Stay focused on VALUE

Transcription

1 Stay focused on VALUE and don t get distracted by the current irrational market exuberance Q1, 2018 Marco Martinelli, CIWM December 2017

2 We stick to our disciplined Value Investing Strategy 5-year track record of our Master Portfolio 240% 200% 160% 120% FTSE Vietnam Index TR USD VN Index TR USD Master Portfolio 207% 152% 80% 40% 51% 0% -40% Dec-12 Jun-13 Dec-13 Jun-14 Dec-14 Jun-15 Dec-15 Jun-16 Dec-16 Jun-17 Source: TIM, Master Portfolio daily performance were interpolated from monthly official NAV Page 2

3 which has payed off handsomely Recent acquisitions of some core portfolio holdings: 350, ,000 VCF VCF YE TP Masan Beverage tender offer at VND 268,000share - Vinacafe Bien Hoa (VCF.HSX) - DHG Pharmaceutical JSC (DHG.HSX) - Tien Phong Plastic JSC (NTP.HSX) 250, ,000 by large multinational and national companies 150, ,000 Dec-14 Jun-15 Dec-15 Jun-16 Dec-16 Jun-17 Nov ,000 DHG DHG YE TP 100,000 NTP NTP YE TP 80, ,000 50,000 Taisho purchased 24% at VND 80,000/share (adjusted price) 60,000 40,000 20,000 Sekisui Chemical bought 15% at VND 74,000/share - Page Dec-14 3 Jun December Dec Jun-16 Dec-16 Jun-17 Nov-17 - Dec-14 Jun-15 Dec-15 Jun-16 Dec-16 Jun-17 Nov-17

4 However, the past 6 months were shaped by irrational market exuberance 50% 47% 40% 30% FTSE Vietnam Index TR USD VN Index TR USD Master Portfolio Divergence started in July 2017 VNM +20%, boosted by new, large foreign capital inflow SAB + 58%, boosted by speculation on high-price state divestment ROS +120% weird speculation 37% 23% 20% 10% 0% -10% Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Source: TIM, Master Portfolio daily performance were interpolated from monthly official NAV Page 4

5 driven by a few Big Caps, with now stretched Valuations, Top 10 accounted for 57% of total MC of stocks on Ho Chi Minh Stock Exchange: 2018 P/E of 23.9x and P/B of 6.0x Market 30 Nov 2017 Share Price cap Free Float/tot al share 3M average P/E (x) P/B (x) volume S/N Ticker Company name (USDm) (VND) % (shares) FY17F FY18 FY17F FY18F 1 VNM Vietnam Dairy Products JSC 11, , , SAB Saigon Beer Alcohol Beverage C 9, , , VIC Vingroup JSC 8,650 74, ,360, VCB Bank for Foreign Trade of Viet 7,681 48, ,033, GAS PetroVietnam Gas JSC 6,712 79, , VRE Vincom Retail JSC 4,100 49, , CTG Vietnam Joint Stock Commercial 3,983 24, ,156, BID Bank for Investment and Develo 3,860 25, ,143, ROS FLC Faros Construction JSC 3, , ,089, PLX Vietnam National Petroleum Gro 3,163 62, , Top 10 63, Source: TIM Page 5

6 while Small/Mid Caps are unjustifiedly cheaper and offer Buying Opportunities for VALUE investors Our TIM VN Certificate has a weighted average 2018F P/E of 9.5x and P/B of 1.2x Free Market 3M average 30 Nov 2017 Share Price Float/total P/E (x) P/B (x) cap volume share S/N Ticker Company name (USDm) (VND) % (shares) FY17F FY18F FY17F FY18F 1 DHC Dong Hai JSC of Bentre 62 41, , DRC Danang Rubber JSC , , VSC Vietnam Container Shipping JSC , , PVD PetroVietnam Drilling & Well S , ,185,514 na na DXG Dat Xanh Real Estate Service & , ,575, KBC Kinh Bac City Development Shar , ,436, TDH Thuduc Housing Development Cor 52 14, , na 0.7 na 8 DBC DABACO Corp 96 26, , VGC Viglacera Corp , , DPM Petrovietnam Fertilizer & Chem , , PVS PetroVietnam Technical Service , ,909, CTS VietinBank Securities JSC 45 10, , MCH Masan Consumer Corporation 1,502 65, , BMP Binh Minh Plastics JSC , , NTP Tien Phong Plastic JSC , , Total TIM Cert Source: TIM Page 6

