Vietnam Sector outlook 3Q2016

Tran Thang Long – Head of Research

E Longtt@bsc.com.vn

P +84 4 39352722 (118)

M +84 906 959 034

S rongbeo

BSC

Sector Outlook Alpha Seeking

2

Cases to consider

Blue Chips: VIC, VNM, FPT, MBB, DPM, GMD, REE, BMP, MWG

Blue Chips for bottom

fishing:

HPG, HSG, PVD, GAS, PVS, VCG, SCR

Mid Caps: VSC, DXG, KDH, HBC, CMG, ITD, BFC, TCM, NT2,

VNR, VGC, MBB, VGG, CTI, DGC, DGL,

Mid Caps for bottom

fishing:

AAA, LCG, PVG, PGI, BCC, SAM, PPC, PTI, TNG,

PVT, BHS, NCS

Small Caps: HDC, KSB, LIX, NET, CHP, SJD, VIP, PGS, ITC, CSV,

PGC, C32, SMC, BTP, PET, HAH

Penny: LIG, UNI, L10, SAV, TTC, VIT, HNM, TCR, VCA, AGM

Caution: HAG, HNG, FLC, HVG, MSR, DRH

• First half 2016: Most of previous stocks on our list is outperformed Vnindex in the first half of 2016.

• Blue in, red out: some start look expensive including top O&G stock (GAS, PVD), AAA, KSB

• Out of favor stocks: REE, SAM, PPC, BCC, TRC can be interesting

How news and macro policies affect sectors

Sectors

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Texti

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Ele

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Ph

arm

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Pla

sti

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Tir

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Ba

nk

Ste

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Aq

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Su

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Oil &

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Fe

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Ru

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Ce

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tile

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IT

Se

ap

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Au

tom

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Insu

ran

ce

Milk

Material (+) (+) (+) (+) (+) (+) (+) (+) (-) (-) (+) (-) (+) (+) (+) (+) (+)

Fed hikes (+) (-)

USD/VND (-) (+) (-) (-) (+) (-) (+) (-) (+)

Euro / Brexit (+) (-) (+) (-) (-)

Japan/ JPY (-) (+) (-) (-)

China / RMB (-) (-) (-) (-) (-) (-) (-) (-) (-)

TPP, FTAs, (+) (-) (+) (+) (-) (+) (-) (-) (-) (+) (+) (+) (+) (+) (-)

Interest rate (-) (-) (-) (+) (-) (-) (+)

Sectors in each stage of economic cycle

Cycle Beginning Mid Ending Depression

Real Estate High Mid Mid Low

Construction High Mid Mid Low

Insurance Mid High Mid Low

Bank High Mid Mid Low

Textile High Mid Low Low

Aquaculture High Mid Low Low

IT Low High Low Low

Materials High Low High Low

Consumer

goods

Mid Low High High

Oil& gas Mid Low High Low

Pharmaceutical Low Low High High

Source: Fidelity

• Vietnam: from the beginning period of the recovery to the mid period with Growing (GDP, PMI), interest rate bottoming, the consumer confidence rising.

• Recommenced sectors : real estate, construction, construction materials, bank, insurances, information technology, and chemicals.

• We note that some sectors which grew strongly recently such as oil&gas, Pharmaceutical will be less attractive than others

• The Seasonal effect. The third quarter is usually the time with more exciting business activities than the first two quarters of year

