Vietnam Economy and Stock Market FY2018 outlook

Transcription

1 Ho Chi Minh City Securities Corporation Vietnam Economy and Stock Market FY2018 outlook Fiachra Mac Cana Head of Research and Managing Director

2 Macro Outlook the cyclical recovery to continue HSC forecasts CPI will quicken to 4.3% y/y in 2018 on higher food and fuel prices. We also expect the VND will depreciate by some 2% as normal pressures return. And predict credit growth of 18% y/y as M2 expands by 16% y/y. With deposits also growing by some 16% y/y. We estimate average interest rates will increase by 30 bps as the era of low interest rates draws to a close. And that bond yields will rise by some 50 bps. HSC then forecasts GDP growth of 6.42% y/y. With most segments other than mining growing steadily. We believe the trade surplus will expand by 75% y/y as exports continue to thrive. ODA will decline as the World Bank reduces aid given Vietnam s confirmed status as a middle income country. However remittances should remain stable and at high levels. While we expect FDI will increase by 15%. We see the budget deficit expanding a little to 3.7% of GDP. After the FY2017 likely narrowed substantially to just 3.4%. New sources of revenue such as equitizations have brought in far more than expected thus easing the fiscal situation considerably.

3 Macro plus and minus for 2018 Key positive and negative factors for the Vietnamese stock market in 2018 Macroeconomic changes Importance level Likelihood in next 3 months Likelihood in next 6 months GDP grow th to remain fairly stable in 2017 Primary High High High As inflation accelerates tow ards 4% Primary Low High High Currency to depreciate at a faster rate Primary Low Medium High Manufacturing and consumer sectors to grow faster Secondary Medium Medium High Recovery in agriculture to continue as prices grow Secondary Medium Medium High Mining and resource sector output to fall hard Secondary High High High Likelihood in next 12 months Some movement on regional trade pacts Tertiary Low Low Medium Monetary policy changes Credit grow th and M2 to decelerate slightly in 2018 Primary High High High Interest rates to increase at a moderate pace Primary Low Medium High Liquidity gap to remain negative for now Primary High Medium Low Fiscal policy changes and BOP Budget deficit to narrow as new revenue sources kick in Primary Medium High High Trade surplus to double as export grow th accelerates Primary High High High Currency reserves to build on BOP surplus Primary High High High Decline in ODA w ill have a minor impact Primary High High High FDI to continue to increase Primary High High High Structural changes SOE equitisation to continue at a steady pace Primary Highj High High Addition of covered w arrants and possible exchange merger Secondary Low High High Other changes Continuing interest in M&A as foreigners look to snap up assets Primary High High High Cleanup of bank sector management to continue Secondary High High High Regional geopolitical tensions to rise Primary Medium Medium High Global stock markets likely to more volatile as bull market matures Primary Medium High High Taper tantrum risk at some of very high Primary Low Medium High

4 Manufacturing will accelerate

5 Manufacturing will accelerate

6 Manufacturing will accelerate

7 Manufacturing will accelerate

8 Retail sales are popping

9 Retail sales are popping

10 Retail sales are popping

11 Construction is doing well

12 Construction is doing well Residential unit launch plans for 2018

13 Mining will continue to decline

14 Mining will continue to decline Oil production output by oilfie ld '000 Bbl pe r day E Bach Ho Ca Ngu Vang Tho Trang CN Phuong Dong Chim Sao The Giac Trang Dai Hung Rang Dong Ruby STD Others Total

15 M2 is growing slower than credit as SBV gradually drains liquidity

16 CPI was lower than expected

17 Core CPI still in decline.

18 CPI will accelerate this year

19 Interest rates are at the bottom

20 Short term rates have moved higher recently

21 Risks are all external Risks for the global market & economy in 2018 Risks Impact on Vietnam's economy & stock market Risk w eighting Federal Reserve Bank balance sheet w inddow n shock Medium to high Bond yields w ill spike gobally Spillover in currency and equity markets Risk-off mentality w ill lead to FII outflow s Sabre rattling on trade High Canada w arns US may signal intent to leave NAFTA next month Tough talk from US on China continues Core inflation m ay surge later this year Low to medium Headline inflation w ill follow after a quarter or tw o Global interest rates w ill spike Spillover into equity markets and real economy Geopolitical risk might spill over Medium Sudden w ithdraw al of capital from frontier and emerging markets Risks to currency; FDI and underlying economy

22 QE unwinding may be most significant risk over the medium to longer term

23 QE unwinding may be most significant risk over the medium to longer term Total Assets of all U.S. Federal Reserve Banks Billions 4,800 4,400 4,000 3,600 3,200 2,800 2,400 2,000 1,600 1,

24 QE unwinding may be most significant risk over the medium to longer term

25 Core inflation is slowly picking up speed as output gap closes Core CPI in leading global economies (y/y) 3.5% 3.0% US Core CPI (y/y) China Core CPI (y/y) Japan Core CPI (y/y) 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% -0.5% -1.0% -1.5% -2.0% Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17

26 Stock Market Outlook

27 Stock market is being driven by margin lending and foreign net buying

28 Margin lending is not excessive

29 Foreigner were aggressive net buyers in Foreign net buying of equities (FY YTD) HoSE HaSTC Total Total in US$ million FY ,875 2,865 25,740 1,225.7 FY2008 5, , FY2009 3, , FY , , FY2011 1, , FY2012 3,321 1,083 4, FY2013 5,502 1,304 6, FY2014 2, , FY2015 2, , FY2016 (8,997) 959 (8,038) (354.1) FY ,431 (308) 26,123 1,150.8

