Company update – CTD (downgrade from Outperform to Hold)

Coteccons Construction Joint Stock Company​ – ​Downgrade from Outperform to Hold​ (CTD : HSX​ – ​Construction & Materials)
·         Coteccons (CTD; HOLD) has released FY2018 results with net sales of VND 28,561 billion (+5.2% y/y) and NPATMI of VND 1,510 billion (-8.6% y/y) fulfilling 102.0% and 100.7% of their full-year sales and NPATMI targets respectively.
·         Significant growth in the value of newly signed contracts with estimated backlog at the end of the year value at around VND 28,000 billion.
·         Significant drop in GPM from 7.4% last year to 6.4% due to a worsening of the product mix, higher material price commercial assets investment s and increasing competition.
·         Vincity is one of the key projects in the backlog and will drive revenue next year.
·         Plans for M&A with various related companies will likely be discussed in the next AGM, which is going to be held around April.
·         Forward outlook calls for moderate growth given the maturity in the building the cycle. However, there are two very powerful potential catalysts which is the M&A with related companies and the shift towards commercial assets investment.
·         For FY2019, we revise up our forecast for revenue from VND 30,950 billion (+8.4% y/y) to VND 32,196 billion (+12.7% y/y), given the large backlog of contracts at the end of 2018, but revise down our forecast for NPATMI from VND 1,685 billion (+11.6% y/y) to VND 1,586 (+5.0% y/y) due to a lower gross margin estimate.
·         We revise down our fair value from VND 164,000 per share to VND 154,000, which represents a forward P/E of 7.7x.
·         Downgrade from OUTPERFORM to HOLD.
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