Tasco Joint Stock Company

29-Apr-16 29-May-16 29-Jun-16 29-Jul-16 29-Aug-16 29-Sep-16 29-Oct-16 29-Nov-16 29-Dec-16 29-Jan-17 28-Feb-17 31-Mar-17 Tasco Joint Stock Company Real Estate Segment drags down 2017 growth Flash Notes I April 26 2017 We attended HUT s Conference Day with following highlights: In FY2016, top line grew robustly 31.2% yoy to VND 2,961bn and bottom line significantly expanded 152% yoy to VND 403bn thanks to a shift from construction to real estate which yields higher margin accompanied with impressive sale at Foresa Xuan Phuong. We expect FY2017 s performance to continue improving and achieve VND 3,140bn (+6% yoy) in revenue and VND 410bn (+1.6% yoy) in net income due to following reasons: (i) (ii) (iii) backlog from Foresa Villa Xuan Phuong (VND700bn) and Xuan Phuong Residence s successful sale progress of which VND1,140bn will be allocated; 3 more BOT projects go in to operation, Completion of 28/28 Electronic Toll Collection (ETC) stations. FY2017 basic EPS is VND 2,325 and HUT trades at FY2017 P/E 5.8x. Figure 1: Business Breakdown Peformance Business Segment 2017F 2016A %change Net Revenue 3,140 2,961 6.0%. Real Estate 2,010 2,147-6.4%. BOT / BT 632 447 40.9%. Healthcare & Others 500 367 36.2% Net Income 410 403 1.6%. Real Estate 281 286-1.9%. BOT / BT 95 86 10.5%. Healthcare & Others 34 31 9.7% Source: TVS Research, Company FS Build-Operate-Transfer (BOT) sector. We forecast revenue from BOT to increase 41% yoy to VND 632bn. Switching from BOT to BT can boost HUT s earnings because BOT projects often yield lower ROE and have long congestion time time. Furthermore, BT projects will help HUT to acquire new land bank of which will run out by 2019. Real estate sector. We forecast revenue from real estate to be VND 2,010bn (-6% yoy) and net income to be VND 281bn (-2% yoy). FY2017 s revenue will be strengthened by a backlog of VND 700bn from Foresa Villa Xuan Phuong. Xuan Phuong Residence and Foresa My Dinh sale progress will fiercely be challenged by VinCity Tay Mo which locates just 5km away. Healthcare and Technology sector. We expect VND 500bn (+36.2% yoy) in revenue and VND 34bn (+10% yoy) in net income from Health care & Technology sector. HUT would complete 18 more Electronic Toll Collection (ETC) and 490,000 e-tags in 4Q17. Potential competitors such as Viettel may pose competition threat. NOT-RATED Son Nguyen, Senior Analyst sonnt@tvs.vn Trading Data and Key Metrics Ticker HUT Sector Real estate Listed since 11-April-2008 Price as of 26-Apr-2017 (VND) 13,500 52-week range (VND) 14,900/8,500 Market cap (VNDbn) 2,380 Shares outstanding (mn) 176.3 Free Float (mn) 136.18 10-day average volume 1,606,232 2016 P/ BV (x) 0.8 2016 P / E (x) 4.1 Dividend yield (%) 8.09 Net Debt to Equity (x) 1.7 15% 10% 5% 0% -5% -10% -15% -20% -25% -30% -35% -40% Source: TVS Research, Thomson Reuters Data Price Performance Chart HUT HNXindex Source: TVS Research, Thomson Reuters Data Share Price Perf (%) 3M 12M YTD Absolute 11.7 41.5 17.7 Source: TVS Research, Thomson Reuters Data Company Description Tasco Joint Stock Company (HNX:HUT) is a Vietnam-based construction and real estate company. It constructs commercial and residential projects which locate in Northern Vietnam. The company is also involved in BOT/BT projects in which the company develops public infrastructure in exchange for congestion charge and land bank. Recently, the company enters into technology sector by investing Electronic Toll Collection stations and applying high-tech to healthcare service. Thien Viet Securities JSC (TVS) does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. Please see more important disclosures in the last pages.

