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[BSC Vietnam] You May Say I Am A Dreamer (CSV) 06.12.2017 (DELAYED)

|Includes: VanEck Vectors Vietnam ETF (VNM)

Summary

Vnindex have a wild ride today, end loss “only” 6 points from -20 points at trough. Two sectors (that we mentioned on 07 Aug and 02 Oct) again lead the index are material (+0.91%) and energy.

CSV (VND 35,100, + 2.3%, market cap of USD 66 mil, P/E of 7.28x). Our analyst had a visit to CSV last week. CSV is a leader in chemical manufacturing in Vietnamwith.

You may say I'm a dreamer. In our presentation of 2017 outlook at Vietnam Investment Professional Forum last year, we mention the fearless forecast on page number 7.

Margin lending and the market. Recently our colleague informed me that the margin rinsed to the ceiling in many top broker. That action help cool down the market (together with the delay of divestment we mentioned before) which is not a bad thing at this very moment.

Dear Value Clients and partners

·         Vnindex have a wild ride today, end loss “only” 6 points from -20 points at trough. You can Imagine that VN30 future fluctuate even much more. Consumer staple (-1.47%) and consumer Discretionary (-1.26%) drop the most due to the pull back of VNM, MWG and BHN. Two sectors (that we mentioned on 07 Aug and 02 Oct) again lead the index are material (+0.91%) and energy (+1%). Moreover, the Divestment team are seem recruiting few members from Vinachem (CSM, DRC, CSV, BFC…)

 

Today’s Markets:

·         Indexes : VN-Index -0.59%, HNX-Index -0.36%,  Upcom -0.42%

·         Active: HOSE: HPG, SSI, FLC, and FPT.   HNX: SHB, PVS, ACB, MST.

·         Foreigner, Buy: HPG, HCM, VRE, MSN, PVD.  Sell: NVL, VNM, VIC, DIG, VJC.

·         Notice stocks : MWG, ASM, DRC, SJS, HT1, EVE, RAL, CTI, MST, HVN, GEX

·         Trading volume : ~ 333.96 million shares

·         Trading value : VND 7586 bil ~ 334.2 USD mil

·         Foreigner transaction Net: -24.7 mil USD Sell 44.93 USD million and Buy 20.27 USD million

·         Derivative market Trading value: VND 2,009.4 billion +33.94% ~ USD 88.5 million,  VN30F1712  949; VN30F1801  951; VN30F1803   973; VN30F1806  993.8

Corporate update:

 

·         CSV (VND 35,100, + 2.3%, market cap of USD 66 mil, P/E of 7.28x). Our analyst had a visit to CSV last week. CSV is a leader in chemical manufacturing in Vietnamwith more than 40 type of products. The main products include NaOH (capacity of 30k tons per year), liquid Cl2 and HCl (capacity of 126k tons per year). Accumulated 9M2017, the company's total revenue and NPAT were VND 1,067 billion (-11% YoY) and VND 178 billion (+ 38% YoY) respectively. (1) Profit margin from finished products increased sharply from 24% in 9M2016 to 28% in 9M2017 thanks to an 11% increase in the price of Natri Hydroxide (NaOH). (2) Management expense decreased by 54% to VND 37 billion as the company no longer had to allocate goodwill (VND 14 billion in 9M2016) and reversed provision expenses of VND 451 million (In 9M2016, the company made 26 billion dongs as provision expenses).

 

CSV estimates pretax profit of the parent company is about VND 270-280 billion in 2017 and VND 280-290 billion in 2018. Then, 2018 EPS 2018 will be 4,725 VND/share. The increase of NPAT in 2018 is due to the reduction of management expenses and other income from the recovery of bad debts and a decrease of about VND 10 billion in depreciation. By 2018, electricity costs will increase by about 6%, which will increase the cost of the business.

In near term, at least next 2 year, CSV’s capacity hardly go up because of relocation of current factories from Bien Hoa 1 to Nhon Trach 6. At present, CSV has basically completed the procedures of leasing land and infrastructure and applied for permission to relocate the factory to Nhon Trach 6 Industrial Park. At time of completion, the company will expand its capacity of producing NaOH, with an additional capacity of 20-30 thousand tons per year (referring to 100% NaOH) in the first phase (estimated investment capital is VND 1200 billion, financed by 70% of loans). The advantage of CSV is that the current plant is fully depreciated, and additional investment will generate long-term growth for the company. However, it may reduce margins.

In 2017, the company plans to pay 20% dividend (higher than the target of 14%). CSV plans to divest all of 65.05% at Vietnam Phosphorus JSC, which can be done through auction.

Vinachem holds 65% of CSV and plans to divest its capital at CSV, which could fall to 51%.

 

Comments:  

 

·         You may say I'm a dreamer. In our presentation of 2017 outlook at Vietnam Investment Professional Forum last year, we mention the fearless forecast on page number 7 (please look closely I made a mistake on that chart link). On that day, there was a joke that I have to take responsibility for that fearless forecast of Vnindex.Looking back at what happened for the last 12 months, here we are at the 9xx. May be I am a dreamer but will you join me and have fearless forecast for 2018 and the years to come.

·         Margin lending and the market. Recently our colleague informed me that the margin rinsed to the ceiling in many top broker. But the market keep performing strongly in term of momentum and liquidity thanks to fresh money. So it is likely that in this very last month of the year, the brokers have to adjust their lending portfolio for new clients and new stock. That action help cool down the market (together with the delay of divestment we mentioned before) which is not a bad thing at this very moment. The big trend is remain unchanged, so why don’t we just enjoy the music Imagine J

 

“…You may say I'm a dreamer
But I'm not the only one…”

 

John Lennon

 

Picture of the day: Vnindex fearless. Please look closely I made a mistake on that chart

Source: Bloomberg data

 

 

Cheers

 

Long Tran