Power Construction JSC No.1 (PC1: HOSE)

Transcription

1 Power Construction JSC No.1 (PC1: HOSE) BUY - 1Y Target Price: 54,000 Current price: 43,000 Kien Trung Nguyen, CFA kiennt@ssi.com.vn ext November 2016 INDUSTRIALS - VIETNAM Key figures Market cap (USD mn) 154 Market cap ( bn) 3,462 Outstanding shares (mn) 75 Foreign ownership (%) State ownership (%) 0 Management ownership (%) Company Snapshot N.a Power Construction JSC No.1 (PCC1) is the leading power construction company with more than 50 years of operation experience. Founded as a SOE of Electricity of Vietnam (EVN), PCC1 was fully privatized in 2005 and at the moment is a private company. PCC1 is involved in hundreds of key power construction projects in Vietnam, and has expanded to other businesses including property, energy and steel pole manufacturing. On 16 November, 2016, PC1 listed its 75.2mn shares on the Ho Chi Minh Stock Exchange under the ticker PC1. Leading power Construction Company with undervalued assets Executive Summary Company overview Power Construction JSC No.1 (PCC1) is the leading power construction company with more than 50 years of operation experience. Founded as a SOE of Electricity of Vietnam (EVN), PCC1 was fully privatized in 2005 and at the moment is a private company. PCC1 is involved in hundreds of key power construction projects in Vietnam, and has expanded to other businesses including property, energy and steel pole manufacturing. On 16 November, 2016, PC1 listed its 75.2mn shares on the Ho Chi Minh Stock Exchange under the ticker PC1. Business segments of PC1 include: Power system construction: The core business of PC1 is construction of electricity connection systems and substation for National Power Transmission Corp (NPT) and other EVN s subsidiaries. For the last 4 years, PC1 maintains a stable market share of more than 30%. Electrical steel structure manufacturing: PC1 owns two 100% fully owned subsidiaries which produce hot-dip galvanized steel structure with total capacity of 45K tons/year, including Dong Anh Plant (acquired from Huyndai in 2009) and Yen Thuong Plant. Property segment: PC1 finished, handover and recorded revenue of 3 projects in Hanoi and developing 2 other projects to record revenue in Hydropower plants: PC1 have 2 small hydropower plants to commercialize in 4Q16 and other two small plants in 4Q17. Historical Financial Performance From , revenue and net profit CAGRs were 30% and 54% respectively. Sales growth was mainly driven by increasing value of construction segment revenue. From 2011 to 2015, revenue of the segment increased 4 times from 541bn to 2337bn. Gross profit margin and net profit margin varied with revenue structure. As the gross profit margin of the property segment is much higher than the industrial segment, in 2014 and 9M16, net margin was higher than 10% while other years margin was lower than 10%. PC1 maintains a high ROE of more than 20% and has been exceptional high in the years that they have property projects. D/E declined from 1.49 to only 0.38 in 2015, but will increase since 2016 on the debt for hydropower plants. In 9M16, revenue and net profit reached 2,100bn (+8% YoY) and 260bn (+12.4% YoY). However, sales of construction and manufacturing declined by 17.7% and 22.7% YoY due to delayed projects. Property sales of PCC1 Complex accounted for 20% of total sales, thus helped improve both gross profit margin and net profit in 9M16. Business Outlook We expect that in 2017, PC1 s construction segment s revenue will recover by 15% thanks to new projects and restarting delayed projects. For , we expect that the segment s revenue will grow at 10%/year. GPM is expected to stay at 17% in the period. For provision reversal, we expect in 2017, PC1 will reverse more provision as they have booked more provision in 2015 than in Page 1

