investment strategy for the second half of 2020

Investment strategy for the second half of 2020 CATCH-UP NEW INVESTMENT WAVE

Macro-economic and stock market in 1H2020 and 2H2020

Public investment and benefiting sectors

Industrial parks catch-up new FDI movement

EVFTA and prospect for exporting sectors

1

2

3

4

PART 2: Public investment and benefitting sectors

ContractorTechnology -Digitalization

Infrastructure development

Public investment

Power generation

Construction materials

Tele-communication

Infrastructure Development

4

2 Ready for the new investment waves

5

Vietnam

Government

advocates public

investment

disbursement for

economic recovery

and being ready

for investment

movement

The Government

reforms to attract

private

participation in

infrastructure

development

1 2 3

Vietnam

infrastructure

demands

tremendous

capital and

depending on

Government

budget

Electricity generation Technology - telecommunicationConstruction material & ContractorPublic investment

2

102

96

87

66

55

53

29

24

5

4

1

Philippines

Cambodia

Lao

Vietnam

Indonesia

Thailand

Malaysia

China

Korea

Japan

Singapore

Transportation Infrastructure

107

97

96

90

89

87

65

51

22

11

5

Cambodia

Lao

Philippines

Thailand

Indonesia

Vietnam

China

Malaysia

Korea

Japan

Singapore

Utility Infrastructure

Source: World Economy Forum, PHFM compilation

• In the Global Competitiveness Report 2019, Vietnam ranks 66th in infrastructure and 87th in utilities. Vietnam's rank is not high in SEA. The

WEF criteria for infrastructure evaluation are:

Transport Infrastructure: Road, Airport & Liner shipping connectivity; Quality of road infrastructure; Railroad density; Efficiency of the

railroad, air transport & seaport services, etc.

Utility infrastructure: Electricity access, Electricity supply quality, Reliability of water supply, etc.

Low ranking of Vietnam transportation infrastructure


2

0

5

10

15

20

25

30

35

bill

ion U

SD

Infrastructure Investment Estimation

Energy Seaport Rail Road Water Airport

Source: GIH, PHFM compilation

• To attract foreign investment, Vietnam needs to strengthen infrastructure development.

• Global Infrastructure Hub (GIH), which belonged to G20, estimated that Vietnam will need to invest USD 515 billion in infrastructure from 2021

to 2040 with the assumption annual growth of 5.2%. The estimation is for Vietnam to catch up with the best performing peers. In comparison to

other Asian countries, Vietnam has to be the most active country from 2021 to 2030 with the investment rate for infrastructure above 7% GDP.

In which, two sectors including Transport Infrastructure and Water Supply will be invested heavily.

0

1

2

3

4

5

6

7

8

9

10

% G

DP

Investment as % GDP

Vietnam China Indonesia Japan

Korea Philippines Singapore Thailand

Vietnam infrastructure needs large investment and depends on State budget


2

• Similarly, ADB estimates that Vietnam needs USD 110 billion from 2021 to

2025. According to ADB, to develop infrastructure, Vietnam needs:

- More catalysts to support development

- Passing a strong law on public-private partnerships (PPP)

- Better mobilization of domestic capital markets

• Only 10% of infrastructure projects in Vietnam are financed by private

sector; the remaining is financed by the Government. However, the

disbursement progress in infrastructure is still low due to bottlenecks such

as capital balancing issues, site clearance, work acceptance, etc.

• Private participation would improve efficiency and partially solve the

above problems. Hence, Vietnam creates a mechanism to attract private

capital in infrastructure development.

• PPP law attracts private participation in infrastructure construction and

services which the Government has the responsibility to provide.

• PPP law provides the foundation for the world financial institutions’

disbursement to support Vietnam's infrastructure development.0.15

0.20

0.75

1.11

1.12

1.59

1.82

1.84

2.83

5.92

17.34

Multisector

Industry & Trade

Health

Finance

Education

Water and Other UrbanInfrastructure and Services

Public Sector Management

Agriculture, Natural Resources& Rural Development

Energy

Transport

Total

Cumulative investment from ADB until 2019

Source: ADB, PHFM compilation

Vietnam infrastructure needs large investment and depends on State budget (cont.)