30 Foreign buying was a lot bigger when you include it all HSC estimation of total foreign net buying of Vietnamese equities in 2017 Foreign buying categories VND billion US$ Net foreign buying through normal market operations HoSE 26, HaSTC (308.00) Total in FY , Estimated net foreign buying of major private placements VJC 1,894.0 NVL 1,367.4 NKG VGC 1,800.0 VPB 6,423.9 HDB 3,139.2 Total in FY , Estimated net foreign buying of major auctions and IPOs Post and Telecommunication Tourism Joint Stock Company Vietnam Urban and Industrial Zone Development Investment Corporation (IDICO) Vietnam Dairy Products Joint Stock Company 8, Investment and Industrial Development Corporation Saigon Beer - Alcohol - Beverage Corporation 109, Investment and Industrial Development Corporation Total in FY , Estimated grand total 162, This is a rough estimate using selected corporate actions given a lack of published information

31 Daily turnover spiked in November on aggressive foreign buying.

32 Deja vu market themes just like last year Earnings market continues into a second year 27 out of TOP70 stocks expected to see NPAT growth plus 18% y/y Financial services stocks will see accelerated earnings this year Real estate stocks will see strong earnings this year Consumer stocks should see moderate growth Resource stocks earnings will rebound this year Equitisation and listing progress to continue at same pace Reduction of government stakes in VNM; BHN; VGC; DPM; BMP & FPT. Possibly BMI & GAS Private placement and listing of Yeah1; OCB; Techcombank; Ben Thanh Group. Coming IPOs of PVPower; PV Oil; VRG; VICEM & possibly MobiFone. HoSE upgrade for ACV & VIB. Economy will continue to grow GDP growth close to 6.5% Agriculture to do a bit better. As will services. Manufacturing improving and construction decelerate a little. Mining will be a major drag. Credit growth little slower. Exports growing faster. While FDI looks solid.

33 Global equities look expensive especially if interest rates rise

34 TOP70 forward PE based on HSC numbers looks a bit expensive Top 70 - Forward PE [VALUE] Jan-14 9-Apr-14 9-Jul-14 9-Oct-14 9-Jan-15 9-Apr-15 9-Jul-15 9-Oct-15 9-Jan-16 9-Apr-16 9-Jul-16 9-Oct-16 9-Jan-17 9-Apr-17 9-Jul-17 9-Oct-17 Times

35 Earnings are still there Summary forecast sheet for Top 70 companies Aggregate FY2013 FY2014 y/y FY2015 y/y FY2016 y/y FY2017e y/y FY2018F y/y Net aggregate sales 894,963, ,801, % 1,012,252, % 1,133,279, % 1,371,998, % 1,607,411, % COGS 694,798, ,099, ,450, ,214, ,790,544 1,154,218,409 Gross profit 200,165, ,701, % 262,802, % 313,065, % 378,208, % 453,193, % Gross profit margin 22.4% 22.7% 26.0% 27.6% 27.6% 28.2% Operating profit 117,180, ,944, % 139,031, % 164,387, % 202,191, % 235,696, % Pretax profit 106,329, ,280, % 114,981, % 137,147, % 163,132, % 194,770, % Net profit 77,270,281 80,816, % 87,483, % 105,755, % 125,151, % 147,963, % Net profit margin 8.6% 8.1% 8.6% 9.3% 9.1% 9.2% Average OS. 32,680,202,988 35,289,841,672 39,315,911,765 43,657,589,808 46,741,705,639 48,780,799,627 EPS 1,584 1, % 1, % 2, % 2, % 3, % BVPS 14,995 15,373 15,935 15,608 16,371 18,149 ROA 9.05% 8.03% 7.32% 10.45% 10.67% 10.87% ROE 15.77% 15.65% 14.97% 16.17% 17.30% 17.93% PE PB

36 Banks & manufacturing should see acceleration in net profit growth TOP70 earnings by sector Unit: VNDmillion Net Profit y/y% Sector earning FY2014 FY2015 FY2016 FY2017e FY2018F FY2015 FY2016 FY2017e FY2018F Financial service 33,666,647 32,106,789 35,378,307 44,955,716 65,851,098-5% 10% 27% 46% Consumer 13,278,666 20,473,397 19,379,856 23,582,966 26,656,094 54% -5% 22% 13% Manufacturing 4,662,837 5,644,465 9,797,567 10,124,328 12,775,104 21% 74% 3% 26% Real Estate 6,465,407 6,227,505 10,562,351 15,108,238 18,552,054-4% 70% 43% 23% Energy 20,412,209 17,358,825 15,244,070 14,330,400 16,077,437-15% -12% -6% 12% Technology 1,701,928 2,060,156 2,113,805 2,476,794 2,762,790 21% 3% 17% 12% Transportation 2,990,771 3,388,437 9,713,437 11,036,089 13,481,645 13% 187% 14% 22% Pharmaceuticals 619, , , , ,019 10% 19% 8% 7% Logistics 779, , ,875 2,694, ,386-13% -7% 326% -72% Utilities 1,403, , ,022 1,182,906 1,049,160-42% -1% 48% -11% Retails 2,405,113 4,092,673 6,004,572 5,766,116 6,795,038 70% 47% -4% 18%

37 To sum up the equity market environment Promise of a significant increase in earnings continues to drive the VN index higher Foreign net buying is driving prices with margin playing a supporting role. Valuations at multi year highs VN index should approach 1200 this year. We sill recommend - BUY earnings

38 Contact Fiachra Mac Cana Head of Research and managing director Tel.: +84 Fax: Visit our website: