HSC Daily Market Watch with a corporate note on VHM (Outperform)

Market commentaryThe VN index decreased with turnover still below recent averages. Market breadth widened while we also see that 24 stocks went to the ceiling and 21 stocks fell to the floor. Foreigners were less active net sellers to a small degree. The put through market was more active with large deals in VJC & TPB and then a smaller deal in MSN seen going through.


Foreigners were active buyers of VNM; HPG and BID. And net sellers of VRE and VHM.


  • Bank shares were mixed to higher, led by MBB and ACB.



  • Non-banksshares were mixed with gains for BVH and SSI while there were losses for HCM and VCI.



  • Consumer and retail nameswere mixed to lower, led by MSN and KDC .



  • Tech stocks were mixed with a loss for YEG while FPT hold ground.



  • Manufacturing nameswere mixed with gains for NKG and PAC while there were losses for HPG and TCM.



  • Resource names were mostly up, except PXS lost ground.



  • Real estate and construction stockswere broadly higher, led by SJS and DXG.



Corporate news – VHM sees successful launch of VinCity projects to date. Earnings expected to surge. Rate Outperform. Vinhomes (Outperform) plans to launch its VinCity project in HCMC very soon with a busy December schedule planned. Recent launches in Hanoi have been very successful.


Quick conclusion. Outperform. We have a fair value price of VND 84,100 per share using a combination of both RNAV and P/E which values the company at a FY2019 forward P/E of 14.2 xs. HSC forecasts FY2018 NPATMI of VND 17.1 trillion, up 11 xs for a forward P/E of 15.4 times. For FY2019, we forecast NPATMI growth of 14.5% y/y. VinCity launches to date have gone very well with strong demand for the product which is aimed at the midmarket segment. Indeed, presales ratios for recent launches have ranged from 50-70% which is very high. The stock has recovered recently on the news after a correction earlier this year. However, with a decent forward outlook we think it still looks reasonably valued.


Major VinCity project in HCMC to be kicked off soon – Vinhomes (VHM) will kick off the VinCity Grand Park project (formerly known as VinCity New Saigon) and plans to launch the first phase of above 10,000 units in mid-December. This project is located on a 272-ha land area in district 9, HCMC and about 30 minutes from the CBD. The project will include 71 buildings for a total of 43,500 high-rise units, plus another 1,600 low-rise units. With facilities such as a 36-ha park with a 5,000 sqm integrated water play zone, an outdoor gym park with over 700 machines, as well as educational and healthcare facilities.


First phase of the first Vincity project in Hanoi deemed successful – VHM enjoyed a successful first launch of a VinCity project, VinCity Ocean Park (formerly known as VinCity Gia Lam), as 70% of the product (5,263 units) were sold in one week. A kick-off event for this project was held on September 30th, 2018, with a soft launch on October 17th, 2018. The company launched 7,549 apartments in the first phase and to date, about 6,500 units were pre-sold (equivalent to a ratio of 86.1%). They plan to launch the second phase in December, for a total of 16 buildings with approximately 9,900 apartments launched in Q4 2018. This project is located on 420 ha of land in Trau Quy Town, Gia Lam District, Hanoi which is about 14 km from the CBD. It includes 66 buildings with total of 44,000 high-rise units, plus another 2,400 low-rise units. Construction density at this project is just 19%, with 117 ha of greenery and water surface, a 6.1 ha salt water lagoon, a VinMec hospital and VinUni, etc.


In December, VHM also plans to kick off and launch 7 buildings in the VinCity Sportia (formerly known as Vincity Park) in Ha Noi, which is located on 281 ha of land in Nam Tu Liem District, 13 km from the CBD of Hanoi. The project includes 58 buildings with total of 45,000 high-rise units plus another 100 low-rise units. With Vietnam’s largest outdoor gym park boasting 1,200 machines, as well as other educational and healthcare facilities.


VinCity projects are targeted at the mid-tier market, with an average sales price of approximately US$ 1,200 per sqm of NSA, and smaller unit sizes (ranging from 45 m2 to 75 m2 NSA). Financial packages are also offered by banks for home buyers with tenor of up to 35 years and 70% of total consideration. Furthermore, home buyers can pay as little as 10% of total consideration instead of 30% as is usually the case when signing a SPA, with a further 10% paid in the subsequent 90 days and a further 10% after 180 days. VHM plans to develop these three Vincity projects with a total of 132,500 apartments and 4,100 low-rise units over 5 years from FY2018 – 2022. 


Unbilled contracted sales totaled VND 56.8 trillion by the end of Oct 2018 – In the first 10 months, in its residential business, VHM sold a total of 8,000 units with total contracted sales of VND 33.1 trillion, leading total outstanding unrecognized contracted sales amounting to VND 56.8 trillion by the end of October.


Vinhomes launched 10,159 units in total in 4 new projects including;


  • 7,549 apartments in VinCity Ocean Park (Hanoi).
  • 754 villas in Vinhomes Star City (Thanh Hoa).
  • 1,400 apartments in Vinhomes West Point (Hanoi).
  • 456 apartments in Vinhomes New Center (Ha Tinh).


Pre-sales of these projects look impressive with 50% of Vinhomes Star City, 53% of Vinhomes West Point and 70% of Vincity Ocean Park sold shortly after launch.


Targets the launch 11 new projects in FY2019 – Besides 3 Vincity projects and 1 Vinhomes project to be launched in Q4 this year, VHM expects to launch a further 11 new projects in FY2019, including some key projects such as Vinhomes Gallery, Vinhomes Galaxy, VinCity Dan Phuong in Ha Noi and Vinhomes Ky Hoa, Vinhomes Landmark Serviced Apartment in HCMC. 


Another VND 22.6 trillion of pre-sales expected to be recognized for the year – In Q4, the company will continue delivery of current completed projects such as Vinhomes Green Bay (high-rise units), Vinhomes Central Park (Landmark 81), Vinhomes Imperia, Vinhomes The Harmony and Vinhomes Golden River. Furthermore, the company will also record earnings from some newly completed projects such as Vinhomes Metropolis and Vinhomes Star City.


Strong growth in 9M FY2018 after some restructuring in February – In the first 9 months, VHM reported net sales of VND 22.4 trillion (+85.7% y/y) and NPATMI of VND 11.9 trillion (+394.7% y/y). This result fulfilled 91% and 69.4% of the company’s sales and NPAT target for the whole year. Most of the revenue came from key projects such as;


  • Vinhomes Green Bay (VND 6.6 trillion).
  • Vinhomes Central Park (VND 5.5 trillion).
  • Vinhomes Golden River (VND 4.3 trillion).


If we use proforma FS, net sales only increased 16% y/y while NPATMI increased 143% y/y thanks to significant increase in profit sharing from BCC projects.


Worsening product mix led to a drop in GPM to 31.2% – We saw a drop in gross profit margin from 38.3% to 31.2% in the first 9M, leading to a drop in gross profit to VND 7 trillion (-15% y/y) due to increase in deliveries of units with less favorable facings in Vinhomes Green Bay, Vinhomes Central Park, lower priced units in Golden River and the booking of low gross margin advisory projects (e.g. Vinhomes Thang Long). Although, we note an improvement in GPM in Q3 to 38.6% vs. 27.9% in the 1H. VHM expects margins to continue to recover in Q4 2018.


Significant increase in profit sharing from BCC projects – VHM recorded a profit of VND 7,016 billion (+924% y/y) from BCC projects including Vinhomes The Harmony, Vinhomes Imperia, Vinhomes Dragon Bay and Vinhomes Golden River after they handed over units to buyers.


One-off gain on selling investments climbed by 1,197% y/y – In the first 9 months, the company recognized a financial gain of VND 3,028 billion (+1,197% y/y) on selling investments in the Vinhomes Lotus (Hanoi) in Q3 and some other companies such as Vincom Retail, Vincom General Service Trading and VinAcademy in the 1H.