7 What do Companies in our Certificate have in common? P/E 9.5x & P/B 1.2x Cheap Valuation (2018F, weighted average) $ mn Market Capitalization 15% EPS Growth Bright Growth Prospects (2018F EPS) Foreign Ownership Rooms available as Foreign Investors primarily focus on Big Caps 2.8% Dividend Yield Most of them pay regular dividends (Combined average 2017 yields) Page 7

8 Dong Hai Ben Tre (DHC.HSX) - A producer of industrial paper (kraft) and box packaging paper. It runs a full current capacity and its being developed factory will fourfold capacity. - Current market is just domestic, in which demand is robust thanks to industrialization: CAGR 10% for In 2015, domestic producers supply only 60% - Lower input cost of Old Corrugated Cardboard (OCC) and higher export demand to China, following China s restriction to import OCC EPS CAGR of 31% and 2018F P/E of 10.8x is undemanding - A committed management team owns 42% stake VND ths Net profit (RHS) DHC Price (LHS) EBITDA (RHS) VND bn Key stock data HSX As of Nov 30, 2017 Sector Valuation Measure VND F 2018F EPS 2,985 2,668 3,808 P/E (x) BV 24,329 25,502 24,383 P/B (x) EV/EBITDA Key Financial Indicators Materials Current price VND 41, fair price VND 54,911 Market cap USD 62 mn USD mn F 2018F Revenue Net profit GP margin % Net profit margin % ROE % Source: TIM Page 8

9 Da Nang Rubber (DRC.HSX) - The largest truck tire manufacturer in Vietnam with an estimated market share of 20%. - Fertile domestic supply of natural rubber helps to stabilize input costs and to create a competitive advantage. - The number of trucks in Vietnam shows robust growth. The CAGR of 8% from 2010 to 2016 should accelerate thanks to increasing trade flows, improvement in infrastructure and stricter regulations on truck loads. - Capacity will increase by 25% from Current facility runs at 100% utilization. From 2018, the second phase of radial project will add 300,000 radial tires. - Operating cash flow is very strong. The quick depreciation of the radial tire factory will tighten the bottom line, but will provide strong operating cash flow. VND ths Net profit (RHS) DRC Price (LHS) EBITDA (RHS) VND bn Source: TIM Key stock data HSX As of Nov 30, 2017 Sector Consumer Discretionary Current price VND 22, fair price VND 47,588 Market cap USD 118 mn Valuation Measure VND F 2018F EPS 3,059 1,566 2,453 P/E (x) BV 13,317 12,640 13,482 P/B (x) EV/EBITDA Key Financial Indicators USD mn F 2018F Revenue Net profit GP margin % Net profit margin % ROE % Page 9

10 Viconship (VSC.HSX) - A port operation and logistics company in Hai Phong city, responsible for 18% of container throughput in Hai Phong. - Hai Phong is the central port operation in the north of Vietnam, accounting for 30% of Vietnam s total container port throughput. The supply is scarce in this area due to limited land area for port development. - Demand for port operation is bright with support from strong FDI inflows and accelerating trade flows. 5-year forecasted CAGR for container throughput is 10% in Hai Phong. - VSC s port utilization is at 80%, room for growth without near future capex, thanks to its new port which operated from the end of EPS CAGR of 13% while 2018F P/E of 8.3x and EV/EBITDA of 4.5x are undemanding. VND ths Net profit (RHS) VSC Price (LHS) EBITDA (RHS) VND bn Source: TIM Key stock data HSX As of Nov 30, 2017 Sector Industrials Current price 51, fair price VND 95,234 Market cap USD 102mn Valuation Measure VND F 2018F EPS 4,931 4,984 6,124 P/E (x) BV 29,602 31,331 35,355 P/B (x) EV/EBITDA Key Financial Indicators USD mn F 2018F Revenue Net profit GP margin % Net profit margin % ROE % Page 10

11 TIM Vietnam Actively-Managed Certificate Monthly performance since inception in Jul Jul Aug Sep Oct Nov Dec YTD TIM VN Certificate 0.3% -2.6% 1.4% -4.7% 12.7% 6.3% FTSE VN TR -0.2% 3.1% 2.8% 4.9% 12.1% 24.4% VN Index TR 1.1% 0.3% 3.2% 4.2% 13.6% 23.9% Sector allocation Cash Financials Materials Consumer Staples Consumer Discr. Energy Real Estate Industrials Valuations Valuation 10.4% 3.6% 5.0% 8.4% 10.9% 11.2% 20.6% P/E EPS Growth P/B 29.8% 0% 5% 10% 15% 20% 25% 30% 35% Yield (x) (x) (%) (x) (x) (x) (%) TIM VN Certificate FTSE VN TR VN Index TR Holdings Ticker Company Name % Portf DHC Dong Hai Ben Tre JSC 15.17% DRC Da Nang Rubber JSC 10.94% VSC Viconship JSC 8.87% PVD PV Drilling JSC 7.38% DXG Dat Xanh Group 7.01% KBC Kinh Bac City 6.87% TDH Thu Duc Housing Devel. Corp. 6.76% DBC Dabaco JSC 5.79% VGC Viglacera Corporation 5.73% DPM Phu My Fertilizer 4.98% PVS PVN O&G Tech. Services Corp. 3.79% CTS Vietinbank Securities JSC 3.65% MCH Masan Consumer Corp. 2.65% Cash 10.41% Page 11

