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[Long's View] The Age Of Futures (VNM) 29.05.2018 (Delayed)

Summary

Crude oil futures tumbled by the most this year following reports that Saudi Arabia and Russia were nearing agreement on raising production.

VNM – We recommend to Hold VNM with target price VND 192,284, upside 14% (Market cap VND 244,680 billion – Current price VND 168,600/share – PE FW 23.7x – PB.

The age of “Futures”.Future trading value reach to peak of USD 383 million which well above trading value of USD 338 million on the stocks.

Are Vnindex really pass All Time High? Let call it Vnindex -7 (the old Vnindex excluding 7 new big listing stocks in last 1.5 years). Actually, Vnindex – 7 just touched the the peak of 1,161 point in April 2018 which was slightly lower than All-time high of 2007 (1,170 point).

That Vnindex -7 come down to the lowest point of 885 this morning with P/E ratio of 15.86 which is sound pretty good (as we haven’t exclude the current most hyper valuation stocks yet).

Dear Value Clients and partners;

  • Crude oil futures tumbled by the most this year following reports that Saudi Arabia and Russia were nearing agreement on raising production, lead to free fall of energy stocks globally. In Vietnam, recent constrain from margin trading, foreign outflow and high valuation big stocks lead to Vnindex sharp drop. All 10/10 sectors rise today vs 9/10 sectors down yesterday. Futures Vn30 break the record of value trading again with USD 383 million.

Today’s Markets

  • Indexes : VN-Index +2.19%, HNX-Index +5.13%, Upcom +2.42%
  • Active : HOSE: VPB, HPG, NVL, VIC, MBB. HNX: ACB, SHB, PVS, VGC, DNP.
  • Index movers : Leader: VCB, CTG, BID, VNM, VRE Laggard: GAS, VHM, VIC, ROS, SAB
  • Foreigner, Buy: HPG, VCB, VNM, DXG, BMP. Sell: VIC, GAS, VHM, KBC, BID
  • Notice stocks : VPB, HPG, NVL, MBB, HDB, CTG, GAS, ACB, SHB. LPB, VIB
  • Trading volume : ~ 250.7 million shares
  • Trading value : VND 6,283.5 bil ~ 275.6 USD mil
  • Foreigner transaction Net: -0.8 mil USD Sell 34.4 USD million and Buy 33.6 USD million
  • Derivative market: Total contracts: 96,219 contract; Trading value ~ USD 383.7 million;
  • VN30F1806@ 924; VN30F1807@ 931.7; VN30F1809@ 940; VN30F1812@ 967

Corporate update:

  • VNM – We recommend to Hold VNM with target price VND 192,284, upside 14% (Market cap VND 244,680 billion – Current price VND 168,600/share – PE FW 23.7x – PB FW 9.3x). In 2017, Vinamilk continued to be the leading dairy company in Vietnam with a market share of 58%, up 2% compared to last year. We forecast EPS FW 2018 of VND 7,127 (+7.91% yoy) so PE FW approximated 23.7x which is slightly lower than the median PE for emerging markets (23.8x).
  • 2018: We expect in 2018 the revenue and 2018 EAT to reach VND 55,580 billion (+9% yoy) and VND 10,888 billion (+5.93% yoy) as we assume the revenue growth rate of 9% will be similar to last year. Additionally, we predict a gross profit margin of 47.4%.
    • Vinamilk currently prioritizes investment in the Organic milk segment due to the demand for organic milk both domestically and internationally to increase significantly, with the budget of VND 5,000 billion including lands and cows in the next five years.
    • Vinamilk aims to boost export of products to Asia (Indonesia, Myanmar, Thailand and Cambodia) and other countries (China), but the process is still going to tested by searching for M&A deals with other foreign dairy companies.
  • Vinamilk has planned to pay dividends for 2018 including cash dividends of at least 50% of EAT in 2 periods with the first interim dividend expected at 20% in Q32018 and the second dividend of 2018 in May – June 2019. The final dividend for 2017 will be settled 15% in June 26th 2018.
  • The investment risks include: (1) Rising prices of raw materials such as skimmed and fat milk in 2018F. (2) Iraq`s political turmoil - which contributed the export revenue breakdown in 2017 of 30%-40%, affecting VNM`s export. (3) Prospects for the divestment of SCIC in 2018 may take a long time due to the veto right of SCIC based on their controlling 36% stakeholder share of the company.

Comments:

  • The age of “Futures”. Futures is the latest product in Vietnam’s stock market which is currently available on Vn30 index. Since started Aug 2017, the volume of Futures trading increase dramatically. Lately, Future trading value reach to peak of USD 383 million which well above trading value of USD 338 million on the stocks. We think that it is kind of hot since futures trading is a negative sum game (if we count fee and tax). Like all speculative games, it won’t have happy ending. Moreover, heavy Futures trading also push stocks rise and fall further from its normal level.
  • Are Vnindex really pass All Time High? Let call it Vnindex -7 (the old Vnindex excluding 7 new big listing stocks in last 1.5 years). Actually, Vnindex – 7 just touched the the peak of 1,161 point in April 2018 which was slightly lower than All-time high of 2007 (1,170 point). That Vnindex -7 come down to the lowest point of 885 this morning with P/E ratio of 15.86 which is sound pretty good (as we haven’t exclude the current most hyper valuation stocks yet).

P/s: I will take few days off. During that time I might not be able to answer call and reply to your email. In case you have business with BSC, please contact Mr. Khoa (khoabn@bsc.com.vn for macro & market research), Ms. Huong (huonglt@bsc.com.vn for Equity research) or Mr. Phong (phongvt@bsc.com.vn for institutional equity trading)

Graph of the day: Vnindex excluding 7 new big listing stocks in recent 1.5 years (VHM, VRE, VJC, HDB, VPB, ROS, SAB)

aaa.pngSource: BSC

Cheers,

Cheers

Tran Thang Long (Mr.)

Head of Research and Institutional Clients