How discount P/E Vnindex vs Asean 4

5,9

11,4 9,7 8,9 9,5 9,1 7,9

10,1 8,2

12,3

20,4

29,9

24,1

18,8 17,3 16,5 12,9

16,7 12,9 14,4

71% 62% 60% 53%

45% 45% 39% 39% 36%

14%

-100%

-80%

-60%

-40%

-20%

0%

20%

40%

60%

80%

0

5

10

15

20

25

30

35

40

45

Max P/E Min P/E Vietnam Median Discount

Sector rating 2016 No Sector Rating 2016 Buy Hold/tracking

1 Real Estate Outperform SJS, VIC, ITC, KDH VCG

2 Construction Outperform CTD, HBC, CTI

3 Tiles Outperform CVT, TTC VIT, VGC, TCR

4 Technology Outperform FPT, CMG, ITD

5 Sea Port Outperform GMD, PHP, VSC, HAH PSP, CDN

6 Textile Outperform TCM, TNG, VGG EVE

7 Electric power Outperform BTP, SJD, CHP NT2

8 Dairy Outperform VNM HNM, VLC

9 Cable Outperform VKC CAV, TYA

10 Fertilizer Market perform BFC DPM, LAS

11 Cement Market perform BCC HT1, BTS

12 Automobile Market perform SVC, TMT HAX

13 Insurance Market perform PTI, PGI, VNR BMI, HTL

14 Plastic Market perform BMP AAA, NTP

15 Steel Market perform HPG, HSG, NKG SMC, VCA

16 Sugar Market perform SLS BHS, SBT, LSS

17 Tire Market perform DRC, CSM

18 Banking Market perform MBB VCB, ACB

19 Pharmacy Market perform DHG, IMP, TRA, DMC

20 Rubber Market perform TRC DPR

21 Oil & Gas Market perform PVS, PGS, PXS,PVG, PGC GAS, PVD

22 Aquaculture Underperform HVG, VHC

23 Marine Transport Underperform PVT, GSP SKG, VIP, VTO

• OUTPERFORM: Real Estate, Construction, Building materials (tiles, plastic, cable), Technology, Sea Ports, Textile, Electric power and dairy.

• MARKET PERFORM: Plastic, Steel, Sugar, Tires, Cement, Automotive, Insurance and Banking, Pharmacy and Oil & Gas and Natural Rubber, Fertilizer.

• UNDERPERFORM: Marine Transportation and Aquaculture

• .

Key take away points

• Financial sector. Real estate, construction, material (Steel, cement, ceramic tiles), furniture (wood, bulbs, wires…). Bank, Insurance flat -> Favor Real estate (VIC, DXG, CEO, ITC, VCG)

• Free Trade Agreement. Textile, aquaculture, footwear, automobile trade, Marine Transportation, seaport, industrial park, logistics… -> Favor logistics and seaport

• Stock re-rated. HNX and HSX joint in to one stock exchange (Hnx is 30% discounted), Upcom Premium index, sectors turnaround thanks to input or output recovery… -> start buy top blue chips in HNX, Upcom.

• SOE Divested or full foreign room stocks. Diary sector (VNM), plastic (BMP, NTP), insurance (BMI, VNR) real estate (VCG, DIG), AGM…

• High & stable dividend, low beta, local focus. Ports (VSC, GMD, PHP), electricity (NT2, PPC, CHP, BTP),fertilizer (BFC, DPM), water, plastic (BMP, NTP), aerospace companies (NCT), gas distributors (PGC, PGS), retail (MWG, SVC) and dairy(VNM)

REAL ESTATE – OUTPERFORM

We maintain OUTPERFORM rating only for Real estate companies which have big land construction and good financial condition:

• While 2016Q1 revenues of Vietnam’s real estate companies grew by 90% yoy, earnings only raised slightly by 4% yoy, Only 24/48 firms was profitable from their core business activities

• No. 06 Circulars will take effect from the beginning of 2017, which gradually tightens capital inflows into the real estate market, and we expect to see large differentiation among real estate companies

• House and villas supplies to the market will most likely increase rapidly as major companies are deploying large-scale projects.

Recommendation:

Best sell (VIC, KDH) state divestments (VCG, HDC); large discount compared to book value (ITC, DIG, SJS, SCR).

9

Ticker Revenue

2016

Net profit

2016E EPS 2016 P/E FW P/B

ROE

2016 Dividend 2015

Price on 24th,

Jun, 2016 Target price

VIC 53.000 4.100 2.110 26 2.03 23.5 11% stock 45.700 53.000

KDH 1.765 290 2.305 9.37 1.08 11.3 8% cash div 21.600 25.100

ITC 450 20 289 31.8 0.43 1.4 5% cash div 9.300 14.443

SJS 984 303 3.059 7.5 1.14 15.2 10%cash div 22.900 25.307

(*) Forecast excules exchange rate profit/loss

CONSTRUCTION – OUTPERFORM

We maintain OUTPERFORM rating for the construction sector in 2H2016 due to (1) positive 2016 earnings, (2) infrastructure construction growth and (3) the benefit of real estate growth.

• The construction production value reached VND 215 trillion, increasing by 18.8% yoy

• 85/102 companies reported positive 2016Q1 earnings.

