2014 Market Outlook and Strategy Run Now Charge Later January 2014 SSIResearch

Institutional Research & Investment Advisory
Date: 31.01.2014
EXECUTIVE SUMMARY
2014 Macro Outlook: A year of loosely infrastructure spending
In 2014, the government will continue to advocate its double-goal strategy: supporting growth while
maintaining macroeconomic stability We believe the government will be more inclined to promote pro-growth
measures in 2014 as local businesses cannot bear the brunt of another prolong reform. The end of the 5-year plan
(2011-2015) is in hands reach and the government needs to salvage and implement some of the previous
announced reforms. Below are key highlights that will capture the governments attention during the year:
1. The apparent need for infrastructure improvement: With Vietnams poor infrastructure score
against ASEAN peers, it is conspicuously rational for the government to direct its focus onto upgrading Vietnams
infrastructure system. Two important sectors include transportation and energy, with capital expenditure to increase
33.3% and 11.7% in 2014. It is estimated that Vietnam needs approximately USD 167 bn similar to Vietnams
current GDP - in the next ten years for infrastructure investments (source: ADB), and this leaves Vietnam with a
dilemma; to stay competitively fit against its ASEAN peers, it needs to enhance and improve its infrastructure, but
with investment needs exceeding available funding, Vietnam will need to accurately identify and execute the most
viable projects. However, it should be noted that infrastructure investment is a long term strategy, and its multiplier
effect could potentially translate into significant growth in the coming years, but not immediately in 2014.
Although the need for improving infrastructure is apparent, there are a number of issues in the implementation of
infrastructure projects in Vietnam: (1) Land-swap mechanism in infrastructure projects; (2 Is PPP (Public
Private Partnership) the solution? (3) Concern on efficiency of infrastructure investment projects
2. Accelerating SOEs restructuring: SOEs restructuring were plagued with delays in 2013, and we expect
that a number of 2013 IPOs would be carried over to 2014, including Viglacera (glass & ceramics), Vinatex (textile
and garment) and Vietnam Airlines. A number of new IPOs were announced including ACV (Airport Corporation of
Vietnam, owner of all the major airports in Vietnam, including Tan Son Nhat, NoiBai and primary investor of the Long
Thanh Airport mega-project), and a number of the Ministry of Transports CIENCO (Civil Engineering Construction
Corp, No 1-4-5-6, which are all major contractors for most of the public infrastructure projects). The new regulation
that stipulates the listing of stocks within one year after an IPO would entice investors participation. Other
developments in 2014 would include SCIC (State Capital Investment Corp) and SOEs non-core business
divestment, where the MoF might issue a decision that permits SCIC and SOEs to sell states assets below book
value.
3. Funding source: Foreign investors remain an extremely imperative part of the equation
Large-scale infrastructure projects, banking sector reform and more aggressive IPOs raise the question of funding
sources. Public investment will remain identical in 2014 (from state budget development investment, plus
government disbursement was nearly USD 13 bn, similar to 2013s level). The government expects for higher credit
growth in 2014 (target 12-14%, but our estimate is higher at 15% - because of a soft-landing for the banking sector
which will be discussed below), and seemingly factors behind higher credit growth are not only consumer credit (as
in 2013) or SOEs, but also private investment. Foreign investors remain an extremely imperative part of the equation,
not just FDI (2013 high commitments might result in better disbursements in 2014), or FII (with foreign ownership
limit extending for both bank and non-bank institutions), but ODA would become an integral source of financing. It is
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Date: 31.01.2014
reported that undisbursed ODA reached USD 15 bn so far, and the government has set aside roughly USD 1 bn as
counter-capital for 2014 with detailed distribution sent to all provinces, so it signals more disbursement of ODA for
2014.
Risk to our forecast: (1) Political risks will be limited, if not rare, and nowhere in the proximity to Thailand. (2) In
regards to public finance, the risk of high public debt is very conspicuous and legitimate, given the nature of high
budget deficit, increasing demand for infrastructure investment (however, ill-managed), all of which could easily
translate to higher inflation. Public debt is rapidly increasing (debt payment accounted for roughly 24% of the state
budget in 2013, and several experts forecast that it would rise to 30% in the next 3 years, which would be quite
alarming), and the reason behind the rapid increase was to satisfy the immense demand for infrastructure projects.
2014 MARKET OUTLOOK: Six investment themes for 2014

1. The economy has bottomed out with macro stability being ensured, all the elements
are in place for upsides ahead
Although the recovery will be gradual with continuous support from the FDI sector, the two important reforms (i.e.
banking reform and SOEs reform) have finally exhibited initial momentum. Our assumption is that both reforms will
accelerate in 2014. It is befitting to assume that 2013, the year of the snake, exhibited crawling banking and SOEs
reforms and restructuring. We expect that 2014, the year of the horse, banking and SOEs reforms and restructuring
will run rampant.
In both reforms, recapitalization is the key. However, it is not easy to attract external funding at this moment in time
as investors will carefully consider before investing in banks or SOEs, and among the factors of consideration there
are operation efficiency and risks. This, in turn, will accelerate the two reforms.
2. Given the gradual economic recovery and on-going reforms which triggered positive
catalysts for the market, market valuation re-rating is envisioned for 2014.
We believe the VN Index could increase 17-20% as compared with 2013-end (which closed at 504.6). This then
renders to the notion that the VN Index might reach 590-600 by the end of this year. If we add a 5% dividend yield,
the average total return from Vietnam equity market will be 23% in 2014.Our forecast is based on 2014 EPS growth
at 7%. We expect market PER will be rerated from the level of 10.7x in the beginning of the year to 12x 13x by
end of this year, powered by gradual economic improvement and the on-going reforms which will trigger positive
catalysts such as FOL extension, new IPOs or banks M&A etc
3. Time to revisit the banking sector?

We believe the time is prime to revisit the sector in 2014, although not immediately, but possibly by end of 1Q14 when banks release their 2013 results and have a more definite picture on 2014. After nearly 2 years of being headover-heels with challenges, management at most of the banks have now taken on a very conservative approach and
most have decreased operating expense by reducing staff, salary cut and organization restructuring to improve
operation efficiency. Developments in retail banking and consumer finance are the choices for many banks to
compensate for NIM reduction.
In 2013, given serious challenges facing the banking sector, investors shied away from bank stocks and this
corresponded with our consistent view of 'Sector Underweight' so far.
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Date: 31.01.2014
4. Top line growth will be stronger in 2014, margin expansion will trail that of 2013
2013s average sales/net profit growth of 62 companies under SSIResearch coverage are 9% and 19.3%,
respectively
2014s average sales/net profit growth of 62 companies are 16% and 8.2%, respectively
In 2013, margin expansion was supported by significant lower interest rate, lower input cost and operating
expense cut while top line growth was quite weak, corresponding with the overall weak economy. In 2014, our
forecast on revenue growth is better than 2013 while margin will stabilize with support from lower CIT (from 25%
in 2013 to 22% in 2014), no more salary cut and slightly lower interest rate in 2014.
2014 median EPS growth of 9% (2013: -5%)
2014 dividend yield of 5% (2013: 5%)
5. Industrial & Infrastructure-related sectors are our favorite for this year.
With mega infrastructure projects in the pipeline, we are bullish on industrial and infrastructure-related sectors such
as construction, construction materials, industrial zones and ports.
6. Turnaround stocks are sexy.

As the economy has bottomed out, different sectors will exhibit different turn-around phases. We believe that the
Consumer sector has already bottomed out in 1H13 while Banking -Property and a number of commodity sectors
have not yet reached their bottom. For turnaround companies, we would like to note that their valuations are still at
very high as they just transitioned from 'loss' to 'profit-making' status and their balance sheets remain under pressure
to a certain degree.
investors in 2014.
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Those stocks, mostly mid and small cap, will attract investors' attention, especially retail
Date: 31.01.2014
TABLE OF CONTENTS
EXECUTIVE SUMMARY ......................................................................................................................................................................... 1
MACRO .......................................................................................................................................................................... 5
2013 Macro Review: FDI-led growth ............................................................................................................................................... 6
2014 Macro Outlook: A year of loosely infrastructure spending ............................................................................................... 9
MACRO ECONOMIC FORECAST...................................................................................................................................................17
2014 MARKET OUTLOOK .......................................................................................................................................... 18
MARKET REVIEW: Vietnam Stock market saw a decent performance in 2013....................................................................19
MARKET OUTLOOK: Six investment themes for 2014..............................................................................................................20
SECTOR WEIGHTING SUMMARY .................................................................................................................................................26
NATURAL RUBBER (Basic Materials)
STEEL (Basic Materials)
..........................................................................................................................27
..................................................................................................................................... 30
FERTILIZER (Basic Materials)
........................................................................................................................... 33
SUGAR (Consumer Goods)
............................................................................................................................... 35
DAIRY (Consumer Goods)
................................................................................................................................ 38
CONFECTIONERY (Consumer Goods)

FISHERIES (Consumer Goods)
FEED (Consumer Goods)
............................................................................................................. 42
......................................................................................................................... 44
................................................................................................................................... 48
OTHER F&B (Consumer Goods)
....................................................................................................................... 51
TIRES (Consumer Discretionary)
...................................................................................................................... 54
Textile & Garment (Consumer Discretionary)

BANKING (Financials)
........................................................................................................................................ 60
INSURANCE (Financials)
.................................................................................................................................. 68
HEALTH CARE (Pharmaceuticals)

PLASTIC PIPE (Industrials)
.................................................................................................................... 75
................................................................................................................................ 79
PORTS AND SHIPPING (Industrials)

ENERGY (Oil & Gas)
................................................................................................................. 82
........................................................................................................................................... 85
TECHNOLOGY & TELECOMUNICATION (IT)

UTILITIES (Electricity)
.................................................................................................. 57
................................................................................................... 88
.......................................................................................................................................... 91
PROPERTY (Commercial Developer)
............................................................................................................... 93
INDUSTRIAL PARK DEVELOPER (Real Estate)
............................................................................................ 101
INFRASTRUCTURE & CONSTRUCTION (Industrials)
................................................................................... 105
RATING .................................................................................................................................................................................................108
DISCLAIMER ........................................................................................................................................................................................108
CONTACT .............................................................................................................................................................................................109
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Date: 31.01.2014
MACRO
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2013 Macro Review: FDI-led growth

It was clear from the beginning of 2013 that FDI
Services posted the highest growth rate of 6.56% YoY,
would serve as Vietnams macroeconomic hope, and

throughout the year, it proved to be the engine
and contributed 2.85 percentage points to the overall

growth. Industry and Construction came in second place
behind Vietnams economic growth given its

substantial contributions to total social investments,
with an increase of 2.09% YoY; meanwhile, Agriculture,

Forestry & Fishery almost flattened at 2.67% following
manufacturing, and exports amid a deprecate private
unfavorable weather conditions. On the expenditure
sector. In particular, 2013 GDP growth finished at

5.42% YoY, improving slightly compared to the previous
side, final consumption edged up 5.36% YoY, and gross

capital formation posted an uptick of 5.45%. The story of
years level of 5.25%. Among GDPs constituents,
FDI-led growth is staunchly reflected in the below data.
2013 growth
Total investment
Construction
Employment in manufacturing sector
Export
Import
FDI sector
9.9%
34.3%
6.6%
26.8%
24.2%
State sector
8.4%
-1.4%
-0.3%
3.5%
5.6%
Private sector
6.6%
6.2%
3.2%
Source: GSO
Vietnams GDP growth (by sectors, yearly, year-on-year) 2010 2013
GDP growth (%- 2010p)

Agriculture (%)
Industry & Construction (%)
Construction (%)
Manufacturing (%)
Service (%)
12
10
8
6
4
2
0
2010
2011
2012
2013
-2
Source: GSO
Although we have seen modest growth, we believe it is
too premature to substantiate that economic growth will
regress back to its standard trend. In fact, economic
convalesced, and registered a modest growth of 5.9%;

moreover, the inventory/production ratio remained high
indicators are still alluding to challenges ahead

which will require further governments attention
this number.
and responses despite modest improvement. For
Despite
instance, retail sales growth was designated at a 4-year
Vietnams trade posted a persuasive performance

with a growth rate of 15.7% YoY compared to 2012s
low of 12.6% YoY in nominal terms or 5.6% in real

terms. The Index of Industrial Production (IPI)
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at around 71.1% in spite of continuous efforts to lessen
stagnant
global
economic
activities,
level of 18.2%. However, the majority chunk of export

turnover was contributed by the FDI sector, which
Date: 31.01.2014
accounted for 61.4% of total export value and increased

22.4% YoY. The composition of the export basket
noting that this figure has not taken into account gold
imports. Indeed, positive trade balance, and sustainable
continued to gravitate towards high value added

products with computer, hand phone, and electronic
FDI inflows helped the central bank strengthened its

foreign reserve, which was estimated at USD 32 billion
exports amounting up to 24.35% of total exports. On the
or 12.7 weeks of imports. Consequently, the Vietnamese
other hand, imports experienced slightly higher growth of

16.1% YoY. As such, the overall trade balance was
Dong recorded the best performance against other

foreign currencies.
modestly positive at USD 10 million. But it is worth

Monthly trade balance
15,000
VND/USD exchange rate

2,000
Trade Balance (RHS)

Exports (LHS)
Imports (LHS)
13,000
22,500
Official VND/USD Rate
1,500
1,000
Unofficial VND/USD Rate
22,000
500
11,000
9,000
21,500
(500)
(1,000)
7,000
21,000
(1,500)
Jan-14
Dec-13
Nov-13
Oct-13
Sep-13
Aug-13
Jul-13
Jun-13
Apr-13
May-13
Jan-13
Feb-13
20,500
Mar-13
(2,000)
Jan-12
Mar-12
May-12
Jul-12
Sep-12
Nov-12
Jan-13
Mar-13
May-13
Jul-13
Sep-13
Nov-13
5,000
Source: GSO, & SSI
Source: SBV, Bloomberg, & SSI
Economic stability became the Governments pride

as headline inflation recorded a 10-year low of 6.04%
YoY. Additionally, decelerating commodity prices also

supported lower nationwide inflation. As such, the rally in
YoY and averaged 6.6%. Specifically, soft domestic

demand continued to materialize since foods and
foodstuffs price growth remained at a low level of 5.08%
Vietnams inflation
35%
30%
25%
adjustments
health
care
(+18.97% YoY) and education fees (+11.71% YoY).
250%
3%
200%
20%
150%
10%
100%
0%
-2%
Inventory/production Ratio (LHS)

Retail Sales Real Growth (YoY)
Industrial Production Index (YoY) (RHS)
40%
30%
50%
-10%
0%
-20%
Jul-13
0%
Jan-13
-1%
Jul-12
5%
Jan-12
0%
Jul-11
10%
Jan-11
1%
Source: GSO
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in
4%
15%
Jul-10
upward
300%
2%
Jan-10
government
5%
20%
Jul-09
consumer price was solely predicated on public goods

and service price growth following a series of
Inventory, manufacturing, and retail sales
Consumer price index: YoY (LHS)

Consumer price index: MoM (RHS)
CPI MoM (seasonal adjusted) (RHS)
Jan-09
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Date: 31.01.2014
Given tamed inflation, the central bank further

curtailed policy rate, and propelled lending at banks
to support domestic economic activities, however,
the
impacts
were
constrained
by
high
Non
Performing Loans (NPLs). Banking data released by

the State Bank of Vietnam (SBV) indicated that total
credit lines accelerated in December, and surpassed the
SBVs target of 12% YoY to finish at 12.51%. However,
actual credit growth and rescheduled one. In fact, fears

of rising bad debts galvanized banks to cascade their
money into the bond market, helping the Government to
finance its widened budget deficit at a low cost. As such,
even though the Vietnam Asset Management Company
(VAMC) asserted that they purchased VND 32.4 trillion
or USD 1.5 billion worth of bad debts in 2013, it will likely
take time to resolve these amounts, clean up banks
its relatively challenging to identify the proportions of
distressed assets, and enhance lending at banks.
Credit and deposit growth (% YoY)
Budget deficit & issuance of G-bonds
30%
Credit growth
25%
Deposit growth
20%
Trillion Dong
200
T-bills (LHS)
180
G-bonds (LHS)
160
Budget deficit (% of GDP) (RHS)
8%
7%
140
15%
6%
Sep-13
Nov-13
Jul-13
May-13
40
Mar-13
-5%
Jan-13
60
Nov-12
3%
0%
Sep-12
4%
80
Jul-12
100
5%
May-12
5%
Jan-12
120
10%
Mar-12
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2%
1%
20
-
0%
2009
2010
2011
Source: SBV & SSI
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2012
2013
Source: HNX, MOF, & SSI
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2014 Macro Outlook: A year of loosely infrastructure spending

When it is all said and done, what will be definitive of 2014? And to answer this question, we must first acquaint
ourselves with the past. Five years ago in 2009, the government initiated the so-called lending rate subsidy
stimulus package which ushered in a period of easy accessible credit that ultimately failed to support sustainable
GDP growth. Core problems such as inflation, the depreciation of the Dong, bad debt, ect., began to emerge in 2010,
and by 2011, the government found themselves fully submerge in the crisis. 2012 and well into 2013, was a period of
assessments of the damages done and methods of amending those damages. Solutions such as comprehensive
banking restructuring and equitizing state owned enterprises (SOEs) were gradually proposed, ratified, signed into
law and implemented in 2013. This brings us to date, with the 2015 deadline of completing comprehensive
restructuring, before the Party Congress in 2016, we think that 2014 would serve as an important stepping stone to
accelerate the long-awaited reform or in short, a year of less talking but more walking.
In 2014, the government will continue to advocate its double-goal strategy: supporting growth while
maintaining macroeconomic stability (GDP growth at 5.8%, CPI around 7%, VND depreciation at 2% at most,
budget deficit at 5.3% of GDP, credit growth at 12-14%, maintain deposit rate stability and lower lending rate for
priority sectors). Our own estimate for key macroeconomic indicators are provided in page 14, where we expect
GDP growth at a lower rate of 5.6% (due to limited immediate ramifications from infrastructure investment and the
FDI sector), higher CPI (7.5%, due to the fact that results from public investments could not improve overnight,
couple with the continuous increases of subsidized utilities prices such as healthcare, electricity and higher VND
depreciation).
In pertaining to exchange rate, although forex reserve is adept to increase in parallel with import growth (12 weeks of
import) and foreign remittance remains resilient, we expect trade deficit might return due to a series of mega
infrastructure projects which is scheduled to commence in 2014 (therefore increasing demand for construction
materials and machineries). However, the current account balance or overall balance of payment is all positive,
therefore permitting the SBV to actively manage the VND/USD exchange rate.
We believe the government will be more inclined to promote pro-growth measures in 2014 as local businesses
cannot bear the brunt of another prolong reform. The end of the 5-year plan (2011-2015) is in hands reach and the
government needs to salvage and implement some of the previous announced reforms. Below are key highlights that
will capture the governments attention during the year:
4. The apparent need for infrastructure improvement

With Vietnams poor infrastructure score against ASEAN
approximately USD 167 bn similar to Vietnams current
peers (source: WEF 2013-2014 report), it is

conspicuously rational for the government to direct its
GDPin the next ten years for infrastructure

investments (source: ADB), and this leaves Vietnam with
focus onto upgrading Vietnams infrastructure system.

Two important sectors include transportation and
a dilemma; to stay competitively fit against its ASEAN

peers, it needs to enhance and improve its
energy, with capital expenditure to increase 33.3% and

11.7% in 2014. Key projects in the pipeline include:
infrastructure, but with investment needs exceeding

available funding, Vietnam will need to accurately
national road 1A & 14, a number of expressways,
identify and execute the most viable projects. However,
bridges, airports, deep-water ports (transportation), two

refineries and pipelines, a number of thermal power
it should be noted that infrastructure investment is a long

term strategy, and its multiplier effect could potentially
plants and the second 500kV grid (energy see pages

8-9 for details). It is estimated that Vietnam needs
translate into significant growth in the coming years, but

not immediately in 2014.
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Date: 31.01.2014
Infrastructure Score
148 countries, The Global Competitiveness Report 2013-2014 (WEF)
Singapore
Malaysia
Thailand
Brunei
Indonesia
Vietnam
Laos
Philippines
Cambodia
Myanmar
Infrastructure score
29
47
58
61
82
84
96
101
141
Quality of overall infrastructure
25
61
39
82
110
65
98
86
146
Quality of road
23
42
35
78
102
65
87
80
138
10
18
72
n/a
44
56
n/a
89
91
104
Quality of port infrastructure
24
56
49
89
98
137
116
81
136
Quality of air transport infrastructure
20
34
55
68
92
76
113
90
146
16
23
14
100
15
32
121
26
88
94
37
58
59
89
95
61
93
112
118
Mobile telephone subscriptions
18
27
49
64
62
21
90
81
38
148
Fixed telephone lines
29
79
96
72
82
88
122
109
110
127
Quality of railroad infrastructure
Available airline seat kilometers

Quality of electricity supply
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Date: 31.01.2014
List of notable infrastructure projects to be implemented in 2014
Project name
Transportation
Road & bridge
National Road
1A Expansion
National Road
14
HanoiHaiphong
Da NangQuangNgai
Ben Luc - Long
Thanh Highway
DauGiay PhanThiet
Highway
NinhBinhBaiVot (PPP)
Cao Lanh
bridge
Vam Cong
bridge
Airports
NoiBai Terminal
2
Cat Bi
Ports
Lachhuyen
(deepwater
port)
Hau river
channel
Total
investment
(USD bn)
Starting
date
Completion
date
2.5
2013
2016
0.8
2013
2016
0.3
2007
2015
1.5
2013
2016
1.5
3Q.2013
VEC
JICA+ADB
Dong Nai +
BinhThuan
0.8
3Q.2015
Bitexco + 2nd
investor
WB
NinhBinh,
ThanhHoa,
Nghe An
2.4
2014
2018
WB (PPP)
Dong Thap
0.1
2013
2017
AusAID, ADB
CRBC - China &Vinaconex E&C
Dong Thap
0.3
2013
2017
Cu Long
CIPM
EDCF (South
Korea)
GS E&C & HANSHIN E&C (South Korea)
HaiPhong
0.2
2013
2015
HaiPhong
1.2
2013
2017
Saigon New
Port Corp
Japan ODA
Toa Corporation, Penta Ocean
TraVinh
0.4
2008
(delayed
from
2011,
restarted
2014)
ThanhHoa
9.0
2013
Location
Capacity
Investors
Lenders
Contractors
World Bank
Lotte
Ha Noi
Energy
Nghi Son
refinery
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2017
(started)
10 mil tons/year
(expandable to
20 mil tons/year)
Kuwait,
Idemitsu
Kosan, Mitsui
Chemical
JGC (Japan) - Chiyoda (Japan), GS E&C

(South Korea), SK E&C (South Korea),
Technip France (France),
TechnipGeoproduction (Malaysia).
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Date: 31.01.2014
Project name
Vung Ro
refinery
Location
Total
investment
(USD bn)
Phu Yen
3.2
Starting
date
Completion
date
Capacity
2017
(detailed
designing)
8 mil tons/year
Investors
Lenders
Contractors
Technostar Management Ltd
Electricity
DuyenHai 3
coal-fired power
plant
Long Phu 1
coal-fired power
plant
Mekong Delta
Wind Power
Centre
Mong Duong 2
coal-fired BOT
power plant
QuangTrach 1
coal-fired power
plant
Quynh Lap 1
coal-fired power
plant
Thai Binh 2
coal-fired power
plant
Vinh Tan 1
thermal power
plant BOT
project
Vinh Tan 2
thermal power
plant
VungAng 2
coal-fired power
plant
Vinh Tan 4
thermal power
plant
Bank of China,
ICBC, China
Development
Bank
TraVinh
1.3
2012
2015
1,244 MW
EVN
SocTrang
1.2
2011
2017/2018
1,200 MW
PVN
Bac Lieu
1.0
2012
2015
500 MW
VDB, US
Eximbank
China
Investment
Corporation
Eastern Electrification, Southwest Design

Institute, Zhejiang Power Construction
Petrovietnam Technical Services Joint Stock
Corporation (PTSC)
Doosan Heavy Industries & Construction

Co., Posco Energy Ltd., AES, HoaBinh
Construction and Real Estate Trading Joint
Stock Co (HBC)
QuangNinh
2.1
2011
2014
1,200 MW
QuangBinh
2.3
2013
2015
1,200 MW
PVN
PVX, PVE
Nghe An
1.5
2012
2016
1,200 MW
Vinacomin
No 1 Construction Consultancy JSC
Thai Binh
1.7
2011
2015
1,200 MW
PVN
, Toshiba, Babcock & Wilcox Beijing

Company (BWBC), Petrovietnam
Construction Joint Stock Corporation (PVC),
Sojitz Corporation, Daelim Industrial
Company
BinhThuan
1.9
2013
2018
1,200 MW
Vinacomin
and Chinese
Investors
China Southern Power Grid
BinhThuan
1.3
2013
2015
1,244 MW
EVN
Shanghai Electric Group[Construction)
Ha Tinh
1.7
2013
2015
1,200 MW
BinhThuan
1.6
2014
2017
1200 MW
Vapco Engineers, Hung Nghiep Formosa Ha

Tinh Co.
EVN
Kesim, Ksure,
JBIC
Doosan, Mitsubishi, PECC2,
Source: SSI Research
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Although the need for improving infrastructure is

apparent, there are a number of issues in the
The government has made tremendous strides in

launching a comprehensive PPP where all parties
involved will benefit. But what is still unclear and
implementation of infrastructure projects in Vietnam

which we discuss below:
remained ambiguous to a lot of investors is the

magnitude of the governments role. In a PPP
project,
conventionally,
the
governments
Land-swap mechanism in infrastructure projects:

Currently, many infrastructure projects in Vietnam
whether in the form of BOT (Build Operate
participation will come in the form of subsidy, in

many cases land subsidies. However, it is very
Transfer) or BT (Build Transfer) are not financially

feasible for the private sector, keep in mind, Vietnam
difficult for the government and private investors to

agree on the value of the land as both parties have
needs the private sectors participation as

Government funding in itself is insufficient. In order
different
land subsidy policy program. In essence, what the

government does is compensate investors land
The
BOO, DBFMOT, BFOM, O&M. The new decree will

clearly specify the role of the Government in PPP
is more in fact the government.
projects and allow SOEs to participate in PPP

projects as well.
However, this strategy is problematic in several
their inflated prices are being questioned by the

market.
land.
definition and mechanisms of PPP, BOT, BTO, BT,
as contractors rather than investors, and the investor
government as most of thevaluable plots in urban

areas and along the coast are already occupied and
evaluating
prompted the Ministry of Investment and Planning to

draft a new Decree on PPP, which will include the
instead of getting paid in physical cash, they are

compensated by land. Therefore, investors are seen
subsidy will become less and less feasible for the
of
can explain why there is such a lack of PPP in

infrastructure projects. All the ambiguities have
granted once they complete a project and hand it

back to the government. In a normal transaction,
inflated investment costs and loss of state

resources. Secondly, relying on land as a form of
methods
accountability on the government side is also a

question. The governments ambiguous role in PPP
to attract investments, the government initiated a
respects. Firstly, the non-transparent nature of land

swap projects provides fertile ground for corruption,
Is PPP (Public Private Partnership) the solution?
Concern
on
efficiency
of
infrastructure
investment projects: The most important
infrastructure
challenge
facing
Vietnam
is
investment inefficiency rather than inadequate levels
of investments.
What VN needs is a wellcoordinated national strategic plan that identifies and
prioritize a number of viable large-scale projects.
Vietnam does not need ports in every coastal cities
nor an airport in every city. 2014 infrastructure
spending should be carefully monitored.
www.ssi.com.vn
13
Date: 31.01.2014
M
A 5. Accelerating SOEs restructuring
C SOEs restructuring were plagued with delays in 2013,
R and we expect that a number of 2013 IPOs would be
O carried over to 2014, including Viglacera (glass &
(mobile phone operator) is also expected to be

scheduled in 2014 (after splitting from Vietnam Post and
Telecommunication Group - VNPT), however,less likely
ceramics), Vinatex (textile and garment) and Vietnam

Airlines. A number of new IPOs were announced
than those mentioned.

The new regulation that
stipulates the listing of stocks within one year after an
including ACV (Airport Corporation of Vietnam, owner of
IPO
all the major airports in Vietnam, including Tan Son

Nhat, NoiBai and primary investor of the Long Thanh
developments in 2014 would include SCIC (State Capital

Investment Corp) and SOEsnon-core business
Airport mega-project), and a number of the Ministry of

Transports CIENCO (Civil Engineering Construction
divestment, where the MoF might issue a decision that

permits SCICand SOEs to sell states assets below book
Corp, No 1-4-5-6, whichareall major contractorsfor most
value.
would
entice
investors
participation.
Other
of the public infrastructure projects).Mobifones IPO

IPO Watch
Chartered
Capital (Mn
USD)
2013
Revenue
(Mn USD)
2013 PBT
(Mn USD)
Shares
offered
Share
price
(VND)
Shares
outstanding
IPO time
76,947,600
10,300
307,000,000
20/02/2014
Viglacera
145
Vinatex
Vietnam
Airlines
Airports
Corporation of
Vietnam
236
2,151
68.40
245,000,000
N.A
500,000,000
1Q 2014
422
3,422
25.17
383,000,000
N.A
894,200,000
2014
693
397
N.A
N.A
146,930,000
2014
Vinamotor
N.A
N.A
N.A
36,732,500
51% of
shares
outstanding
N.A
N.A
2014
Cienco 1
33
340
N.A
16,183,500
N.A
70,000,000
N.A
Cienco 4
28
498
N.A
16,125,200
N.A
60,000,000
N.A
Cienco 5
21
198
N.A
14,215,300
N.A
43,900,000
N.A
Cienco 6
28
N.A
N.A
28,724,100
N.A
60,000,000
N.A
Mobifone
N.A
1,943
311.00
N.A
N.A
N.A
N.A
www.ssi.com.vn
14
Date: 31.01.2014
M
A 6. Funding source: Foreign investors remain an extremely imperative part of the equation
C Large-scale infrastructure projects, banking sector 2014 with detailed distribution sent to all provinces, so it
R reform and more aggressive IPOs raise the question of signals more disbursement of ODA for 2014.
O funding sources. Public investment will remain identical Risk to our forecast
in 2014 (from state budget development investment,
plus government disbursement was nearly USD 13 bn,
similar to 2013s level). The government expects for
higher credit growth in 2014 (target 12-14%, but our
estimate is higher at 15% - because of a soft-landing for
the banking sector which willbe discussed below), and
seemingly factors behind higher credit growth are not
only consumer credit (as in 2013) or SOEs, but also
private investment. Foreign investors remain an
extremely imperative part of the equation, not just FDI
(2013 high commitments might result in better
disbursementsin 2014), or FII (with foreign ownership
limit extending for both bank and non-bank institutions),
but ODA would become an integral source of financing.
Although
in
the
longer
term
ODAwillgraduallybecomescarce as Vietnam is rapidly
approaching the per capita income level of a lowermiddle income country, It is reported that undisbursed
ODA reached USD 15 bn so far, and the government
has set aside roughlyUSD 1 bn as counter-capital for
Political risks will be limited, if not rare, and nowhere in

the proximity to Thailand. Continuous reforms and
comprehensive
restructuring
will
expose
mismanagement and in certain cases, corruption, and
those who are responsible should be held accountable.
A number of high profile criminal cases have been
brought to courts, and we hope that past disruptions
would not exacerbate and engender more volatility.
In regards to public finance, the risk of high public debt is
very conspicuous and legitimate, given the nature of
high budget deficit, increasing demand for infrastructure
investment (however, ill-managed),all of which could
easily translate to higher inflation.Our concern remains
on the public debt level. The latest report published by
the MoF revealed some intriguing subjects concerning
public debt. The below table are the estimated data for
2013-2014:
(unit: VND trillion)
2012
2013
2014
Government debt (1)
1280
1573.8
1952.3
342
457.1
512.1
20.9
1642.9
43.9
2074.8
64
2528.4
42.60%
46.20%
56.20%
59.80%
Government guaranteed debt (2)

Municipal debt (3)
Public debt (=1+2+3)
Government debt (% GDP)
Public debt (% GDP)
(1): Government debt includes domestic one (government bond in VND, Treasury bills and other borrowings) and external one
(ODA, sovereign bonds.)
(2) Government guaranteed debt includes domestic one (VDB, VBSP, VEC bond) and external one.
(3) Municipal debt includes municipal bond, borrowing from Treasury and other.
The composition of external debt and domestic debt

which combined make up for government debt was 57%
and 43% respectively (2012 data). It is worth mentioning
that total government debt which was used for re-lending
to domestic companies totaled USD 10.8 bn with a NPL
ratio of 3.45%.
Pertaining to government guaranteed debt issued by
VDB and VBSP (total volume was roughly USD 8 bn), a
www.ssi.com.vn
duration risk can be seen as most of the issued bonds

are 2-3 year, but the pay-back period is at least 10-15
years. One example is the notorious case of VEC
(Vietnam Expressway Corporation - where the MoF once
denied guaranteeing VECs bonds), the MoF announced
that they might have to pay VND 3.85 trillion on behalf of
VEC, from now to 2015 as VEC is incapable of servicing
the loan.
15
M
A
C
R
O
Date: 31.01.2014
(unit: VND trillion)
2012
2013
2014
Government guaranteed debt
342.1
457.1
512.1
Domestic
191.5
198.5
235.1
VDB+VBSP
153.2
148.1
167.1
VEC
4.3
4.4
Other
34
46
63
150.6
258.6
277
External
Source: MoF, SSI estimates

In regards to municipal debt, it was reported that the
immense demand for infrastructure projects. We think
amount increased from USD 1 bn in 2012 to nearly USD