HSC forecasts FY2018 NPATMI of VND 17.3 trillion, giving forward P/E of 15.0 times – We forecast FY2018 net sales of VND 30.7 trillion (+100.7% y/y) and NPATMI of VND 17.3 trillion (+1,130% y/y), based on the following assumptions:


  • We estimate the company will record revenue from following projects:


  • Vinhomes Central Park – VND 8.7 trillion.
  • Vinhomes Golden River – VND 5.8 trillion.
  • Vinhomes Gardenia – VND 1.3 trillion.
  • Vinhomes Metropolis – VND 3.8 trillion.
  • Vinhomes Greenbay – VND 8.1 trillion.


  • Meanwhile, we expect the company will record profit sharing of VND 7,500 billion from BCC projects and VND 3,800 billion from one-off gain on selling their investments. As a result, net financial income will surge to VND 10.9 trillion vs. a net loss of (VND 688 billion) in FY2017.


  • For FY2018, we assume the company will pre-sell a total of 25,616 units (+146.2% y/y) with total contracted sales of VND 58 trillion (-19.0% y/y) as most of new launching are VinCity products which generate lower value than Vinhomes products.  


  • SG&A will total 2.5 trillion (+20.5% y/y) and account for 8.0% net sales.


We thus forecast FY2018 NPATMI of VND 17.3 trillion (+1,130% y/y), generating a FY2018 EPS of VND 5,176 and leading to a forward P/E of 15.0x, which is quite reasonable for the biggest listed real estate developer in Vietnam.


For FY2019, we forecast NPATMI growth of 14.5% y/y – We forecast FY2019 net sales of VND 63.6 trillion (+107.1% y/y) as the company will consolidate revenue of most projects, not through BCC contracts. Meanwhile, we expect NPATMI will grow 14.5% y/y to VND 19.8 trillion (+14.5% y/y), based on the following assumptions:


  • We estimate the company will record revenue from some key projects such as Vinhomes Skylake, Vinhomes Greenbay, Vinhomes Metropolis, Vinhomes Cau Rao 2 and low rise of Vincity Ocean Park and Vincity Sportia.


  • Then, we estimate net financial income will drop to VND 1,247 billion (-88.6% y/y) due to (1) lower profit sharing from BCC projects and (2) assuming no one-off gain from selling their investments. We estimate profit sharing from BCC projects of VND 3,034 billion, mostly from Vinhomes Imperia and Vinhomes Star City. 


  • We also assume pre-sales will increase significantly to 47,266 units (+84.5% y/y) with total contracted sales of VND 140.9 trillion (+143% y/y) given aggressive new launching plan next year.   


  • Then we estimate SG&A expenses of VND 4.6 trillion (+87.2% y/y) on higher sales.


As a result, we forecast FY2019 NPATMI of VND 19.8 trillion (+14.5% y/y), generating a FY2018 EPS of VND 5,924 and leading to a forward P/E of 11.8x.


Investment conclusion. Rate Outperform. We have a fair value price of VND 84,100 per share using the combination valuation methodology of both RNAV and P/E which values the company at FY2019 forward P/E of 14.2 xs. Hence at the current price, this stock is trading at a discount of 8% to our fair value. Vinhomes is by far the biggest residential real estate developer in Vietnam with 15% market share across all residential segments and a 48% market share in the high-end and premium segments in Hanoi and HCMC by the end of FY2017. The company has a total land bank of 164 million sqm including 29 projects under the Vinhomes brand and 7 projects under the VinCity brand with a strong presence in both main cities and also several other locations. With an unbilled contractual sales amounting to VND 56.8 trillion by the end of Q3 and the successful launching of the first Vincity project, we believe that the company still enjoys strong earnings growth this year and next year. And obviously, a shift into affordable housing through VinCity projects could also be a major catalyst over the next few years.


  • Agriproducts and aquaculture stockswere mostly higher, except losses for SBT and VHC.



  • Pharmaceutical stocks mostly had a sideways movement.