• Infrastructure construction has strengthened.

Recommendation: the transportation infrastructure construction enterprises, which benefit from the necessary to develop the infrastructure Buy: CTI Tracking: CTD, HBC

10

Ticker Revenue

2016

Net profit

2016E EPS 2016 P/E FW P/B

ROE

2016 Dividend 2015

Price on

24th, Jun,

2016

Target price

CTD 16.000 877 18.743 10.4 2.31 22.19 55% cash div 195.000 196.000

HBC 6.500 175 2.300 8.91 1.15 16.7 25% stock 20.500 22.800

CTI 1.405 107 2.521 11.11 1.440 13 15% cash div 28.000 31.800

CERAMIC – OUTPERFORM

We assess OUTPERFORM with Ceramic Sector in 2H2016, with the following reasons:

• Increasing competition keeps selling prices stable or down slightly by 2-5% in 1H2016. We expect selling price

to remain stable in 3Q2016

• In 1Q2016, ceramic tiles enterprises showed positive performance thanks to increase demand for ceramic tiles.

• Positive earnings growth in second half as construction projects finishing up towards year end

Investment recommendation: Recently, ceramic stocks have outperformed the market, and the stocks we

recommended including CVT, VIT, TTC have met or exceeded our target price. Under recent review, we recommend

to BUY to CVT, TTC and TRACKING to VIT, TCR, VGC.

Ticker Rev

2016

EAT

2016

E

EPS

2016

P/E FW P/B ROE

2016

Div 2015 Closed price

on 24 June

2016

Target Link

CVT 1200 96 5,000 6.20 1.54 24.9% Cash Div 5%; Share Div 10 : 2 31,000 35,030 Link

VIT 870.4 59.9 3,196 7.76 1.46 18.9% Cash Div 12%; Share Div 100 : 15 24,800 25,642 Link

TTC 413.3 27.8 4,675 5.50 1.13 20.6% Cash Div 8% 24,000 32,754 Link

TECHNOLOGY-TELECOMMUNICATIONS – OUTPERFORM

We still maintain the Outperform assessment with IT – Telecommunications sector, with the following reasons:

• Vietnam is ranked as in top 6 Outsourcing countries in Asia - Pacific by Gartner

• Issue Resolution 41/NQ-CP on tax incentives for the IT sector

• Number of internet account increase 940,000 in first 4 month (26% ytd)

• Improving earning results is expected in the second half

Investment Recommendation:

Buy: FPT, CMG, ITD

12

Ticker Rev2016

(bil VND)

PAT 2016

(bil VND)

EPS 2016 PE 2016 PB 2016 ROE 2016 Div yield

2016

Price

30/06/16

Target Price

FPT 42,514 2,678 4,618 9.05 1.79 21.57% 20% 41,800 51,000

CMG 4,209 171 1,808 8.02 1.00 17.82% N/A 14,500 18,900

ITD 740 60 2,400 14.46 2.60 23.09% 12% 34,700 38,600

SEAPORT – OUTPERFORM

We maintain our Outperform rating for Seaport sector for 2H2016, due to:

• Cargo throughout Vietnamese seaport system continued to increase with high speed of 14.35%yoy in 4M2016

• benefits from signed and soon-in-effect FTAs and growth of cargo throughout the region

• Please be noted the divergence in 3Q2016 business performance between North (decrease) and South seaports (increase)

Investment recommendation: valuation attractive, stronger second half, BUY: GMD, VSC, HAH, TRACKING: PHP, CDN, PSP

13

Ticker Revenue

2016 Net profit

2016E EPS

2016 P/E FW P/B

ROE 2016

Dividend 2016

Price on 24th Jun,

2016

Target price

GMD 3,453 362 3,641 11.97 2.25 21.31% 30% cash div

10% stock div 26.900 30.503

PHP 3,303 210 2,567 9.39 1.23 14.62% 40% cash div

10% stock div 20.900 22.980

VSC 1,391 381 7,005 9.28 1.62 14.80% Cash: 10% 65.000 86.208 HAH 509 113 4,564 8.83 1.78 21.00% Cash: 30% 40.300 47.419 PSP N/A N/A N/A N/A N/A N/A Cash: 5% 12.400 N/A

CDN N/A N/A N/A N/A N/A N/A Cash: 10% 22.500 N/A

TEXTILES – OUTPERFORM Although the total textile export value in 5M2016 grew at a modest rate, listed textile firms still had positive

performance in 1Q2016. We maintain our assessment of OUTPERFORM for Textile Sector in 2H2016:

• Since 3Q 2016 is the peak season for textiles companies, we expect textile export volume to improve from the growth of 6.13% of 5M2016.