12 Certificate Key Information Investment objective Add value for risk-conscious long-term investors who wish to profit from the future growth in the newly industrializing country Vietnam Asset Classes and the respective universes Equities which are listed on HSX, HNX, UPCoM, or overseas exchanges as for example Hong Kong Stock Exchange but has its businesses carried out in Vietnam. Fixed income securities of established companies which can be listed or unlisted; Equities of privately-held companies Investment strategy A pure bottom-up stock picking based on fundamental analysis of the business and fair price valuation. Assessments are reviewed at least on a quarterly basis or when new information is deemed having material impact on the business and valuation. A steady fair valuation provides us with high level of confidence to act especially in market overreactions. Certificate details: Type Fund Currency Issuer Neue Helvetische Bank AG Inception 14 Jul 2017 Reference Index Strategy Manager Market Maker Clearing Institution/ Clearing Code Dynamic Tracker- Certificate US Dollar Min. Investment USD 100 Mgmt./ Admin Fee 1.0%/ 0.5% Performance Fee ISIN 10% with HWM CH FTSE Vietnam Index Turicum Investment Management AG Issuer with 1% spread SIX SIS AG/ CH Continuous liquidity with the issuer as market maker Page 12

13 Annex 1 - Macroeconomic Indicators Macro indicators F 2018F Production Population (mn) GDP (USD bln) Real GDP growth (%) Service growth (%) Agricultural growth (%) Industrials and construction growth (%) Retail sales growth (%) Prices Consumer price inflation (year-end) Money, FX & Interest rates Credit growth (avg.,% y-o-y) Broad money supply M2 (avg.,% y-o-y) Avg. lending rate (%) yr VGB yields (year-end, %) USD/VND (year-end) 16,017 17,483 18,472 19,500 21,036 21,048 21,306 21,601 22,540 22,770 22,719 23,065 USD/VND (avg.) 16,096 16,759 17,804 19,400 20,800 21,042 21,177 21,454 22,071 22,370 22,178 22,892 External sector Trade balance (USD bln) Current-account balance (USD bln) Current-account balance (% of GDP) Personal remittance (USD bn) FDI registered (USD bln) FDI disbursement (USD bln) BOP (USD bln) BOP (% GDP) Grand official reserves (USD bln) Public and external solvency indicators External debt (USD bln)* External debt (% GDP) Fiscal balance (USD bln) Fiscal balance (% GDP) Source: General Office Of Statistics of Vietnam, IMF, World Bank, ADB, TIM Note: * external debt includes government-guaranteed debts Page 13