(USD Billion)


2 Strategies to strengthen State disbursement, developing infrastructure

• The Politburo considered the public investment as the key solution for Vietnam economic recovery.

• The state budget for public investment in 2020 is VND 467 trillion (+36% YoY). Since 2016, the actual disbursement has not completed the

assigned budget. In 2019, the disbursement was only 89.5% of the budget. The accumulated budget remaining of the previous year is VND 225

trillion.

• In 1H2020, the investment disbursement was estimated as VND 154.4 trillion (+19.2% YoY), which was equivalent to 33.1% of the planned

budget. Ministry of Transport received the largest investment of VND 5,953 billion, which was equivalent to 24% of the State budget in 1H2020.

(5)

-

5

10

15

20

25

30

35

40

45

2011 2012 2013 2014 2015 2016 2017 2018 2019

Difference between Budget and Actual Disbursement

178 205 206 208

220

269 291

325 343

-

50

100

150

200

250

300

350

400

450

500

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Trilli

on V

ND

State Budget Disbursement

25%

7%

5%

63%

Investment from State Budget in 1H2020

MOT

MOH

MARD

Others

Source: GSO, PHFM compilation


2

On 18 JUN 2020, at the 9th meeting, the National Assembly officially approved the law in the form of public-private partnership - PPP Law.

Capital mobilized from bonds must not

exceed the loan portion

Mobilized capital must not

be used for purposes other

than PPP

TransportationElectricity Power

Grids and Generation Plants

Water System, Water Supply,

Waste and Sewage Treatment

Health & Education (*)

Information, Communication and Technology Infrastructure

(*) Except projects in Health & Education, minimum size of the project is VND 200 billion

INVESTMENT SECTOR

- Limited liability Co.

- Joint Stock Company

- Not qualified as public companies

COMPANIES

BOND ISSUANCE

REVENUE SHARING MECHANISM

Revenue

Larger than 125%

State shares 50%

Lower than 75%

State shares 50%

Attracting private sector to infrastructure development


2

Source: PHFM compiles

• North-South expressways are key projects in the public

investment disbursement.

• There are 11 highway projects, in which 3 are State

projects and 8 are PPP projects. Total investment for the

project is estimated at VND 102.5 trillion (approved by the

Ministry of Transport in 2018).

• However, only 7 in 8 PPP projects have partnerships that

are eligible for bidding. Vinh Hao – Phan Thiet project has

no qualified partners to proceed to the bidding round.

Expressway projects are scheduled to start in September

2020.

• Besides the expressway projects, many projects are in

the process of disbursements such as Long Thanh

Airport, Ha Noi, and Ho Chi Minh City Urban railway, etc.

• Long Thanh Airport is the project having the highest

investment with VND 368 trillion. However, Long Thanh

Airport is still in the process of site clearance, so the

construction is expected to start in 2021.


Attracting private sector to infrastructure development (cont.)

Benefit from Public Investment

12

2 Construction Material & Contractor

13

General

evaluation of

industries’

benefits from the

public investment

Demand for

materials and

services from

the expressway

project

Particular evaluation

for each industry and

company’s benefits

from public

investment

1 2 3

Electricity generation Technology - telecommunicationPublic investmentConstruction material & Contractor

Source: MOT, PHFM compilation

11%

66%

8%

15%

Cost allocation in expressway projects

Site Clearance

Construction & equipment

Project management &consultant

Provision & interestexpenses

• 66% of expressway projects investment is for materials and

equipment, equivalent to VND 68 trillion. 8% of the

investment is for project management and consultancy.

• Based on the Decision No.44/QD-BXD of Ministry of

Construction, we estimated that VND 60 trillion is the cost

of the materials. In particular, construction steels account

for 30%; both construction stone and cement account for

15% of the total materials cost.

Demand for materials and services from the expressway project

2

52Electricity generation Technology - telecommunicationPublic investmentConstruction material & Contractor

General evaluation of industries’ benefits from the public investment

Disbursement acceleration for infrastructure construction is expected to open up potential opportunities for companies in related

industries. We evaluate the potential benefits based on the following the factors: (1) Demand for raw materials & services of

infrastructure projects; (2) Production technology to manufacture the high-quality product with low selling prices; (3) Market share and

distribution system near infrastructure projects and (4) Financial health.

