a LCC.

 Ease of access to capital and lower financing cost The company has been receiving government support in accessing capital, both directly as equity injection and indirectly in the form of loan guarantees for aircraft, engine purchases and fleet renovation. By the end of 2013, approximately 74% of the company’s loan balance is guaranteed by the Government.

 Favorable macroeconomic environment

Challenges

 Fuel price fluctuation Since raw material cost occupies 37% to 38% of total expenses, the fluctuation of crude oil will significantly impact the results of the company. Management estimates that for each one USD change in fuel price will result in adjusted fuel costs from VND150 billion to VND160 billion (USD7.1 million to USD7.5 million). To hedge a part of this risk, the company engaged in a derivative contract with a ratio of hedging 35% of its total fuel consumed during the year.

 Difficulties in the control of the exchange rate risk Currently, as said by management, 50% of the company’s cash inflow comes from international currencies, of which, JPY accounts for approximately 10%, followed by EUR (8% - 9%), KRW (8% - 9%), USD (7% - 8%) and AUD (4% - 5%). Therefore, if these currencies depreciate, the company will receive less revenue. In terms of

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expenses, if VND depreciates (which seems more likely), fuel cost and international airport fees will increase. In order to manage this risk, the management has applied an international cash control system since 2013. Based on the forecast of fluctuations of each currency, the company can adjust the cash flow accordingly.

 No longer holds a control slot (for both landing and take-off) at Noi Bai International Airport and Tan Son Nhat International Airport Because the control right of slot was transferred to the Ministry of Transportation in 2007, the company no longer has control of key negotiation leverage, leading to an increase of airport service expenses.

 Fiercer competition The company had a fiercer competition not only in the region but also in the domestic market. The fact that Vietjet Air – a low cost carrier – entered the market in May 2011 has been a threat to the operation of the company as Vietjet Air’s market share has increased from year to year. By the end of 2013, Vietjet Air accounted for 26% of domestic passenger market share. However, this airline tends to only impact Jetstar Pacific, a subsidiary of Vietnam Airline, as the target customer segment for Vietnam Airlines is primarily well-paid passengers and the company believes that with the upgrade of its service level to four-star in the future, its market share will increase. In terms of region, many Southeast Asian low-cost carriers such as Air Asia have entered and established flight routes into and out of Vietnam. The entry of Middle Eastern airlines such as Emirates, Qatar Airways and Etihad Airways showed a change in the global commercial airlines competitive landscape between Europe and Asia. The fact that major airlines are opening routes connecting the two continents through Middle East hubs has exerted additional competitive pressure on European and Asian airlines, including Vietnam Airlines.

EQUITIZATION PLAN

The Decision No.1611/QD-TTg dated September 10, 2014 of the Prime Minister approved the equitization plan for parent company of Vietnam Airlines. After equitization, the chartered capital of Vietnam Airlines is expected at VND14,101.8 billion (USD663.6 million), of which 75% will belong to the State. Consistent with the approved plan, on November 14, 2014, the company will organize a public auction with an initial price at VND22,300 per share. Structure of share capital after equitization

Object Value (VNDbn) Number of share Portion Expected received capital (VNDbn) State-owned capital 10,576.4 1,057,638,000 75.0% 10,576.4 Incentives sale for employee 208.0 20,795,100 1.5% 362.8 Unions 7.1 705,092 0.1% 9.4 Strategic investors (*) 2,820.4 282,036,800 20.0% 6,289.4 Public auction 490.1 49,009,008 3.5% 1,092.9

Note: (*): strategic investors have not been identified. Source: Company’s prospectus

According to the plan, the proceeds from equitization will be used for investment and development in aircraft expansion projects.

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Management also stated that the company would have the plan to list its shares on the Ho Chi Minh Stock Exchange (HSX) when the company meets all conditions. However, according to Decision No.51/QD-TTg, issued on September 15, 2014, the equitized enterprises have to list their shares on the stock market within one year from meeting all the listing conditions. Expected proceeds from equitization

Content Value (VNDbn) USDmn Share capital after equitization (a) 14,101.84 663.62 State capital after equitization (b) 10,576.38 497.71 Proceeds from equitization (c) 7,754.50 364.92 Proceeds from employees’ share purchase 362.75 17.07 Trade Unions 9.43 0.44 Strategic investors 6,289.42 295.97 Public auction 1,092.90 51.43 Par value of shares sold to employees, Trade Unions, strategic investors and (d) 3,525.46 165.90 public auction Par value of additional issuance (e)=(a)-(b) 3,525.46 165.90 Equitization cost (f) 57.02 2.68 Statutory redundancy package and (g) - - entitlement Capital surplus in proportion to the rate of (h)=[(c)-(d)-(f)- 1,043.00 49.08 additional issuance to share capital (g)* [(e)/(a)] Remaining capital surplus (c)-(e)-(f)-(g)-(h) 3,129.02 147.25