14 Annex 2 - Recommendation List Free 3M Market Current 2018YE Upside/ 30 Nov 2017 Float/tota average P/E (x) P/B (x) EPS Growth cap Price TP (downside) l share volume Yield (%) Debt/ Equity (x) Effective Avail. Ytd (%) Room S/N Ticker Company name Sector (USDm) (%) (Shares) (VND) (VND) (%) FY16 FY17 FY18 FY16 FY17 FY18 FY16 FY17 FY18 FY16 FY17 FY18 FY16 (%) Ytd BUY recommendation (15.3) (10.1) (2.2) DPM Petrovietnam Fertilizer & Chem Materials ,184 21,500 32,325 50% PVS PetroVietnam Technical Service Energy ,909,745 18,200 30,292 66% KBC Kinh Bac City Development Shar Real Estate ,436,198 13,800 18,633 35% DRC Danang Rubber JSC Consumer Discretionary ,632 22,500 47, % VSC Vietnam Container Shipping JSC Industrials ,030 51,100 95,234 86% DBC DABACO Corp Consumer Staples ,391 26,300 38,718 47% DHC Dong Hai JSC of Bentre Materials ,040 41,000 54,911 34% TDH Thuduc Housing Development Cor Real Estate ,088 14,600 19,711 35% n.a n.a n.a HOLD recommendation (9.2) MSN Masan Group Corp Consumer Staples 3, ,594 67,100 64,014-5% HPG Hoa Phat Group JSC Materials 2, ,954,588 41,200 45,327 10% * MCH Masan Consumer Corporation Consumer Staples 1, ,279 65, ,261 62% FPT FPT Corp Information Technology 1, ,604,865 58,400 58,715 1% DHG DHG Pharmaceutical JSC Health Care , , ,389 12% VGC Viglacera Corp Industrials ,046 27,500 27,846 1% NTP Tien Phong Plastic JSC Industrials ,871 85,600 77,772-9% PVD PetroVietnam Drilling & Well S Energy ,185,514 18,750 17,220-8% 92.4 n.a. n.a n.a. n.a DXG Dat Xanh Real Estate Service & Real Estate ,575,017 19,700 22,838 16% * VCF Vinacafe Bien Hoa JSC Consumer Staples , ,000 35% IMP Imexpharm Pharmaceutical JSC Health Care ,942 66,800 77,723 16% REDUCE recommendation VNM Vietnam Dairy Products JSC Consumer Staples 11, , , ,119-24% SAB Saigon Beer Alcohol Beverage C Consumer Staples 9, , , ,935-41% VCB Bank for Foreign Trade of Viet Financials 7, ,033,427 48,500 28,588-41% n.a GAS PetroVietnam Gas JSC Utilities 6, ,478 79,700 60,900-24% (2.6) 22.5 (6.3) VJC Vietjet Aviation JSC Industrials 2, , ,000 61,075-55% (5.0) MWG Mobile World Investment Corp Consumer Discretionary 1, , , ,219-12% ACB Asia Commercial Bank/Vietnam Financials 1, ,030,912 34,900 34,073-2% n.a PNJ Phu Nhuan Jewelry JSC Consumer Discretionary , , ,567-17% BMP Binh Minh Plastics JSC Industrials ,610 96,000 81,243-15% WATCH FOR TRADING recommendation (11.4) (33.0) QNS Quang Ngai Sugar JSC Consumer Staples ,982 59,200 79,538 34% HCM Ho Chi Minh City Securities Co Financials ,165 51,700 41,390-20% Note: * These companies have a concentrated shareholders structure, which may result in disadvantages for minority shareholders Page 14

15 Annex 3 Equity Market Overview UPCoM, a Sub-bourse within the Hanoi Stock Exchange, saw a significant Market Cap Increase, thanks to several new Listings As of 30 Nov 2017 Ho Chi Minh City Stock Exchange (HSX) Ha Noi Stock Exchange (HNX) Unlisted Public Company Market (UPCoM) Market cap (USDm) 111,094 9,752 26, ,859 Number of stocks ,400 Number of large cap stocks (> USD 400m) m average daily trading volume (USD m) Indices VNINDEX: mc-weighted of all stocks FTSE Vietnam Index: tradable index for foreign investors HNXINDEX: mc-weighted of all stocks Min charter cap of VND 120 bn Min charter cap of VND 30 bn Min 20% voting rights owned by at least 300 not-large shareholders Min 15% voting rights owned by at least 100 not-large shareholders UPCOM-INDEX: mc-weighted of all stocks Be a public company (at least 100 shareholders with min VND 10 bn charter cap or have made an IPO) Total Key listing requirements At least 2 years in operation as a Joint stock company No loss in 2 years preceding listing, no negative retained earnings Min ROE of 5% in the year preceding listing year At least 1 years in operation as a Joint stock company No negative retained earnings Min ROE of 5% in the year preceding listing year Source: Bloomberg, TIM, as of 30 Nov 2017, legal Circular 58/2012/CP Page 15

