International Development & Investment Corporation I.D.I (HOSE- IDI)

Transcription

1 COMPANY UPDATE 22/12/2015 International Development & Investment Corporation I.D.I (HOSE- IDI) STRONG GROWTH THANKS TO SOARING EXPORTS TO CHINA One of Vietnam s leading Pangasius fillet processing companies, IDI accounts for 4% of total sector exports in 9M2015 with 96% of the company s products exported to US, China & Hong Kong. In addition, the company also promotes the development of fish oil brand Ranne in the domestic market and exports to Singapore, Middle East. IDI aims at developing production chain with a closed process from feed production, breeding, raising and processing pangasius fillet. The company will continue boosting investment in the next three years. Particularly in 2016, capital demand is estimated at VND600 billion for feed production plant, packaging plant and farming areas. The feed production plant operating at full capacity is projected to contribute 30% of total revenue (equivalent to VND1,000 billion) in Revenue in 2015 is forecast to grow 18%, reaching VND2,513 billion, mainly driven by an increase in pangasius fillet and fish oil exports. Net income reaches VND122 billion, +36% yoy, equivalent to 2015 EPS of VND1,241. We expect sales of IDI to maintain a 20% growth in 2016 and reach 27%-30% in the next three years when feed production plant come in operation. IDI is trading at the price of VND7,600/share (12/12/2015), 2015 P/E is estimated at an attractive 6.1x, compared to the industry average of 10.4x. However, we consider diluting risk to be high due to the company s need of capital for investment. Most likely IDI will continue issuing shares to raise its capital (ratio 1:1) and convertible bonds (VND300 billion) in Therefore, TVS recommends HOLD to IDI shares. Unit: billion 9M2015 9M2014 Growth yoy (%) Net revenue (NR) 1,823 1,611 13% Gross profit % Gross margin (%) 14.7% 12.4% Net financial profit % Interest expenses % Sales & Admin expenses/ NR (%) 6.6% 4.9% PAT % Net margin (%) 5% 5% EPS 1,082 2,002-46% COMPANY INFORMATION Industry Fisheries Established 2003 Ticker IDI (HOSE) Charter Capital (VND bn) 983 Current price 7,700 TRADING INFORMATION Beta week High 10, week Low 6,100 Outstanding shares (mn) 98.3 Capital (VND Avg 52-week trading volume (shares) 844,989 VALUATION 4 Recent quarters EPS (VND) 1,034 Book value (VND) 12,424 P/E trailing (12/12/15) 7.35 P/B 0.64 Dividend yield (%) N/a SHAREHOLDER 8/12/2015 ASM 21% MBS 3% Nguyen Bang Thuong 3% Asia Fish Oil JSC 1% Asia Real Estate & Minerals JSC 1% Foreigners 5% Others 66% IDI s SHARE PRICE VS. VNIDEX From the beginning of the year to 08/12/2015, price movement of IDI has been underperformed the market, falling 20% while VNIdex rose 5.5%. 30% 20% 10% 0% -10% -20% -30% -40% IDI VNINDEX 5/1/15 5/4/15 5/7/15 5/10/15

2 Exports of fish fillet & fish oil, aiming at a closed production process. 90% REVENUE FROM PANGASIUS FILLET EXPORTS IDI's business is diversified, including frozen pangasius fillet, fish by-products, oil and construction. Currently, 96% of IDI revenue comes from core businesses such as selling products (fish, oil & fish by-products), building industrial parks (Lap Vo industrial zone), mostly to support the company s production. Revenue structure of IDI Top 10 pangasius exporters in 9M % 96% Fishery products revenue Construction revenue Others Company Export value (USD mn) Market Share Vinh Hoan % Bien Dong 82 7% Hung Vuong 73 6% Navico 68 6% Golden Quality 53 5% I.D.I 50 4% Agifish 44 4% GODACO 41 4% Hung Ca 38 3% Dai Thanh 32 3% Source: VASEP Pangasius fillet: IDI developes the production chain with a closed process from feed production, breeding, raising and pangasius fillet processing. Thus, in medium-term the company s target is focusing on developing the missing steps in the production chain. Farming area: Currently the total area of self-farming and outsourcing area of IDI is 160 ha, concentrated in Dong Thap, An Giang and Can Tho. Of which 40 ha farming area meets Global G.A.P, A.S.C, B.A.P. standards. In 2016, the total farming area of IDI is expected to increase to 200 ha, mainly increase in link and farming area. Farming Area Area (ha) Materials (ton) Proportion Self-farming 40 12,000-14,000 15% Outsourcing ,000-45,000 65% Purchase 15,000 20% Total ,000-74, % Processing: current total processing capacity of IDI reaches 300 tons of material/day/ 12 hours with one processing plant, operating at full capacity. Besides, IDI also outsources three additional small plants for processing. The second processing plant (capacity of 150 tons/day/12 hours) will begin running a pilot by the end of 2015, and officially comes into operation from 2016, increasing total capacity by a further 50%. Exports: Approximately 87% - 90% of IDI finished products are exported, the rest is sold domestically. As of 9M2015, IDI is the 6th largest company