2 Steel structure manufacturing: Thanks to the cooperation with AG Ajikawa, PC1 will export more steel structure and in the process will become less dependent on local buyers. We expect that the segment will recover by 20% in 2017 and continue to grow by 10% onwards based on the recent 40K tons contract with AG Ajikawa and potential contract value of 200K tons to GPM will decline to 15% when steel price increases and stabilizes at that level. Property segments: We expect that My Dinh Plaza 2 will contribute revenue from while Khuc Trieu project revenue will be booked in For GPM, we expect that the two projects will have at least 30% of GPM and 15% of net margin. Hydropower plants: For the two first projects, and the next two projects (Bao Lam 3 and Bao Lam 3A), we assume that they will run at 3,500 hours/year for the first year and 4,000 hours for the second year. Revenue contribution will be 275bn for each of the two projects and GPM will improve from 45% in the first year to 50% in the second year and 58% in the third year as depreciation is fixed. In 2016, we expect that revenue and net profit will reach 3,199bn (+3.2% YoY) and 366bn (+49% YoY), resulting in diluted EPS of 4,556. It should be noted that PC1 books bonus and welfare fund at a maximum of 12% of 25% of charter capital. As the charter capital has increased to 752bn this year, we expect that they will book 22.6bn since In 2017, we expect that PC1 will only record 50bn in revenue from property from PCC1 project in 1Q17. Revenue might decline by 1.3% YoY to 3,158bn and net profit might decline to 328bn (-12.3% YoY) based on the assumption that the two hydropower plants will make loss of 20bn in the first year of operation. In 2018, we expect strong growth thanks to My Dinh Plaza 2 project. Profit will grow steadily thanks to property projects, while starting in 2020, four hydropower plants will contribute 60-80bn in net profit to PC1, counterbalancing the absence of property profit. Investment view PC1 is trading at 2017 PE of 10.6x and PB of 1.6x at the market price of 43,000/share. However, in 2017, results will reflect the construction and manufacturing segments and even losses of hydropower plants. Segments Method Valuation Notice Core industrial Core profit in 2017 P/E 2,948bn segments x PE target of 9x we expect NAV of Property segment NAV of 2 upcoming the two projects at 262bn project the end of 2017 is 262bn Hydropower segment Book value 700bn Target P/B of 1x Affiliates Book value 1,55bn Target P/B of 1x Total value 4,065bn Fair price/share 54,000/share We recommend BUY for PC1 at 1Y target price of 54,000/share (+25.6% upside). We believe that PC1 is a good company with stable core business (including power construction and manufacturing businesses) and undervalued assets including property projects and hydropower plants which will generate high cash flow and profit for PC1 in the next 5-10 years. Risks High floating rate indicates potential selling pressure for the stock in the short term The company will need 400bn next year for the new hydropower projects and M&A purpose, creating potential dilution risks AR risks: although PC1 has not yet incurred any real bad debt so far, increasing exposure to more customers might create potential risks of bad debt. Page 2

3 TABLE OF CONTENTS 1. Company overview Business lines Power system construction Electrical steel structure manufacturing Property segment Hydropower plants Other segments 9 3. Historical Performance Outlook Investment view 14 APPENDIX: ANNUAL FINANCIAL STATEMENTS.15 ANALYST CERTIFICATION. 16 RATING 16 DISCLAIMER...16 CONTACT INFORMATION...17 Page 3

4 1. Company overview Power Construction JSC No.1 (PCC1) is the leading power construction company with more than 50 years of operation experience. Founded as a SOE of Electricity of Vietnam (EVN), PCC1 was fully privatized in 2005 and at the moment is a private company. PCC1 is involved in hundreds of key power construction projects in Vietnam, and has expanded to other businesses including property, energy and steel pole manufacturing. On 16 November, 2016, PC1 listed its 75.2mn shares on the Ho Chi Minh Stock Exchange under the ticker PC1. PC1 s milestones: 1963: establishe d as SOE of EVN 2005: IPO 2009: acquired Dong Anh- Hydai Steel Structure company. 2010: started the first property project 2014: achieved revenue of USD 150mn 2016: listing on HOSE, first 2 hydropow er plants commcerc ialized 2020: target 400mn USD of sales 2025: target 1bn USD of sales Charter capital increase: From 2005 to 2014, the company increased its charter capital 4 times, mostly through internal issuance. However, from 2014 until now, it has increased charter capital 3.5 times through both dividend payment and private placement. Charter capital 800 Charter capital Issued 11.48mn shares to Dragon Capital with price of stock dividend and mostly to existing shareholders to finance Nang Huong project Jun-16 Sept Page 4