• Cotton prices is expected to maintain the rebounce in 2H2016, as the supply is lower than demand for the first time since the 2009/10

• Some proposals to policy makers, if granted, will enhance the competitive advantages of domestic textile firms

• We note that textile is one of the sectors negatively affected by Brexit

Recommendation: BUY: TCM, TNG, VGG TRACKING: EVE

Ticker Rev 2016 NI

2016E

EPS

2016

P/E

FW

P/B ROE

2016

Div 2015 Closed price

on 24th Jun

2016

Target

price

TNG 2,426.8 95.3 3,217 5.44

0.98

18.1%

6% cash div

10% share div

Incentive sale at ratio 4:1

17,500 25,128

TCM 3,391.7 160.8 3,258 7.89 1.19 15.1% 6% cash div 25,700 30,045

VGG 7166.3 365.9 8,711 7.43 1.99 26.8% 30% cash div 64,700 80,333

EVE 1000.0 133.4 4,851 11.75 1.53 13% 20% Cash div + 50%

stock div

57,000 n/a

ELECTRIC POWER – OUTPERFORM

We maintain our OUTPERFORM rating for the electricity sector in 2H2016 due to the following reasons: • Since the second half of the year is the water season, we expect business performance of

hydroelectric companies will improve significantly, compared to 1H2016 results. • For thermal electric companies, we expect low input price and stable production, which enhance

profit in 2H2016. • However please note that thermal companies are likely to record exchange rate loss in 2H2016,

except for BTP and NBP.

Recommendation: BUY: SJD, CHP, BTP HOLD: NT2

15

Ticker Revenue

2016

Net profit

2016E EPS 2016 P/E FW P/B

ROE

2016 Dividend 2015

Price on

31st, Dec,

2015

Target price

NT2 (*) 5,902 1,204 4,016 8.67 1.57 17.00% 22% cash & 7% stock 34,800 36,405

PPC (*) 7,271 532 1,669 8.63 0.79 14.00% 12% cash div 14,400 15,700

SJD 348 163 3,289 8.27 1.12 21.00% 25% cash div 27,200 30,941

CHP 527 208 1,581 12.52 1.31 20.00% 9%cash div & 5% stock 19,800 23,200

(*) Forecast excules exchange rate profit/loss

DAIRY– OUTPERFORM

We maintain OUTPERFORM rating for the dairy sector 2H2016, due to the following reasons:

• Raw milk prices are forecasted by the International Farm Comparison Network (IFCN) to slightly recover in 2H2016. However, raw milk prices was fixed by dairy companies for the period of 6 – 9 months so the cost of goods sold will be stable.

• On June 28th, 2016, Vinamilk’s Director Board approved of lifting the current foreign ceiling ratio to 100%.

• We expect new yogurt products will help HNM increase its revenue and profit in 2H2016.

Recommendation: BUY: VNM TRACKING: HNM, VLC

16

Ticker

Reven

ue

2016

Net

profit

2016E

EPS

2016 P/E FW P/B

ROE

2016 Dividend 2015

Price on

31st,

Dec,

2015

Target

price

VNM 45,016 8,823 7,353 18.63 7.54 41% Cash div 60% 137,000 148,000

HNM 360 3.4 170 45.88 0.74 1.6% 0 7,800 N/A

VLC 550(*) 51(*) N/A N/A N/A N/A Cash div 6.5% 18,000 N/A (*) The revenue and profit of the parent company.

ELECTRIC CABLE – OUTPERFORM

We maintain our OUTPERFORM rating for Electric Cable sector due to the following reasons:

• Copper prices is expected to lower at USD 4.725/ton in 2016.

• The Government continuously invests in electrification to cover electric over the country.

• Customer segment is stable with large partners as VNPT and EVN.