2 bn in 2013 (of which USD 0.7 bn were municipal
that inefficient management and disbursement have

exacerbated matters. As long as GDP growth is
bond). Public debt is rapidly increasing (debt payment

accounted for roughly 24% of the state budget in 2013,
ensured, rising debt can be admissible, so it explains

why the government has placed great emphasis on
and several experts forecast that it would rise to 30% in

the next 3 years, which would be quite alarming), and
growth, and the increasing absolute GDP number would

help maintain the debt at the limit stipulated in the Laws
the reason behind the rapid increase was to satisfy the
of Public Debt i.e 65%.
www.ssi.com.vn
16
Date: 31.01.2014
M
A MACRO ECONOMIC FORECAST
C
2007
R
GDP growth (%- 2010p)
7.13
O Agriculture (%)
3.96
2008
2009
2010
2011
2012
2013
2014F
5.66
5.4
6.42
6.24
5.25
5.42
5.6
4.69
1.91
3.29
4.02
2.68
2.67
2.8
7.36
4.13
5.98
7.17
6.68
5.75
5.43
5.7
Construction (%)
n/a
n/a
n/a
10.06
-0.62
3.25
5.4
5.5
Manufacturing (%)
n/a
n/a
n/a
8.38
11
5.8
7.44
7.7
Service (%)
8.54
7.55
6.55
7.19
6.83
5.9
6.56
6.7
Retail Sale (%)
22.9
30.9
18.5
24.96
22
16
12.6
14
n/a
7.4
7.1
10.7
6.8
4.8
5.9
6.5
12.6
19.9
4.35
11.09
18.13
6.81
6.03
7.5
17.46
-4.56
13.81
31.8
6.2
0.57
4.3
PPI (Industrial) (%)
7.44
25.79
2.38
13.44
18.3
10.1
5.25
Exports (USD bn)
43.7
58.0
51.3
72.2
96.9
114.6
132.2
146.7
Imports (USD bn)
54.5
74.8
62.3
84.8
106.7
113.8
131.3
150.4
-10.84
-16.81
-10.95
-12.60
-9.80
0.80
0.90
-3.70
24.82%
28.98%
21.32%
-17.45%
10.11%
0.70%
0.68%
-2.52%
15950
17483
18479
18932
21250
20900
21250
21900
-6.9
-10.8
-6.6
-4.3
-0.6
8.8
8.1
Foreign reserve (USD bn)
23.74
24.17
14.1
12.4
13.5
25.4
32
36
Foreign reserve/imports (weeks)
22.64
16.80
11.77
7.60
6.58
11.61
12.67
12.45
Credit growth (%)

Deposit rate (VND -%)
52.42
25.43
14.71
37.73
8.61
29.81
11.89
14.41
16.66
8.91
8
12
8
15
8
Industry & Construction (%)
Industrial Production Index (%)

CPI (%)
PPI (Agriculture) (%)
Trade Balance (USD bn)

% of Export
Exchange rate (USD/VND)
Current Account Balance (USD bn)
www.ssi.com.vn
17
Date: 31.01.2014
2014 Market Outlook
www.ssi.com.vn
18
2014
Market
Outlook
Date: 31.01.2014
MARKET REVIEW: Vietnam Stock market saw a decent

performance in 2013
Vietnam stock market made a decent rebound in 2013,
where the VN Index and the HNX Index closed at 504.63
YoY growth). Trading value roughly averaged VND 1.38

trillion/session (USD 65.4 mil, 31% YoY growth). Foreign
and 67.84 pts, 21.97% and 18.83% YoY growth,
investors maintained in a net buy position (approximately
respectively. Total market capitalization reached VND

949 trillion (around USD 4.5 bn or 32% of GDP and 24%
USD 365 mil in equity and USD 500 mil in bond).
VN Index performance in 2013 (Source: Bloomberg)
HNXIndex performance in 2013 (Source: Bloomberg)
In more details, from Jan to May, the VN Index strongly

rallied spurred by significant foreign inflow (about USD
130 mil). Nevertheless, sentiment was elevated in

September, with fears from increasing risks in the
280 mil, most notably, ETFs) and trading volume

improved given supportive measures by the State
banking sector subsiding because of better-thanexpected VAMCs participation in bad debt resolution,
Securities Commission
(higher trading band on the
the exhaustive discussions on FOL extension and the
HOSE from 5% to 7% and the HNX from 7% to 10%,

introduction of market order,). The rally was also
revival of foreign inflow (in the last four months of 2013,

foreigners total net-buy position was approximately VND
supported by strong earnings seasons, and a turnaround

was imminent. Discussions on foreign ownership limit
170 mil, higher than the outflow level in June-Aug

period). Leading movers for the VN Index were GAS,
extension fueled investors sentiment throughout the

year. Fears from U.S. Fed tapering and the official VND
and VNM and lagging mover was MSN. While on the

HNXIndex, PVS and OCH led the rally while PVX, and
depreciation in June triggered a sizeable outflow from
ACB were the biggest laggers.
June to August (total net foreign outflow was about USD
HOSE Movers
Ticker
GAS
VNM
HPG
VIC
PVD
www.ssi.com.vn
Closing
price
66,500
135,000
41,100
70,000
61,000
Change
Index points
+27,900
+47,000
+20,100
+9,623
+26,909
34.636
22.669
5.445
5.337
4.208
Ticker
MSN
EIB
CTG
PVF
ALP
Closing
price
82,500
12,500
16,200
4,200
4,000
Change
Index points
-19,500
-3,200
-3,262
-4,200
-5,000
-8.314
-2.461
-1.670
-1.518
-0.615
19
2014
Market
Outlook
Date: 31.01.2014
HNX Movers
Ticker
PVS
OCH
LAS
NTP
SHB
Closing
price
20,300
27,600
37,500
59,900
6,900
Change
Index points
+6,600
+16,200
+14,583
+25,900
+1,100
1.833
1.563
0.742
0.729
0.637
Closing
price
3,000
15,600
49,500
78,200
3,500
Ticker
PVX
ACB
PSD
SQC
PVR
Change
Index points
-2,600
-900
-18,500
-1,700
-3,200
-0.679
-0.558
-0.168
-0.112
-0.111
MARKET OUTLOOK: Six investment themes for 2014

7. The economy has bottomed out with macro stability being ensured, all the elements are in place for
upsides ahead:
Although the recovery will be gradual with continuous
support from the FDI sector, the two important reforms
year or the last year of this process. This is why we

believe this might be an appropriate time to revisit our
(i.e. banking reform and SOEs reform) have finally
view on the sector in 2014.
exhibitedinitial momentum. Our assumption is that both

reforms will accelerate in 2014. It is befitting to assume
SOEs reform will not be a cakewalk.
that 2013, the year of the snake, exhibited

crawlingbanking and SOEs reforms and restructuring.
We expect that 2014, the year of the horse, banking and
SOEs reforms and restructuring will run rampant.
We see the
motivation behind SOEs reform should be SOEs debt

restructuring and weak financial situation in a number of
large SOEs. In 2013, all the economic groups submitted
their restructuring plans to the Prime Minister which were
then approved. Therefore, in 2014, we hope to see
Banking reformexhibited encouraging progress in 2013
SOEs abiding to their plans of divestments in non-core
with the birth of VAMC which managed to purchase a

large chunk of bad debt from banks. VAMC will continue
businesses, cleaning their balance sheets, all the actions

that are required to amend past mistakes, in essence,
their bad debt purchasing program in 2014. Our view is

that bad debt restructuring and sales is much more
more walk and less talk.
fundamental and we hope this commence this year.

Circular 02 - a new risk management regulation will not
In both reforms, recapitalization is the key. However, it
be delayed but rather be eased in order to help banks

maintain their credit growth at not a depress level. Debt
restructuring will continue and consequently we do not
expect a sharp rise in the official NPL level after Circular
02 takes effect.
is not easy to attract external funding at this moment in

time as investors will carefully consider before investing
in
banks
or
SOEs,
and
among
the
factors
of
consideration there are operation efficiency and risks.

This, in turn, will accelerate the two reforms.
Unsurprisingly, we will see more divestments and IPOs
in the coming time (as mentioned in our Macro
Our assumption is that the banking sector will need at

least 3 years to clean its balance sheet, based on the
Outlook).The recent Decree 01 by the Government on 3

January 2014 relaxed the terms and conditions for
calculation that the PPOP (Pre-Provision Operating
foreign investors to acquire domestic banks and we
Profit) of the whole system in 2012 was roughly 42% of

the official NPL of 4.6%. As the process of aggressive
hope to see more M&A transactions in the banking

system in the coming time.
provision-booking began in 2H12, 2014 will be the 3rd
www.ssi.com.vn
20
2014
Market
Outlook
Date: 31.01.2014
8. Given the gradual economic recovery and on-going reforms which triggered positive catalysts for the
market, market valuation re-rating is envisioned for 2014.
We believe the VN Index could increase 17-20% as
compared with 2013-end (which closed at 504.6). This
on 2014 EPS growth at 7%. We expect market PER will

be rerated from the level of 10.7x in the beginning of the
then renders to the notion that the VNIndex might reach
year to 12x 13x by end of this year, powered by
590-600 by the end of this year. If we add a 5%

dividend yield, the average total return from Vietnam
gradual economic improvement andthe on-going reforms

which will trigger positive catalysts such as FOL
equity market will be 23% in 2014.Our forecast is based
extension,
new
IPOs
or
banks
M&Aetc.
Source: SSIResearch
9. Time to revisit the banking sector?
We believe the time is prime to revisit the sector in 2014,
although not immediately, but possibly by end of 1Q14 -
Developments in retail banking and consumer finance

are the choices for many banks to compensate for NIM
when banks release their 2013 results and have a more

definite picture on 2014. After nearly 2 years of being
reduction.
head-over-heels with challenges, management at most

of the banks have now taken on a very conservative
In 2013, given serious challenges facing the banking
approach and most have decreased operating expense

by reducing
restructuring
www.ssi.com.vn
staff, salary
to
improve
cut and organization

operation
efficiency.
sector, investors shied away from bank stocks and this

corresponded with our consistent view of 'Sector
Underweight' so far.
21
2014
Market
Outlook
Date: 31.01.2014
10. Top line growth will be stronger in 2014, margin expansion will trail that of 2013
2013s average sales/net profit growth of 62

companies under SSIResearchcoverage are 9% and
quite weak, corresponding with the overall weak

economy. In 2014, our forecast on revenue growth
19.3%, respectively
is better than 2013 while margin will stabilize with

support from lower CIT (from 25% in 2013 to 22% in
2014s average sales/net profit growth of 62
2014), no more salary cut andslightly lower interest
companies are 16% and 8.2%, respectively
rate in 2014.
In 2013, margin expansion was supported by

significant lower interest rate, lower input cost and
2014 median EPS growth of 9% (2013: -5%)
operating expense cut while top line growth was
2014 dividend yield of 5% (2013: 5%)
11. Industrial & Infrastructure-related sectors are our favorite for this year.
With mega infrastructure projects in the pipeline, we are
bullish on industrial and infrastructure-related sectors
such as construction, construction materials, industrial

zones and ports.
12. Turnaround stocks are sexy.

As the economy has bottomed out, different sectors will
exhibit different turn-around phases. We believe that the
valuations are still at very high as they just transitioned

from 'loss' to 'profit-making' status and their balance
Consumer sector has already bottomed out in 1H13

while Banking -Property and a number of commodity
sheets remain under pressure to a certain degree.

Those stocks, mostly mid and small cap, will attract
sectors have not yet reached their bottom.

For
turnaround companies, we would like to note that their
investors' attention, especially retail investorsin 2014.
www.ssi.com.vn
22
Date: 31.01.2014
Top movers from 31Dec2013
Top movers from 23Jan2014
GAS
28%
GAS
13%
CTG
14%
CTG
8%
MSN
12%
MBB
24%
PVD
36%
HPG
16%
HPG
33%
PVD
14%
MBB
34%
FPT
18%
FPT
37%
DHG
15%
VNM
4%
EIB
6%
PVS
48%
HAG
6%
STB
20%
PVS
7%
BVH
11%
BMP
15%
EIB
16%
HSG
11%
VCB
4%
LAS
17.7%
VIC
4%
BCI
27%
DPM
10%
DIG
19%
DHG
18%
PNJ
13%
HSG
26%
NTP
9%
LAS
41%
ITA
5%
BMP
25%
HVG
7%
ITA
16%
PGS
15%
Source: SSIResearch
www.ssi.com.vn
23
Date: 31.01.2014
Top high earnings growth conviction for 2014

Market cap (mil USD)
Foreign ownership (%)
2014 Earnings growth
2013PER
2014PER
MSN
2014PBR
3289.6
34.9
376%
116.3
20.7
Na
CII
108.0
40.4
330%
51.4
9.4
1.5
KBC
146.3
25.8
174%
84.8
41.4
1.0
PAC
27.8
25.6
111%
16.8
8.0
1.1
PNJ
108.0
49.0
56%
11.7
7.5
1.6
EIB
802.1
27.1
51%
21.9
14.5
1.0
DIG
89.2
30.0
48%
47.8
34.6
0.7
ACB
706.5
30.0
47%
18.3
12.5
1.2
HAG
738.7
35.3
36%
19.3
19.2
Na
BCI
65.4
34.8
35%
16.1
11.9
0.7
IMP
38.0
48.2
34%
13.1
9.7
1.1
TDH
25.9
33.3
34%
40.5
31.5
0.4
BVH
1490.6
24.1
27%
23.2
18.3
2.4
BMP
164.6
49.0
26%
12.1
9.6
2.0
KDC
451.9
49.0
25%
21.4
24.5
1.3
TCM
65.9
49.0
23%
9.8
8.0
1.7
PVD
956.8
40.6
20%
10.7
8.8
1.7
HVG
140.6
10.1
20%
9.7
8.4
0.9
PVI
199.7
49
20%
13.8
11.6
0.6
PVT
131.8
5.3
19%
11.9
9.8
1.0
BTP
38.9
1.7
18%
11.8
10.0
0.8
FPT
714.0
49.0
18%
8.8
7.6
1.8
EVE
35.4
49.0
17%
8.5
7.2
0.9
DBC
71.7
38.8
17%
9.5
8.1
0.9
PET
72.2
26.9
17%
8.2
6.9
1.1
PSD
35.2
3.8
16%
7.6
6.6
3.1
NTP
133.1
48.1
14%
9.3
8.1
1.8
VNS
98.4
42.5
13%
8.2
7.3
1.1
ITA
214.9
17.3
13%
49.3
44.0
0.7
VNM
5596.1
49.0
13%
18.4
16.3
5.5
PVS
597.7
24.4
11%
10.2
9.2
1.5
HPG
941.9
45.8
10%
10.3
9.5
1.9
Source: SSIResearch
www.ssi.com.vn
24
Date: 31.01.2014
Stocks with low PER

Market cap (mil USD)
Foreign ownership (%)
2014 PER as of 23Jan14
2013EPS growth
2014EPS growth
MBB
734.3
10
5.8
-2.5%
3.7%
PGS
62.6
22.2
5.9
38.0%
9.3%
DXP
17.8
29.76
6.2
7.1%
4.0%
TRC
59.6
30.88
6.4
-42.6%
2.5%
PSD
35.2
3.8
6.6
-19.1%
15.8%
PET
72.2
26.9
6.9
-4.4%
18.7%
SBT
84.1
14.82
6.9
-40.2%
5.5%
EVE
35.4
49
7.2
4.8%
17.6%
DPR
94.5
32.42
7.2
-44.4%
-5.9%
LAS
166.8
11.69
7.2
13%
9%
VNS
98.4
42.47
7.3
15.3%
13.3%
PNJ
108.0
49
7.5
-35.3%
55.8%
FPT
714.0
49
7.6
9.0%
16.0%
VSC
85.3
49
7.7
-4.6%
6.0%
TCM
65.9
49
8.0
Na
22.7%
PAC
27.8
25.64
8.0
-43.2%
110.8%
NTP
133.1
48.14
8.1
2.3%
14.4%
DBC
71.7
38.84
8.1
-51.7%
17.1%
DVP
84.0
13.39
8.2
8.5%
5.4%
HSG
211.4
35.73
8.4
58.0%
-7.4%
HVG
140.6
10.07
8.4
-23.8%
15.9%
PGD
91.3
4.93
8.5
-8.3%
7.9%
PVD
956.8
40.58
8.8
19.7%
21.9%
PHR
117.4
19.2
8.9
-45.0%
-16.3%
DPM
835.9
31.13
9.1
-21.1%
-19.3%
PVS
597.7
24.43
9.2
9.9%
11.3%
CII
108.0
40.37
9.4
-89.4%
446.6%
HPG
941.9
45.75
9.5
92.0%
8.7%
PPC
396.9
11.69
9.5
149.0%
-41.8%
BMP
164.6
49
9.6
-38.6%
26.4%
CSM
123.7
13.07
9.6
-7.0%
-17.8%
REE
386.8
44.99
9.6
39.7%
-8.9%
IMP
38.0
48.21
9.7
-24.3%
34.5%
PVT
131.8
5.29
9.8
113.7%
20.5%
BTP
38.9
1.65
10.0
-49.8%
18.2%
Source: SSIResearch
www.ssi.com.vn
25
Date: 31.01.2014
SECTOR WEIGHTING SUMMARY