Industry Company Demand Production

Technology

Market &

Distribution Network

Financial Health Evaluation

Steel HPG *** *** *** *** POTENTIAL

HSG ** *** *** ** LESS POTENTIAL

NKG ** ** ** * LESS POTENTIAL

Contractor CTD * *** * *** LESS POTENTIAL

HBC * ** * * NO POTENTIAL OR UNCLEAR

Construction Plastic BMP ** *** *** *** LESS POTENTIAL

NTP ** *** *** ** LESS POTENTIAL

DNP ** ** ** * LESS POTENTIAL

Construction Rock KSB ** ** * * NO POTENTIAL OR UNCLEAR

DHA ** ** * *** NO POTENTIAL OR UNCLEAR

C32 ** ** * *** NO POTENTIAL OR UNCLEAR

Cement HT1 ** ** *** *** LESS POTENTIAL

BCC ** ** ** ** LESS POTENTIAL

*** = Potential, ** = Less potential, * = No Potential/Unclear

2


47%

10%

17%

26%

Steels Consumption in 5M2020

Construction steel

Steel pipe

Stainless steel

Hot rolled steel, coldrolled

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

2015 2016 2017 2018 2019 5M20

ton

Steel Consumption over years

Construction steel Steel Pipe Galvanized Steel Rolled Steel

0

200

400

600

800

1000

1200

1400

HPG TIS Kyoei Việt Nam

POM VCA

nghin

tấn

Consumption of construction steel in 5M2020

0

100

200

300

400

500

HSG NKG DTL

nghìn

tấn

Consumption of stainless steel in 5M2020

- Construction steel is the main material used in many large projects. And the

leading companies in Vietnam construction steel market share is HPG.

- HPG’s production technology can create products specifically for large

infrastructure projects. Along with a strong distribution network nationwide, we

assess that HPG would have the potential benefits from public investment.

Source: Fiinpro, VSA, PHFM compiles

Steels

Industries and companies evaluation2


HBC, CTD

VCG

UDIC

HAN

Ministry of Defense’s Companies

Residential & Industrial

CC1, CC4

VCG, IDC, Licogi Group

Infrastructure

Contractor

- Infrastructure projects are usually undertaken by contractors

such as Vinaconex (VCG), Construction Corporation No. 1

(CC1), Investment & Construction No. 4 (CC4).

- CTD and HBC do not have competitive advantages in large

infrastructure projects. At the latest annual shareholder

meeting, the chairman of CTD expressed his view that he had

no intention to participate in the infrastructure segment.

- We appreciate VCG's ability in infrastructure construction

because of its experience and the ability to raise large capital

for projects development. In bidding for 11 highway projects,

VCG participated in bidding for 5 projects.

- However, because of disagreements among large

shareholder groups, we assess that VCG is not attractive due

to governance risk.

Industries and companies evaluation (cont.)2


- BMP, NTP, DNP, and HSG are the listed companies that supply

construction plastic materials.

- The market share of plastic pipes of BMP, NTP, and HSG is the

top 3 in 2019. BMP and NTP are the companies that we favor in

the construction plastic group.

- But public investment will not have big impacts on business

results of these leading companies because their market

segments are residential construction. Specifically, in the latest

AGM in June, BMP's BOD expressed that they had not yet

seen any impact from public investment on their business.

- The largest market share of infrastructure construction plastics

belongs to DNP. However, DNP has been actively involved in

the water supply sector in recent years. This required huge

initial investment costs, increasing Total Debt/Equity ratio to

2.25 times. The effectiveness of investment is currently unclear

(although the future is quite positive), making the business

operation results over total assets not as attractive as peers.