Recommendation: Buy: VKC Tracking: CAV, TYA

17

Ticker

Reven

ue

2016

Net

profit

2016E

EPS

2016 P/E FW P/B

ROE

2016 Dividend 2015

Price on

24th,

Jun,

2016

Target

price

CAV 6.000 216 7.500 12.13 4.6 38 30% cash div 91.000 97.500

VKC 1.210 44.3 1.995 8.52 1.23 14.3 10% cash div 17.000 22.000

TYA 1.433 54 1.936 9.7 1.3 13.4 10% stock 19.300

FERTILIZER – MARKET PERFORM

We lower our rating of OUTPERFORM for fertilizer sector to MARKET PERFORM in 2H2016 due to the following reasons:

• We expect that level of fertilizer price will remain stable in 2H2016 due to the intense competition with low price imported fertilizer from Belarus and Indonesia, while the input costs are forecasted to go up in the last six months.

• We note that La Nina effects could boost up fertilizer consumption towards the end of 2016.

Recommendation: discount valuation, demand is weak, BUY: BFC TRACKING: DPM, LAS

18

Ticker

Reven

ue

2016

Net

profit

2016E

EPS

2016 P/E FW P/B

ROE

2016

Dividend

2015

Price on 31st,

Dec, 2015

Target

price

DPM 9,420 1,506 3,310 8.37 1.34 19% 40% tiền 27,700 30,100

LAS 4,189 255 3,536 7.63 1.58 28% 55% tiền 27,000 26,600

BFC 7,537 258 5,155 6.45 1.69 24% 28% tiền 32700 38,600

CEMENT – MARKET PERFORM

We maintain our assessment of MARKET PERFORM for cement sector

• Domestic cement consumption increased by 15% yoy; Cement consumption in the Northern Region rised by16.42% yoy

• High growth in domestic consumption thanks to the increase of real estate projects and infrastructure constructions

• Cement companies are expected to record unrealized foreign exchange rates gain in 2Q2016

Investment Recommendation: Strong demand, great valuation, Buy: HT1, BCC, BTS

19

Ticker Rev 2016

(bil VND)

PAT 2016

(bil VND)

EPS 2016 PE 2016 PB 2016 ROE

2016

Div yield

2016

Price

30/06/16

Target

price

HT1 8,229 785 1,975 14.78 1.78 15.06% N/A 29,200 37,404

BCC 4,147 244 2,038 7.61 0.78 12.50% 10% cp 15,500 19,300

BTS 3,038 120 1,100 8.00 0.72 8.85% 5% 8,800 10,500

AUTOMOBILE– MARKET PERFORM

We maintain our MARKET PERFORM rating for the automobile sector in Q3/2016, due to the following reasons:

(1) We expect the strong growth of 31% yoy in 5M2016 will slow down in 2H2016 due to the effect of new excise policy

(2) Consumption rate of truck is expected to stay strong, supported by the demand for replacement of overdue cars, and the high demand from the real estate market recovery

Investment Recommendation: BUY: SVC, TMT TRACKING: HTL

20

Ticker Rev 2016

(VND Bil)

PAT 2016

(VND Bil)

EPS

2016

PE

2016

PB

2016

ROE

2016

Div 2016 Price as of

June 24th

2016

Target

price

Link

TMT 5,803 256.3 7,795 5.5 2.2 39.3% 50% 40,000 54,500 Link

SVC 11,000 160 3,778 11.6 1.2 10% 14% 45,700 52,000 Link

HTL 1,481 66 5,500 17.1 3.8 22% 50% 92,000 N.A

HAX 2,385 36 3,230 11.1 2.1 19.1% 36,000 N.A

HHS 4000 398 1,475 6.7 0.7 10.8% 15% 9,400 N.A

INSURANCE SECTOR – MARKET PERFORM

We maintain our MARKET PERFORM rating for Insurance market. Revenue growth momentum in 3Q2016 is positive, thanks to

(1) the expected growth of auto sales remains high

(2) Real estate market is developing well, supporting the Property and Casualty segment,

(3) Cargo volume is expected to increase further.

(4) Investment activities will depend on the interest rate movements in the market, because 70% of the investment is in saving accounts.