Sub-Sector
Sector Weighting
Natural Rubber
Steel
Fertilizer
Sugar
Diary
Confectionary
Fisheries
Feed
Other F & B
Tires
Textile & Garment
Banking
Insurance
Pharmaceutical
Plastic pipe
Ports and shipping
Oil & Gas
IT
Electricity
Property
Industrial park developer
Infrastructure and Construction
Underweight
Neutral
Neutral
Underweight
Neutral
Neutral
Neutral
Overweight
Neutral
Neutral
Overweight
Underweight
Neutral
Overweight
Overweight
Neutral
Overweight
Overweight
Neutral
Neutral
Neutral
Overweight
www.ssi.com.vn
Favorite stock
PHR, DPR
HPG
DPM, LAS
SBT
VNM
HVG
DBC
MSN
TCM, EVE
MBB
BVH, BIC
DHG
BMP
VSC, VIP
GAS, PVD, PVS
FPT
DIG, BCI
KBC
CII, FCN
26
Date: 31.01.2014
SECTOR
IN
FOCUS
NATURAL RUBBER (Basic Materials)
UNDERWEIGHT
KienTran Nguyen, +84 4 9366321 ext 679, kiennt1@ssi.com.vn
2013 Summary: another treading year for prices.
Rubber
sector
in
2013:
The
natural
rubber
industry
underperformed the VN Index and the Basic Materials sector in

2013. The industry forfeited 0.8% while the VN Index and the
Basic Materials sector gained 20.6% and 29.5% respectively in
Natural rubber performance in 2013

140%
2013.
130%
120%
Vietnams NR industry witnessed a decline in export value

resulted from decreases in NR price: in 2013 Vietnam is
110%
100%
estimated to reach approximately 1mn tons (+ 6.7% YoY), and

USD 2.5bn (- 11.7% YoY) in NRs export volume and value
90%
80%
70%
respectively.
60%
Jan-13 Mar-13 May-13
Jul-13
Sep-13 Nov-13
Average selling price of SVR 3L, accounting for 43% of total

Vn Index
Materials
Natural rubber
export volume, depressed 18% YoY in 2013.
Source: Bloomberg
World NR supply increased at a faster pace than

consumption: in 2013, total NR output is estimated at11.6 mn
tons (+ 2.2% YoY) while total consumption is estimated at
approximately 11.3mn tons (+ 1.9% YoY) which is a surplus of
0.3mn tons (+ 14% YoY) by the end of 2013. NR output in 2013
increased due to plantings during 2005 2008 which were then
DPR performance in 2013

130%
120%
110%
100%
90%
80%
70%
60%
harvested in 2013 while the improvement in NR consumption

was mainly contributed by the surge in demand for NR in China
during 2013. In 2013, China imported approximately 2.47mn
tons (+13.5% YoY) of NR which was the result of a recovery
seen in the auto industry.
Natural rubber stocks performance: PHR was the best

performer among listed NR stocks in 2013. The stock gained
5.6% while DPR and TRC forfeited 12.5% and 5.2% respectively
DPR
VNINDEX Index
Source: Bloomberg
www.ssi.com.vn
in 2013. PHRs products structure comprises of approximately

50% of SVR CV 50, 60 in total sales volume which carry higher
prices than other products categories. Higher dividend yield is
another attractive element of PHR compared to DPR and TRC
27
Date: 31.01.2014
SECTOR
IN
FOCUS
130%
130%
125%
125%
120%
120%
115%
115%
110%
110%
105%
105%
100%
100%
95%
95%
90%
90%
85%
85%
80%
80%
PHR
TRC
VNINDEX Index
SVR 3Ls average physical price in 2013

3,300
3,100
2,900
2,700
2,500
2,300
2,100
1,900
1,700
1,500
VNINDEX Index
2014 Outlook: Negative
Sector trend: natural rubber pricesare expected to slightly

decrease in 2014
The gap between supply and demand of natural rubber is
expected to expand approximately 10% YoY in 2014. 2014s
NR output and demand are expected at 11.96mn tons (+ 3.3%
YoY), a result of increase tapping area, and 11.59mn tons (+
3.1% YoY), a result of a recovery seen in the Chinese auto
industry.
SVR3L
According to the IMFs world economic outlook published in Oct
2013, world economic growth was revised down to 2.9% in
2013 and to 3.6% in 2014, down from 3.1% and 3.8% from
Source: VRA, Jan-2013
Junes forecast respectively. These forecasts compare with

growth in 2012 and 2011 of 3.2% and 3.9% in 2011
respectively, implyinga slow improvement in the next 12
months.
The recovery of the global auto industry supported the demand
for natural rubber in 2013. In 2013, global automobile sales
reached a record high of 82.84 mn units (+4.1% YoY), and it is
expected to increase 5% YoY in 2014. However, demand for
replacement tire accounts for 90% of total demand for tire
globally. This implies that the demand for replacement tire will
improve in the next few years starting in 2015 with the gradual
recovery of the global economy. Thus, the gap between supply
and demand of NR is expected to reduce starting in 2015 and
this will support NR prices.
www.ssi.com.vn
Risks: Natural rubber prices are highly volatile which can be
28
Date: 31.01.2014
SECTOR
IN
FOCUS
adversely affected by fluctuations in currency exchange,

weather conditions, oil prices, and changes in policies in major
consuming countries.
Sector Call: Underweight

Investment view: Our assumption is that average prices of NR in
Vietnam are expected to decline at least 4% YoY in 2014.
Accordingly, PHR, DPR, and TRCs revenue are expected to reach
VND 1,585bn (- 15.6% YoY), VND 1,030bn (- 10% YoY), VND
705bn (- 8% YoY) respectively, and pre-tax profit are expected to
reach VND 366bn (- 19.5% YoY), VND 276bn (- 15% YoY), VND
205bn (- 8% YoY) respectively. We reiterate our HOLD
recommendations for these three natural rubber stocks, with 1-year
target prices of VND 29,718/share, VND 45,515/share, and VND
40,221/share
Drivers/catalysts to watch:
Global and Chinas monthly auto sales, and Chinas monthly import
of NR should be closely monitoredin 2014
Favorite stock: PHR, DPR
-
PHR offers the highest dividend yield and dividend payout

ratio
DPR also offers higher dividend payout ratio than TRC.

DPR possesses a younger profile of rubber tree than PRH,
and TRC which generates higher profit margins.
PHR, DPR, TRC (23/01/2014)

Stock Price Market cap
PER
PBR
EV/EBITDA
(VND) (mil USD) 2013 2014E 2013 2014E 2013 2014E
Dividend yield
2013
EPS (VND)
EPS Growth
2014E 2013 2014E 2013
Sales growth Net profit growth
2014E 2013 2014E
2013
2014E
PHR 31,400
121
7.18
8.5
1.24
1.21
4.99
5.76
9.4%
10%
4,371 3,728
-43%
-15%
-15% -16%
- 41%
- 15%
DPR 47,100
96
5.39
7.25
0.88
0.85
4.38
5.69
8.5%
6.2%
8,746 6,494
-30%
-26%
-15% -10%
-30%
-26%
TRC 43,000
61
5.75
7.34
0.87
0.82
4.74
5.95
7%
7%
7,482 5,856
-34%
-22%
-15%
-34%
-22%
www.ssi.com.vn
-1%
29
Date: 31.01.2014
SECTOR
IN
FOCUS
STEEL (Basic Materials)
NEUTRAL
Minh Dinh, +84 838242897ext2148, minhdd@ssi.com.vn
2013 Summary: Only industry leaders achieved

encouraging business results
Steel industry performance in 2013

200%
Strongly outperformed the VN Index: The steel industry gained
180%
79.42%, compared with 20.62% of the VN Index. Best-performing

stocks were HSG (+112.6%) and HPG (+94.8%).
160%
140%
Only industry leaders achieved positive business results:
120%
Except for HPG and HSG, business performances of steel
100%
companies were extremely poor in 9M13. HPG and HSG were the
80%
only two exceptions thanks to lowest production cost and dominant

market share. In addition, HSG possesses outstanding distribution
60%
network and well-known brands.

Vn Index
Materials
Steel
Two factors influenced earnings growth of HPG and HSG: i) lower

Source: Bloomberg
interest expense, ii) low-cost inventory 1Q and 2Q13. In addition,

HPG earned approximately VND 250 bn in extraordinary earnings,
and HSG saw sale volume advanced by 32.7%, in which export
volume increased by 54.8% and accounted for 46% of sales.
9M13 earning results of steel companies

(VND bn)
Net sale
DNY
1,745
DTL
1,463
HLA
3,205
HPG
12,474
HSG
9,065
NKG
3,168
POM
7,706
TLH
2,174
VGS
1,770
VIS
2,406
124.2%
42.6%
-21.5%
-1.2%
19.8%
42.5%
-15.9%
5.5%
-10.9%
-13.7%
11
10
-241
1,465
455
42
-242
141
-10
YoY growth
Margin
8.5%
0.6%
-58.2%
0.7%
-658.7%
-7.5%
78.9%
11.7%
69.3%
5.0%
-180.4%
1.3%
-4942%
-3.1%
279.9%
6.5%
87.5%
0.4%
-206.9%
-0.4%
12M Trailing P/E
13.2
48.4
-0.6
11.5
7.1
-53.2
-10.7
3.7
16.5
-13.6
YoY growth
NI attributable to
shareholders
Note: DNYs sales grew by 124.2% thanks to expansion in production capacity, however net income only increased by 8.5%. TLHs income
growth was a result of extraordinary income, not from core business.
Demand for construction steel remained brittle. Construction

steel sale volume advanced by a modest 2.2% in 11M13, of which
domestic sale only increased by 1.1%. Steel companies
acknowledged that 2013 remained a difficult year for the whole
industry. Several companies suffered from loss for a long time and
went bankrupt.
Sales of steel sheet and pipe were more encouraging and saw
double-digit growth. Compared with construction steel, demand for
steel sheet and pipe was less affected by the stagnant property
www.ssi.com.vn
30
Date: 31.01.2014
SECTOR
IN
sector because customers are much more diversified. Nevertheless,

fierce competition and overcapacity confined profit of most
FOCUS
companies at a minimum level.

In order to cope with the overcapacity problem, steel sheet and pipe
companies managed to export. Fortunately, their production costs
were competitive enough for selling products to other countries,
mainly within ASEAN region. Though export generated small profit
margins, this was an effective measure to increase inventory
turnover and generate additional cash.
Aggregate steel sale volume of Vietnamese steel companies

Construction steel
2012
11M13
4,475,284
4,215,264
(tons)
Total sales
YoY growth
Domestic sales
2012
1,103,476
Steel sheet
11M13
1,377,667
2012
649,706
Steel pipe
11M13
714,170
-6.7%
2.2%
14.2%
39.6%
2.7%
20.8%
4,222,527
3,934,324
732,370
828,650
512,685
552,201
YoY growth
Export
-7.8%
1.1%
-0.1%
26.5%
-2.3%
18.8%
252,757
280,940
371,106
549,017
137,021
161,969
16.2%
22.5%
59.1%
65.5%
26.8%
27.9%
YoY growth
Note: Because sale volume of certain companies was not compiled in 2012, we estimate that actual growth rate of total steel sheet sale would
be approximately 32%, and growth rate of domestic steel sheet sale would reach approximately 20%. Source: Vietnam Steel Association (VSA).
2014 Outlook
Slight improvement in demand: We expect domestic sale volume
of construction steel to advance by 4-5% in 2014. Though a
significant improvement is improbable, we have seen certain
indicators for a possible recovery in steel demand:
Steel material price

800
700
According to the General Statistics Office (GSO), the

construction industry expanded by 5.83% in 2013, compared
with 2.09% in 2012.
More social and low-cost housingprojects will be implemented in

2014.
Higher investments ininfrastructure projects.
(USD/ton)
600
500
400
Hot rolled coil
Steel scrap
Iron ore
300
200
100
Jan-14
Jul-13
Oct-13
Apr-13
Jan-13
Jul-12
Oct-12
Apr-12
Jan-12
Jul-11
Oct-11
Apr-11
Jan-11
Material prices may not be as favorable as in 2013: During 1Q

and 2Q13, steel companies benefited from a rising trend in material
prices because they had amassed low-cost inventory earlier.
Nevertheless, based on various sources of commodity price
forecast, we do not think there is a high possibility for a similar trend
to repeat in 2014.
Issues and risks: Overcapacity remains a problem in the industry.
As a result, steel companies find it implausible to increase profit
margin, except in the case of a fluctuation in steel prices.
www.ssi.com.vn
31
Date: 31.01.2014
SECTOR
IN
FOCUS
Sector Call: Neutral

Drivers/catalysts to watch: Steel material price; Growth rate of
construction industry.
Favorite stock: HPG
Industry leader in construction steel, steel pipe and office

furniture. HPG is amassing steel market share (from 13.7% in
2012 to 15.2% in 2013).
Lowest production cost compared with peers (approximately 7%

lower) thanks to vertically integrated production
Phase 2 of the Steel Complex, which commenced operations in

Oct 2013, raises production capacity from 650,000 tons to
1,150,000 tons of construction steel p.a. Once the economy
recovers, steel sale volume and profit margin will significantly
advance.
Mandarin Garden Apartment Project will generate an estimated

of VND 4,800 bn in revenue and VND 500 bn in net profit in
2014.
Risks: Addition depreciation and interest expense arising from

Phase 2 of the Steel Complex may prompt profit margin to
decline in 2014; growth rate in steel sale volume may be lower
than expected as demand for steel has not significantly
recovered.
HPG (23/01/2014)
PER
PBR
EV/EBITDA
Dividend yield
(VND) (mil USD) 2013 2014E 2013 2014E 2013 2014E 2013
HPG
47,200
www.ssi.com.vn
941.9 10.3
9.5
2.2
1.9
1.4
6.2
4%
EPS (VND)
EPS Growth
2014E 2013 2014E 2013 2014E 2013 2014E

4% 4,582 4,980
92%
9%
14%
29%
2013
95%
2014E
10%
32
Date: 31.01.2014
SECTOR
IN
FOCUS
FERTILIZER (Basic Materials)
NEUTRAL
Thuy Nguyen, +84 4 9366321 ext 526, thuyntt@ssi.com.vn
Fertilizer industryperformance in 2013
2013 Summary: Slightly outperformed

Fertilizer industry in 2013: The fertilizer industry slightly
outperformed the VN Index, DPM (which accounted for 84% of total
the industrys market cap) recorded 1 year performance of 26%
compared with 20.62% of the VN Index.
Fertilizer stock performance: Oversupply persisted, attractive
dividend yield remained alluring.
Source: Bloomberg
Two key players in the industry are DPM and LAS: DPMs core
business is centered on producing urea with capacity of 800,000
Urea price in 2013
tons/year while LASs core business is producing superphosphate

and NPK with capacity of 830,000 tons and 730,000 tons
respectively.
DPM (1 year performance 26%): Negative earnings growth in 2013
(-20% YoY in our estimates) due to decreases in both volume and
average selling price. The urea oversupply put downward pressure
on average selling price (The current domestic urea demand is
Source: Indexmundi
approx2 mntons/year while the domestic urea supply is 2.3 mn

tons/year). 2013 dividend is estimated at VND 4,500/share (DPM
has already paid VND 2,500/share).
LAS (1 year performance 74%): 2012 dividend was VND
3,000/share and 20% in stock bonus, which was paid in 2Q13, which
spawned positive catalyst for the stock in 2013; Increase in net
income (+13.5% YoY).
2014 Outlook: Neutral

The performance of the whole industry is highly influenced by the
performance of DPM (weight in the industry is approx.84%)
Existing world oversupply will further exert downward pressure on
international urea price. Furthermore, in 2014, Ca Mau fertilizer plant
and NinhBinh fertilizer plant will be running at maximum designed
capacity, which will exacerbate domestic supply (In 2013, NinhBinh
urea plant was behind schedule as the plant was suspended for 71
days due to technical problems). Our estimates reveal that DPM
www.ssi.com.vn
33
Date: 31.01.2014
SECTOR
IN
FOCUS
would continue to record negative revenue growth and earnings

growth in 2014 (-12% YoY and -19% YoY respectively). However,
high dividend yield is an attractive element of DPM.
For LAS, despite the saturated superphosphate and NPK market,
we assume that LAS could experience a slight increase in bottom
line thanks to its lower input cost and lower depreciation cost. Our
estimates reveal that 2014 LAS bottom line would total VND 486 bn
(+8.7% YoY)

Drivers/catalysts to watch: changes in international urea price,
domestic supply demand balance
Favorite stock: DPM, LAS
We assume that DPM and LAS will continue to maintain their
attractive dividend policy: 2013 dividend of DPM is estimated at VND
4,500/share and 2013 dividend of LAS is estimated at VND
2,000/share and 20% stock bonus
Stock call (23/01/2013)
Price
(VND)
Market
cap
(mil
USD)
PER
2013
E
2014
E
PBR
2013
2014
E
E
EV/EBITDA
2013
2014
E
E
Dividend yield
2013
2014
E
E
EPS (VND)
2013
2014
E
E
EPS growth
2013
2014
E
E
Sale growth
2013
2014
E
E
Net profit
growth
2013
2014
E
E
DPM
46200
836
7.3
9.1
1.8
1.8
3.1
4.1
10%
8%
6302
5083
-21%
-19%
-20%
-12%
-21%
-19%
LAS
45000
167
7.1
7.2
2.5
2.0
4.9
4.6
4%
4%
6339
6245
13%
9%
6%
8%
13%
9%
www.ssi.com.vn
34
Date: 31.01.2014
SUGAR (Consumer Goods)
UNDERWEIGHT
KienTran Nguyen, +84 4 9366321 ext679, kiennt1@ssi.com.vn
2013 Summary: A bitter year for the sugar industry
Sugar sector in 2013: the sugar industry underperformed VN