35%

24%

22%

19%

Plastic Market in 2019

Packaging

Building materials

Household

High-tech products

Source: VPA, PHFM compilation

Construction Plastic

Tickers

Net

Revenue YoY PAT YoY

Gross

margin

Total

assets

Total

debt/

Equity

EBITDA/

Net

Revenue

BMP 1,020 9.5% 102 12.4% 24% 2,949 0.02 17.6%

NTP 960 -4.2% 76 5.6% 32% 4,223 0.52 15.4%

DNP 937 73.6% 3 -61.0% 16% 7,928 2.25 13.2%

DPC 18 -7.4% 1 -36.7% 31% 78 0.70 7.4%

Business results in Quarter 1/2020


56Electricity generation Technology - telecommunicationPublic investment

Construction material & Contractor

Companies Quarry location Provinces

CTI, DND, DHA, VLB Tan Cang, Bien Haa

ĐỒNG NAICTI, KSB, DND, DHA, VLB Thien Tan, Vinh Cuu

VLB Soklu, Thong Nhat

NNC Nui Nho, Di An

BÌNH DƯƠNGKSB Phuoc Vinh, Phu Giao

BMJ An Binh, Phu Giao

KSB Tan My, Bac Tan Uyen

DHA Nui Gio, Hon Quan BÌNH PHƯỚC

- Listed mining construction stone companies are

mainly in Dong Nai, Binh Duong, and Binh Phuoc.

- Although KSB has quarries in Thanh Hoa and Nghe

An, the permitted mining output is not large.

- The MOT has sent an official letter to the People's

Committees of the Provinces having highways

projects. The letter required the Province to support

raw materials supply for construction project. Except

for the Long Thanh - Dong Nai airport project in the

area near quarries of listed companies, other areas

have many private companies which can provide.

- Therefore, we do not think potential benefits of public

investment in the stone industry are high.

Construction stone



Cements

- The cement market is oversupply. Export still contributes to a

large proportion of revenue.

- According to the Department of Construction Materials (Ministry

of Construction), in 2020, it is expected that two cement

production plants will be put into operation, which brings the total

number of plants in the country to 86 with total productivity

reaching 106 million tons. If exports reach 34 million tons equal

to 2019, domestic consumption will have to obtain 72 million

tons, equivalent to +7% YoY. Given the current situation, it is

difficult for domestic consumption to absorb the supply from

production.

- The export has been facing difficulties because of the pandemic,

which makes domestic competition more fierce. Additionally, the

cost of cement in infrastructure projects is not really large as it

only accounts for 10% - 15% of the total cost of raw materials.

Total cement demand for expressway projects is estimated at

only 2% - 3% of total current consumption.

- Therefore, we do not see the potential benefits of cement

companies.

0

5

10

15

20

25

Production Domestic Consumption Export

Mill

ion t

ons

Production & Consumption in 2019 and 2020

2019 2020

Tickers

Net

Revenue YoY PAT YoY

Gross

margin

Total

assets

Total

debt/

Equity

EBITDA/

Net

Revenue

HT1 1,732 -13.3% 105 -1% 17.0% 9,752 0.56 21.2%

BCC 1,051 13.8% 19 -23% 12.3% 4,689 0.68 11.6%

BTS 689 -4.6% 11 -47% 13.0% 3,565 0.92 13.0%

HOM 404 4.4% 0 -90% 10.1% 1,751 0.33 9.7%

VCX 189 3.1% -1 82% 5.7% 718 2.50 10.1%

Source: VCA, PHFM compilation

Business results in Quarter 1/2020



HPG is the leading company in construction steel market with the largest share and

latest production technology.

Catalyst

With the technology to manufacture specific products for infrastructure, HPG is

expected to benefit from public investment policy.

Participating in the HRC market will be a stepping stone for HPG to encroach into the

galvanized steel market. HPG will also be a supplier of raw materials for galvanized

steel manufacturing companies such as HSG and NKG.

Strong financial structure and effective supporting businesses (agriculture, real estate

industrial parks) create a solid foundation for the company to continue operating in

difficult times.

Compared with Index

Historical valuation

21

2 Stock pitch

HOA PHAT GROUP JSC. (HPG)

Target Price: 28,700 VND

Financial Indicators 2015A 2016A 2017A 2018A 2019A 2020E

Net revenue (billion VND) 27,453 33,283 46,162 55,836 63,658 81,947

Profit after tax (billion VND) 3,485 6,602 8,007 8,501 7,578 8,088

EPS (VND) 4,755 7,833 5,278 4,003 2,720 2,441

EPS Growth (%) -27% 65% -33% -24% -33% -10%

Book Value (VND) 19,706 23,425 21,282 19,127 17,210 17,307

Cash dividend (VND) 10% 15% N/A N/A N/A 5%

Electricity generation Technology - telecommunicationPublic investmentConstruction material & Contractor

Dual benefit from public investment

22

Electricity Generation

23

Demand will grow

with economic

development,

especially in the

manufacturing

sectors

Undersupply of

electricity

Listed companies

have long-term

plans to increase

installation capacity,

participate in

electricity market, and

accompany with

economic

development.