Source: Company’s prospectus

Strategic partners The decision No.1611/QD-TTg as we mentioned above allowed the Ministry of Transportation to choose strategic partners which are aviation companies or financial organizations that have investment experience in the aviation industry. Vietnam Airlines’ priority is choosing aviation companies as its strategic partners then financial investors. The process of selling shares to strategic partners is expected to finish on March 9, 2015. The company also hires professional consultant organizations – Morgan Stanley and Citigroup to perform the process for electing strategic partners during six months from September 10, 2014. The maximum number of strategic partners is three but it seems unlikely that Vietnam Airlines would have more than one. According to management, at the end of October 2014, there are more than two investors that have applied to become Vietnam Airlines’ strategic partner but to date no details have been released.

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BUSINESS PLAN AFTER EQUITIZATION

After equitization, management expects that the average annual growth rate of the parent company’s revenues will be 14% - 20% from 2015 to 2018. To improve profits, the company will apply a cost-cutting strategy in order to lower the ratio of cost per revenue from 99.5% in the previous years to 96.2% in 2015, and 95.6% in 2018. As a result, the average annual net profit margin from 2015 to 2018 would be 3.1%, and reach 3.6% in 2018. The company does not have any plan to pay dividends in the next five years. Having explained the dramatic growth rate of net income over the next years, management cited the below reasons:

 The completion of replacing the new generation of wide body aircrafts in 2018 will cut 25% of fuel costs and from 15% to 20% of checking, repairing and maintenance expenses, leading to an increment increase of gross margin for the company.  The new air fleet will help the company upgrade its service to four-star level, which in turn supports the company’s ability to attract more premium customers or increases its revenues.  The equitization process will create a change in management, leading to a global modern management system in the company. Business plan of parent company

INCOME STATEMENT (VNDbn) 2012A 2013A 2014 2015 2016 2017 2018 Revenues 49,142 52,460 59,008 67,497 81,246 95,017 109,532 % y-o-y 10.4% 6.8% 12.5% 14.4% 20.4% 16.9% 15.3% COGS 45,008 46,912 52,560 59,303 69,698 80,927 94,054 Gross profits 4,134 5,548 6,448 8,194 11,548 14,090 15,478 Selling expenses 2,530 3,272 2,904 3,457 4,288 4,906 5,577 G&A expenses 1,329 1,110 1,401 1,568 1,658 1,778 1,892 Selling and G&A expenses 3,859 4,382 4,305 5,025 5,946 6,684 7,469

EBIT 275 1,166 2,143 3,169 5,602 7,406 8,009 Financial income 1,149 1,205 364 401 427 455 487 Financial expense 2,069 2,528 2,809 2,923 3,697 4,149 4,636 Net other incomes / (expenses) 783 315 643 697 830 924 995 EBT 138 158 341 1,344 3,162 4,636 4,855 Tax expense 0 0 0 211 602 920 961 Effective tax rate 0.0% 0.0% 0.0% 15.7% 19.0% 19.8% 19.8% Profits after tax 138 158 341 1,133 2,560 3,716 3,894 % margin 0.3% 0.3% 0.6% 1.7% 3.2% 3.9% 3.6%

BALANCE SHEET (VNDbn) 2012A 2013A 2014 2015 2016 2017 2018 Cash & near cash items 2,148 1,440 3,620 5,176 5,338 8,986 13,817 Current assets 7,416 8,612 13,443 16,104 17,183 18,262 24,411 Net fixed assets 34,234 35,694 37,717 51,276 61,052 68,277 70,962 Long-term assets 48,084 50,725 52,345 66,622 77,936 83,760 83,376 Total assets 55,500 59,336 65,788 82,726 95,119 102,022 107,787

Short-term borrowings 6,862 6,653 9,953 11,625 9,437 7,875 8,276 Current liabilities 16,453 17,830 21,240 24,688 25,527 27,142 30,812 Long-term borrowings 29,654 31,189 30,037 42,539 47,500 50,256 50,184 Long-term liabilities 29,754 31,490 30,154 42,672 47,660 50,443 50,399 Total liabilities 46,206 49,320 51,394 67,360 73,187 77,585 81,211 Equity 9,293 10,017 14,394 15,366 21,932 24,437 26,576