5 Shareholder structure: Ownership Structure Chairman 21% other local individual shareholders 54% Vietnam Enterprise Investment Ltd (Dragon Capital) 15% 6M lockup 10% The Chairman and the strategic partner are the only two large shareholders. However, other management members also hold 9.54% and are subjective to 6M lockup period according to listing requirements. The floating share of 54% is very high and signal high liquidity after listing. There is no government related shareholders and all the floating shares are held by more than 600 individual investors. Page 5

6 2. Business lines PC1 is the leading power construction company with the highest market share in Vietnam. The company also produces electrical steel tower for domestic market and for export. Furthermore, it is expanding to the energy industry by investing in small hydro power plants in the North and real estate in Hanoi for apartment projects. Revenue Structure (9M16) 9M16 GP Structure Trading Leasing 6% 0% others 2% Trading 2% Leasing 1% others 2% Manufacturi ng 17% Property 20% Construction 55% Manufacturi ng 19% property 27% Construction 49% 2.1. Power system construction The core business of PC1 is construction of electricity connection systems and substation for National Power Transmission Corp (NPT) and other EVN s subsidiaries. The company built various projects of 500KV, 220KV, 110KV, 35KV transmission lines, and 500KV substation. Key projects include Vinh Tan-Song May 500KV line, Dac Nong-Phuoc Long- Binh Long 220KV line, and Pleiku-My Phuoc-Cau Bong 500KV line. For the last 4 years, PC1 maintains a stable market share of more than 30% Market share INCO 3% Others 6% Song Da 11 12% PCC1 39% PCC4 14% PCC2 14% VNE 12% Page 6

7 PC1 maintains a dominant market share not simply based on the relationship with EVN but on the engineers experiences and construction technology as well as strong financial status. For the last 5 years, revenue of this segment has increased by 44% p.a, reaching 2,237bn in However, in 9M16, revenue of the segment experienced negative 17.7% growth due to temporarily delayed projects as public spending is lower in the Election year. GPM 25% 20% GPM 15% 10% 5% 0% M16 Gross profit margin might vary from 14.5% to 19% depending on the nature of the projects. For substation projects, GP is usually lower as PC1 must buy power transformers from third parties. Therefore, the company targets to enter this market to gain extra margin on their projects Electrical steel structure manufacturing PC1 owns two 100% fully owned subsidiaries which produce hot-dip galvanized steel structure with total capacity of 45K tons/year, including Dong Anh Plant (acquired from Huyndai in 2009) and Yen Thuong Plant. PC1 is the only local company that can produce tubular poles 110KV, and 220KV- 1, 2, 4 circuits. The products are popularly used in power transmission projects, transportation projects, and telecom and exported to Japan, South Korea and Chile. Since 2010, revenue of the segment grew steadily by 15%/year except for 2013 with 954bn revenue, increasing by 120% YoY thanks to Pleiku-My Phuoc-Cau Bong project ( 452bn). In 9M16, revenue achieved 358bn, declining by 22.7% YoY, or equivalent to 75% of its capacity. Actually, 90% of the products are now distributed in the domestic market and depending on the project progress. PC1 recently cooperated with AG Ajikawa to export its products to Indonesia. The cooperation might help fulfill its capacity in the next 2-3 years. With 90% of COGS being steel and labor cost, this segment margin will depend on steel price. Page 7