1 2 3

2

Public investment Technology - telecommunicationConstruction material & ContractorElectricity generation

Demand growth for electricity

Electricity Consumption

0%

6%

12%

18%

24%

0

500

1,000

1,500

2,000

2,500

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

20

19

kW

h

kWh per capita Growth

Consumption by sectors

0%

20%

40%

60%

80%

100%Others

Administration &Residential

Commercial & Hotels,Banks

Industry & Construction

Agriculture, Forestry &Aquaculture

Industrials

0%

5%

10%

15%

0

5

10

15

20

25

2012 2013 2014 2015 2016 2017 2018 2019

US

D B

illio

n

FDI disbursement GDP growth IIP growth

- Electricity consumption has grown steadily annually.

- Industrials and Construction sector consumed the most.

- The development outlook in production sector would lead to

strong demand growth.

Source: World Bank, EVN, GSO, PHFM compilation Source: EVN, PHFM compilation

Source: GSO, PHFM compilation

2


62

1,341

6,40010,676

0

3,000

6,000

9,000

12,000

15,000

2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2020 -2030

Shortcomings in installed capacity (MW)

Source: MOIT, PHFM compilation

0

30,000

60,000

90,000

120,000

150,000

2019 2020 2025 2030

Total installed capacity (MW)

- Installed capacity is in short with the Plan to meet the

demand.

- Renewable energy installed capacity will increase and take

a significant proportion in total.

- Draft of Electricity Plan VII in June 2020 attracts all sectors

to participate in the investment of the electricity system.

38%43% 49%

43%

0%

20%

40%

60%

80%

100%

2019 2020 2025 2030

Structure of installed capacity

Hydropower Coal thermal power Gas thermal power

Renewable energy Nuclear power (*) Import

Source: Plan VII, PHFM compilationSource: EVN, Decision 5, PHFM compilation

Undersupply of electricity – Prospect and installation trends2


63

- Types of power plants depend on geographical location

and infrastructure development associated with

electrical system development.

- Thermal power and renewable energy continue to grow

in the future.

- Companies with healthy financial strength have long-

term plans to expand capacity in important areas.

- The retail electricity market open opportunities for

companies to improve business results (experienced

plants and hydropower plants)

Source: PHFM compilation

2 Undersupply of electricity – Prospect and installation trends


64

Long-term plans of listed companies to boost installed capability

2020

GEG – Truong Phu

Hydropower & 3 RN (173

MW)

2021

POW –NT3&4 Gas Thermal (1500 MW),

Central Gas Thermal 1&2 (1500 MW), RN

(55 MW)

POW – LNG Ca Mau 3 (1500 MW),

Quang Ning Gas Thermal (1500 MW),

RN (1000 MW)

GEG – RN (1216 MW)

REE – RN (176 MW)

PGV – Thermal (4800 MW – 6000 MW)

(*) RN = Renewable Energy

Source: PHFM compilation

2025

2


65

NT2 is the best operating thermal plant in Vietnam.

Catalyst

Sao Vang - Dai Nguyet gas field will be expected to operate in quarter 4 of 2020, which

will ease the gas supply problem.

The financial situation with low debt and abundant cash flow from business activities

helps the company to be able to pay high and regular dividends (2019 is 25% and

expected to be 20% in 2020).

The geographical location and operational efficiency of the plant create favorable

conditions for NT2 to be prioritized for mobilization.

Compared with Index


28

2 Stock pitch

PetroVietnam Power Nhon Trach 2 JSC (NT2)

Target price: 27,600 VND



Profit after tax (billion VND) 1,142 1,086 810 782 754 754

EPS (VND) 4,095 3,740 2,768 2,618 2,540 2,542

EPS Growth (%) -29% -9% -26% -5% -3% 0%

Book Value (VND) 17,408 17,230 17,317 12,795 14,336 15,894

Cash dividend (VND) 22% 33% 26% 72% 22% 20%


POW is the second largest generation power company in Vietnam with the portfolio

focusing on gas thermal and coal thermal power.