Total liabilities and equity 55,500 59,336 65,788 82,726 95,119 102,022 107,787

Source: Company’s financial statements and prospectus

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In order to meet the business target, the company will invest in improving service quality. The investment capital for the period from 2014 to 2018 is projected at VND69,994 billion (USD3.3 billion), of which, capital for new aircraft is VND63,297 billion (USD3.0 billion). Investment plan Capital expenditure from 2014 to 2018 Aircraft expansion plan Capital expenditure VNDbn Plane 2014 2015 2016 2017 2018 Aircraft 63,297 A321 4 3 Construction 2,356 B787-9 4 3 1 Facilities 2,348 A350 2 4 2 Capital investment 1,993 Total 69,994 Total 4 7 5 5 2

Source: Company’s prospectus

In terms of aircraft expansion plans, according to the approval of Prime Minister for the period from 2014 to 2018, the company will receive a total of 23 airplanes. With regard to construction plans, the company focuses on planning and investing in infrastructures such as aircraft aprons, hangars with ancillary workshops and facilities for aircraft repairs at the airports. The company also plans to contribute to the establishment of new companies supporting air transport and to continue to increase its contributed capital in its subsidiaries and divest its investment in 12 subsidiaries and associates during 2014 to 2016. In order to finance the investment plan, the parent company plans to increase its owners’ equity by 165% in comparison with 2013’s figure and achieve VND26,576 billion (USD1.3 billion) at the end of 2018. The company projects to raise capital through these sources: (i) VND3,525 billion (USD165.9 million) of premiums from 25% equity sales through IPO, (ii) additional issuance of VND4,000 billion (USD188.2 million) for current shareholders in 2015, (iii) additional issuance of VND4,500 billion (USD211.7 million) to reduce state ownership to 65%.

PEER COMPARISON

As stated by management, the initial auction price of the company is VND22,300 per share, which is approximate two valuation methods from the third parties and is also taken into account for strategic partners. Previously, the joint venture consultant of Citigroup and Morgan Stanley derived the fair value as of December 31, 2013 was VND22,213 per share. According to the asset valuation method of Vietnam Valuation and Finance Consultancy Company (VVFC), the fair value was VND21,166 per share as of March 31, 2013. In comparison with other regional peers, EV/EBITDAR ratio of Vietnam Airlines is relatively higher than the average of regional peers, which means that this initial price of Vietnam Airlines is relatively high and may be less attractive to regional investors.

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Regional peer comparison

EV/ Revenues Net income 2013 P/E P/B Market EBITDAR Company cap 2013 % y-o-y 2013 Margin Assets Equity ROE ROA 2013 LTM 2013 LTM 2013

USDbn USDbn USDmn USDbn USDbn Japan Airlines Co Ltd 10.0 15.0 -1.8% 2,078 20.7% 12.9 6.0 36.0% 14.9% 4.6 6.7 1.7 1.7 2.1 Air China Ltd 9.2 15.4 1.9% 531 5.8% 33.9 8.9 6.3% 1.7% 17.0 20.9 1.0 1.1 7.5 Singapore Airlines Ltd 8.9 12.2 2.5% 305 3.4% 18.1 10.5 2.9% 1.7% 33.8 41.9 0.8 0.9 2.9 ANA Holdings Inc 8.3 18.0 0.4% 522 6.3% 22.7 8.1 6.6% 2.1% 14.2 25.9 1.0 1.1 3.5 Cathay Pacific Airways Ltd 7.3 13.0 1.1% 338 4.6% 22.3 8.1 4.4% 1.6% 24.6 19.2 0.9 0.9 6.3 China Eastern Airlines Corp Ltd 6.6 14.4 6.2% 386 5.9% 23.1 4.4 10.1% 1.8% 11.4 15.9 1.5 1.1 7.0 China Southern Airlines Co Ltd 4.6 16.0 1.6% 323 7.0% 27.3 5.7 5.9% 1.3% 11.8 37.2 0.8 0.6 7.8 Qantas Airways Ltd 3.2 15.0 9.5% 1 0.0% 18.3 5.3 0.0% 0.0% n/m n/m 0.6 1.3 2.7 Korean Air Lines Co Ltd 2.1 10.8 -4.1% (206) n/m 21.8 2.5 n/m n/m n/m 3.6 0.8 0.8 n/a Eva Airways Corp 1.9 4.2 2.9% 25 1.3% 5.1 1.2 2.1% 0.5% 72.2 55.1 1.6 1.6 n/a Air New Zealand Ltd 1.8 3.6 5.3% 149 8.4% 4.3 1.4 10.4% 3.3% 9.0 8.8 1.3 1.2 3.0 Garuda Indonesia Persero Tbk PT 1.1 3.7 7.0% 11 1.0% 3.0 1.1 1.0% 0.4% 83.5 n/m 1.0 0.9 2.6 Cebu Air Inc 1.0 1.0 7.6% 12 1.2% 1.5 0.5 2.4% 0.8% 55.8 19.3 2.1 1.8 8.0 Thai Airways International PCL 1.0 6.7 -0.1% (393) n/m 9.4 1.7 n/m n/m n/m n/m 0.5 0.7 5.5

