COMPANY UPDATE 12-Nov-18. Vietnam Container Shipping JSC. 9M.2018 Update VSC (HOSE) Stock performance (%) Mr. Bao H. Vo. Pros:

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1 Rating COMPANY UPDATE 12-Nov-18 VSC (HOSE) OVERWEIGHT Logistics-Marine Port Market price (VND) 40,950 Target price (VND) 50,000 Annualized price return (%) 25.9% Expected dividend yield (%) 5.8% Expected total return (%) 32% VND ' Stock performance (%) YTD 1M 3M 12M Absolute -2% -12% 2% 0% Relative 4% -6% 7% -7% Source: Bloomberg, compare to VNI Stock Statistics 52-week range (VND) 12-Nov k-46.0k Shares o/s (m) 50 Mkt cap (VND bn.) 1,999 Mkt cap ($m) 86 Foreign % owned 37% Est. free float (ml. shares) 44 3m avg. daily vol. (shares) 210,749 VND/USD 23,282 Index: VN-Index/HNX 914/103 Source: Bloomberg, KISVN Ownership 12-Nov-18 Franklin Resources funds 12.55% KWE Beteilgungen AG 10.01% PXP funds 5.01% Vietnam Holding Limited 4.87% Source: Bloomberg, Stoxplus, KISVN Mr. Bao H. Vo (+84 28) Ext: 1460 Bao.vh@kisvn.vn Price - Volume 0 11/ / / /2018 '000 shares Vietnam Container Shipping JSC. 9M.2018 Update Pros: - Marine transportation industry is on a recovery trend with an increase in using Super- Sized container vessels, which is an opportunity for the downstream and container ports like VIP Green port. - Vietnam cargo throughput is expected to grow 10-13% annually with supports from import/export activities from FTAs and FDI sector. - Hai Phong is a major hub of sea ports of Vietnam and accounted for 20% of total cargo throughput of all Vietnam ports in 9M Total cargo throughputs of both VSC s ports reached 778k TEUs (+34%YoY) in 9M.2018, in which that of VIP Green grew 39%YoY to 473.3k TEUs. - Container storage yard and Logistics center in Dinh Vu Industrial zone (GIC) lift the capacity of VIP Green (VGR-UpCOM) to 800k TEUs/year for potential growth in the following years. - VIP Green Port is also supported by Evergreen, which holds 21.7% stake of the port and has also agreed to increase to 26.7% in Downward pressure on port service tariffs from Cam upstream ports is insignificant from Financial aspect was enhanced significantly thanks to the robust growth of VIP Green. 9M.2018 net sales and NPAT of VSC reached VND 1,244bn. (+30%YoY) and VND 261bn. (+37%YoY). - Cheap valuation. 2018F P/E of Cons: - Cargo throughput and profit margin in Green Port is expected to resume downtrend in the foreseeable future as other upstream ports. - Hai Phong decided to impose infrastructure fee to sea ports in the area from Recommendation: Our expectations on the future prospect of VSC remain positive from 2018 onward. We evaluate the value of VSC shares at VND 50,000 per share at the end of The total expected return is 32% (incl. a cash dividend of VND 2,000 in 2019), Therefore, we maintain our OVERWEIGHT recommendation with VSC shares. VND bn F 2019F Net sales 928 1,082 1,303 1,695 1,826 Sales growth (%) 4% 17% 20% 30% 8% Operating profit (EBIT) Operating margin (%) 35% 31% 25% 24% 25% Net profit Net margin (%) 30% 24% 20% 20% 22% Number of shares (mn.) Bonus-adjusted EPS (VND) 4,960 4,463 4,214 5,566 6,442 Adjusted EPS growth (%) 12% -10% -6% 32% 16% ROE (%) (excl. minority interest) 24% 19% 17% 20% 21% Net debt/equity (%) 1% 18% 15% -15% -36% PER (x) PBR (x) EV/EBITDA (x) DPS (VND) 1,500 2,000 2,000 2,000 2,300 Dividend yield (%) 3.1% 4.6% 5.0% 5.0% 5.8% Page 1