Catalyst

Electricity supply is under demand, thermal power plays an important role in supply.

The changes in policy from Government create more conditions to support the future

growth of power generation companies.

Vung Ang Plant started operating normally and would be able to increase the output

capacity in 2020

Compared with Index


29

2 Stock pitch

PetroVietnam Power Corporation (POW)

Target Price: 12,800 VND



Profit after tax (billion VND) 2,169 1,075 2,233 1,676 2,855 2,628

EPS (VND) 996 494 1,026 820 1,028 960

EPS Growth (%) -40% -50% 108% -30% 27% -7%

Book Value (VND) 12,063 12,275 12,702 11,423 12,571 12,601

Cash dividend (VND) - - - 0% 0% 0%


Maintain momentum

30

Total revenue of Information Technology, Electronics and Telecommunication in 2019

reached USD 112.4 bn (+9.1% YoY).

In 1H2020, total revenue was USD 50 bn (+2.2% YoY). Outsourcing services and

technology - telecommunication projects in 2Q/2020 were less affected by Covid-19

pandemic. And companies increased technology investment in logistics, e-commerce,

software and applications, as well as telecommunications services.

In 2020, Vietnam Government plans to expand fiscal policy and increase public

spending to stimulate the economy, so technology and telecommunication projects

would be highly invested in 2020. Technology and telecommunication companies

would benefit as public investment increases. We expected that the industry growth

will be USD 121.3 bn (+8% YoY).

Technology – Telecommunication Industry still has positive

growth although the Covid-19 pandemic had strong impacts on

the economy.

2 Technology - Telecommunication

Sources: Vietnam Technology and Telecommunication White book

Risks

Competition from China, India, and domestic technology & telecommunication

companies.

Technology - Telecommunications industry requires huge investment but

technology can quickly become obsolete.

The pandemic affected major IT contracts due to large corporations cut their

CAPEX spending on Technology - Telecommunications.

In October 2020, Vietnam will commercialize 5G with Vietnam equipment. Vietnam

Electronics and Telecommunication companies need to change, install and test

their infrastructure, research and apply new technologies such as 5G, IoT, Big

Data, AI, etc. Requirements for highly technical labor and infrastructure to meet

new technologies are challenging.

60.767.7

91.6 103.0112.4

121.3

12.0% 11.5%

35.3%

12.4%9.1% 8.0%

0%

5%

10%

15%

20%

25%

30%

35%

40%

0

20

40

60

80

100

120

140

2015 2016 2017 2018 2019 2020F

Total Revenue of Technology and Telecommunication Industry (USDbn)

Revenue (bn USD) Revenue Growth Linear (Revenue (bn USD))

53.158.8

81.691.5

99.9

12.0%

10.7%

38.8%

12.1%

9.1%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

0

20

40

60

80

100

120

2015 2016 2017 2018 2019

Total Revenue of Electronics Hardware (USDbn)

Electronics, Hardwares Revenue Revenue Growth

Public investment Power generationConstruction material & ContractorTechnology – telecommunication 31

Three major companies take up 98.1% total market share: Viettel (54.1%), MobiFone

(25.6%), VNPT (18.4%)

Total number of mobile subscribers in 2019 reached 140 subscribers/100 people with

Average Revenue Per User (ARPU) of USD 7.6 (according to Global Data’s estimation).

Global Data forecasted that mobile telecommunication revenue in Vietnam is expected to

grow at CARG of 5.9% per year, while revenue of fixed broadband services will grow at

CARG of 0.9% per year in the period of 2019-2024 due to steady growth in the number of

users and ARPU.

Telecommunications Industry

Sources: MIC, PHFM

Risks

The telecommunication industry requires major investments to upgrade

infrastructure and software, given these technologies can quickly become

obsolete.

Competition from competitors in the industry.

Network safety and security risks.