8 Manufacture's GPM 25% 20% Manufacture's GPM 15% 10% 5% 0% M16 Except for 2013 in which a large project was recorded, since 2014, GPM has improved as PC1 increased its volume sales and steel price declined Property segment PC1 focuses development on the mid-end apartment segment based on good location rather than acquiring huge land bank. Since 2008, the company has handover two projects in Hanoi and is developing two projects in good location. Finished project Ongoing project Planned project Projects Nang Huong Apartment My Dinh Plaza ( *) PCC1 Complex (**) My Dinh Plaza 2(***) Trieu Khuc Project( ****) Location 583 Nguyen Trai Street, Thanh Xuan District, Hanoi 140 Tran Binh Street, Cau Giay District, Hanoi Phu Luong, Hadong District, Hanoi Tran Binh Street, My Dinh 2, Hanoi 44 Trieu Khuc, Na Thanh Xuan, Thanh Xuan District, Hanoi Total area (meters square ) Starting Handover Scale Recorded/Estimated Revenue villas 300bn Q Q stories, 350 apartments 15 stories, 540 apartments. 28 stories with 472 apartments 484 apartments n.a 709bn / 282bn GP 530bn 1,110bn (*) My Dinh Plaza project s revenue was booked in 2014 and had a GPM of 39.7%. (**) 79% of PCC1 Complex s revenue was booked in 9M16 and the remaining is likely to be booked in 4Q16. Gross profit margin was 26.43% as the location is not as good as in Cau Giay or Thanh Xuan Districts. Besides, the first portion of revenue usually generates a lower margin as most of the costs have already booked. (***) The My Dinh Plaza 2 is very close to the My Dinh Plaza. But the location is better because on the other side is Nguyen Hoang Street which is wider than Tran Binh Street. According to the company s plan, it can generate 183bn of net profit for PC1 after excluding 77bn land cost for Tan Mai Group. Page 8

9 (****) PC1 recently announced that it took over Hoa Binh Auto (Hoa Binh Automobile Mechanical JSC). The company is located on a 0.6ha land piece. The actual purpose is to build another property project on the land piece. As the location is even better than My Dinh Plaza 2, we expect PC1 will receive more profit from the project in Hydropower plants PC1 was granted by the Ministry of Industry and Trade to invest in 6 small hydropower projects in Dien Bien and Cao Bang provinces. Finished projects Ongoing projects Planned projects Projects Location Ownership Capacity Capex Trung Thu Bao Lam 1 Bao Lam 3 Bao lam 3A Bao Lam 2a Bao La 4A (Mong An) Dien Bien Cao Bang Cao bang Cao Bang Cao Bang Cao Bang 60% 30MW 100% 30MW 100% 46MW 100% 8MW n.a n.a 13MW 30MW 899bn 915bn bn 312bn 435bn 922bn Estimated annual revenue 140bn 130bn 223bn 35.6bn NPV IRR Operation 158bn 146bn 270bn 56.8bn 11.6% 4Q % 4Q % 4Q % 4Q The two first projects, including Trung Thu and Bao Lam 1 will go online this November. They already signed the PPA under an avoidable cost tariff scheme. Usually, price in the dry season is higher than the rainy season. As all plants are located in the North, the rainy season is similar to most large hydropower plants in Vietnam. Therefore, more output will be generated in the rainy season at a lower price. However, we estimate that the ASP will not be lower than 1,000/KWH. For ongoing projects, including Bao Lam 3 and Bao Lam 3A, PC1 will bundle the two into 1 contract to receive an avoidable cost tariff (two plants on the same river with capacity lower than 60MW can be viewed as 2 plants with capacity below 30MW). For those projects, PC1 will receive 4 years of tax exemption and the next 9 years of 50% tax deduction (effective 5% CIT). Although the company expects 4K hours of operation for each plant every year, we conservatively estimate that it can only run 3,500 hours/year and experience loss in the first two years for every plant. This implies that from now to 2019, the energy segment will contribute negative profit and no profit in and 2018 respectively, and will only begin to contribute profit in Other segments Other segments including leasing and trading business contribute about 7% of sales but only account for 5% of gross profit. We do not expect this segment to create significant profit for PC1. PC1 has 2 affiliates, including Cao Bang Cast Iron and Steel JSC (CISCO) (25.1% ownership of 430.1bn charter capital) and Tan Phat Mineral JSC (48.8% ownership of charter capital of 80bn). CISCO owns a valuable mine with more than 22mn tons of reservoir, license for 25 years and yearly capacity of 200K tons/year. However, due to poor state management and high interest expense, CISCO incurred losses for 2 years. Recently, there have been several changes in top management, which will improve the performance of this company. Page 9