Investment recommendation: Growth look great at 17%, If interest rate hike, Insurrance will be the first to be benefited. BUY: PGI, VNR, BMI, TRACKING: BMI, PTI

21

Rev

2016

PAT

2016

EPS

2016

P/E

F P/B F ROE Div 2016

Price as of

24/6/2016

Target

price Link

PTI 2,913 141.7 1,762 14.8 1.05 7.1% 12% 27,000 N/A Link

VNR 1,730 260.5 1,576 11.8 0.8 7.1% 18,300 21,800 Link

PGI 2,376 102.6 1,474 12.7 1.6 12.1% 14%- tiền 16,400 18,600 Link

BMI 3,590 134.1 1,578 15.1 0.9 5.9% 23,800 N/A

PLASTIC SECTOR – MARKET PERFORM

We maintain the rating of MARKET PERFORM to plastic sector due to the following reasons:

• Positive business performance thanks to strong output growth and low resin price

• M&A trends and opening room for foreign investors

However:

• Compared to peers, some plastics firms are currently traded at high valuation, such as AAA, NTP, TPC, HBD.

• Some packaging plastic still deal with pressure from customers and fierce competition.

Recommendation: Strong demand growth, valuation still attractive relatively to growth, Buy: BMP Tracking: NTP, AAA

22

Ticker Rev

2016

EAT

2016E

EPS

2016

P/E

FW P/B ROE 2016

Dividend

2015

Price on

24th, June,

2016

Target

BMP 3,525 689 15,141 9.51 3.25 31% >= 20% cash 144,000 159,754

NTP 4,063 418 6,368 10.41 2.24 23% 25% Cash

66,300 62,200

AAA 2,100 118 1,414 17.1 1.58 12% 10% - 15%

cash

26,900 N/A

STEEL – MARKET PERFORM

We maintain our rating of MARKET PERFORM for steel sector, due to:

• Iron ore prices continue to fluctuate due to China’s demand

• Import from China does not have any sign of declining after imposition of safeguard duty

• Consumption output of steel grew slower in Q2 than Q1 due to hoarding

Investment Recommendation: as long as steel consumption pickup and favor duty policies are

applied, steel sector can maintain good last bottom. Buy: HPG, HSG, NKG Tracking: VIS, SMC, VCA

23

Ticker

Rev 2016

(VND

billion)

PAT 2016

(VND

billion)

EPS 2016 PE 2016 PB 2016 ROE

2016

Div yield

2016

Price

June 30,

2016

Target

price

HPG 29,166 4,240 5,727 6.91 1.69 24.73% 30% 39,600 46,389

HSG 17,098 1,272 6,472 6.38 2.11 32.51% N/A 41,300 48,540

NKG 7,194 320 6,396 3.91 1.30 33.24% N/A 25,000 35,178

SUGAR – MARKET PERFORM

We assess NEUTRAL with Sugar sector in the next quarter due to:

• Last 6 months in 2015/16 crop year, world sugar prices is expected to grow 7-10% in Q3 due to the shortfall concerns

• Domestic sugar prices is expect to has a slight increase of 3-5% in Q3 thanks to a stable supply

• Some policies and draft policies supporting the sugar sector were enacted and discussed

• 9M earnings results for 2015/16 of listed sugar firms improved significantly compared to the same period

Investment Recommendation: Incase of Lanina, sugar price can rise and improve sugar stocks result. M&A on the

way. Tracking: BHS, SBT, LSS.

Ticker Rev

2016 (bil d)

NI

2016 (tỷ

đ)

EPS

15/16

P/E F

2016

P/B F

2016

ROE

2016

Dividend

2015

Closed price on

24th June 2016

Target

price

BHS 4,858 217 1,742 10.62 1.11 10.5% 5% cash div 18,900 n/a

SBT 3,090 255 1,330 23.5 2.32 9.9% 7% cash div 31,200 n/a

LSS 1,697 74.6 1,066 16.1 0.73 4.5% 1.5% cash div 17,100 n/a

SLS 741 118 17,410 6.9 2.86 41.4% 65% cash div 118,600 n/a

TIRE SECTOR – MARKET PERFORM

We give MARKET PERFORM rating to tire stocks due to the following reasons:

• Fierce competition, especially with Chinese manufacturers drag down output price, and inflate marketing & advertising expenses. Average tire price settled by DRC and CSM down by 20%yoy and by 8-10% yoy, respectively. Hence, operating profit margin might decline.

• Radial tire consumption is so slow that DRC and CSM still suffer losses in Radial factories.

• Hardly down in rubber prices anymore.