  • Utilities, transport and logistics stocks were mixed to higher, led by ACV and VSH.


Vietnamese stocks close mixed today – The markets today ended with either small losses or small gains depending on the indices being looked at. VNM was the biggest gainer in terms of index points as it continues to climb on recent good news. Banks such as VCB; MBB; CTG and BID all rose as decelerating November CPI raised market hopes of a possibly slightly easier stance on credit growth this year. Other financial issues such as BVH and SSI also climbed.


On the other hand, VHM slipped after recent gains as related issues such as VIC & VRE and other real estate developers such as NVL and contractors such as CTD. Banks such as HDB and TPB both fell. Consumer names such as MSN & BHN and retail names such as MWG lost out.  Aquaculture leader VHC continued to lose ground.


The four futures contracts were quite volatile today with a broad range from -26 to + 2.3 index points due to a sharp drop in the March 2019 contract. Two contracts edged higher while two contracts dropped back. All four contracts are trading at a discount to the VN30 cash index ranging from 7.3 to 34.8 index points. Leaving aside the anomaly of the March 2019 contract, the discount to cash of the other three contracts suggest continued caution on the part of investors.  


The VN index has continued to trade in a fairly narrow 8-9-point range below resistance at the 930 level with volumes still on the low side. Today’s movement was closely in line with regional markets as indeed have the moves over the last few days. Even so, the mood towards the end of the session lifted a little with support at the lower end of the range pushing the market back up towards yesterday’s close or just above it (depending on the indices).


Obviously, investors currently await the outcome of the G20 gathering; with other key events such as the OPEC meeting (December 6-7th); UK parliament Brexit vote (December 11th) and Fed FOMC meeting (December 18-19th) all coming up in the next 3 weeks. Of these the G20 and the FOMC are the most important for Vietnamese equities. Frankly even a mildly positive result at the G20 would be more than enough to extend the current trading rally and bring us back up towards the 200; 100 and 50-day MA lines before the end of the year. However, given the unpredictability of the current external environment this is a hard call.


Asian shares & major currencies – Asian shares mostly rose today even after Wall Street slipped on Thursday. As for currencies, the US$ (96.847) gained some ground today when measured against its trade weighted ICE index. Then the Euro (1.1386) traded narrowly; Pound Sterling (1.2807) edged higher; the Japanese Yen (113.43) was little changed while the Chinese Yuan traded narrowly at (6.9432).


Oil prices slip – Crude oil traded a little lower after recent gains today with the active month WTI futures crude oil contract trading at US$ 71.77 in late Asian trade. Some uncertainty creeping in after recent moderate gains. Big weekend ahead.


The Russians appear to be leaning towards joining any OPEC internal consensus on production cuts when they hold their next meeting on December 6th and 7th in Vienna. Given the sharp decline in crude oil prices this month, this comes as little surprise although the Russians have previously sounded cautious on the idea. In the end, the close cooperation between the Russians and the Saudis on managing production has paid handsome dividends in the past few years for both and clearly the Russians have decided that the relationship is worth continuing. However, while the Saudis want a production cut of around 1.4 million barrels a day, the Russians and others would likely prefer a smaller number. Some feel that a consensus might be formed at the 1 million barrels a day level.


The pressure on prices continued with the EIA reporting that crude oil inventories in the U.S rose by 3.6 million barrels in the week to November 23rd to 450.49 million barrels, while U.S production remained at a record 11.7 million barrels per day (bpd). However, refinery utilisation is on the increase again after the annual maintenance season draws to a close so perhaps the steady rise in inventories will at least slow from next week.


In global macro and general news – Global markets are somewhat becalmed today as we all await the results of tomorrow’s dinner between President Trump and President Xi. Both sides have indicated in recent days that they would like to make progress in the ongoing trade dispute and indeed there has been a  lot of midlevel contact in recent weeks.