10 3. Historical Performance Sales Property sales Net profit 3,500,000 Sales Growth GPM Net margin 60.0% 3,000,000 2,500,000 2,000,000 1,500,000 1,000, , % 40.0% 30.0% 20.0% 10.0% M16 0.0% From , revenue and net profit CAGRs were 30% and 54% respectively. Sales growth was mainly driven by increasing value of construction segment revenue. From 2011 to 2015, revenue of the segment increased 4 times from 541bn to 2337bn. Gross profit margin and net profit margin varied with revenue structure. As the gross profit margin of the property segment is much higher than the industrial segment, in 2014 and 9M16, net margin was higher than 10% while other years margin was lower than 10%. Gross profit margin M16 25% 20% 15% 10% 5% GPM Construction Manufacturing 0% M16 Page 10

11 ROE 17% 19% 34% 61% 22% ROA 5% 5% 8% 20% 9% D/E Receivable collection period (day) Payable payment period (day) Inventory period (day) PC1 maintains a high ROE of more than 20% and has been exceptional high in the years that they have property projects. D/E declined from 1.49 to only 0.38 in 2015, but will increase since 2016 on the debt for hydropower plants. Days of receivables and inventory both declined, hence improving the cash flow of the company. In 9M16, revenue and net profit reached 2,100bn (+8% YoY) and 260bn (+12.4% YoY). However, sales of construction and manufacturing declined by 17.7% and 22.7% YoY due to delayed projects. Property sales of PCC1 Complex accounted for 20% of total sales, thus helped improve both gross profit margin and net profit in 9M16. Provision: According to Cir 228/2009/TT-BTC issued on 7 December, 2009 by the Ministry of Finance, PC1 accrued its maintenance provision for bad debt in construction projects at 3-5% of contract value. In 2013, PC1 recorded huge provision. As the provision is usually for two years, since 2015, the company started to reserve the provision. We expect that reversal of the provision will offset 90% of new provision recorded based on the assumption that construction revenue will increase by 10%/year to Provision short term provision Long term Provision Provision Reversal M Page 11

12 4. Outlook Construction segments: Packages Unit KV Substation MVA 17,100 26,700 26,400 23, KV substation MVA 36,863 34,966 33,888 32, KV Grid Km 3,833 2,746 3,592 3, KV Grid KM 10,637 7,488 4,076 3,435 Capital Investment bn 77, , K According to the Master Plan VII, EVN NPT will need to invest 210.4tn in the transmission system for and need 494tn for According to EVN NPT, they disbursed 77,206bn for the system during Therefore, EVN NPT need another 133tn for the system in the next 5 years and twice the amount from For every 5 years, the capital need will double; therefore, the average growth rate could be at least 15%/year for the next 15 years. PC1 is going to purchase a substation producer to increase its margin in construction projects. Although the company has not yet provided any detail information on the target company, it targets to achieve 500bn in revenue and 25bn in PBT contribution from the new segments. We expect that in 2017, PC1 s construction segment s revenue will recover by 15% thanks to new projects and restarting delayed projects. For , we expect that the segment s revenue will grow at 10%/year. GPM is expected to stay at 17% in the period. For provision reversal, we expect in 2017, PC1 will reverse more provision as they have booked more provision in 2015 than in Steel structure manufacturing: Thanks to the cooperation with AG Ajikawa, PC1 will export more steel structure and in the process will become less dependent on local buyers. We expect that the segment will recover by 20% in 2017 and continue to grow by 10% onwards based on the recent 40K tons contract with AG Ajikawa and potential contract value of 200K tons to GPM will decline to 15% when steel price increases and stabilizes at that level. Property segments: We expect that My Dinh Plaza 2 will contribute revenue from while Khuc Trieu project revenue will be booked in For GPM, we expect that the two projects will have at least 30% of GPM and 15% of net margin. Hydropower plants: For the two first projects, and the next two projects (Bao Lam 3 and Bao Lam 3A), we assume that they will run at 3,500 hours/year for the first year and 4,000 hours for the second year. Revenue contribution will be 275bn for each of the two projects and GPM will improve from 45% in the first year to 50% in the second year and 58% in the third year as depreciation is fixed. Mineral segment: For CISCO, we expect that in 2017, it will generate 15bn in loss for PC1 but will begin to contribute modest profit of 10bn in Page 12