Index and the Consumer Staples sector in 2013. The industry
Sugar performance in 2013
forfeited 12.5% whilethe VN Index and the Consumer Staples

sector gained 20.6% and 17% respectively in 2013.
140%
130%
120%
110%
Average selling price of sugar (ASP), including RE and RS,

continued on a downward spiral during 2013, and even fell
lower than 2012s average. In 2013, ASP of RE and RS
100%
90%
80%
sugar declined 11%YoY, and 12%YoY respectively.
70%
Vn Index
Consumer Staples
Average purchasing price of sugarcane in the 2012 2013

production season was slightly higher than that in the 2011
2012.
Sugar
Source: Bloomberg
Smuggled sugar and the perennial oversupply situation

restricted improvements in the sugar industry. According to
the Vietnam Sugar and Sugarcane Association,
approximately 1,000 tons of sugar is smuggled into Vietnam
a day which accumulatesto a total of over 300,000 tons/year.
In the 2012 2013 production season, total sugar produced
reached approximately 1.5 mn tons while total sales volume
SBT performance in 2013

130%
125%
120%
115%
110%
105%
100%
95%
90%
85%
80%
reached approximately 1.3mn tons in 2013.
Sugarstock performance: SBT underperformed the VN Index
SBT
02/12/2013
02/11/2013
02/10/2013
02/09/2013
02/08/2013
02/07/2013
02/06/2013
02/05/2013
02/04/2013
02/03/2013
02/02/2013
in 2013. The stock forfeited 12.5% while the VN Index gained

02/01/2013
SECTOR
IN
FOCUS
20.6% in 2013. SBTs performance was adversely affected by

the oversupply situation and smuggled sugar during the year.
VNINDEX Index
Source: Bloomberg
www.ssi.com.vn
35
Date: 31.01.2014
Average price of RE and RS sugar in 2013
20,000
19,000
18,000
17,000
16,000
15,000
14,000
13,000
12,000
2014 Outlook: Negative
Sector trend: the industry will not likely see improvements

in 2014.
Perennial oversupply: in the 2013 2014 production season,
RE
Nov-13
Jul-13
Sep-13
May-13
Jan-13
Mar-13
Nov-12
Jul-12
Sep-12
May-12
Jan-12
the Vietnamese sugar industry is expected to produce

approximately 1.6 mn tons of sugar, an increase of 7% YoY,
Mar-12
SECTOR
IN
FOCUS
RS
Source: Department of Price Management Ministry of

Finance
while total demand is expected at 1.5mn tons of sugar.

Moreover, other sugar supply sources include WTOs import
quota (77,200 tons in 2014), and smuggled sugar.
Ubiquity of smuggled sugar: over300,000 tons/year of sugar
(approximately 25% of total sugar produced in Vietnam) is likely
to be smuggled into Vietnam which willcompound the oversupply
situation facing the industry in 2014.
Unexpected price improvements: fundamentally, oversupply
will exert downward pressure on average selling price.
Moreover, domestic ASP is mainly influenced by smuggled
sugar. These two factors signify that sugar ASP in 2014 is more
likely to maintain on its downward trend. How deep the ASP will
stumbleis contingent on the control of smuggled sugar and
resolutions for the sugar industry.
Sector Call: Underweight

Investment view: 2014 is expected to be another bitter year for
sugar companies. In terms of fundamentals, investors should
monitorfor appropriate resolutions from the government to aid the
industry to reprieve its inventory and to bolster operation. In 2014,
SBT is forecastedto achieve VND 2,159bn (+5% YoY), and VND
275bn (+5% YoY) in revenue and pre-tax profit respectively,
equivalent to an EPS of VND 1,771/share. At the current price of
VND 12,100/share, the stock is being traded at 2014PE of 6.83x.
We reiterateour HOLD recommendation for this stock, with 1-year
target price of VND 14,218/share.
Drivers/catalysts to watch: (1) oversightof smuggled sugar, (2)
resolutions from the government to assist the industry
Favorite stock: SBT
www.ssi.com.vn
36
Date: 31.01.2014
SBT (23/01/2014)
PER
PBR
EV/EBITDA
(VND) (mil USD) 2013 2014E 2013 2014E 2013 2014E

SBT
12,300
www.ssi.com.vn
82
7.33
8.03
1.04
1.13
5.92
5.61
Dividend yield
2013
14.2%
EPS (VND)
EPS Growth
2014E 2013 2014E 2013

10.7% 1,679 1,771
2014E 2013 2014E
-40%
6%
5.3%
5%
2013
2014E
-36%
6%
37
Date: 31.01.2014
DAIRY (Consumer Goods)
NEUTRAL
Giang Nguyen, +84 4 9366321 Ext 430, giangntt@ssi.com.vn
FAO Dairy Price Index (2011-2013)
2013 Summary: Outperformed most of the year

except in the last two months
300
Dairy sector in 2013: 2013 saw a price hike in the
270
international dairy commodities market. The Food and
240
Agriculture Organization (FAO) Dairy Price Index increased by
210
180
25.1% YoY in 2013. This was mainly due to strong demand from
China. Because of its rambunctious appetite for milk products
150
and sheer purchasing power, Chinas consumption has siphoned

Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
SECTOR
IN
FOCUS
2013
2012
off many other buyers and in the process, has been the muscle
behind maintaining global prices at high levels. Milk supply in
2011
China is struggling to increase as a result of small-scale farmers

exiting the industry due to increase in feed and labor costs while
Source: FAO, Jan-2014
large-scale farms are still under development.

As a solution to reduce the over-dependence upon imported milk
powder, many drinking milk producers have strengthened their
strategy to focus on upstream dairy business. In July 2013,
VNM established Thong NhatThanhHoa Dairy Cow Co., Ltd
which is expected to boast 2,600 ha and has plans to raise
16,000 dairy cows until 2020.It is now in the planning stages of
Dairy performance in 2013
180%
another dairy cow project in TayNinh. According to VNMs 20122016 business plan, VNM will increase the number of cows at its
160%
farms to 25,500 heads by 2015 and to 28,000 heads by 2016.TH

Group had approximately 35,000 dairy cows as at October 2013.
The Group targets to increase the number of dairy cows up to
140%
120%
45,000 by April 2014. Based on its plan, the number of dairy

cows will increase to 137,000 by 2017 and 203,000 by 2020.
100%
80%
Jan-13
Apr-13
Vn Index
Jul-13
Oct-13
Consumer Staples
Milk
Source: Bloomberg
Dairy stock performance: The dairy sector significantly

outperformed the entire stock market for three consecutive
years. In 2013, the dairy sector increased 55.16% YTD (2012:
56.15% YTD, 2011: 59.32% YTD), which strongly outperformed
the VN Index (+20.62%). As a conservative stock, dairy stocks
continued to allure both individual and institutional investors
during the economic recession in 2013. The dairy sector is
mainly influenced by VNM which is the best performer among
dairy stocks in particular and consumer staple stocks in general
in 2013. During 2013, VNM increased 55.16%.
In the first three quarters of 2013, VNM consistently
outperformed the market thanks to the following stimulants:
www.ssi.com.vn
38
Date: 31.01.2014
SECTOR
IN
FOCUS
VNM performance in 2013
VNMs financial performance exceeded expectation

when sales and net income rose by 17.0% and 21.6% YoY
in 9M13. This was mainly due to surprisingly high gross
margin (9M13: 37.2% vs. 9M12: 33.6%) even when global
180%
160%
milk powder price sharply increased by approximately 25.1%

YoY in 2013 (Source: FAO).
140%
120%
100%
80%
Jan-13
Apr-13
Jul-13
VNM
Rumors on stock bonus with the ratio of 2:1 supported

VNM stock price during the year. VNM issued stock bonus in
both 2011 and 2012 and investors are expected the same
Oct-13
for 2013. This rumor supported and maintained VNM stock

price at a high level throughout the year. Finally, news broke
VN Index
Source: Bloomberg
that VNM will in fact not issue any stock bonus plan for
2013.
In August 2013, news broke and mass concerns erupted over
VNMs milk powder source from Fonterra which then was feared
to contain botulism-causing bacterium, and as a result, VNMs
stock prices took a nose dive. However, fears were quickly
mitigated when Fonterra dispelled the rumors.
VNM domestic sales growth (YoY)
In 4Q13, VNM stock performance seemed to have flattened

50% 43.7%
40%
30%
and even underperformed the market in Nov and Dec. In our
33.8% 31.9%
28.3%
opinion, the underperformance of VNM in the last two months of

28.2%
23.0%
22.9%
21.7%
16.2%
20%
2013 was driven by both fundamental and technical elements.
15.2%
8.8%
10%
Fundamental reasons: Due to impaired demand in the local

market, VNM sales growth gradually dwindled in 2013. The
first speed bump occurred in 2Q when domestic sales
0%
growth declined to 15.2% YoY (1Q13; 28.2% YoY, 2012:

21.2% YoY). And it became more apparent in 3Q13 with
domestic sales growth rate of only 8.8% YoY. 2014 financial
VNM's domestic sales growth (YoY)
performance of VNM is also expected not to be up to par as

in 2013 (Please refer to 2014 Outlook part).
Source: VNM, SSI Research
Technical reasons: After three consecutive years of

outperforming the VN Index, VNM has exceeded the cap for
a stock in investment portfolios of many funds, especially
large funds. Funds had to sell portions of their VNM shares
which subsequently made the stock a victim of profit taking,
especially when no plan for stock bonus in 2013 was
confirmed. Furthermore, as investors gained conviction and
became bullish starting in the second half of 2013,
conservative stocks like VNM lost its investment aura.
www.ssi.com.vn
39
Date: 31.01.2014
SECTOR
IN
FOCUS
2014 Outlook: Positive
Sector trend: In our opinion, the dairy sector will face minor
difficulties in 2014. However, the outlook is expected to become
brighter in 2H14.
-
Based on sales in 2H13 and our discussion with dairy

companies, impaired demand will continue to pose a threat
to sales growth in 2014. With this situation in mind, dairy
companies are finding it hard to increase their average
selling price. However, with positive macro signals, we
expect that consumer staple demand in general and dairy
demand in particular will gradually recover starting in the
second half of 2014 as a result of recent developments such
as no more salary cut, PIT rate reduction, more jobs from
the manufacturing industry, especially from FDI companies,
increasing consumer confidence and consumer credit.
A further increase in Chinas dairy purchases from the world

market is expected in 2014 which may strengthen dairy
commodities price from already high levels. However,
improved margins spurred by high milk prices and falling
feed costs may attract more producers. Furthermore, a
strong production season in both the Northern Hemisphere
and the Southern Hemisphere may ease dairy commodities
price from mid to late 2014.
o
Risks: With expected increasing input cost and difficulty in

raising selling price, dairy producers may suffer a considerably
lower gross margin in 2014. The Fonterra case in 2013 has
heightened our concern over food safety in the dairy industry.

Investment view: Although we always hold the belief that Vietnams
dairy sector as a potential sector in the long-term, in our opinion,
both sales and net profit growth may decelerate in 2014 due to weak
demand and high input cost. We change our investment view from
Overweight to Neutral on the dairy sector in 2014 which is mainly
influenced by VNM. In additions to not being able to replicate 2013s
financial results, current valuation is quite high (VNMs 2014 PE:
16.00x). Furthermore, as a conservative stock, VNM will lose some
of its aura when the stock market is expected to be bullish in 2014.
Drivers/catalysts to watch: In 2014, investors should closely
www.ssi.com.vn
40
Date: 31.01.2014
SECTOR
IN
FOCUS
monitor VNMs overseas expansion as well as the performances of

the two large factories which commenced in 2H13.
Favorite stock: VNM. For long-term investment, we still favor VNM
as a good fundamental stock (strategy is centered on corebusinesses, established brand-names, leading market position, wide
distribution network, high profit margins and ROE, strong balance
sheet, good corporate governance and long-term positive outlook).
We like VNMs upstream strategy which will help VNM to ease the
dependence upon imported dairy raw materials and the companys
strategy to go global in order to maintain high growth rate in the next
few years despite the fact that VNM, we think, may not have
advantages in foreign markets as it does in the domestic market.
However, due to reasons mentioned above, we recommend to
HOLD VNM for 1-year investment horizon with the target price of
VND 140,377/share.
VNM (23/01/2014)
Stock
Price
(VND)
Market cap
PER
PBR
EV/EBITDA
(mil USD) 2013 2014E 2013 2014E 2013 2014E
VNM 142,000
5,677
17.7
16.5
6.1
5.6
12.9
11.9
Dividend yield
EPS (VND)
EPS Growth
2013
2014E 2013 2014E 2013
2014E 2013 2014E
2013
2014E
2.4%
3.1% 7,650 8,630
12.8% 17.3% 19.7%
9.6%
12.8%
9.6%
www.ssi.com.vn
41
Date: 31.01.2014
SECTOR
IN
FOCUS
CONFECTIONERY (Consumer Goods)
NEUTRAL
Giang Nguyen, +84 4 9366321 ext430, giangntt@ssi.com.vn
2013 Summary:
FAO Price Index (2011-2013)
Confectionery sector in 2013: 2013 saw declining prices of

main raw materials. The Food and Agriculture Organization
(FAO) Sugar, Oil and Cereal Price Indexes decreased by 17.9%,
13.8% and 7.2% YoY on average, respectively. Reduction in
300
prices of key raw materials was the same case for 2012. The
difference between 2013 and 2012 is that demand in 2013
seemed more lethargic than 2012. This was obviously
250
200
reflected in 2013 moon-cake season when moon-cake sales

value growth of KDC (the largest moon-cake manufacturer in
150
End
2012
Mar
Jun
Cereal
Sep
Sugar
Dec
Vietnam with 75% market share) contracted to around 7% YoY

(2012: 13% YoY). Sales volume extended about 9% YoY to
Oil & Fats
2,600 tons in 2013 (2012 ~10%). While KDC increased its

average selling price by 2-3% in 2012, it did not do the same for
2013 due to weak demand. Therefore, gross margin did not see
Source: FAO, Jan-2014
strong improvement in 2013 as it had in 2012.
Confectionary
stock
performance:
In
2013,
the
confectionarysector which is mainly influenced by KDC increased

by 31.31%, outperforming the entire stock market for two
consecutive years (2012: +66.96% vs. VN Index: +18.21%). As
conservative stocks, confectionery stocks continued to allure
investors in 2013. Expectations on Foreign Ownership Limit
(FOL) easing bolstered confectionery stocks prices as some of
them have reached maximum foreign ownership room, such as
Confectionary performance in 2013

160%
KDC and BBC.
140%
BBC increased by 72.94% in 2013 mainly thanks to purchasing
120%
power from both foreign and domestic shareholders. KDC, which
100%
accounts for 94% of confectionary market cap and gained

29.57% in 2013, in our opinion, is the best performer in this
80%
Jan-13
Vn Index
Apr-13
Jul-13
Oct-13
Consumer Staples
Confectionery
Source: Bloomberg
sector. Besides reasons mentioned above, KDC continued to

experience positive financial performances from its restructuring
initiated in 2011. In 9M13, net sales increased only by 6.7% YoY;
however, net profit was up by 30.4% YoY thanks improvements
of profit margins and the absence of net loss from disposal of
financial investments like in 2012. Like previous years, KDC stock
price has on averaged increased sharply in 3Q and 4Q as
investors customarily speculates on KDCs performances for the
Mid-Autumn and Lunar Tet New Year.
www.ssi.com.vn
42
Date: 31.01.2014
SECTOR
IN
FOCUS
KDC performance in 2013
160%
140%
Sector trend: In our opinion, the confectionery sector may still
120%
experience modest growth in 2014. However, we expect that the

situation will improve in 2H14 like other consumer staples. It will
100%
still enjoy the expected downtrend of sugar selling price.
80%
Jan-13
Apr-13
Jul-13
KDC
Oct-13
Risks: The VND depreciates which may have a negative impact

on confectionery companies gross margin because the majority
VN Index
of raw materials involved in confectionery production are

imported, such as wheat and oils.
Source: Bloomberg

Investment view: We keep our investment view of NEUTRAL over
this sector. In our opinion, in a projected bullish market in 2014,
confectionary stocks as conservative ones may be no longer
appealing to investors as they did in 2012 & 2013. Furthermore, the
valuation of confectionery stocks is high (2014 PE of KDC: 21.19x)
and we think that the easing of FOL may not have a significant impact
on share prices.
monitor change in management at KDC as well as its plans to expand
into food businesses.
Favorite stock: No favorite stock. For KDC, although we expect a
24.9% increase in net profit in 2014 thanks to higher cash balance
and higher interest income and lower CIT rate, EPS growth is
estimated to decline by 12.7% due to dilution of issuing new shares to
its strategic shareholders, BoD& BoM and employees. Furthermore,
we see some changes in management at KDC, which we think may
influence its operation activities to a certain degree. Therefore, we
recommend to HOLD this stock for 1-year horizon with the target
price of VND 50,155/share.
KDC (23/01/2014)
Stock
Price
(VND)
Market cap
PER
PBR
EV/EBITDA
(mil USD) 2013 2014E 2013 2014E 2013 2014E
KDC 49,600
390 19.0
21.2
1.2
1.1 6.08
4.8
Dividend yield
EPS (VND)
EPS Growth
2013 2014E 2013 2014E 2013 2014E
2013 2014E
2013 2014E
3.9%
8.4% 12.7%
26.8% 24.9%
4.0% 2,686
2,345 15.9% -12.7%
www.ssi.com.vn
43
Date: 31.01.2014
FISHERIES (Consumer Goods)
NEUTRAL
Minh Dinh, +84 838242897 ext 2148, minhdd@ssi.com.vn
Fishery industry performance in 2013
2013 Summary: Shrimp industry recovered, but

pangasius remained submerse in difficulties
140%
130%
Underperformed the VN Index: The fishery industry gained
120%
13.24%, compared with 20.62% of the VN Index.
110%
- Best performing stock: HVG (+52.14%). Share price advanced

thanks to the fact that HVG will issue 30,000,000 shares to
100%
90%
strategic shareholders in 2014. Selling price would be at least