2 2017 BUSINESS SEGMENT PREVIEW A successful switch from construction to real estate & infrastructure helped HUT to significantly improve performance. In FY2016, top line grew robustly 31.2% yoy to VND 2,961bn which was contributed by VND 2,000bn sale at Foresa Xuan Phuong. Bottom line significantly expanded 152% yoy to VND 403bn due to speedy sale progress. FY2016 EPS was VND 2,400. In 1Q17, the company reports VND 630bn (+10.5% yoy) in revenue and VND 130bn (+55% yoy) earnings which are equivalent 19% and 29% of FY2017 guidance. We expect FY2017 s performance to achieve VND 3,140bn (+6% YoY) in revenue and VND 410bn (+2% YoY) in net income due to following reasons: (i) backlog from Foresa Villa Xuan Phuong (VND 700bn) and Xuan Phuong Residence s successful sale progress of which VND 1,140bn will be allocated; (ii) 3 more BOT projects go in to operation, (iii) Completion of 28/28 Electronic Toll Collection (ETC) stations. FY2017 basic EPS is VND 2,325 and HUT is traded at FY2017 P/E 5.8x. BOT sector. Three new BOT projects which are BOT 10 Hai Phong, BOT 32 Phu Tho, BOT 39 Thai Binh go into operation this year. We forecast revenue from BOT to go up 43% yoy to VND 632bn as a result of increasing traffic and trading activities along with strong FDI in northern provinces. From FY2017, HUT will not enter into new BOT projects. We believe that investment in infrastructure sector presents huge potential as infrastructure is a pre-condition of and usually implemented in advance of economic growth. Despite pressing demand, Government expenditure is able to provide 65% of required investment capital while the remaining will have to rely on the private sector. Switching to BT projects may boost HUT s earnings because BOT often yields lower ROE. BOT project time also last from 12 to 17 years which slows down working capital turnover. Furthermore, BT projects will help HUT to acquire new land bank of which will run out by 2019. Risk. Banking lending is tightened and interest rate is in uptrend movement would affect HUT s ability to implement BT projects which require high leverage. In addition, BOT projects can be re-valued by State authority and period of toll collection is decreased. Previously, the period of toll collection at BOT 10 (La Uyen bridge - Tan De bridge) was reduced nearly half to 11.8 years. In 2Q17, this project will be examined again by the State Audit Office of Vietnam. Similarly, toll collection at BOT 32 (Tam Nong, Phu Tho) which was open in Mar/2017 had to cease charging fees due to fierce protests from local commuter regarding congestion charges and location of the toll station. These may affect scheduled cash-flows.

3 Real estate sector. We expect revenue from real estate is VND 2,010bn (-6% yoy) and net income is VND 280bn (-2% yoy). FY2017 s revenue will be strengthened by a backlog of VND 700bn from Foresa Villa Xuan Phuong. Xuan Phuong Residence also observed an impressive sale progress of which may exceed VND 1,140bn. Revenue of 126 townhouses from Xuan Phuong Residence will be allocated in 2Q17 while revenue of 642 apartments will be allocated in 4Q17. We forecast that South Building project would achieve a sale rate of 70% which brings about VND 170bn 4Q17. Success at Foresa Villa Xuan Phuong partly came from earlier-than-scheduled construction time which helped HUT to gain confidence from buyers as well as to catch the right time of soaring real estate. Smaller revenue in FY2017 reflects a lack of big source of revenue which HUT enjoyed from Foresa Villa Xuan Phuong project in FY2016 as well as tougher challenge in western Hanoi s real estate market. However, a stronger sale at South Building would be the earnings surprise in FY2017. Sale performance at Foresa My Dinh will be FY2018 s catalyst as the project forecast to bring about VND 3,400bn revenue, yet this will need to be revised in FY2018. Risk. HUT s real estate projects locate around Hanoi and spread at high/mid/affordable segments which may harm the company s revenue as the real estate market observe an (i) over-supply at high-segment. Xuan Phuong Residence and Foresa My Dinh sale progress will fiercely challenge by (ii) VinCity Tay Mo which will be ground-break in 2Q17 and locates just 5km away. In addition, HUT needs to expand land bank which will run out after 2019. Health care and Technology sector. We expect VND 500bn (+36.2% yoy) in revenue and VND 34bn (+10% yoy) in net income from Health care and Technology sector. HUT would complete 18 more Electronic Toll Collection (ETC) and 490,000 e-tags in 4Q 2017 (ETC). The company will also implement vertical and horizontal expansions by applying Technology to other sectors such as parking lot, e- bus ticket, congestion charge zone, sky-train as well as expanding more ETC stations. Being granted 6-7% of total revenue from 28 ETC, HUT would receive low risk and stable cash-flow. The company also co-operates with Hanoi s public hospitals by utilizing their human resource and facilities in exchange for capital and technology injection. The aims are to smooth hospitals operation and reduce congestion. The first two projects will be with Hanoi Institute of Ophthalmology and Hanoi Heart Hospital but first revenue is not expected until FY2018. Risk. Potential competitors such as Viettel are planning to join. Yet ETC exhibits high operating leverage and high entry barrier which may offer advantage for first comers like HUT.