13 Revenue forecasts GPM Hydropower others Trading Leasing Manufacturing property Construction Source: SSI s estimates In 2016, we expect that revenue and net profit will reach 3,199bn (+3.2% YoY) and 366bn (+49% YoY), resulting in diluted EPS of 4,556. It should be noted that PC1 books bonus and welfare fund at a maximum of 12% of 25% of charter capital. As the charter capital has increased to 752bn this year, we expect that they will book 22.6bn since In 2017, we expect that PC1 will only record 50bn in revenue from property from PCC1 project in 1Q17. Revenue might decline by 1.3% YoY to 3,158bn and net profit might decline to 328bn (-12.3% YoY) based on the assumption that the two hydropower plants will make loss of 20bn in the first year of operation. In 2018, we expect strong growth thanks to My Dinh Plaza 2 project. Profit will grow steadily thanks to property projects, while starting in 2020, four hydropower plants will contribute 60-80bn in net profit to PC1, counterbalancing the absence of property profit. 2016F 2017F 2018F 2019F 2020F Revenue 3,198,596 3,158,333 3,897,832 4,316,280 4,566,573 Growth 3.2% -1.3% 23.4% 10.7% 5.8% Net profit 457, , , , ,457 Growth 48.9% -10.4% 36.6% 13.7% 4.0% EPS 4,556 4,052 5,643 6,459 6,726 Source: SSI s estimates Page 13

14 5. Investment view PC1 is trading at 2017 PE of 10.6x and PB of 1.6x at the market price of 43,000/share. However, in 2017, results will reflect the construction and manufacturing segments and even losses of hydropower plants. Segments Method Valuation Notice Core industrial segments P/E 2,948bn Core profit in 2017 x PE target of 9x Property segment NAV of 2 upcoming project 262bn we expect NAV of the two projects at the end of 2017 is 262bn Hydropower segment Book value 700bn Target P/B of 1x Affiliates Book value 1,55bn Target P/B of 1x Total value 4,065bn Fair price/share 54,000/share We recommend BUY for PC1 at 1Y target price of 54,000/share (+25.6% upside). Risks: High floating rate indicates potential selling pressure for the stock in the short term The company will need 400bn next year for the new hydropower projects and M&A purpose, creating potential dilution risks AR risks: although PC1 has not yet incurred any real bad debt so far, increasing exposure to more customers might create potential risks of bad debt. Page 14

15 APPENDIX: ANNUAL FINANCIAL STATEMENTS Billion F 2017F Billion F 2017F Balance Sheet Income Statement + Cash Net Sales 3,100 3,101 3,199 3,158 + Short-term investments COGS -2,433-2,672-2,629-2,520 + Account receivables Gross Profit Inventories Financial Income Other current assets Financial Expense Total Current Assets 1,610 2,121 2,151 2,132 Income from associates LT Receivables Selling Expense Net Fixed Assets ,879 Admin Expense Investment properties Income from business operation LT Assets in progress Net Other Income LT Investments Profit Before Tax Other LT Assets Net Income Total Long-Term Assets 468 1,143 1,656 2,082 NI attributable to shareholders Total Assets 2,078 3,263 3,807 4,214 Minority interest Current Liabilities 1,071 1,287 1,266 1,214 In which: ST debt Basic EPS () 5,625 3,261 4,556 4,052 + Non-current Liabilities BVPS () 42,977 38,056 24,868 26,920 In which: LT debt Dividend (/share) 0 0 2,000 2,000 Total Liabilities 1,178 1,893 1,865 2,114 EBIT Contributed capital EBITDA Share premium Retained earnings Growth + Other capital/fund Sales 53.1% 0.0% 3.2% -1.3% Shareholders' Equity 900 1,370 1,942 2,100 EBITDA 125.6% -39.5% 58.7% 21.4% Total Liabilities & Equity 2,078 3,263 3,807 4,214 EBIT 133.4% -41.3% 44.7% 6.5% NI 198.1% -42.2% 49.0% -9.6% Cash Flow Equity 81.4% 52.2% 41.7% 8.1% CF from operating activities Chartered Capital 11.7% 70.0% 120.3% 0.0% CF from investing activities Total assets -2.0% 57.0% 16.6% 10.7% CF from financing activities Net increase in cash Valuation Beginning cash P/E n.a n.a Ending cash P/B n.a n.a P/Sales n.a n.a Liquidity Ratios Dividend yield n.a n.a 4.7% 4.7% Current ratio EV/EBITDA n.a n.a Acid-test ratio EV/Sales n.a n.a Cash ratio Net debt / EBITDA Profitability Ratios Interest coverage Gross Margin 21.5% 13.8% 17.8% 20.2% Days of receivables Operating Margin 18.1% 9.4% 12.7% 13.3% Days of payables Net Margin 13.7% 7.9% 11.4% 10.5% Days of inventory Selling exp./net sales 0.6% 0.2% 0.2% 0.4% Admin exp./net sales 3.0% 4.1% 4.0% 6.0% Capital Structure ROE 60.8% 21.6% 22.1% 16.4% Equity/Total asset ROA 20.2% 9.2% 10.3% 8.2% Liabilities/Total Assets ROIC 44.1% 17.0% 17.5% 15.1% Liabilities/Equity Debt/Equity ST Debt/Equity Source: Company, SSI forecasts Page 15