28,000/share. In addition, it is expected that HVG will expand
80%
farming areas and the feed business, and increase ownership in

th
Fimex (FMC the 5 largest shrimp exporter in Vietnam) to over

50%.
Vn Index
Consumer Staples
Fisheries
Source: Bloomberg
- Worst performing stock: MPC (-23.77%). Share price declined

because MPC would be delisted in 2014.
Pangasius industry: More of the same
- Export price continued to decline: 2013 pangasius export is
estimated to reach USD 1.73 bn, a 1.8% YoY increase. However,
due to cramped competition among pangasius exporters
(approximately 230 exporters), average export price is estimated
to reach only USD 2.2/kg in 2013, a 9.1% YoY decline.
Average pangasius export price

(USD/kg)
- Farmers made no profit: During most of 2013, price of live
3.00
2.80
2.60
2.40
2.20
2.00
1.80
1.60
1.40
1.20
1.00
pangasius stayed below VND 22,500/kg, and at this price,

farmers made no profit. Most farmers depended on bank loans for
raising pangasius, while export companies usually purchased fish
Oct-13
Jul-13
Apr-13
Oct-12
Jan-13
Jul-12
Apr-12
Oct-11
Jan-12
Jul-11
Apr-11
on credit. Due to losses and lack of capital, many farmers aborted

their farms. According to the General Department of AquaJan-11
SECTOR
IN
FOCUS
Source: Ministry of Industry and Trade
products, total pangasius farming areas reached 5,200 ha, a

17.5% decline YoY.
- Earnings of exporters declined in general: Among nine listed
pangasius exporters, six saw their profits decline in 9M13 (see
table below). Aggregately, their sales advanced by 19.5% YoY,
but their net income declined by 16.2% YoY.
www.ssi.com.vn
44
Date: 31.01.2014
SECTOR
IN
FOCUS
9M13 earning results of pangasius companies

(VND bn)
Net sale
AAM
380
ABT
418
ACL
723
AGF
2,348
ANV
1,836
HVG
7,711
IDI
1,096
TS4
582
VHC
3,711
8.6%
-21.3%
-7.9%
9.0%
41.1%
36.0%
16.0%
18.2%
19.9%
YoY growth
NI to shareholders
YoY growth
51
-5
34
32
241
27
13
150
-60.4%
-31.1%
-126.0%
23.8%
22.6%
-13.6%
-12.5%
24.7%
-10.5%
1.3%
12.3%
-0.6%
1.5%
1.8%
3.1%
2.4%
2.2%
4.0%
21.5
7.1
-25.2
8.4
14.5
11.2
8.6
7.7
7.6
Margin
12M trailing P/E
Shrimp industry: Significant recovery in 2013
Average shrimp export price

(USD/kg)
13.00
Early mortality syndrome (EMS) no longer a threat: In 2012,

about 101,000 ha of shrimp farm (15% of total shrimp farm area
12.00
in Vietnam) suffered from EMS. In 2013, the cause of EMS was

discovered and there have been measures to prevent EMS.
11.00
10.00
9.00
Vietnam shrimp export reached over USD 3 bn in 2013,

approximately 37% YoY increase, of which export volume
8.00
advanced by about 24%.

Oct-13
Jul-13
Apr-13
Jan-13
Jul-12
Oct-12
Apr-12
Jan-12
Jul-11
Oct-11
Apr-11
Jan-11
7.00
Export price surged due to global EMS: It is estimated that

global shrimp output declined by 23% in 2013 due to EMS in
Note: Average shrimp export price, including both black

tiger shrimp and white-leg shrimp, is estimated to reach
USD 10.7/kg in 2013, a 10.3% YoY increase. However,
if black tiger shrimp and white-leg shrimp are
separately examined, 2013 price increase would
significantly higher than 10.3%. Source: Ministry of
Industry and Trade.
Thailand, China, and Mexico, which are major shrimp producers.

As a result, shrimp price in the US and Japan increased by
roughly 20% compared with 2012.
-
Relaxed trade barriers in Japan and the US: It is likely that

Japan will increase its maximum allowance for Ethoxyquin
concentration of Vietnamese shrimp from 0.01 ppm to 0.2 ppm,
a 20-time increase. The decision will be announced by the end
of Jan 2014. In the US, neither anti-dumping duty nor
countervailing duty is imposed on Vietnamese shrimp.
White leg-shrimp export surpassed black tiger shrimp: For

the first time in history, white leg shrimp export reached over
USD 1.5 bn (+110% YoY), surpassing black tiger shrimp with
export reaching over USD 1.3 bn (+6% YoY). White leg shrimp is
less prone to diseases, cheaper and requires shorter farming
period. Nevertheless, black tiger shrimp remains a more
premium product.
www.ssi.com.vn
45
Date: 31.01.2014
SECTOR
9M13 earning results of pangasius companies
IN
FOCUS
(VND bn)
Net sale
YoY growth
Net income attributable to

shareholders
YoY growth
Margin
12M Trailing P/E
CMX
429.4
FMC
1,503.4
MPC
7,329.8
-46.8%
37.2%
29.1%
2.3
5.1
155.8
-64.5%
0.0%
97.3%
0.5%
0.3%
2.1%
28.6
7.7
10.2
Note: MPCs 2013 net profit is estimated to reach VND 280 bn, compared with just
VND 16 bn in 2012. FMCs 2013 net profit is expected to surpass its target, which is
VND 20 bn.
2014 Outlook
Pangasius industry
Export volume may decline due to shrinking farming areas.

According to the General Department of Aqua-products, total
pangasius farming areas declined by 17.5% in 2013 because
farmers aborted their farms.
Export price may slightly increase due to declining output

volume. However, we do not think the trend will be sustainable
because once the pangasius business recovers and becomes
profitable, output volume will grow rapidly. Vietnam Association
of Seafood Exporters and Producers (VASEP) and the
Pangasius Association have proposed many measures to boost
export price, but we do not expect those to be effective.
It is likely that the US Department of Commerce (DOC) will

impose high anti-dumping duty on Vietnamese pangasius.
th
According to the preliminary results of the 9 antidumping duty
administrative review, VinhHoan Corporation (VHC) may have to
pay USD 0.42/kg (POR8: USD 0.19/kg, POR7: zero). For Hung
Vuong Corporation (HVG), the duty may reach USD 2.15/kg
(POR8: USD 0.77/kg). The Vietnam-wide rate is USD 2.11/kg. If
the DOCs decision is not changed in the final result, pangasius
export to the US will decline.
Shrimp industry
www.ssi.com.vn
Export price will slightly decline: At present, Thailand and

China have found solutions for the EMS treatment. Although it
may take as much as two years for the industry to fully recover,
global shrimp price may abate in 2014.
We
expect
encouraging
business
results
of
shrimp
46
Date: 31.01.2014
companies in 2014. Although shrimp export price may decline,

we believe that shrimp exporters will be able to maintain their
profit margins because material price may also decrease. In
2014, shrimp price in Vietnam may cool down thanks to the
recovery of shrimp industry in Thailand and China.
SECTOR
IN
FOCUS
Vietnam shrimp industry falls behind Thailand and India in

terms of farming costs, especially for black tiger shrimp. It is
estimated that black tiger shrimp farming cost in Vietnam is 1015% higher than that of Thailand and India. As a result, when
Thailands shrimp industry fully recovers, Vietnam will find it
difficult to compete against Thai shrimp.

Drivers/catalysts to watch: Export price of pangasius and shrimp;
US anti-dumping duty and any other trade barriers.
Favorite stock: HVG
The largest Vietnamese pangasius exporter. Fully integrated

production covering the entire value chain from farming,
manufacturing of fish feed, processing, production of frozen fish
and cold storage warehousing.
Expanding to the shrimp industry by acquiring two large shrimp

exporters Fimex (FMC) and Faquimex (FBT).
Will expand feed production and increase ownership in Fimex

and Agifish.
New business in the US: HVG will invest in Asian-oriented

markets in the US and consolidate Vietnamese agriculture and
food products and export to the US.
Maintaining DPS of VND 2,000/share, which translates to rather

attractive yield of 8%.
Risks: High anti-dumping duty in the US; pangasius export price

may not recover.
HVG (23/01/2014)
PER
PBR
EV/EBITDA
Dividend yield
(VND) (mil USD) 2013 2014E 2013 2014E 2013 2014E 2013
HVG
24,600
www.ssi.com.vn
140.6
9.7
8.4
0.9
0.9
3.8
6.5
8%
EPS (VND)
EPS Growth
2014E 2013 2014E 2013 2014E 2013 2014E

8% 2,529 2,932
-24%
16%
33%
27%
2013
42%
2014E
20%
47
Date: 31.01.2014
SECTOR
IN
FOCUS
FEED (Consumer Goods)
OVERWEIGHT
Nguyen Tran Kien +84 4 9366321 ext 679, kiennt1@ssi.com.vn
2013 Summary: the industry bottomed out in 2H13

Feed performance in 2013
Feed sector in 2013: The feed industry outperformed the

Consumer Staples but slightly underperformed the VN Index in
150%
140%
130%
120%
110%
100%
90%
80%
2013. The industry gained 19.7% while the VN Index and

Consumer Staples sector gained 20.6% and 17% respectively in
2013.
Key ingredients prices including corn, soybean, and soybean
meal decreased 19% YoY, 2% YoY, and 4% YoY while average
Vn Index
Consumer Staples
selling price ofcompleted feed for pigsdecreased 1.6% YoY

which benefited feed producers in the industry in 2013.
Feed
In 1H13, live hog prices declined approximately 16% YoY.

Nevertheless, the prices rebounded and ultimately increased 7%
Source: Bloomberg
YoY in 2H13.
In 2013, total industrial feed production is estimated to reach
13.6bn tons, an increase of 7% YoY.
DBC performance in 2013
150%
Feedstock performance: DBC stock gained 19.7% while the

VN Index gained 20.6% in 2013. In 2013, DBC benefited from
140%
decreases in key feed ingredients prices, increases in live hog

prices in 2H13, and stable industrial feed selling prices.
130%
120%
110%
100%
90%
DBC
VNINDEX Index
Source: Bloomberg
www.ssi.com.vn
48
Date: 31.01.2014
Average price of live hog in Northern Vietnam in
2012 and 2013
60,000
Sector trend: benefit from low costs infeed ingredients and

relatively stable live hog prices
55,000
Downward trend in major feed ingredients prices:Global

corn, and soybean ending stock-to-use ratios (SUR) in 2013
2014 season are higher than the last 2 seasons implying a
decline in world prices of corn and soybean during this season
50,000
45,000
40,000
Live hog priceswill fluctuate in a narrow range in respond to

forecastedweak demand in 1H14, and higher demand in
2H14: live hog prices have increased approximately 20%
comparedto the lowest level in May 2013. According to the
Ministry of Agriculture and Rural Development (MARD), livestock
herds in Oct 2013 remained flat comparedto the previous year.
These two factors signifythat livestock farmers were cautious
over the currenthog marketgiven losses incurred in 2012, and
most are reluctant to significantlyincrease hog production. This is
an important feature to stabilize the hog market in 2014 as the
current hog inventory will satisfy demand forthe next few
months.
Sep-13
Nov-13
Jul-13
May-13
Jan-13
Mar-13
Nov-12
Jul-12
Sep-12
May-12
Jan-12
35,000
Mar-12
SECTOR
IN
FOCUS
Source: Department of Price Management Ministry of

Finance
In 2014, total production of industrial feed is expected to reach

14.07mn tons, an increase of 7.5% YoY.
Risks:local animal diseases, and weather conditions in major

feed grains producing countriescan affect feed companies
business performance.
Sector Call: Overweight

Investment view: In 2014, feed producers in the industry including
DBC will benefit from declining key feed ingredients prices, and
stable prices of livestock products. In 2014, DBC is expected to
achieve VND 4,820bn (+ 6% YoY), and VND 263bn (+ 9% YoY),
translating to an EPS of VND 3,355/share. At the current price of
VND 21,700/share, the stock is being traded at 2014PE of 6.47x.
We recommend BUY for this stock with 1-year target price of VND
25,237/share, an upside of 16.3%.
Drivers/catalysts to watch
Extraordinary earnings from real estate segment
Movements of corn and soybean, and livestock products prices.
Favorite stock: DBC
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49
Date: 31.01.2014
DBC (23/01/2014)
Stock
Price Market cap

(VND)
DBC
PER
PBR
EV/EBITDA
(mil USD) 2013 2014E 2013 2014E 2013 2014E

71
www.ssi.com.vn
7.69
8.15
0.9
0.84
5.7
5.31
Dividend yield
EPS Growth
Sales growth
2013 2014E 2013 2014E 2013 2014E
2013 2014E
4.2%
EPS (VND)
5.3% 3,122 3,355 -40%
7%
-5%
6%
Net profit growth

2013
-22%
2014E
8%
50
Date: 31.01.2014
SECTOR
IN
FOCUS
OTHER F&B (Consumer Goods)
NEUTRAL
Giang Nguyen, +84 4 9366321 ext 430, giangntt@ssi.com.vn
2013 Summary:
MSN performance in 2013
150%
Sector Update: Similar to the confectionery sector, the

instant coffee and noodle sectors enjoyed a reduction in
price of key raw materials such as coffee beans, wheat and
cooking oil. According to the International Coffee Organization,
130%
110%
coffee bean price was down by 23.56% YoY on average in 2013,
90%
mainly due to global impaired demand. The Food and

Agriculture Organization (FAO) Oil and Cereal Price Indexes
70%
50%
Jan-13
Apr-13
Jul-13
Vn Index
also decreased by 13.8% and 7.2% YoY on average,

respectively. In the domestic market, coffee beans price also
Oct-13
Consumer Staples
Masan
declined by 13.4% YoY from VND 38,550/kg to VND 34,000/kg

in 2013. Instant coffee makers like VCF thus improved their
Source: Bloomberg
gross margin significantly (gross margin of VCF in 9M13: 28.0%

vs. 9M12: 25.9%).
VCF performance in 2013
Other
F&B
stock
performance:
Both
MSN
and
VCFsignificantly under-performed the entire stock market in

160%
2013 when these two stocks declined by 18.32% and 15.00%,
140%
respectively, in comparison with a 20.62% increases of the VN

Index. In our opinion, the underperformance can be traced to
120%
poor financial performance of MSN and VCF in 9M13 when
100%
these companies invested heavily in product development,

branding and focused on launching new products in 2H. In
80%
60%
Jan-13
Vn Index
Apr-13
Jul-13
9M13, VCFs net sales increased only by 3.6% YoY while net
profit declined by 24.5% YoY. At the same period, MSNs net
Oct-13
Consumer Staples
Instant coffee
sales increased by 11.43% YoY and net profit (VAS) decreased

by 62% YoY (Pro-forma: - 41.9% YoY) due to a significant
Source: Bloomberg
decline in Techcombanks net profit (-84% YoY) in addition to

reasons mentioned above. Operational performance of MSN and
VCF improved in 3Q when sales increased by 21% and 8% YoY,
which led to out-performance at end of 2013 and early 2014.
However, for the entire 2013, they significantly underperformed
the market.
Sector trend: In our opinion, with positive macroeconomic

signals ahead, we expect that consumer staple demand will
gradually recover starting in the second half of 2014 as a result
of recent developments such as no more salary cut, PIT rate
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51
Date: 31.01.2014
SECTOR
IN
FOCUS
reduction, more jobs from the manufacturing industry, especially

from FDI companies, increasing consumer confidence and
consumer credit. MSN and VCF launched new products in 2H13
as well as have plans to introduce more products (convenience
foods and beverages) in 2014. Although the initial feedback on
these new products remains a question mark, we still think that
more products can help MSN and VCF increase sales.
Risks: The increase of key raw materials in 2014, especially

when their prices have declined consistently for the past 2
consecutive years and the global demand has showed signals of
recovery.