16 Annex 4 Top 50 by Market Capitalization on HSX, HNX 30 Nov 2017 Free Effective Market 3M average Div. yld Div. yld Div. yld Share Price Float/tot P/E (x) P/B (x) EPS growth (%) Avail. Perf. (%) cap volume (%) (%) (%) al share Room S/N Ticker Company name (USDm) (VND) % (shares) FY16F FY17F FY18 FY16F FY17F FY18F FY16F FY17F FY18 FY16 FY17 FY18 (%) YTD 1 VNM Vietnam Dairy Products JSC 11, , , SAB Saigon Beer Alcohol Beverage C 9, , , VIC Vingroup JSC 8,650 74, ,360, VCB Bank for Foreign Trade of Viet 7,681 48, ,033, GAS PetroVietnam Gas JSC 6,712 79, , VRE Vincom Retail JSC 4,100 49, , CTG Vietnam Joint Stock Commercial 3,983 24, ,156, BID Bank for Investment and Develo 3,860 25, ,143, ROS FLC Faros Construction JSC 3, , ,089, na PLX Vietnam National Petroleum Gro 3,163 62, , MSN Masan Group Corp 3,094 67, , HPG Hoa Phat Group JSC 2,751 41, ,954, VJC Vietjet Aviation JSC 2, , , MBB Military Commercial Joint Stoc 2,046 25, ,392, MWG Mobile World Investment Corp 1, , , BVH Bao Viet Holdings 1,794 59, , NVL No Va Land Investment Group Co 1,689 61, ,693, BHN Hanoi Beer Alcohol & Beverage 1, , , ACB Asia Commercial Bank/Vietnam 1,515 34, ,030, FPT FPT Corp 1,365 58, ,604, STB Saigon Thuong Tin Commercial J 1,040 13, ,656, na na VCS VCS Advanced Quartz Stone JSC , , CTD Coteccons Construction JSC , , EIB Vietnam Export Import Commerci , , na DHG DHG Pharmaceutical JSC , , Source: TIM, HSC, Bloomberg, as of 30 Nov 2017 Page 16

17 Annex 4 Top 50 by Market Capitalization on HSX, HNX 30 Nov 2017 Free Effective Market 3M average Div. yld Div. yld Div. yld Share Price Float/tot P/E (x) P/B (x) EPS growth (%) Avail. Perf. (%) cap volume (%) (%) (%) al share Room S/N Ticker Company name (USDm) (VND) % (shares) FY16F FY17F FY18 FY16F FY17F FY18F FY16F FY17F FY18 FY16 FY17 FY18 (%) YTD 26 PNJ Phu Nhuan Jewelry JSC , , na SSI Saigon Securities Inc , ,812, VCG Viet Nam Construction and Impo , ,336, REE Refrigeration Electrical Engin , ,354, GMD Gemadept Corp , , VGC Viglacera Corp , , SBT Thanh Thanh Cong Tay Ninh Jsc , ,984, SHB Saigon - Hanoi Commercial Join 463 9, ,261, KDH Khang Dien House Trading and I , , NT2 PetroVietnam Nhon Trach 2 Powe , , VCI Viet Capital Securities JSC , , DPM Petrovietnam Fertilizer & Chem , , HSG Hoa Sen Group , ,841, PVS PetroVietnam Technical Service , ,909, CII Ho Chi Minh City Infrastructur , ,304, PVI PVI Holdings/Vietnam , , KDC KIDO Group Corp , , PDR Phat Dat Real Estate Developme , ,405, BMP Binh Minh Plastics JSC , , NTP Tien Phong Plastic JSC , , PPC Pha Lai Thermal Power JSC , , PVD PetroVietnam Drilling & Well S , ,185, na na HAG HAGL JSC 316 7, ,780,123 na na na na na na HNG Hoang Anh Gia Lai Internationa 314 9, ,162,718 na na na DCM PetroVietNam Ca Mau Fertilizer , ,298, Top 50 97, Top 10 63, Source: TIM, HSC, Bloomberg, as of 30 Nov 2017 Page 17

18 Annex 5 Top Stocks traded on UPCoM 30 Nov 2017 Free Effective Market 3M average Div. yld Div. yld Div. yld Share Price Float/tot P/E (x) P/B (x) EPS growth (%) Avail. Perf. (%) cap volume (%) (%) (%) al share Room S/N Ticker Company name (USDm) (VND) % (shares) FY16F FY17F FY18 FY16F FY17F FY18F FY16F FY17F FY18 FY16 FY17 FY18 (%) YTD 1 ACV Airports Corp of Vietnam JSC 8,050 84, , MCH Masan Consumer Corporation 1,502 65, , HVN Vietnam Airlines JSC 1,956 36, , QNS Quang Ngai Sugar JSC , , FOX FPT Telecom JSC , , MSR Masan Resources JSC , , VIB Vietnam International Commerci , ,657, Source: TIM, HSC, Bloomberg, as of 30 Nov 2017 Page 18

19 Contact MARCO MARTINELLI, CIWM Director BEAT KAELIN Director Turicum Investment Management AG Blegistrasse 5 CH-6340 Baar Switzerland Tel: marco.martinelli@timvest.ch Turicum Investment Management AG Blegistrasse 5 CH-6340 Baar Switzerland Tel: beat.kaelin@timvest.ch Page 19

20 Turicum Investment Management AG (TIM) All rights reserved. The information contained in this presentation is strictly confidential and is intended only for the use of the individual or entity to whom TIM has provided the report. No part of this report may be divulged to any other person, distributed, resold and/or reproduced without the prior written permission of TIM