16 1. ANALYST CERTIFICATION The research analyst(s) on this report certifies that (1) the views expressed in this research report accurately reflect his/her/our own personal views about the securities and/or the issuers and (2) no part of the research analyst(s) compensation was, is, or will be directly or indirectly related to the specific recommendation or views contained in this research report. 2. RATING Within 12-month horizon, SSIResearch rates stocks as either BUY, HOLD or SELL determined by the stock s expected return relative to the market required rate of return, which is 18% (*). A BUY rating is given when the security is expected to deliver absolute returns of 18% or greater. A SELL rating is given when the security is expected to deliver returns below or equal to -9%, while a HOLD rating implies returns between -9% and 18%. Besides, SSIResearch also provides Short-term rating where stock price is expected to rise/reduce within three months because of a stock catalyst or event. Short-term rating may be different from 12-month rating. Industry Rating: We provide the analyst industry rating as follows: Overweight: The analyst expects the performance of the industry over the next 6-12 months to be attractive vs. the relevant broad market Neutral: The analyst expects the performance of the industry over the next 6-12 months to be in line with the relevant broad market Underweight: The analyst expects the performance of the industry over the next 6-12 months with caution vs. the relevant broad market. *The market required rate of return is calculated based on 5-year Vietnam government bond yield and market risk premium derived from using Relative Equity Market Standard Deviations method. Our rating bands are subject to changes at the time of any significant changes in the above two constituents. 3. DISCLAIMER The information, statements, forecasts and projections contained herein, including any expression of opinion, are based upon sources believed to be reliable but their accuracy completeness or correctness are not guaranteed. Expressions of opinion herein were arrived at after due and careful consideration and they were based upon the best information then known to us, and in our opinion are fair and reasonable in the circumstances prevailing at the time, and no unpublished price sensitive information would be included in the report. Expressions of opinion contained herein are subject to change without notice. This document is not, and should not be construed as, an offer or the solicitation of an offer to buy or sell any securities. SSI and other companies in the SSI and/or their officers, directors and employees may have positions and may affect transactions in securities of companies mentioned herein and may also perform or seek to perform investment banking services for these companies. This document is for private circulation only and is not for publication in the press or elsewhere. SSI accepts no liability whatsoever for any direct or consequential loss arising from any use of this document or its content. The use of any information, statements forecasts and projections contained herein shall be at the sole discretion and risk of the user. Page 16

17 4. CONTACT INFORMATION Institutional Research & Investment Advisory Kien Trung Nguyen, CFA Research Manager Tel: (844) ext. 510 Phuong Hoang Hung Pham Giang Nguyen, ACCA Deputy Managing Director, Associate Director Associate Director Head of Institutional Research & Investment Advisory SAIGON SECURITIES INC. Member of the Ho Chi Minh Stock Exchange, Regulated by the State Securities Commission HO CHI MINH CITY 72 Nguyen Hue Street, District 1 Ho Chi Minh City Tel: (848) Fax: (848) info@ssi.com.vn HANOI 1C Ngo Quyen Street, Ha Noi City Tel: (844) Fax: (844) info@ssi.com.vn Page 17