Average 2.9% 5.5% 7.3% 2.5% 30.7 23.1 1.1 1.1 4.9 Median 2.2% 5.2% 5.2% 1.6% 17.0 19.3 1.0 1.1 4.5

Vietnam Airlines 1.5 3.2 6.2% 2 0.1% 3.3 0.5 0.4% 0.1% 730.7 n/a 3.1 n/a 5.2 Note: Market cap and EV of Vietnam Airlines are based on its initial price of VND22,300 per share Source: Bloomberg, data as of October 30, 2014

CONCLUSION

We expect that the recovery of the global economy and the growing travelling demand from air passengers will support the country’s aviation industry to grow rapidly from 2016 onwards. Being a national flag carrier and having the biggest economy of scale in the domestic market, Vietnam Airlines enjoys many incentives from the government and consequent growth opportunities. The company targets 2014 net profits of the parent company to double the 2013 results and increase dramatically in the next years. The business plan for the period from 2014 to 2018 is quite optimistic although the company might have to face several challenges in the following years, especially in terms of competition from Middle Eastern airlines and low-cost carriers. According to the business plan after equitization, as well as its initial auction price, we recognize that a share of Vietnam Airlines is relatively higher than its regional peers. In addition, investors have to face liquidity risks since the company has not yet made a plan for listing.

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Consolidated financial statements

INCOME STATEMENT (VNDbn) 2008A 2009A 2010A 2011A 2012A 2013A Revenues 37,612 32,609 46,354 56,465 64,859 68,855 % y-o-y 35.5% -13.3% 42.2% 21.8% 14.9% 6.2% COGS 31,390 26,725 37,980 48,914 56,451 57,950 Gross profits (excluding depreciation & amortization) 6,222 5,883 8,374 7,551 8,408 10,905

Selling expenses 1,798 1,859 3,178 2,845 2,940 3,607 G&A expenses 1,262 1,137 1,600 1,854 1,930 1,699 Selling and G&A expenses 3,059 2,996 4,778 4,699 4,871 5,306

EBITDA 3,162 2,887 3,595 2,852 3,537 5,599 Depreciation & amortization 1,560 1,704 1,942 2,342 3,024 3,705

EBIT 1,602 1,184 1,653 510 513 1,894

Financial income 1,518 1,083 1,823 2,396 1,083 1,023 Financial expense 2,930 2,206 2,976 3,284 2,098 2,728 Net other incomes / (expenses) 422 549 501 800 836 351 Income from associates 13 15 13 -6 56 -33

EBT 625 624 1,013 416 391 507

Tax expense 194 171 203 175 248 249 Effective tax rate 31.0% 27.3% 20.0% 42.1% 63.5% 49.2%

Profits after tax 431 453 810 241 143 258

Minority interest 208 286 266 221 206 214

Net income 223 167 544 19 -63 43 % margin 0.6% 0.5% 1.2% 0.0% -0.1% 0.1%

BALANCE SHEET (VNDbn) 2008A 2009A 2010A 2011A 2012A 2013A

Cash & near cash items 2,306 2,164 3,879 5,911 5,491 5,047 Short term investments 533 423 1,121 502 227 287 Accounts receivables 3,006 4,163 6,782 7,452 6,530 7,707 Inventories 1,198 1,622 2,122 2,757 3,278 4,090 Other current assets 276 457 557 435 405 521 Current assets 7,319 8,829 14,462 17,057 15,931 17,652

Net fixed assets 17,554 18,388 19,658 28,557 35,622 37,784 Long-term investments 577 771 858 982 2,096 2,092 Other long-term assets 3,498 7,439 8,078 9,785 9,796 11,799 Goodwill 0 0 0 1 1,278 317 Long-term assets 21,629 26,598 28,595 39,326 48,793 51,992