Recommendation: fair valuation, Tracking: DRC, CSM

25

Stocks Revenu

e 2016

Net

profit

2016E

EPS

2016 P/E FW P/B

ROE

2016

Dividend

2016E

Price on 24th,

June, 2016

Target

price

DRC 3,774 455 3,551 10.95 2.02 26.06% N/A 38,900 3,774

CSM 3.235 277 2,445 10.18 1.83 22.68% >= 10% 24,900 3.235

BANKING SECTOR – MARKET PERFORM

• Till 20th, June, 2016, credit grew 6.2%, deposit increased by 8.23% compared to 31st, Dec, 2015

• Abundant liquidity in 2Q2016

• NIM might reduce because of lower lending rate while increase in mobilizing rate.

• Circular 06

• VAMC plans to purchase NPL at market price

• Extending provision time of special bonds from 5 years to 10 years for some banks

• Some banks proposed to open room for foreign investors (CTG, VCB)

Interbank interest rate movement from June, 2015 to June, 2016

0

1

2

3

4

5

6

Thg6/15 Thg8/15 Thg10/15 Thg12/15 Thg2/16 Thg4/16

ON 1 week 1 month

0,00%

1,00%

2,00%

3,00%

4,00%

5,00%

6,00%

STB MBB ACB CTG BID VCB EIB SHB NVB

2013 2014 2015 Q1 2016

NIM of listed banks from 2013 to 1Q2016

BANKING SECTOR – MARKET PERFORM

We give MARKET PERFORM rating to banking stocks due to the following reasons:

• Circular No.06 puts pressure on bank’s credit growth.

• NIM might reduce due to lower lending rate while higher mobilizing rate.

• Provision expenses might soar, except for VCB and MBB.

• Recommendation: Compared to the region, some listed banks as VCB, BID, ACB and CTG are currently traded at relatively high valuation. VCB, CTG ask for more foreign room and BID seeking strategic investors. BUY: MBB, TRACKING: VCB, ACB

27

Ticker Rev

2016

EAT

2016E EPS 2016 P/E FW P/B ROE 2016 Dividend 2015

Price 24th

June, 2016 Target

MBB 2,823 1,561 9,54x 1.04 12,10% 10% cash or

stock

14,900 16,600

VCB 6,682 2,102 22.26 2.65 14.32% 10% cash 46,800 45.500

ACB 1.208 1.337 14.36 1.31 8.45% 10% stock 19,200 NA

PHARMACEUTICAL SECTOR – MARKET PERFORM

We give MARKET PERFORM rating to pharmaceutical stocks due to the following reasons:

• Defensive stocks suit for long term investment and negative stock market.

• Attractive valuation compared to region pharmaceutical stock market.

However:

• The law amendment does not bring much positive effect on pharmaceutical firms.

• Fierce competition, especially with Indian, and after FTAs.

Recommendation: pharmaceutical stocks start looking pricy, time to get out ?

Tracking: IMP, DMC, DHG, TRA

28

Ticker Revenue

2016

Net profit

2016E EPS 2016 P/E FW P/B ROE 2016 Dividend 2016

Price on 30th,

June, 2016 Target price

DHG 3,530 695 7,196 14.31 3.50 24.00% 30% cash div 103,000 NA

IMP 999 104 3,103 14.44 1.43 11.00% 30% cash div 44,800 NA

TRA 2,100 210 7,829 14.69 2.94 19.00% 22% cash div 115,000 NA

DMC 1,415 155 5,802 12.67 2.47 17.00% 15% cash div 73,500 NA

NATURAL RUBBER– MARKET PERFORM

We raised our assessment from UNDERPERFORM to MARKET PERFORM, due to:

• Currently, rubber price is 7% higher than the average price in 2015.

• We expect rubber price to follow downward trend, but the decline will not be as severe as planned by most rubber companies.

• We note the possibility of reduction in supply due to La-nina effect towards the year-end, as happened in 2011

Recommendation: results look bad but the worst may be behind. One of the leftover sector to turn

around. BUY: TRC Tracking: PHR

29

Rev

2016 PAT 2016 EPS 2016 P/E F P/B F ROE Div 2016

Price as of

24/6/2016

Target

price Upside Link

TRC 339.73 70.66 1,941 10.1 0.4 4% 10% 21,500 25,10

0 16.7%

Link

• Oil prices increased by 57% from the bottom on January 20th, 2016 but the recovery has weakened

• Large organizations raised forecasted oil prices to 39-45 USD/barrel in 2016.