3 in exports value in Vietnam, accounting for 4% of market share in total export value, equaling USD49.5 million. Main exports markets are the Americas (USA, Mexico, Colombia), China and Hong Kong, representing 93% of total value. Production of fish oil Ranee: consumption growth of IDI fish oil products are quite solid, especially with exports orders from China, the Middle East and Singapore. Production capacity is expected to double from 100 tons to 200 tons/day. Boosting investment in production chain in the next three years INVESTMENT PLAN Feed production plant: IDI has just started constructing a feed production plant with a designed capacity of 360,000 tons/year and will provide 70,000 tons of aqua feed for internal production when officially launching in Q In 2017, the plant is expected to supply 150,000 tons of aqua feed for IDI (42% of capacity), meeting 100% demand for internal use. Excluding the aqua feed output for internal use, revenue from feed production trading is projected to contribute a significant revenue of VND1,000 billion or 30% in 2017 total revenue (operating at full capacity). Farming area: IDI was granted 34 ha of aqua area in Con Qua (Dong Thap). The project is at the planning stage currently. Breeding centre: in planning stage to prepare for investment in Packaging plant (both paper & plastic packaging): to pack pangasius fillet and oil products. Rice milling plant: in survey stage, in order to utilize rice husk to burn boilers in by-products processing plant. The company estimates the cost of husk purchasing will be reduced from VND10 billion to VND6 billion when the plant goes into operation. In addition, rice bran from the plant is also used to make animal feed. High demand for capital use: IDI needs around VND600 billion for investment and intends to issue shares (ratio 1:1) to fund capital requirements in Besides, the company also plans to issue VND300 billion of convertible bonds with the three-year maturity. However, every change in capital and bond issue plan must get approval from the upcoming AGM in 4/2016. Project Investment Capital (VND) Starting time Expected launching Food production plant Q4/2016 Packaging plant N/a Farming area 100 N/a N/a Breeding centre N/a 2017 N/a Rice milling plant N/a N/a N/a

4 Pangasius exports shifts to less demanding market such as China when traditional markets like US, Europe have leveled off or declined. VIETNAM PANGASIUS EXPORTS AS OF 10M2015 As of the end of 10/2015, the total export value of Vietnam pangasius reached USD1.3 billion, down 10.4% yoy. The industry growth figures showed exports to traditional markets sliding. The two largest markets, US and Europe, accounting for 39% of total exports, decreased by 4.6% and 15% yoy respectively. ASEAN, Mexico and Brazil markets dropped by 2%, 10% and 44.5% yoy respectively. Meanwhile, exports to China (accounting for 10.3% of total export) has gone in an opposite direction with recorded very strong growth, up 53% compared with 10M2014 and reached USD134 million, becoming Vietnam's third largest imports market in pangasius. The causes of fluctuation in exports market structure came from: Exports value in US market fell slightly due to the impact of a higher anti-dumping duty POR11. In addition, US has begun to apply the standards under the Farm Bill, causing major difficulties for catfish exports to this market in the upcoming time. Demand for pangasius in the European market dropped continuously since the beginning of the year combined with Euro plummeting against the Dollar also made things difficult for importers. China importing market increased due to (1) demand for Chinese domestic pangasius climbed when Chinese started to switched to pangasius instead of red tilapia and tilapia (2) China imports more pangasius to process and export to US market. Therefore, in case highquality markets run into difficulty, Vietnam temporarily switched to China market. Vietnam pangasius exports value to China growth (%) T1 T2 T3 T4 T5 T6 T7 T8 T9 T10 T11 T12 100% 80% 60% 40% 20% 0% Source:VASEP IDI S BUSINESS RESULTS IN 9M2015 &THE ENTIRE YEAR FORECASTED IDI s growth in 2015 thanks to increasing exports to China IDI recorded VND1,823 billion in 9M2015 consolidated revenue, up 13% yoy, mainly from Q3 with strong revenue growth of 47% yoy. After meeting with the representative of the company, we learned that revenue of processing finished products (96% of total revenue) increased thanks to China s consumption of fish fillet rising sharply, making up for the decline in other