Total assets 28,948 35,428 43,057 56,383 64,723 69,644

Accounts payable 5,332 6,579 8,748 10,905 12,037 14,160 Short-term borrowings 2,101 2,849 6,238 8,919 11,422 11,978 Other short-term liabilities 447 652 822 337 895 516 Current liabilities 7,880 10,080 15,807 20,161 24,354 26,655

Long-term borrowings 13,843 17,300 17,574 26,670 29,778 31,513 Other long-term liabilities 162 151 175 219 441 773 Long-term liabilities 14,005 17,451 17,750 26,889 30,219 32,286

Total liabilities 21,885 27,532 33,557 47,050 54,573 58,941

Contributed capital and other funds 6,366 7,203 8,540 8,428 9,353 10,309 Retained earnings 235 276 443 365 288 -62 Equity 6,601 7,480 8,983 8,793 9,641 10,247 Minority interest 461 417 516 540 509 456

Total liabilities and equity 28,948 35,428 43,057 56,383 64,723 69,644 www.VPBS.com.vn Page | 20

CASH FLOW STATEMENT (VNDbn) 2008A 2009A 2010A 2011A 2012A 2013A Cash from operation activities 600 (1,412) 1,911 1,986 4,739 2,448 Cash from investing activities (3,328) (2,471) (3,648) (10,236) (10,682) (4,943) Cash from financing activities 1,390 3,682 3,432 10,285 5,508 2,038

Net changes in cash (1,338) (201) 1,695 2,035 (435) (457)

Beginning cash balance 3,660 2,306 2,164 3,879 5,911 5,491 Impact of exchange rate fluctuation (17) 59 20 (3) 15 13

Ending cash balance 2,306 2,164 3,879 5,911 5,491 5,047

RATIO ANALYSIS 2008A 2009A 2010A 2011A 2012A 2013A

Profitability ratios Gross margin 12.4% 12.8% 13.9% 9.2% 8.3% 10.5% Gross margin (excluding depreciation & amortization) 16.5% 18.0% 18.1% 13.4% 13.0% 15.8% EBITDA margin 8.4% 8.9% 7.8% 5.1% 5.5% 8.1% Operating margin 4.3% 3.6% 3.6% 0.9% 0.8% 2.8% Net profit margin 0.6% 0.5% 1.2% 0.0% -0.1% 0.1% Return on avg. assets 0.8% 0.5% 1.4% 0.0% -0.1% 0.1% Return on avg. equity 3.4% 2.4% 6.6% 0.2% -0.7% 0.4%

Leverage ratios Interest coverage ratio (EBIT/I) 1.8x 1.6x 2.0x 0.4x 0.4x 1.5x EBITDA / (I + capex) 0.8x 0.9x 0.9x 0.2x 0.3x 0.8x Total debt/capital 70.7% 72.9% 72.6% 80.2% 81.0% 80.9% Total debt/equity 241.5% 269.4% 265.1% 404.8% 427.3% 424.4%

Liquidity ratios Asset turnover 1.3x 1.0x 1.2x 1.1x 1.1x 1.0x Accounts receivable turnover (days) 31.4 40.1 43.1 46.0 39.3 37.7 Accounts payable turnover (days) 68.5 81.3 73.6 73.3 74.2 82.5 Inventory turnover (days) 13.4 19.3 18.0 18.2 19.5 23.2 Current ratio 0.9x 0.9x 0.9x 0.8x 0.7x 0.7x Quick ratio 0.7x 0.7x 0.7x 0.7x 0.5x 0.5x

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CONTACT INFORMATION

For further information regarding this report, please contact the following members of the VPBS research department:

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Luu Bich Hong Nguyen Thi Quynh Trang Director - Fundamental Analysis Research analyst [email protected] [email protected]

For any questions regarding your account, please contact the following:

Marc Djandji, CFA Head of Institutional Sales and Brokerage & Foreign Individuals [email protected] +848 3823 8608 Ext: 158

Ly Dac Dung Head of Retail Sales and Brokerage [email protected] +844 3974 3655 Ext: 335

Vo Van Phuong Domalux Director of Retail Sales and Brokerage Director of Retail Sales and Brokerage Nguyen Chi Thanh 1 - Ho Chi Minh City Nguyen Chi Thanh 2 - Ho Chi Minh City [email protected] [email protected] +848 6296 4210 Ext: 130 +848 6296 4210 Ext: 128

Tran Duc Nguyen Danh Vinh Director of Retail Sales and Brokerage Associate Director of Retail Sales and Brokerage Lang Ha - Ha Noi Le Lai - Ho Chi Minh City [email protected] [email protected] +844 3835 6688 Ext: 369 +848 3823 8608 Ext: 146

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