• Requirements for LPG business was loosened, which enables small participants to the market

• LPG price recovered along with the rebound of oil prices

• The crude oil exploitation output of Vietnam decreased in the first 5M2016

OIL & GAS SECTOR – MARKET PERFORM

20

25

30

35

40

45

50

55

Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16

World crude oil price (USD/barrel)

WTI Brent

15

20

25

30

35

Imported cude oil volume of China (million tons)

Imported crude oil volume of China 14M - MA

OIL & GAS SECTOR – MARKET PERFORM

We raise our rating for the oil & gas sector from UNDERPERFORM to MARKET PERFORM

• oil prices will fluctuate around 45-50 USD/barrel in the last six months (average $40-42 of 1H2016).

• DCM and gas electric plants will be affected by 6days maintenance of Nam con son Gas pipline in Sep 2016.

• Implementation of petrochemical refinery projects (Long Son in 4Q2016, Nhon Hoi in 1Q2017).

• Capacity expansion for Dung Quat refinery from 6.5 million tons to 8.5 million tons.

Recommendation: stocks start looking pricy, time to get out of O&G Bluechip ? BUY: PVS, PGS, PVG,

PXS, PGC TRACKING: GAS, PVD

31

Ticker

Reven

ue

2016

Net

profit

2016E

EPS

2016 P/E FW P/B

ROE

2016 Dividend 2015

Price on

31st, Dec,

2015

Target

price

PVS 21,060 1,108 2177 8.27 0.69 9.44% 12% cash 18,000 22,700

PGS 4,052 97 1,442 11.85 0.63 15.00% 25% cash & 31%

stock 16,900 20,100

PVG 2,766 28 836 9.18 0.51 7.00% 7,600 9,100

PXS 1900 116 1837 7.01 0.95 15.00% 13% cash& 10 %

stock 12,700 14,700

PGC 2,511 111 1600 6.44 0.96 17% 12% cash 10,300 12,015

AQUACULTURE– UNDERPERFORM

We maintain our assessment of Underperform for Aquaculture sector. Although VASEP forecasts aquaculture export value to recover decently by 13% yoy in 2016, we are concerned of the long term perspective due to:

(1) The material input supply is strongly affected by drought in the South delta.

(2) The political changes in Eu (Brexit) migh cause downgrade in pound, Euro.

(3) Foreign exchange rate will continue to be unfavorable in 2H2016

Investment recommendation:

Tracking: HVG, VHC,FMC

32

Ticker Revenue

2016 Net profit

2016E EPS 2016 P/E FW P/B ROE 2016

Dividend 2016

Price on 24th Jun,

2016

Target price

HVG 23,994 162 870 11.26 0.7 7.30% 10:2 stock div 9.8 N/A

VHC 6,746 382 4,131 10.14 1.78 17% 10% cash div 41.9 35

FMC 3,176 105 3,500 6.89 1.6 N/A Stock div: 2:1 24.1 24

MARINE TRANSPORTATION– UNDERPERFORM

We maintain our Underperform assessment for marine transportation sector, due to:

• The weak demand in China will negatively affect bulk cargo transportation

• Exchange rate fluctuation is likely to affect business results negatively in 2H2016

• We note that a few companies which transport liquid have better outlook thanks to higher demand from domestic projects.

Investment recommendation: Discount multiples, demand and exchange risk are main concerns

BUY: PVT, GSP Tracking: VIP, SKG, VTO

33

Ticker Revenue

2016 Net profit

2016E EPS 2016 P/E FW P/B

ROE 2016

Dividend 2016 Price on 24th Jun,

2016 Target price

PVT 6,358 507 1,742 7.4 0.97 13% 8% cash div 10%

stock div 12.9 16.19

GSP 1,132 71 1,922 7.13 1.03 20% 12% cash div 13.7 15.2

SKG 382 218 8,921 10.65 4.88 37% Cash: 30% 95 N/A

VIP 625 106 1,561 5.7 0.55 n/a Cash: 8% 8.9 N/A

Thanks for your supports and confidence in us

Long Tran Head of research

Please feel free to contact me at

E Longtt@bsc.com.vn

P +84 4 39352722 (118)

M +84 906 959 034

S rongbeo

BSC