Investment view: Although we always hold the belief that Vietnams
food & beverages sector as a potential sector in the long-term,
current valuations are quite high compared with the whole market
(2014 PEs of MSN and VCF are 18.9x and 17.5x). We maintain our
investment view of Neutral on the food & beverage sector in 2014.
Furthermore, as conservative stocks, MSN and VCF will lose some
of their auras when the stock market is expected to be bullish in
2014.
monitor the performances of these two companies new products.
For MSN, Nui Phao mine is the key upside catalyst for earnings in
2014.
Favorite stock: MSN. Although we think that current the valuation of
MSN is reasonable (2014 PE: 18.9x and 2014 PE pro-forma:
15.5x), we see upside catalysts for this stock in 2014. These upside
catalysts can be traced to the significant earnings contribution of Nui
Phao mine when it commences full operation in 2014. We estimate
that the mine will contribute roughly VND 1,546 billion to net profit of
MSNs parent shareholders or 35.6% while this number is zero in
2013. When earnings of this mine flows into MSNs P&L, a high YoY
net profit growth is expected. Additionally, MSNs PE is forecasted to
stabilize and this will spur upsides for this stock. We have a HOLD
view on MSN at 1-year target price of VND 92,614/share.
www.ssi.com.vn
52
Date: 31.01.2014
MSN & VCF (23/01/2014)

Stock
Price
Market cap
PER
PBR
EV/EBITDA
(VND)
(mil USD)
MSN
99,000
3,490
102.1
21.2
n.a
n.a
n.a
VCF
135,000
172
15.0
16.8
3.3
2.8
12.2
2013 2014E 2013 2014E 2013 2014E
Dividend yield
EPS (VND)
EPS Growth
2013
2014E
Sales growth
Net profit growth
2013
2013
2014E
2013
2014E
2013
2014E
n.a
0%
0%
808
4,546
-54.5% 462.6% 23.9% 63.2%
-51.0%
375.8%
11.5
1,500
3,000
9,059
8,109
-20.7%
-19.3%
-10.5%
-10.5%
2.8%
2014E
10.2%
www.ssi.com.vn
53
Date: 31.01.2014
SECTOR
IN
FOCUS
TIRES (Consumer Discretionary)
NEUTRAL
KienTran Nguyen, +84 4 9366321 ext679, kiennt1@ssi.com.vn
2013 Summary: declining natural rubber prices and a

mild recovery in the auto industry fueled the auto
industry
Tire performance in 2013

200%
190%
180%
Tire sector in 2013: The tire industry outperformed the VN

Index and the Consumer Discretionary sector in 2013. The
170%
industry gained 77% while the VN Index and the Consumer

Discretionary sector gained 20.6% and 64% respectively.
160%
150%
140%
130%
120%
Downward trend inproduction materials: Average price of
110%
SVR 3Ldeclined 18% YoY which benefited tire makers in

Vietnam.
100%
90%
Jan-13
Mar-13
May-13
Vn Index
Jul-13
Sep-13
Nov-13
Consumer Discretionary
Tires
Recovery of domestic and global auto industry: According to

Vietnam Automobile Association, 2013 total auto sales in
Source: Bloomberg
Vietnam reached 110,519 units, an increase of 19% YoY.

Additionally, global auto sales reached a record high of roughly
83 mn units (+ 4.1% YoY). China and the US were the major
contributors to the surge in auto sales in 2013. China and the
USs auto sales growth reached 14% and 16% respectively in
DRC and CSMs gross margin versus average NR
price
35.0%
4,500
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
-
30.0%
25.0%
20.0%
15.0%
10.0%
5.0%
0.0%
2009
DRC
2010
2011
CSM
2012
2013
Average price
2013.
Tire stocks performance: DRC and CSM gained 78% and 75%
respectively while the VN Index gained 20.6% in 2013. Tire
stocks performances were mainly supported by decreases in
average prices of natural rubber during 2013, and a slight
recovery in the global auto industry in 2013. In 9M13, DRC and
CSMs revenue totaled VND 2,008 bn (- 2% YoY), and VND
2,332bn (+2.2% YoY). Nevertheless, DRC and CSM gross profit
increased 26% YoY, and 23% YoY respectively, and pre-tax
profit of DRC and CSM increased 28% YoY and 38% YoY
respectively which supporting the gains of DRC and CSM stocks
prices.
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54
Date: 31.01.2014
CSM performance in 2013
210%
190%
170%
150%
130%
110%
90%
Sector trend: demand for tires is likely to gradually increase

in 2014
CSM
02/12/2013
02/11/2013
02/10/2013
02/09/2013
02/08/2013
02/07/2013
02/06/2013
02/05/2013
02/04/2013
02/03/2013
02/02/2013
02/01/2013
According to the IMFs world economic outlook in Oct 2013,

world economic growth was revised down to 2.9% in 2013 and
to 3.6% in 2014, down from 3.1% and 3.8% from Junes forecast
respectively. In 2014, global auto sales are expected to increase
VNINDEX Index
5% YoY.
Source: Bloomberg
Continue to benefit from downward trend of natural rubber

prices: The gap between supply and demand of natural rubber
is expected to expand approximately 10% YoY in 2014. 2014s
DRC performance in 2013
NR output and demand are expected at 11.96mn tons (+ 3.3%
200%
190%
180%
170%
160%
150%
140%
130%
120%
110%
100%
YoY), a result of increase tapping area, and 11.59mn tons (+

3.1% YoY), a result of a recovery in the Chinese auto industry.
DRC
02/12/2013
02/11/2013
02/10/2013
02/09/2013
02/08/2013
02/07/2013
02/06/2013
02/05/2013
02/04/2013
02/03/2013
02/02/2013
02/01/2013
This will fundamentally exert pressure on average price of

natural rubber in 2014. In 2014, average natural rubber prices
are expected to decline at least 4% YoY.
Risks: fluctuations in currency exchange, oil prices, and

changes in policies in major consuming countries will affect the
VNINDEX Index
price of natural rubber and synthetic rubber.

Source: Bloomberg
SVR 3Ls monthly average price in 2012 2013
Sector Call:
4,000
Investment view: In 2014, both CSM and DRC will experience high
3,500
costs from new radial plants which will negatively affect the
3,000
performance of the two companies. The sales of new products may

not reach a break-even point in 2014, thus reducing the bottom line
2,500
Nov-13
Sep-13
Jul-13
Mar-13
May-13
Jan-13
Sep-12
Nov-12
Jul-12
May-12
Mar-12
2,000
Jan-12
SECTOR
IN
FOCUS
SVR3L
of the businesses. In our assumption, DRC and CSMs new radial

plants will operate at 65% and 15% of its capacity respectively.
Nevertheless, the downward trend in natural rubber prices is a
significant factor supporting CSM and DRCs profit margins in 2014.
Therefore, DRC and CSMs revenue and pre-tax profit are expected
Source: Vietnam Rubber Association
to reach VND 3,703bn (+ 30% YoY), VND 3,966bn (+ 27% YoY),

and VND 379bn (- 20% YoY), VND 330bn (- 25% YoY) respectively.
Accordingly, DRC and CSMs 2014 EPS reach VND 3,561/share,
and VND 3,827/share respectively. We recommend HOLD for DRC
and CSM stocks, with 1-year target prices of VND 39,536/share, and
VND 37,697/share respectively.
www.ssi.com.vn
55
Date: 31.01.2014
US producer price index synthetic rubber 2012
Sales of new radial tires of DRC and CSM in 1Q and 2Q14 should
be closely monitored to see whether the new products will reach the
2013
break-even points.
300
290
280
270
260
250
240
230
220
210
200
Global and Chinas monthly auto sales, and Chinas monthly import
of NR should be closely monitor in 2014
Favorite stock: Given negative earnings growth projection of both
but will revisit our view later.
01/11/2013
01/09/2013
01/07/2013
01/05/2013
01/03/2013
01/01/2013
01/11/2012
01/09/2012
01/07/2012
01/05/2012
01/03/2012
DRC and CSM in 2014, we do not recommend these stocks by now

01/01/2012
SECTOR
IN
FOCUS
Source: Bloomberg
CSM, DRC (23/01/2014)

PER
PBR
EV/EBITDA
(VND) (mil USD) 2013 2014E 2013 2014E 2013 2014E
Dividend yield
2013
EPS (VND)
EPS Growth
2014E 2013 2014E 2013
2014E 2013 2014E
2013
2014E
CSM 38,600
124
7.2
2.0
1.84
4.5
4.3
3.9%
3.9%
5,359 3,827
2%
28%
3%
27%
42%
-29%
DRC 41,600
163
9.16 11.62 2.16
1.91
6.28
6.87
3.6%
3.6%
4,518 3,563
0.1%
-21%
0.5%
32%
20%
-21%
www.ssi.com.vn
10.09
56
Date: 31.01.2014
SECTOR
IN
FOCUS
Textile & Garment (Consumer Discretionary)
OVERWEIGHT
Giang Nguyen, +84 4 9366321 ext 430, giangntt@ssi.com.vn
2013 Summary: Remarkable year

Vietnams textile & garment export value
20,000
Industry and Trade (MOIT), Vietnam achieved textile & garment

export value of $US 17,891 mn in 2013, increasing 18.6%
YoY.This growth rate is much higher than that of 7.5% YoY of
30%
25%
20%
15%
10%
5%
0%
-5%
15,000
10,000
5,000
2009
2010
2011
2012
Textile & Garment sector in 2013: According to the Ministry of
2012 thanks to slight recoveries of Vietnams key export markets

such as US, EU and Japan and low labor cost advantage of
Vietnam over its main competitors (China and Indonesia). 2013
saw influxes of investment waves to Vietnams textile and
garment sector in order to reap the future benefits of the Trans
2013
Textile&Garment Export Value - Total,

Real, Vietnam ($mn)
YoY growth (%)
Pacific Partnership (TPP). For more details, please refer to our

previous sector updates.
Source: GSO, MOIT
Textile and garment stock performance: Textile and garment

sector underwent an extremely successful year in 2013 when it
increased by 91.16%, much higher than 20.62% of the VN
Textile & Garment performance in 2013
Index. Almost all textile and garment tickers achieved strong

performances, including TCM (278%), KMR (122%), GMC
200%
180%
140%
(62%), TNG (49%) and EVE (24%). In our opinion, this success
can be traced to two factors: (1) Positive financial performances
120%
of these companies in 2013, given that some of them suffered
160%
100%
80%
Jan-13 Mar-13 May-13 Jul-13 Sep-13 Nov-13
Vn Index
Consumer Discretionary
Textile & garment
Source: Bloomberg
losses in 2012 (such as TCM and KMR), creating a very low

base for their share prices at the beginning of 2013; (2)
Investors speculation on the positive impacts of the TPP
negotiations on Vietnams textile and garment companies.
Best performer: TCM (+278%). Factors for the extremely high
performance of TCM includes (1) Positive financial results in
2013 with a net profit estimate of VND 128.7 billion when it
TCM performance in 2013
incurred a loss of VND 19 billion in 2012; (2) Boast a vertically

integrated supply chain, TCM is qualified for the yarn forward
480%
principle of the TPP negotiations, thus, enjoys 0% import tax to

the US market; (3) A favorite stock of retailed investors; (4)
380%
280%
Speculation on the easing of FOL because TCMs foreign

ownership room has reached maximum capacity and the
180%
80%
Jan-13
Company may raise more equity; (5) Given 2013FY earning

Apr-13
TCM
Jul-13
Oct-13
surge, TCM was trading at quite low PE, less than 7x; and (6)
Possibility of raising cash dividends for 2013 when the Company
VN Index
Source: Bloomberg
www.ssi.com.vn
is expected to exceed its earnings target by 43%.
57
Date: 31.01.2014
SECTOR
IN
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2014 Outlook: Another positive in the works
Sector trend: In our opinion, in the long-term, Vietnams textile

and garment outlook is forecasted to be a powerhouse thanks to
foreign textile and garment investment movement from China to
countries with lower labor cost such as Vietnam, Bangladesh,
etc. Furthermore, it is widely believe that Vietnamese textile and
garment
employees
are
skillful
and
hard-working.
The
infrastructure accommodating Vietnams textile and garment

sector which includes water and electricity supply, waste water
treatment, etc. is more enhanced than that of other countries
that have lower labor cost than Vietnam, like Bangladesh and Sri
Lanka.
In 2014, Vietnams textile and garment export is expected to
expand 11.8% YoY to $20 billion, according to the MOIT. Its
rationales behind the expansion are the recoveries of main
import economies, therefore increasing demand for apparel
products and additional export sales from new investments in
this sector. Currently, the TPP negotiations are expected to
finalize in April 2014 which if it is true will help push textile and
garment export of Vietnam to its largest market, the US.
Risks: Tough competition among textile and garment

companies in terms of labor, raw materials and other resources.
Low profit margin. Further delays in the TPP negotiations.

Investment view: Overweight thanks to its positive long-term
outlook coupled with an encouraging financial landscape in 2014.
Furthermore, the valuation of textile and garment stocks are quite
low in comparison with the whole market (2014 PEs of TCM and
EVE are 6.87x and 7.18x). We think there is still room for these
stocks prices to further increase. However, investors should single
out stocks with solid fundamentals and have not increased
significantly in recent time and be more cautious with stocks that
have already hiked sharply.
Drivers/catalysts to watch: The recovery of global and local
demand for textile and garment products. The easing of FOL for
stocks that currently foreign ownership limit is at maximum capacity
such as TCM and EVE.
Favorite stock: EVE and TCM. We like these stock because both
have solid fundamentals and reasonable valuations. For EVE, we
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Date: 31.01.2014
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think there are some upside catalysts which will derive from (1)
expected demand recovery in 2014; (2) positive outlook for its
padding business when Vietnam joins the TPP and recently Korea
has expressed its intention to join the TPP negotiation. Our
investment view is BUY with 1-year target price of VND 33,787,
which indicates a 16.5% increase from the market price of VND
9,000/share on 20 Jan 2014. However, investors should take into
consideration of the very low liquidity profile of this stock. For TCM,
the stock has increased significantly in 2013 and therefore we are
convinced that the stock price growth will subside in 2014. Investors
may buy TCM on price weakness, at around VND 21,500/share.
TCM & EVE (23/01/2014)

Stock
Price
Market cap
PER
PBR
EV/EBITDA
(VND)
(mil USD)
TCM
26,500
62.4
7.2
7.5
1.3
1.6
5.0
EVE
29,000
38.3
9.1
7.7
1.0
0.96
4.8
2013 2014E 2013 2014E 2013 2014E
Dividend yield
EPS (VND)
EPS Growth
Sales growth
Net profit growth
2013
2014E
2013
2014E
2013
2014E
2013
2014E
2013
2014E
5.2
4.9%
5.7%
2,883
3,539
n.a
22.7%
15.6%
4.9%
n.a
22.7%
4.1
3.5%
5.2%
3,195
3,759
4.8%
17.6%
15.6%
9.1%
20.1%
17.4%
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59
Date: 31.01.2014
SECTOR
IN
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BANKING (Financials)
UNDERWEIGHT
Phong Tran, +84 838242897 ext 1951, phongtt@ssi.com.vn
2013 Summary:
Banking performance in 2013
Banking sector in 2013: On the road to recovery as

credit growth rebounded late in the year coupled with
Vietnam Asset Management Company (VAMC) debt
purchasing program
2013 Earnings preview of listed banks:Listed banks saw

modest profitability in 2013, with only a few winners. Among
the winners are STB (+105% YoY) in earnings growth while
EIB & CTG saw negative earnings growth (-60% YoY&-7%
Source: Bloomberg
YoYrespectively). The decrease in earnings was mainly

contributed by the increase in credit provision and the
decrease innet interest incomegiven the NIM reduction.
VCB performance in 2012
Source: company data
Source: Bloomberg
Net Interest Margin (NIM) trends: During the year, the SBV
implemented a 2% deduction in policy rate and lending rate for
encouraged sectors to below 13% from 15%. Simultaneously,
deposit rate ceiling decreased around 0.5% from 7.5% to 7%.
Private commercial banks (STB and MBB) saw higher NIM than
state owned commercial banks (SOCBs) as they targeted SMEs
and centered on retail and accepted higher risks in return while
SOCBs (such as VCB) adhered to the SBVs policy to provide
support to encouraged sectors. In general, the entire banking
sector came under narrowed NIM pressure as (i) lending rate
curtailment outpaced deposit rate, (ii) fierce competition in credit
business to attract reputable clients coupled with the SBVs
request in lending rate reduction in order to support the corporate
Source SBV
Banking systems Earnings Trends
sector in difficult conditions.

