Vietnam Stock Market daily: Currency market stabilizes as SBV promises action to combat speculators
The markets edged higher today but in lower turnover. Market breadth did
improve somewhat with 27 stocks going to the ceiling while 18 stocks fell to the
floor. Foreign participation was negligible although they were net buyers by a
small margin. The put through market was quieter with a fairly large transaction
in KDC and then a smaller one in TTP all we have to report. Amongst the actives
we saw gains in PPC; REE; VNM; VIC while HSG (announced first 9 month results)
The markets rebounded modestly today following several days of profit taking
as various blue chips hit technical support levels triggering some bargain
hunting by investors. However with volumes low the buying lacks conviction.
Perhaps the opening of the doors over at the VAMC prompted some cheer while
overseas markets appear to have stabilised recently. Then the SBV expressed its
determination to get the currency under control whilst ruling out another
devaluation for the next few months. In any even the broader outlook is for
continued consolidation for the time being.
Currency market stabilizes as SBV promises action to combat speculators
In the currency market today, the VND strengthened slightly. The interbank
VND/US$ rate closed at VND21,345 (representing a gain of 0.14% from VND21,375
yesterday); marking a 0.47% pre¬mium over the adjusted trading band ceiling.
Meanwhile, the black market rate was trading at VND21,600 representing a 1.67%
over the ceiling band.
In today’s gold auction, the SBV sold 40,000 taels out of 40,000 taels
(cumulative sales now come to 1,116,700 taels or about 43 tons) offering gold
bullion in the price range of VND37.48-37.70 mil¬lion per tael. The domestic
gold price has dropped approximately 19% YTD. While the domestic gold price is
currently trading at 16.4% premium over the international price.
After yesterday meeting, the SBV concluded that short term market speculation
is the main cause of the current currency market fluctuation. Therefore, in
order to stabilize the currency, the SBV will likely take administrative actions
to more strictly control both interbank and unofficial market. In addition we
understand they will (1) add more US$ liquidity to the market (2) narrowing the
gap between domestic gold price and international price. The SBV also indicated
that they will not adjust the reference rate over the next 1-2 months at
We also feel that much of this volatility stems from the fact that every
asset class (currencies and commodities) are losing ground against the US$ at
the moment. Due to the QE tapering theme. Hence what is happening to the VND
should come as no great surprise in our opinion. Obviously there are other local
factors at play which the SBV appears determined to address. Looking be¬yond
that over the next few weeks their efforts may be supported by additional supply
of US$ from FDI.
In Q3 FY2013, HSC estimates that the forex market should receive
approximately US$2.3-2.6 billion thanks to drawdown from some ongoing large
foreign invested projects (FDI). We estimate as follows
• Nghi Son refinery and petrochemical project – US$1.8 billion
project in Thai Nguyen – US$500-800 million
HAG (Underperform) to sell Hydropower division and also some real estate
Hoang Anh Gia Lai (HAG) has just announced passage of a BOD resolution to
sell off their hydro¬power division and some real estate assets. According to
this resolution, HAG will restructure their product portfolio by selling off
less profitable projects and reinvest the cash proceeds into more profitable
projects in Myanmar and Laos.
After some conversations with the company, we learnt that HAG sold the 6
hydropower projects based in Vietnam including Daksrong 2, Daksrong 2A, Daksrong
3A, Daksrong 3B, Ba Thuoc 1, Ba Thuoc 2 while still holding onto 2 projects in
Laos including Nam Kong 2, Nam Kong 3. We note that the ASP of electricity in
Vietnam is just around VND800/KwH on average in comparison with VND1,278/KwH for
the Laos based plants. At the moment, 4 out of 6 plants are operational while
the remaining 2 projects (Ba Thuoc 1 and Daksrong 3A) are in the construction
phase and hope to start operations next year. The total capex for 6 sold
projects are estimated at VND4,237 billion with a total capacity of 211.7 MW.
However, the company did not release detailed informa¬tion related to selling
price or the profit on the deal. HSC however assumes that the profit margin is
likely fairly small at around 5% of the net carried amount.
According to HAG, they signed a contract with the buyer before June-end hence
the profit from this deal will be booked in the Q2 financial statement. The
buyer, ( a local group most likely) also committed to pay 90% of the total cash
proceeds for HAG over the next 3 months and the remain¬ing of 10% after that.