2 3Q.2018 and 9M.2018 results Cargo throughput: From our observation, in 3Q.2018, both Green and VIP-Green ports of VSC enjoyed a noticeable growth in vessel calls at 30% and 42%. The container throughput of these two ports also grew at nearly 27% YoY and 39% YoY respectively. In aggregate 9M.2018, as in our previous forecast, VIP-Green port, with more favorable location in the downstream of Cam River and new facility, had a sharp growth when accommodating 382 vessels (+42%YoY) and nearly 473.3k TEUs (+39%YoY). Meanwhile, Green port beat our expectation when posting a growth rate of 30%YoY in vessel calls (259 vessels) and 27%YoY in container throughput (around 305k TEUs). This is an opposite situation compared to the current downtrend in most of upstream ports. Nonetheless, as VIP Green attracted a significant amount of cargo flows, it is reasonable for Green port to also enjoy a robust growth when acting as a secondary choice, supporting for VIP Green in services like barging, depot, storage, etc. On the other hand, these shifting in operation also resulted in a lower profit margin. Vessel Calls Container Throughput (TEUs) 3Q Q M M Q Q M M.2018 Green Port , , , ,960 YoY Growth (%) 30% 30% 27% 27% VIP-Green Port , , , ,302 YoY Growth (%) 42% 42% 39% 39% Total VSC , , , ,263 YoY Growth (%) 37% 37% 34% 34% Source: Maritime Administration of Hai Phong, KISVN estimation Overall, the total cargo throughput of VSC was around 778k TEUs in 9M.2018, +34%YoY. Vessel Calls Upstream Transvina Nam Hải Đoạn Xá Chùa Vẽ Green Port Vật Cách Hải An Đình Vũ Nam Hải Đình Vũ Downstream VIP-Green Nam Đình Port Vũ Lạch Huyện 1Q Q Q Q Q Q Q Q Q Q Q Nov-18 Page 2

3 Cargo Throughput (million tons)* Upstream Downstream Transvina Nam Hải Đoạn Xá Chùa Vẽ Green Port Vật Cách Hải An Đình Vũ Nam Hải Đình Vũ VIP-Green Nam Đình Port Vũ Lạch Huyện 1Q Q Q Q Q Q Q Q Q Q Q.2018 Business results Source: Maritime Administration of Hai Phong, KISVN estimation Keeping the booming momentum in business results in 1H.2018, VSC reported another impressive 3Q business results thanks to the robust growth in container throughput in both ports of VSC and the current utilization rate of VIP Green, which we estimate to surpass 100% (compared to the initial design capacity of 500k TEUs/year). VIP Green port (VGR-UpCOM) has a strong growth in net sales at 39%YoY (reaching VND 550bn.) and in NPAT at 57%YoY (reaching VND 103bn.) in 9M.2018, and it also accounted for 29% of VSC s 9M.2018 NPAT (this contribution in 9M.2017 was 26%). With the booming of VIP Green port, VSC s net revenue of the port service segment were at VND 793bn. (+26%YoY). Overall, 9M.2018 business results of VSC was inline with our previous expectations and almost equal to the plan of VSC s management in 2018 AGM. Net revenue and NPAT 9M.2018 reached VND 1,244bn (+30%YoY) and VND 261bn (+37.1%YoY) respectively. Unit: VND bn. 9M M.2018 Growth (%) Net Sales 959 1,244 30% Port Service % Logistics and others % Gross Profit % Gross Profit Margin (%) 31.6% 30.1% -5% EBIT % EBIT margin (%) 25.6% 24.7% -4% PBT % NPAT % 4Q.2018, 2019 Outlooks and Valuation Net margin (%) 19.8% 21.0% Source: VSC, KISVN With the more-than-expected growth of container throughput of VSC in 9M.2018, especially Green port, we raise our positive expectation on the growth in cargo throughput in 2018 and 2019, which are expected to reach 1,076k TEUs (+35%YoY) and 1,209k TEUs (+12%YoY). With the new regulated range of tariffs applied in Hai 12-Nov-18 Page 3

4 Phong, we remain our forecasts on the growth in tariff in VIP Green, but the Green port tariff is expected to decline -10%YoY as in 9M Thus, our forecasts in total net sales of VSC in 2018 and 2019 are adjusted upward to be at VND 1,695bn (+30%YoY) and VND 1,826bn. (+7.7%YoY). Additionally, we slightly adjust the expected profit margins of VSC s ports in our estimation to the closer to VSC 9M.2018 business results. Therefore, we expect that at the end of 2018 and 2019, VSC could have a NPAT of VND 346bn. (+31%YoY) and VND 404bn. (+16.7%YoY) and 2019 bonus-adjusted EPS are VND 5,566 (+32%YoY) and VND 6,442 (+16%). Maitaining the fair PER of 7.8x in our last valuation, we re-evaluate VSC share price at VND 50,000 per share at the end of Hence, with today (12-Nov-18) trading price of VSC is VND 39,700, the total 1-year expected return is 32% (including VND 2.3k cash dividend in 2019). Therefore, our recommendation on VSC is OVERWEIGHT for 1-year investment period. VND bn F 2019F Net sales 1,082 1,303 1,695 1,826 Sales growth (%) 17% 20% 30% 8% Total Cargo Throughput (k. TEU) ,076 1,209 Sales of Port Service ,084 1,139 Sales of Logistics and others Gross Margin (%) 37% 31% 30% 31% Profit before tax Net profit Net margin (%) 24% 20% 20% 22% Bonus-adjusted EPS (VND) 4,463 4,214 5,566 6,442 Adjusted EPS growth (%) -10% -6% 32% 16% Source: KISVN forecasts Target 2019 EPS (VND/share) 6,442 PER (x) year Target Price 50,000 Annualized price return 25.9% Expected dividend yield 5.8% Total expected return 32% Source: KISVN forecast 12-Nov-18 Page 4