Few expect a comprehensive deal from the dinner. There are then only two likely outcomes; (1) no agreement at all which would mean the trade dispute would escalate early next year as already planned tariff increases are implemented or (2) an agreement to talk further which would lead to a freezing of further tariffs as both sides try to frame a long term agreement covering the main points of disagreement. Many observors are cautious and doubt that a substantive agreement will be reached at this stage.


Ultimately it will all depend on whether any Chinese concessions are viewed by the U.S. side as meeting whatever minimum threshold they have set themselves to kick start meaningful talks. It seems that increased imports of agricultural & energy products; greater IP protection; some tariff cuts and an opening of the financial services sector have been offered.


And, then from the Chinese side, they would also expect that the current U.S. tariff regime would be frozen with additional proposed tariffs not implemented in order to create a stable environment for future in-depth negotiations. The ongoing dispute comes with clear and growing economic costs for both sides, especially if it continues into 2019.


China’s official Purchasing Managers’ Index (PMI), was released today and decelerated to 50 in November, from the reading of 50.2 in October. This was below consensus and the number suggests that growth in the manufacturing sector may be stalling. The production sub-index fell to 51.9 in November from 52 in October, while the new orders sub-index slowed to 50.4 from 50.8 previously. New export orders sub-index edged up to 47 from 46.9 in October which means that it has been in negative territory for six months already. Then import orders decelerated further to 47.1 from 47.6 in October.


The National Bureau of Statistics also reported that China’s official nonmanufacturing purchasing managers index dropped to 53.4 from October’s 53.9. The lowest level in 15 months. Not much relief here and this will put pressure on the authorities to (1) take additional simulative measures and (2) try and prevent the trade dispute from getting any worse.


Equity markets will hope fervently for a breakthrough on trade this weekend with the mood already brightening after the Fed Chairman appeared to signal a shift in policy from a pre-set policy of increasing rates towards a more flexible data dependent policy from next year. In other words, following one last increase in December, the FOMC will predicate future interest rates increases on what the data tells them rather than follow a predetermined policy of raising rates further. This comes as the Fed appeared to note that (1) rates were moving close the a theoretical neutral level; (2) while inflation is not accelerating and U.S. GDP growth is likely to gradually drop towards long term sustainable levels next year.










HCMC – The VN index fell today as turnover expanded to VND 3,938.55 billion or US$ 169.25 million. The index lost 0.03% and closed at 926.54. 146 stocks up while 126 stocks down. And 11 stocks went to the ceiling while 7 stocks dropped to the floor. Foreigners accounted for 16.12% of the buying value and 16.45% of the selling value.


Foreign buying rose in actual terms but fell in percentage terms. While foreign selling also rose further in actual terms and also in percentage terms. Foreigners turned net sellers to the tune of VND 12.90 billion worth of shares in HCMC. And we saw thirty six transactions in the put through market today.


Foreigners were active buyers of VNM; HPG; BID; VHM and VRE. They also actively sold HPG; VNM; VIC; VRE and VHM. The put through market was more active today with two enormous; three super jumbo; four jumbo; five large and some medium sized & smaller deals accounting for 27.28% of total turnover.


We saw 3,000,000 shares of VJC; 7,000,000 shares of TPB; 1,024,460 shares of MSN; 595,970 shares of VNM and 4,631,590 shares of FTM going through. Foreigners were more active in the put through session in the VNM & VRE deals and then twelve other smaller deals today in the market.


E1VFVN30 was down 0.41% today closing at VND 14,720.


Hanoi – The Hanoi market went up today while turnover came to VND 471.75 billion or US$ 20.27 million. The HN index was up 0.63% to close at 104.82. 80 stocks up while 78 stocks down. And 13 stocks went to the ceiling while 14 stocks dropped to the floor. Foreigners accounted for 2.22% of the buying value and 1.23% of the selling value.


Foreigners were net buyers to the tune of VND 4.65 billion worth of shares. And we saw sixteen medium and small sized deals today during more active put through session in Hanoi accounting for 13.21% of total turnover.


We saw 733,500 shares of VNF; 1,614,007 shares of SHB and 550,000 shares of TNG along with some smaller transactions in the put through market today.



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