HAG plans to use the proceeds towards their projects in Myanmar and to help
repay some bank loans.
In the 1-H, HAG also sold one real estate project and the profit from this
will also appear in the Q2 financial statement. In the 2-H, they plan to
continue to sell some other real estate projects in Vietnam to build up some
cash. These deals are still under negotiation however.
Based on these
assumptions, HSC estimates 1-H FY2013 pre-tax profit (including a small profit
from selling the hydropower projects) will to come at VND415 billion, (+97%
y/y). Of which, we estimate pre-tax profit from core business will be flat at
around VND215 billion or so. As the result, the company will have completed only
30% of the full year pre-tax profit plan. We also note that the hydropower
income stream from those 6 projects will drop out of the 2-H FY2013 financial
For FY2013, HSC has just revised our forecast for HAG. Accordingly, we
forecast the company will deliver net sales of VND3,891 billion, (-11.7% y/y)
while revised pre-tax profit are forecasted at VND764 billion, (+11% y/y). We
also forecast the FY2013 net profit (attributable to HAG parent shareholders)
would be around at VND510.8 billion, down 13% y/y from the VND404 billion in our
previous note in May. Based on this forecast, FY2013 EPS would come to VND711
giving a FY2013 P/E of 28.68xs. We reiterate our Underperform rating on HAG.
SII will sell non-core assets to CII (Hold) in order to focus on water
SII announced yesterday that they will restructure their investment portfolio
to focus more on developing water infrastructure segment. To this end they will
sell down unrelated assets. Accord¬ingly, they plan to sell their 26% stake in
Ninh Thuan construction investment & development JSC at a price of VND57.2
billion and a 48.19% stake in Binh Trieu bridge & road construction and
investment at a price of VND47.4 billion to CII (Hold), its parent company (hold
After the transaction, CII will hold a 99% stake in these two companies. We
note that the total cost of these investments amounted to VND56.6 billion and
VND65.6 billion respectively. Therefore, SII’s consolidated statement may show a
loss of VND17.6 billion from the deal (entirely on the Binh Trieu sale) however
this loss will be excluded in CII’s consolidated FS as it’s an internal
transac¬tion. These assets originally belonged to CII; however they were sold to
SII previously to enable the former to record some profits. And now they
In Q1, SII already sold a 40% stake in the Diamond Riverside project to CII
at cost and they cur¬rently still hold a 40% stake. This asset also originally
belonged to CII. This is located on an area of 4.15ha in Vo Van Kiet street
(district 8), with a plan to build around 1,500 apartment units however this
project has been delayed due to the current status of real estate market. SII
still holds a 49% value of the right to collect toll fee in the Hanoi highway
and Kinh Duong Vuong street at a book value of VND86 billion by the end of Q1
Recently, SII did say they have been in negotiation with a foreign strategic
partner to sell their stake however they won’t disclose any further details on
that until their AGM which will be held in August, FY2013. In line with their
strategy which is focused on water infrastructure segment, SII bought a 90%
stake in BOO Dai An Water Supply JSC and 23.28% stake of Long An Water Supply
The company has not set a FY2013 target however in Q1, they disclosed a net
profit of VND28 billion (33% y/y) thanks to a gain on the sale 3.75 million of
CII shares (they sold off their entire holding) and then dividend received from
their investments. At the current price, this stock is trad¬ing at a trailing PE
of 5.6 times and historical PB of 1.3 times. SII has yet to prove its
independence from CII; hopefully this is the beginning of a clearer investment
focus for the company. The stock has gained on the news.
Masan Group to get US$175 million loan from JP Morgan. Substantial interest
Masan Group (MSN – Outperform) have announced Masan Industrial – a subsidiary
of Masan Con¬sumer (MSF) has received a loan of US$175 million for 3 years
arranged by JP Morgan. Masan Industrial is a fully owned subsidiary containing a
significant proportion of Masan Consumer’s operating assets.
This is draw down loan as before and represents a (1) refinancing of an
existing US$108 million loan from JP Morgan which was taken out 2 years ago and
still had a year to run (2) an additional US$67 million on top of the previous
principal. The new interest rate is not disclosed but apparently allows for
significant savings in terms of interest expense. And is part of ongoing efforts
to reduce Masan’s cost of capital. Incidentally US$150 million of the total loan
has been secured by MIGA; a World Bank affiliate.