5 FINANCIALS MODEL Mkt cap: VND 1,999bn. Unit: VND bn F 2019F Net Revenue 1,082 1,303 1,695 1,826 Sales growth (%) 17% 20% 30% 8% Port Service ,084 1,139 Logistics COGS ,186 1,257 Gross margin (%) 37% 31% 30% 31% SG&A EBITDA EBITDA margin (%) 47% 41% 36% 37% Depr n & Amort n Operating profit Operating margin (%) 31% 25% 24% 25% Net interest expenses As % of avg. net debt 21% 15% -154% -2% Interest cover (x) Other profit/loss Tax Effective tax rate (%) 16% 12% 12% 12% Net profit Net margin (%) 24% 20% 20% 22% Minorities Net attributable profit Number of shares (m) EPS (VND, bonusadjusted) 4,463 4,214 5,566 6,442 EPS growth (%) -10% -6% 32% 16% DPS (VND) 2,000 2,000 2,000 2,300 Payout ratio (%) 41% 47% 36% 36% EBITDA = Net revenue (COGs -Depr n&amort n) SG&A expenses EBIT = EBITDA Depr n&amort n Net interest expenses = interest expenses interest income Other profit/loss consists of other financial income/expenses, profit share from JVs/associates and other income/loss Payout ratio = Dividend paid / Net attributable profit CASH FLOWS AND BS ITEMS (VND bn.) F 2019F Increase in WC Capex Other cash flow items Free cash flow Share issues Dividends paid Increase in net debt Net debt, end of year Enterprise value 2,450 2,503 1,695 1,219 Total equity 1,515 1,710 1,921 2,170 Minority interests Shareholder s equity 1,349 1,469 1,647 1,855 BVPS (VND) 29,602 29,307 32,874 37,016 Net debt / equity (%) 18% 15% -15% -36% Net debt / EBITDA (x) Total assets 2,397 2,479 2,520 2,746 Net debt = debts cash & equivalent KEY RETURN AND VALUATION RATIOS ROE (%) (excl. minority interest) F 2019F 19% 17% 20% 21% ROA (%) 11% 11% 14% 15% ROIC (%) 18% 16% 21% 27% WACC (%) 15% 15% 15% 15% PER (x) PBR (x) PSR (x) EV/EBITDA (x) EV/Sales (x) Dividend yield (%) (bonus-adjusted) 4.4% 4.9% 5.0% 5.8% 12-Nov-18 Page 5

6 Contacts: HCM City Head Office Level 3, Maritime Bank Tower Nguyen Cong Tru St., District 1, HCM City Tel: (+84 28) Fax: (+84 28) Hanoi Branch Level 6, CTM Tower 299 Cau Giay, Cau Giay District, Hanoi Tel: (+84 4) Fax: (+84 4) Institutional Sales Ms. Uyen Lam Head of Institutional Sales (+84 28) (x1444)

7 Our Recommendation System OVERWEIGHT: where we believe prospective 12 months VND total return (including dividends) will be 15% or more. NEUTRAL: where we believe it will be -5% to 15%. UNDERWEIGHT: where we believe it will be -5% or less. Disclaimer This report has been issued by the KIS VN Securities Corporation ( KIS ) with the instructional contributions of KIS VN Securities Corporation whose employees are specified in the publication. This report is for information of its institutional and professional customers. This report is and should not be construed as an offer to sell or a solicitation of an offer to purchase or subscribe for any investment. No consideration has been given to the particular investment objectives, financial situation or particular needs of any recipient. Investors are advised make their own financial decisions based on their independent financial advisors as they believe necessary and based on their particular circumstances such as their financial situation, investment objectives and other considerations. In preparing this report, we have relied upon and assumed the accuracy and completeness of all information available from public and other sources which we believe to be reliable, but which we have not independently verified. KIS makes no express or implied guarantee, representation or warranty and accepts no responsibility or liability as to the accuracy or completeness of such information. Opinions, estimates, and projections expressed are current opinions of the authors as of the original publication date appearing on this report only and the information, including the opinions contained herein, and are subject to change without notice. KIS and its affiliates may from time to time perform investment banking or other services for, or solicit investment banking or other business from, companies mentioned herein. Further, KIS and its affiliates, and/or their officers, directors and employees involved in the preparation or issuance of this report may, from time to time, have long or short positions in, and buy or sell, the securities, or derivatives (including options) thereof, of companies mentioned herein, or related securities or derivatives in a manner that may be consistent or inconsistent with this report and opinions expressed therein. As a result, investors should be aware that KIS and its affiliates and/or their officers, directors and employees may have a conflict of interest that could affect this report. This report shall not be copied, reproduced, distributed (in whole or in part) or disclosed by recipients to any other person without the express permission of KIS in writing.