4 Figure 2: Revenue and net income in FY2017 (VN billion) Business Segment Revenue FY2017 Net Income FY2017 Xuan Phuong Villa 700 Xuan Phuong Residence 1,140 South Building 170 280.5 BOT 630 95 Healthcare & ETC 500 34 Total 3,140 410 Source: TVS Research, HUT Dilution risk: (i) In Sep/2016, HUT converted 79,120 convertible bonds (HUT-CB2015) into 7,912,000 shares at price VND10,000/share. 50% of the remaining 265,600 convertible bonds may be converted in FY2017 increasing outstanding shares from 176.3 million to 189.6 million. (ii) In addition, HUT aims to issue maximum of 50 million shares at a price equivalent to 80%-85% of average of 20 previous closing prices but not lower than VND 10,000 per share. The proceeds will be used to invest in Foresa My Dinh and BT Le Duc Tho project. Total outstanding shares would then be added up to 239.6 million. Assume that share increase would be done by 2Q17 then diluted EPS will be VND 1,971 (-15%).

5 SUMMARY FINANCIALS Earning Model VND bn 2013A 2014A 2015A 2016A Balance Sheet (VNDbn) 2013A 2014A 2015A 2016A Net sales 1,775.65 2,762.40 2,245.50 2,786.12 Cash and equivalents 298.81 360.06 576.88 428.69 Cost of sales 1,692.73 2,339.24 1,921.99 1,998.94 Financial investment 38.93 76.36 45.25 134.30 Gross profit 82.92 423.16 323.51 787.19 Accounts receivable 594.66 1,363.41 973.91 1,251.42 Selling expenses 43.71 55.50 51.88 154.37 Inventory 119.39 59.54 56.38 41.51 General administration expenses 0.00 0.00 0.00 0.00 Prepaid expenses, other CA 299.21 107.61 322.77 254.12 Other operating income/(expenses) 0.89-0.22 13.41 Total current assets 1,351.00 1,966.98 1,975.19 2,110.04 EBITDA 65.36 415.53 369.07 793.19 Property and equipment Depreciation & Amortization - - - 4.54 At cost 792.23 811.11 2,662.26 2,660.89 EBIT 38.33 367.66 271.41 614.86 Less accumulated depreciation -81.43-125.83-221.75-398.07 Net interest income/(expenses) 0.00 0.00 0.00 0.00 Net property and equipment 3,360.13 4,107.42 4,479.15 6,408.64 Net investment income -0.24-0.54 - - Net intangibles 0.47 0.34 0.29 0.51 Others (recurring) -0.08-5.40 0.82 0.12 Total investments 52.14 132.10 321.82 325.41 Pretax Profit 15.28 334.09 196.79 489.69 Other long - term assets 6.69 6.50 309.90 475.26 Income tax 3.13 75.49 35.85 85.76 Total Assets 4,770.42 6,213.34 7,086.35 9,319.85 Tax rate (%) 20.45 22.60 18.22 17.51 Account Payables 276.00 229.71 192.46 545.77 Minorities 36.41 31.91 3.50 116.98 Short-term debt 0.00 0.00 0.00 0.00 Net Income 12.15 258.60 160.95 403.93 Other current liabilities 896.57 864.79 534.92 972.03 EPS (basic VND, reported) 211.67 2,710.41 1,260.19 2,783.54 Total Current Liabilities 1,172.57 1,094.50 727.38 1,517.80 Weighted shares outstanding (mn) 58.37 91.41 127.10 144.86 Long-term debt 1,817.55 2,166.33 3,579.61 4,278.23 Other long-term liabilities 1,042.90 1,656.64 1,060.44 1,107.61 Common dividends declared - - - - Total long-term liabilities 2,860.45 3,822.97 4,640.05 5,385.84 DPS (VND) 0.00 0.00 1,122.00 - Dividend Payout ratio (%) 0.00 0.00 0.89 - Stockholders' equity 737.40 1,295.87 1,718.91 2,416.21 Dividend cover (X) Infinity Infinity 1.12 - Common Equity 646.47 946.47 1,284.05 1,763.29 Treasury shares 0.00 0.00 0.00 0.00 Growth and Margin (%) Capital surplus 5.15 3.73 70.24 69.84 Sales Growth (%) -14.45% 55.57% -18.71% 24.08% Retained earnings 41.57 298.76 291.84 502.31 EBITDA Growth (%) 10.41% 535.73% -11.18% 114.92% Budget sources and other funds 44.20 46.90 72.78 80.77 EBIT Growth (%) -17.45% 859.30% -26.18% 126.54% Minority interest 36.41 31.91 3.50 116.98 Net Income Growth (%) -67.97% 2027.63% -37.76% 150.97% Total liabilities and equity 4,770.42 6,213.34 7,086.35 9,319.85 EPS Growth (%) -72.20% 1180.51% -53.51% 120.88% Capitalized leases - - - - Gross Margin (%) 4.67% 15.32% 14.41% 28.25% Capital employed 3,597.85 5,118.84 6,358.97 7,802.05 EBITDA Margin (%) 3.68% 15.04% 16.44% 28.47% EBIT Margin (%) 2.16% 13.31% 12.09% 22.07% Ratios (%) Net Income Margin (%) 0.70% 8.97% 7.13% 14.47% ROE (%) 1.91 25.35 10.63 19.50 ROA (%) 0.27 4.71 2.42 4.92 Cash flow Statements (VNDbn) 2013A 2014A 2015A 2016A ROIC (%) 0.36 5.98 2.81 5.75 Net Income NULL NULL NULL NULL Inventory days 38.61 14.00 11.04 8.96 Adjustments for: Receivable days 147.34 129.72 190.48 146.17 Depreciation and amortization - - - - Payable days 49.07 39.56 40.20 67.58 Change in inventories 118.39 59.86 3.15 14.88 Asset Turnover (x) 0.4x 0.5x 0.3x 0.3x Change in trade receivables 80.51 177.41-249.70-210.66 Net debt/equity (x) 2.9x 1.4x 1.8x 1.7x Change in trade payables -84.45 293.15 527.31 387.24 Interest cover - EBIT(x) 0.4x 0.1x 0.3x 0.2x Other operating cash flow 64.23 407.24 326.34 718.61 Cash flow from operations 120.57 893.72 424.40 648.50 Valuation (Multiples) Net Capital expenditure -319.96-1,229.92-1,428.23-1,858.92 EV / EBITDA (x) 40.3x 7.5x 12.3x 7.7x Acquisition - - - - P/E (x) 32.4x 4.6x 8.7x 4.1x Divestures - - - - Dividend Yield (%) 0.00 0.00 10.20 NULL Other investments, net 1.33 16.20 10.20 104.57 P/B (x) 0.7x 1.0x 0.8x 0.8x Cash flow from investing -426.65-1,333.65-1,718.86-2,090.88 Equity issued 3.96 200.18 270.00 513.07 Net borrowings 537.49 301.14 1,241.30 945.30 Dividends to shareholders -0.01-0.13-0.01-164.18 Cash flow from financing 541.44 501.19 1,511.29 1,294.18 Net cash flow 235.36 61.26 216.82-148.19 Opening cash 63 299 360 577 Notes: CA = current assets; CL = current liabilities Closing cash 299 360 577 429 Source: Thomson Reuters data, Thien Viet Securities model

6 ANALYST CERTIFICATION I, Nguyen Thanh Son, hereby certify that all of the views expressed in this report accurately reflect my personal views about the subject company or companies or its or their securities. I also certify that no part of my compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in this report. RATING and VIEWS Buy (B), Neutral (N), Sell (S) Analysts recommend stocks as Buys or Sell based on his own views. Being assigned a Buy or Sell is determined by as total stock s return (TSR) potential that represents the price differentials between the current share price and the price target expected during the time horizon plus expected dividend yield. Any stock not assigned as Buy or Sell is deemed Neutral. TVS Investment Research: Equity Rating Definitions 12-month rating Definition Buy Total Stock s Return Potential > 15% Neutral Total Stock s Return Potential between (-15%) and 15% Sell Total Stock s Return Potential < (-15%) Short-term rating Definition Buy Stock price expected to rise within three-month because of a specific catalyst or event Sell Stock price expected to fall within three-month because of a specific catalyst or event Not-rated The investment rating and target price, if any, suspended as there is not a sufficient fundamental basis for determining an investment rating or target. DISCLAIMER Copyright 2017 Thien Viet Securities JSC (TVS). ALL RIGHT RESERVED. This research report is prepared for the use of TVS clients and may not be redistributed, retransmitted or disclosed as a whole or partially in any form or manner without the prior written consent of 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. HO CHI MINH 63A Vo Van Tan St, District 3 Floor 9, Bitexco Nam Long Building Tel: +84 (8) 299 2099 Fax: +84 (8) 299 2088 RESEARCH DEPARTMENT Duy Nguyen (Mr.), Manager Equity Capital Market duynh@tvs.vn Bach Nguyen (Mr.), Analyst Oil & Gas bachnkv@tvs.vn INVESTMENT BANKING ib.hcm@tvs.vn THIEN VIET SECURITIES JOINT-STOCK COMPANY HA NOI 22 Lang Ha, Dong Da TDL Building Tel: +84 (4) 220 3228 Fax: +84 (4) 220 3227 Son Nguyen (Mr.), Senior Analyst Real Estate sonnt@tvs.vn Quang Luong (Mr.), Analyst Team Support quanglt@tvs.vn Trung Dong (Mr.), Associate Consumer Goods trungdq@tvs.vn BROKERAGE DEPARTMENT brokerage.hcm@tvs.vn brokerage.hn@tvs.vn