VNIndex closed November at 926.54 points, which gains 1.29% compared to last month. Low liquidity has now become a common factor of this market. The average matching value of November is around $109mn, the lowest in the last ten months. This month, foreign investors have a net buying value of $59.5mn but it’s not enough to lead local investor’s responses.
In general, the market seems to get stuck in its low liquidity, lack of supportive macro news, and lack of local investors’ belief. The shares become cheap but local investors expect to see them a little bit cheaper. People also want to see more buying forces from foreign investors, but no one could say when. This sideway could be challenging the patience of many fund managers, due to their lost in fund’s NAVs while the end of the year is coming closer and closer.
For this week, I want to talk about the potential of eCommerce in Vietnam. In 2018, revenue of Vietnam’s e-commerce is expected to reach $2,269mn, increasing 29% y.o.y with 49.79mn users – a penetration rate of 52.5%. If we take a look around ASEAN, the spending on e-commerce per person in Vietnam is still quite low, only about $45/person/year, while this number is much higher in Thailand and Malaysia, which is $100 and $158 respectively. However, we see the potentials of Vietnam in eCommerce due to these reasons:
Vietnam population is ranked third in ASEAN, behind Indonesia and Philippines.
The urbanization rate is round 35% which helps improving internet users from 67% of total population to 80% in 2020.
There are 70 million people who have mobile phones but only 64 million people use internet due to elderly population. With the strong growth of internet and smartphones, we believe the number of people that use internet should be equal to the number of people that have mobile phones in a few years.
The strong growth of ecommerce companies such as Lazada, Shopee, Tiki and Sendo. None of these companies generates profit as they accept loss in the first few years to improve their market share and customer base. Therefore, we expect the eCommerce’s revenue will continue to grow fast in 2019 and 2020, increasing 25.5% and 19.5% y.o.y respectively.
Fast expansion of eCommerce leads to higher demand for logistics, especially delivery segments. These above mentioned eCommerce companies have two options to solve this problem:
- Build and develop their own shipping companies like Lazada Express (LEX).
- Outsourcing to other logistics companies.
Because their main focus is taking as much market shares as possible, most eCommerce companies choose to outsource logistics to reduce workload, bringing a lot of benefit to big logistics companies such as VN Post and Viettel Post (Ticker: VTP) – the company recently got listed on UPCoM last Friday (Nov 23, 2018)
Viettel Post has the highest growth in delivery services and is ranked second in terms of market share in Vietnam. In 7 years, VTP has increased its market share from 8% in 2010 to 25.7% in 2017. Viettel Post has an annual revenue growth rate of 47% in 5 recent years. The company is changing its business model from sales (air ticket, stationary) and services (express delivery, logistic) to mainly providing services, which accounts for 94% of total revenue in 1Q2018 compared to 60% of total revenue last year. This also helps improving its net profit in 1Q2018, increasing 68% y.o.y.
In the 1H2018, the VTP’s NPAT reached $5.08mn, increasing 60% compared to last year period. The EPS reached VND3,940 in the first six months of 2018. The company aims to be the best logistic business for others companies in Vietnam, targeting $500mn in revenue with 30-37% market share in 2020. Viettel Post has a strong network including 1,400 post offices, 17,000 staff and more than 500 transportation cars to all regions around Vietnam. Viettel Post has reached to foreign markets such as Cambodia and Myanmar since 2009. In specifics, the company has presented in 24/24 provinces in Cambodia through its subsidiaries.
On the market, VTP gained 83.8% since its listing. The stock price is now traded at VND125,000/share, as of Nov 30-2018.
Rong Viet Securities Equity Research Summary
Changes in The Money Market Last Week
The money market always plays a key role in the short-term, highlighting how the State Bank of Vietnam (SBV) responds to changes in the market.
Currently, the interbank market has seen significant higher interest rates which built up a new base around 5%.\
A high US Dollar Index as well as strong fluctuations in the FX markets affects foreign currency demand of exporters and importers.
In the secondary bond market, there are two elements to highlight.
- The G-Bond yields has gone sideways in recent weeks
- The G-Bond yield curve is flattening.
Firstly, that the government actively reduced the amounts issued softened the pressure on G-Bond yields in both the primary and secondary markets. Secondly, relatively high increases of short-term G-Bond yields have contributed to a flatter G-Bond yield curve.
While there is no doubt of that short-term demand is there, the SBV continues to exploit the OMO channels and inject money into the banking system.
Phu Nhuan Jewelry JSC (HSX: PNJ) – (Update, BUY, VND126,000, UPSIDE 34%)
3Q18 performance: maintaining high growth
Revenue and PAT increased by 35% and 38% respectively YoY due to the main contribution of the gold jewelry business.
High same store sales growth (SSSG) of 23%. Ticket size increased 15% YoY, while the numbers of new customers and returning customers rose 50% and 58% respectively.
Opening of the retail network, from 269 stores to 308 stores in 9M18, accomplishing 2018’s target.
2019: Continuing to open retail stores
The jewelry business will grow well next year due to the continued expansion of stores.
The investments in ERP management systems, big data and omni-channel sales will help improve operational efficiency and increase the gap between PNJ and its competitors.
The stock is trading at 94.x current EPS of VND6,434. Furthermore, at its current price, it is trading at ~5.4x P/B. Cash dividend is expected at VND1,800.
Hang Xanh Motors Service JSC (HoSE: HAX ) – Gross Profit Margin of the Automobile Business May Peak in 2018
In 9M18, HAX experienced a growth of 9% YoY in NPAT.
4Q18 GPM of the automobile business may remain as high as that of the two recent quarters.
GPM of HAX’s core business has benefited from difficulties in the automobile market since 2Q18. Its GPM increased from 2.2% and 4.7% in 2Q17 and 3Q17 to 6.0% and 5.6% in 2Q18 and 3Q18.
In 4Q18, the shortage of automobiles may remain supportive of GPM, HAX’s core business.
Incentives could be significant in 4Q18, increasing by 10% YoY to VND28bn.
4Q18 performance will remain strong.
Although in 4Q 2018, supply of Mercedes – Benz cannot meet the high demand, we still believe a growth of 9% YoY in sales volume is possible.
Revenue may reach VND1.25tn (+16% YoY). NPAT could witness a growth of 73% YoY to VND45bn.
Although earnings of HAX in the first three quarters were not so impressive, we still expect 2018 NPAT to reach VND108bn (+29% YoY), corresponding to an EPS of 3,085 VND/share.
At current market price, HAX is trading at a P/E ratio of 5.2x, quite attractive given the bright outlook in 4Q18 and 2019.