5 markets. We estimate revenue of fillet increased by 17% yoy. IDI has boosted sales volume of finished fillet, reduced outsourcing, combined with lowered cost while selling prices unchanged. In addition, IDI also focuses on promoting products with higher added-value such as refined oil, wholesale fish oil, shortening. Gross margin has improved significantly, rising from 12.4% in 9M2014 to 14.7% in 9M2015. Financial expenses heightened by 64% due to capital expenditure in increasing the processing capacity of fishmeal & fish oil Financial income only reached VND13.8 billion (+44% yoy). Total debt has increased by 64% ytd, including VND1,439 short-term debt and VND283 billion long-term debt. Debt increased primarily due to investment in Trisedco to increase fishmeal plant capacity and in fish oil processing plant. In addition, adjusted VND/USD during the period has caused a VND22 billion foreign exchange loss in 9M2015, a 4x increase compared to 9M2014. Accordingly, 9M2015 financial expense reached VND94.5 billion, soaring by 110% yoy. Simultaneously, the ratio of sales & management expenses/net revenue of IDI also increased from 4.9% in 9M2014 to 6.6% in 9M2015. Therefore although gross margin has improved, other costs rose sharply, leading to an unchanged net margin yoy (5%). IDI s PAT amounted to 91 billion in 9M2015, up 14% compared to 9M2014. Those last months of the year are usually considered high season for fisheries enterprises. Meanwhile, the VND/USD exchange rate is expected to maintain at current level in Q42015, thus financial expenses will be more stable. For entire 2015, IDI will reach VND2,513 billion in net revenue (+18% yoy) and VND122 billion in PAT (+36% yoy).

6 FINANCIAL STATEMENTS (Unit: VND Billion) Business Results Q2015 2Q2015 3Q2015 Net revenue 2, Gross profit EBITDA PBT PAT Balance Sheet Q2015 2Q2015 3Q2015 Cash & Cash Equivalents Receivables Inventory Total assets 1,160 1,573 2,318 2,382 Net fixed assets Total assets 1,951 2,394 3,192 3,278 Short-term liabilities 1,216 1,191 1,710 1,774 Long term liabilities Total Liabilities 1,323 1,347 1,999 2,057 Total equities 628 1,047 1,080 1,222 Total Liabilities & Equities 1,951 2,394 3,079 3,278 Cash flow Q2015 2Q2015 3Q2015 Cash at beginning of year Cash flow from business activities Cash flow from investment activities Cash flow from financial activities Change in cash Cash at the end of year Financial Ratios Q2015 2Q2015 3Q2015 Growth Total assets 12% 40% 86% 78% Total capital 9% 78% 72% 80% Net revenue 17% 9% -9% 47% Net profit 120% 123% -1% -13% Profitability Gross margin 12.2% 11.8% 17.6% 14.5% EBITDA margin 4.3% 3.7% 8.1% 3.5% Operating margin 4.6% 0.9% 1.4% 0.7% PAT margin 14.4% 2.0% 4.3% 2.0% Leverage (EBIT / I) Total Liabilities / Capital 68% 56% 65% 63% Total liabilities / Equity 211% 129% 185% 168% Liquidity Receivables (days) Payables (days) Inventory (days) Current ratio 1.0x 1.3x 1.4x 1.3x Source: TVS

7 Charter capital increased 2.5 times since listing in 2011 OVERVIEW IDI is one of Vietnam's largest companies in pangasius raising and trading, operating in Dong Thap. IDI processes fish powder, fish fat, refined oil and invests in industrial parks. Since its listing in 6/2011, IDI has increased chartercapital to 2.5 times, from VND380 billion to VND983 billion. Market cap of the company as of 12/2015 is VND757 billion. Currently Sao Mai JSC (HOSE-ASM) is the largest shareholder of IDI at 18.4%. A subsidiary of IDI (79% stake), Trisedco Tourism - Investment and Fisheries JSC (HOSE-DAT), has just been listed on 5/11/2015. As a result, all the companies owned by ASM have been listed on the stock exchanges. Capital raising progress of IDI (billion VND) Listed on HOSE in Feb-07 Aug-07 Jun-08 Aug-10 May-14 Jan-15 Jul-15

8 ANALYST CERTIFICATION We, Research Department of Thien Viet Securities Company (TVS), hereby certify that the views expressed in this research report accurately reflect our personal views about the subject securities or issuers. We will not compensate, directly or indirectly, for any specific recommendations or views expressed in this report. by Thien Viet Securities Company. All rights reserved. This publication may not be redistributed, retransmitted or disclosed as a whole or partially in any form or manner without the prior written consent of Thien Viet Securities Company (TVS). The information herein is obtained from various sources and TVS does not guarantee its accuracy. Neither the information nor any opinions expressed in this publication constitutes a buy or sell recommendation on any securities or investment. TVS therefore does not take any responsibilities for any investor s decisions. THIEN VIET SECURITIES COMPANY HO CHI MINH 63A Vo Van Tan St, District 3 Floor 9, Bitexco Nam Long Building Tel: +84 (8) Fax: +84 (8) HA NOI 22 Lang Ha, Dong Da TDL Building Tel: +84 (4) Fax: +84 (4) RESEARCH DEPARTMENT INVESTMENT BANKING BROKERAGE DEPARTMENT research@tvs.vn ib.hcm@tvs.vn brokerage.hcm@tvs.vn