Viettel, 54.1%MobiFone, 25.6%

VNPT, 18.4%

Vietnamobile, 1.7%

Gtel, 0.2%

Market shares of Mobile Telecommunication

Viettel, 30.8%

VNPT, 52.6%

FPT, 11.4%

SCTV, 1.2% Others, 3.9%

Market shares of Fixed Broadband Telecommunication

2


Revenue of software industry in 2019 was USD 5 bn (contribute 4.4% to the

total revenue of Information Technology, Electronics and Telecommunications

industry), increasing USD 500 mil compared to 2018.

The IT industry outsourcing contracts, system applications, development

investment, and product design to create competitive edge for profit margin

improvement.

Software Industry

Risks

Competition from China, India and also domestic software companies.

Shortage of high quality human resources.

Risk of market expansion when big companies are cutting CAPEX spending

on IT and telecommunication.

2.6

3.0

3.8

4.4

5.0

17.2%16.8%

24.4%

17.7%

12.4%

0%

5%

10%

15%

20%

25%

30%

0

1

2

3

4

5

6

2015 2016 2017 2018 2019

Total Revenue of Software Industry (USD Billion)

Revenue (bn USD) Revenue growth

Source: Vietnam Technology and Telecommunication White book

2


Major listed companies

No. Ticker

Market CapTotal

SharesEPS BVPS

P/E ROE ROA

Revenue

2020F

EAT

2020F

PE

forward

PB

forward

Fair Price

(VND/share)

(VND Billion) (mil

shares)

(VND/shar

e)

(VND/sh

are)

(VND

trillion)

(VND

trillion)

1 FPT 36,686.76 784 4,171 24,157 11.22 19.57% 9.96% 30.5 4.4 11.03 1.96 48,000

2 VGI 84,450.54 3044 691 9,113 40.13 7.96% 3.46% 18.8 0.5 73.2 3.05 28,300

3 CTR 2,949.96 61 3,190 15,370 15.24 20.51% 7.39% 5.4 0.2 16.2 3.35 51,100

2


FPT currently operates in 3 segments: telecommunication (35% of total FPT revenue),

software (38.8% of total revenue) and software solutions, integration, investment and

education (26.2% of total revenue). FPT is currently ranked third in terms of fixed broadband

telecommunication services and accounts for 9.3% of Vietnam's total software production

revenue.

FPT Corporation (FPT)


Investment highlights

FPT Software (38.8% of total FPT’s revenue) is the largest software company in Vietnam with

high technical and skill capability. FPT does not only do the software outsourcing but also

does solution and maintenance in USA, Japan, European countries.

FPT currently contributes 11.44% total fixed broadband telecommunication services market

share.

FPT has strategical investment and orientation in education, focusing on software export,

government projects.

Stock price movements compared to Index

Historical Evaluation

Stock pitch

Financial Indicators 2016A 2017A 2018A 2019A 2020F

Revenue (bil VND) 39,531 42,659 23,214 27,717 30,489

Earnings after tax (bil VND) 2,576 3,528 3,234 3,912 4,444

EPS (VND) 3,925 5,129 3,903 4,220 4,832

EPS growth (%) -11% 31% -24% 8% 15%

Book value (VND) 22,574 23,163 22,010 22,714 24,531

P/E 10.2 10.3 9.9 12.6 11.03

Cash dividend (%) 20% 20% 25% 20% 20%

2


VGI is providing telecommunication services in 9 foreign markets with a total of 51 mil

subscribers, owning 151,000 km of fiber optic cable length, 55,500 broadcast stations in the

Southeast Asia (contributing 55% of total VGI revenue), Africa (33% of total revenue) and Latin

America (13% of total revenue).

Viettel Global Investment JSC (VGI)



About mobile telecommunication market shares, VGI is ranked No. 1 of market share in Cambodia

(Metfone, 41.3% market share), Laos (Unitel, 56% market share), East Timor (Telemor, 53%

market share), Burundi (Lumitel, 5.3% market share) ). VGI ranked second in Haiti (Natcom, 38%

market share), Mozambique (Movitel, 38% market share). VGI ranks 3rd in Cameroon (Nexttel,

30% market share), Myanmar (Mytel, 21% market share), and 4th in Tanzania (Halotel, 13%

market share).

VGI is building a products and services ecosystem, besides developing voice call subscribers, VGI

is improving data subscribers, e-wallets, etc. in order to increase operational efficiency and

profitability. In 2020, VGI planned no new investment to expand new markets, we expected that

VGI will have positive profit in 2020.



Stock pitch

Financial Indicators 2015A 2016A 2017A 2018A 2019A 2020F

Revenue (bil VND) 14,875 15,336 19,023 16,867 17,104 18,814

Earnings after tax (bil VND) 500 (3,427) (481) (1,049) (535) 499

EPS (VND) 676 (1,721) (159) (450) (218) 387

P/B - - 1.62 3.16 3.22

P/E 73.2

2


CTR is providing telecommunication construction and installation services (contributing 25.7%

of solid waste revenue), operating and maintaining (contributing 57.7% of CTR revenue),

commercial sales and investment real estate infrastructure for rent and integrated solutions,

smart solutions and houses (contributing 16.6% of total solid waste revenue).

Viettel Construction Joint Stock Corporation (CTR)

Target price : 51,100 VND


CTR Currently, CTR is providing maintaining services for Viettel in 62 provinces/cities in Vietnam and

maintaining telecommunication systems for markets where Viettel invested in Cambodia (Metfone),

Myanmar (Mytel) and Peru (Bitel). CTR is also maintaining 1,500 km fiber optic cable for Vietnam’s

Ministry of Public Security, CMC Telecom.

Huge market expansion potentials if Viettel can execute maintenance contracts for Viettel Group in 10

international markets. In addition, the telecommunications infrastructure construction as well as

maintenances have a chance to prosper when Viettel invests in 5G technology and digital service

platform, creating more jobs for CTR in the future.

Till 2025, CTR aims to focus in construction contractor to become the No.1 infrastructure investor in

Vietnam leasing telecommunications infrastructure such as BTS infrastructure, energy, inbuilding

telecommunications, fiber optic cable.



Stock pitch

Financial Indicators 2015A 2016A 2017A 2018A 2019A 2020F

Revenue (VNDbn) 1,523 1,678 3,251 4,277 5,054 5,458

Earnings after tax (VNDbn) 110 100 111 147 181 191

EPS (VND) 3,587 2,496 2,352 2,834 2,980 3,152

P/B - - 1.14 2.41 3.35

P/E 6.0 11.7 16.2

2


Contact

Analyst certification

The report was prepared by Analyst – Phu Hung Fund Management Joint Stock Company. Each research analyst(s), strategist(s) or research associate(s) responsible for the preparation and

content of all or any identified portion of this research report hereby certifies that, with respect to each issuer or security or any identified portion of the report with respect to each issuer or

security that the research analyst, strategist or research associate covers in this research report, all of the views expressed by that research analyst, strategist or research associate in this

research report accurately reflect their personal views about those issuer(s) or securities. Each research analyst(s), strategist(s) or research associate(s) also certify that no part of their

compensation was, is, or will be, directly or indirectly, related to the specific recommendation(s) or view(s) expressed by that research analyst, strategist or research associate in this research

report.

Ly Bui – Research Manager

Chuong Pham – Macro & Market Analyst

Minh Dinh– Technical Analyst

Tuan Pham – Analyst (Banking & Fixed Income)

Dat Do – Analyst (Real Estate)

Minh Ton – Analyst (Consumer)

Lan Pham – Analyst (Airline, Oil&gas, Technology - Telecommunication)

Nien Nguyen – Analyst (Construction & Material, Utilities)

Vy Nguyen – (Textile, Fishery, Pharmacy)

DisclaimerPhu Hung Fund Management Joint Stock Company/Phu Hung Securities Corporation do not hold ourselves responsible for completeness or accuracy of the report. It is not an offer to sell or

solicitation of an offer to buy any securities. Phu Hung Securities/ Phu Hung Fund Management and its affiliates, officers, employees may or may not have a position in or with respect to the

securities mentioned herein. Phu Hung Securities/Phu Hung Fund Management (or one of its affiliates) may from time to time perform investment banking or other services or solicit investment

banking or other business for any company mentioned in this report. All opinions and estimates included in this report constitute are based on the assessments of Phu Hung Fund Management

as of this date and are subject to change without notice.

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investment strategy for the second half of 2020

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