Asset quality trends& VAMC: Due to difficult macroeconomic
conditions during the year, the corporate sectors (ex. Property
and construction sector, etc.) experienced widespread
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Date: 31.01.2014
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IN
challenges,therefore commercial banks had to book more credit

provision as the quality of loan books deteriorated. Another factor
FOCUS
that contributed to dormant business performances for banks was

that the corporate sector remained conservative and borrowed
less as they mainly maintained identical production capacity as
the previous year, while commercial banks were reluctant to lend
due to increasing NPLs and tightening regulation by the SBV.
Source: FSs bank
Source: companies data

The banking system reported increasing NPL from 2009 and
remained at 4.67% at end-11M2013. Given comprehensive
banking sector reform, the SBV issued measures to mitigate the
systems NPLs, such as Circular 02/2013/TT-NHNN on loan
reclassification and established VAMC to repurchase banks
NPLs to support commercial banks on NPL resolution.
Source: SBV
So far about 35 credit institutions have sold NPLs to Vietnam

Asset Management Company (VAMC).According to the SBV,
credit institutions that have sold their NPLs to VAMC include
SCB, Sacombank, PGBank, SHB, Agribank, BIDV, Maritime,
Techcombank, GPBank, Navibank, etc.Many credit institutions
did not have to sell their debts and still were able to mitigate their
NPL ratios to below 3%. According to the SBVs governor Nguyen
Van Binh, as of December 31, 2013, VAMC has purchased some
VND40 trillion worth of bad debts from commercial
banks,exceeding itsVND35 trillion target for the entire year.
Large listed bankshave centeredtheir efforts on dealing with bad
debts. According commercial banks (STB, CTG and VCB) their
NPL ratioscontracted at the end of 2013 compared with level of
bad debt at end-3Q13 after write off or VAMC had purchased of
bad debts.
2013 Banking data: Systems credit growth gained

momentum by 4Q2013
2013 system credit growth was reported at 12.56% (10M13:
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Date: 31.01.2014
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7.18%, 11M13: 8.16%). We estimate that VND denominated

credit growth was 13.5% YTD while USD-denominated fell
around 16.5%. This is the second slowest growth over the past
five years. As of November 2013, loans to the agricultural sector
had risen 17% while loans to the high-tech industryincreased to
24.5%. We saw that systems credit growth added 4% in Dec-13
(the same level compared Dec-12) driven by a surge in credit
growth among large listed banks (VCB, CTG, and BIDV).
Whereas,tier 2&3 banks (such as OCB) saw higher growth with
1.5x.
Banking stock performance: The VN Index ended2013 on an
upbeat
note,
+20.6%
given
encouraging
macroeconomic
conditions (low CPI andtrade surplus) and strong FII inflows. The
financial sector was thetop laggard and underperformed the VN
Index, when it forfeited 5.74%. The banking sector contracted
7.1%. Among the underperformers were EIB (-21.9%), ACB (11.4%), CTG (-11%) and VCB (-3.6%). The winners areonly MBB
(3.9%) and STB (0.38%). Reasons for negative stock
performance, in our view, could have been fuelled by
narrowed NIM coupled with rising credit provision which
impaired overall earnings.
Among listed bank stocks, MBB is one of most profitable bank
with highest ROE&ROA (ROE: 18%, ROA: 1.4%) than peers
(VCB: ROE~9.4%, CTG: ROE ~12%, STB: ROE~14%). In
addition, the bank has cheap funding cost to support the banks
high NIM (~3.8%) and sustainable LDR (~60%) which fuel the
banks growth for next following years. At the end of 2013, MBB
share price is trading at P/E of 5.9X and P/B of 1X, relative cheap
valuation than average sector valuation (2013 P/E of 12X and
2013 P/B at 1.12X).
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62
Date: 31.01.2014
SECTOR
IN
FOCUS
2014 Outlook: Improve loan growth and relax

Circular 02 coupled with VAMC are keys to a
sector revisit by 1Q14-end
Sector trend:
Overall, we saw encouraging measures from the policy makers to

support the economy and the banking sector (extendingFOL for
thebanking sector, easing of Circular 02, and VAMCs
subsequent actions after purchasing bad debts). Additionally, the
SBV have issued Directive 01 which stipulates partial monetary
policy easing in order to support the system credit growth (12%14% target for 2014) and the economy.
Credit growth: given the partial monetary policy easing by the
SBV, we continue to hold the conviction that higher industry loan
growth (ranging from 13%-14%, double GDP target growth of
5.8%) will likely materialize in 2014 as room for growth might
be rooted in (i) infrastructure sector (given guidance of
government), (ii) USD lending, (iii) loans to encouraged sectors
(such as agricultural sector) and (iv)consumer lending. In
4Q2013, severallisted banks (CTG, VCB andEIB) have
boosted lending to theinfrastructure sector as they many
havecooperated with leading infrastructure companies (CII,
Vinacomin, PetroVietnam Exploration Production Corporation
PVEP and National Power Transmission Corporation - EVNNPT).
Consumer lending (mortgage loan, credit card and cash loan) has
seen strong growth in the past couple years. Among those, STB
has benefitted from this trend as it has been the leader in retail
bankingsupported by widespread branch networks.
NIM: the sectors NIM is nearly at an all-timelow; the sectors LDR
receded and exerted additional pressure on NIM. Among listed
banks, MBB & STB boasts stronger NIM given their superior
funding and widespread branch networks.
Earnings Outlook: Our view over Vietnamese banks in 2014 is
less negative than 2013. Our base-case scenario involves NIM
stabilization,
a
pick-up
in
loan
growth,
and
the
increaseinnoninterest income (such as fee service income and
FX income). In addition, continuouscost control and a benign
credit cost environment should be a support factor for Vietnams
banks earnings in 2014.
Investment view: Improvingloan growth and the easing of
www.ssi.com.vn
63
Date: 31.01.2014
SECTOR
IN
FOCUS
Circular 02 coupled with the effectiveness of VAMC is key to

spark a re-rating of the banking sector later in 2014. Additionally,
in terms of valuation, listed banks continued to hover around the
bottom with P/B of 1.1x at end-2013 vs 1.4X at end -2012. We
continue to prefer quality banks (MBB and VCB). We still favor
STB in terms of strong NIM, and its leading retail banking position
supported by the largest branch network among JSCBs.
Favorite Stock: Given the strength and position of each
commercial banks and government spending during the next 2
years, we believe that SOCBs (VCB, BIDVandCTG) will be
leaders in their respectivepositions as they have gradually gained
additionalmarket share while improving risk management practice
(applying BASEL II) and increase capital strength via sellinga
majority of their stakes to foreign strategic partners.
Simultaneously, we think that the consolidated banking system
will accelerate for this yeargiven the SBVs requestand private
commercial banks (JSCBs) will face more challenges and
underperform SOCBs. However, we believe that after 2015,
JSCBs will be in better position (in terms of total asset and branch
networks) after an expected series of mergers and acquisitions.
Among JSCBs, STB remains our favorite bank given itsleading
retail banking and widespread branch networks.
Risks:
Credit provision headwind and credit loss persist: banks will

continue to face rising credit provision given guidance by the SBV
to forcecommercial banksto comply with more risk management
practices. However, pressure on credit provision booking will
mitigate gradually given the expectation as the SBV will relax
Circular 02 and supported by VAMC.
Driver & catalyst to watch
Easing of the banking sector foreign ownership limit

(FOL): On Jan 3rd, 2014, the Government issued Decree
No.01/2014/ND-CP replacing
Decree No.69/2007 coupled
withthe SBVs guidance which aims to increase the single

foreign ownership in Vietnamese banks and broaden the
definition of strategic investors, all of which we deem to
be positive catalysts for Vietnamese banks.
Revisions of Circular 02 (might delay to apply Credit

Informative Center CIC rating for all banks): The SBV
issuance ofDirectiveNo.1 is a conspicuous signal ofeasing
Circular 02 for commercial banks. Circular 02 once fully
applied, will require banks to adhere to closer international
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64
Date: 31.01.2014
SECTOR
IN
FOCUS
practices in measuring bad debts. This would likely to double

system NPLs and increase provision in our opinion. Given the
lack of enthusiasm from commercial banks toward Circular
02,in the midst of a dormant economic activities and stagnant
corporate environment, the SBV might select to relax instead
of pushing Circular 02.
Source: SBV& SSI Research
Effectiveness of VAMC: potential easing of Circular 02 will

prompt VAMC to reduce its bad debt purchasing program
from the initial target of VND 100-150 trillion to VND 70-100
trillion. VAMC has attempted to accelerate selling bad assets
in 2014. Potential buyers of these bad assets will come in the
form of property developers rather than foreign investors
given the lack and strict regulations of property ownership for
offshore investors
Banking M&A might accelerate after a stagnant

2013.PotentialM&A cases are expected.Weak banks would
be merged or sell 100% stake to foreign investors.
BIDV listing: BIDs market capital is around US$ 2.5 bn,

BIDV will become the
th
6 biggest stock in terms of market
capital which will increase listed banks weight from 20% to

approx. 27%.
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65
Date: 31.01.2014
Ticker
1Y TP (VND)
Current
Market
Price
on
20th
Jan
2014
(VND)
ESTIMATES
Net
Profit
2013
(VND
bn)
Net
Profit
2014
(VND
bn)
%
YoY
BV
2013
BV
2013
EPS
2013
EPS
2014
P/E
2013
P/E
2014
P/B
2013
P/B
2014
ROE
2013
ROE
2014
ROA
2013
ROA
2014
Upside
/Downside
ACB
13,500
16,400
825
1,209
47%
13,885
13,972
880
1,289
18.6
12.7
1.2
1.2
6.4%
9.3%
0.5%
0.7%
-17.7%
CTG
18,400
16,300
5,826
5,756
-1%
16,710
16,760
1,538
1,519
10.6
10.7
1.0
1.0
12.0%
9.1%
1.1%
1.0%
12.9%
EIB
14,000
13,200
773
1,170
51%
12,939
13,268
626
947
21.1
13.9
1.0
1.0
4.9%
7.2%
0.5%
0.7%
6.1%
STB
20,700
20,300
2,100
2,184
4%
13,280
14,194
1,690
1,758
12.0
11.5
1.5
1.4
14.0%
12.8%
1.3%
1.2%
2.0%
VCB
27,800
29,200
4,125
4,419
7%
19,621
20,544
1,780
1,906
16.4
15.3
1.5
1.4
9.4%
9.5%
1.0%
1.0%
-4.8%
MBB
17,000
13,300
2,550
2,785
9%
13,682
13,459
2,266
2,349
5.9
5.7
1.0
1.0
18.0%
17.8%
1.4%
1.5%
27.8%
14.1
11.7
1.2
1.2
Average
www.ssi.com.vn
8.2%
Rating
On restructuring
process, less
confidence in
earnings than
peers given
the potential credit
loss from MrKien
Exposure in
interbank loss
Improved risk
management
practice
Lack confidence
in earnings than
peer given
declining NIM and
rising credit
provision
Strong recovery
back by personal
loan and
consumer lending,
high credit growth
and strong NIM
Better quality than
peer, high credit
growth
and sustainable
earnings
cheap funding
cost and
Good track record
in achieving
earnings target
66
Date: 31.01.2014
CIRCULAR 02 BRIEF: Circular No. 02 of the State Bank requires banks in debt classification, the level and methods
of credit provision and the use of provision reserves to handle risks in the operation of credit institutions, foreign bank
branches foreign will be effective from 1-6-2014.
According to the Circular, the central bank requires at least once a quarter, in the first 15 days of the first month of
each quarter, credit institutions and branches of foreign banks must classify debt , off-balance sheet commitments at
the end of the last working day of the previous quarter and send the results manually to Credit Information Center
(CIC) . CIC is responsible for the summary and provide for credit institutions and branches of foreign banks a list of
customer with debt group at highest risk for credit institutions and branches of foreign banks adjust results loan
classification, provisioning and use of reserves to handle risks.
In addition, the central bank also requires credit institutions and branches of foreign banks to develop credit rating
systems to rank internal customers on a regular basis or as needed, for grant credit approval, credit quality
management, provision policy development consistent with the scope of activities and the actual situation of credit
institutions and branches of foreign banks
Source: SBV& SSI Research
www.ssi.com.vn
67
Date: 31.01.2014
SECTOR
IN
FOCUS
INSURANCE (Financials)
NEUTRAL
Phong Tran, +84 838242897 ext 1951, phongtt@ssi.com.vn
2013 Summary:
Insurance performance in 2013
2013 Earnings preview of listed insurers - Yearly earnings

target on track: most of the listed insurers is expected to
achieve their yearly targets as 9M13 earnings results was
promising and reached nearly 80% of targets for the whole year,
largely contributed by investment income. Among those, BIDV
Insurance (BIC) and BMI saw positive growth (+8% & +88%
respectively) in 9M13 given improved underwriting profit
compared with underwriting losses in the previous year. In
addition, BIC also consolidated its subsidiaries earnings to
support its own earnings for the first nine months of the year.
Source: Bloomberg
Premium & underwriting profit (UP) trends: Non-life listed
BVH performance in 2013
insurers such as Bao Viet Insurance, PVI, BMI, BIC made gains
in regular premium, claim improvement and operating cost
efficiencies which led to underwriting profit (UP) and achieved
positive results in 3Q13. In terms of life premium growth, BVH
enjoyed high premium growth of 20% YoY in the life business
during the period.
2013 Share price performance and valuation: the financial

sector and the insurance sector were the worst performers in
Source: Bloomberg
Vietnam
Insurance
30/9/2013
Premium
2013 with negative performances of -5.47% and -4.8%. Best

performing insurance stock was BIC (+73.29%) while BVH
2009-
underperformed -6.2%. At year-end 2013, Listed insurance

stocks were trading at 2013 P/B of 1.0X, near bottom compared
with historical valuation of 1.2-1.5X P/B. In terms of P/E, listed
insurance stocks were trading at 13.2X.
INSURANCE INDUSTRY MARKET REVIEW 9M13
Despite the economic downturn, the insurance industry experienced

steady growth in both life & general insurance. According to data
from the Association of Vietnamese Insurers, 9M13 total premium
revenue growth of the whole market saw a moderate growth of
Source: AVI
13.4% and yearly target growth is expected to achieve nearly 13%,

(2012 premium growth: 13%). Among the insurance segments, the
life insurance segment performed well with a growth rate of 20%
YTD.
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68
Date: 31.01.2014
SECTOR
IN
FOCUS
Market share by total direct premium
GENERAL INSURANCE MARKET

Total direct premium growth rate saw modest growth in 2013
In 1H13, non-life insurers experienced stagnant demand as 1H13
premium totaled VND 12,122 bn, a modest growth of +6% YoY,
however, growth rate was expected to gradually recover in 3Q2013.
According to the Association of Vietnamese Insurers, total direct
premium of non-life market reached VND18,228bn, up 8.3% YoY in
source: AVI
9M13. Baoviet Insurance maintained the market leader with total

direct premium amounting to VND 4,118 billion, adding 3.4% YoY.
Growth rates was driven by Fire & Explosion Insurance,
Personal Accident & Health Insurance
Premium revenue by product lines

Dire economic conditions from 2012 carried over to 2013. With
corporate investment cuts and difficulties facing the marine &
aviation industries led to significant decreases in the growth rates of
these products. According to the Association of Vietnamese
Insurers, Hull and Protection & Indemnity and Aviation, insurance
premium reduced by 6% & 35% YoY respectively, whereas Fire &
Explosion Insurance premium increased by 60.38% YoY. Automobile
insurance premium slightly increased by 8%. As insurance demand
Source AVI
from the corporate sector significantly decreased, insurers shifted

attention to develop the retail/individual segment. Premium revenue
of health and personal accident insurance, credit & financial risk
insurance achieved positive growth rates of 27% YoY, and 25% YoY
respectively in 9M2013.
Loss
ratio
companies
of
leading
insurance
Rising claim expense given significant damages from fire,

explosion and flood in 2013
According to the Association of Vietnamese Insurers, 9M13 direct
insurance claims reached VND 7,429 billion. The market average
loss ratio increased to 41% from 39% in end-2012. Despite insurers
efforts in maintaining claim ratio in the context of rampant calamities,
floods, damages of fire and explosion in 9M13, we saw claim ratio
increased in 4Q2013, combined with payment risk and insurance
fraud risk which remained key concerns. Among the products with
Source: AVI
www.ssi.com.vn
high claim ratio were automobile insurance (61%), Hull & P & I
insurance (141%).
69
Date: 31.01.2014
SECTOR
IN
Market share by new business premium
LIFE INSURANCE
Market
FOCUS
players
focused
on
product
development
and
distribution channel diversification to stay ahead of the

competition. Strong competition in the life insurance market was
witnessed in 9M13, reflecting the launches of new products since the
beginning of the year. Life insurance companies constantly
developed and refreshed products by supplementing more functions
to cover education and medical expenses, with the intent of meeting
the higher demand of customers. Insurers also concentrated on
strengthening distribution capacity by expanding operations network
to more cities and provinces. As the most important distribution
channel of Vietnam life insurance market, agent channel remained
insurers top priority, and agents were often provided with high
source: AVI
quality training. Bancassurance, which proved to be a high potential

distribution channel, offered diversified cooperation forms, including
exclusive distribution agreements between commercial banks and
life insurers.
Figure 6: Agents of top leading life

insurers
New business growth rate significantly increased: According to

data from the Association of Vietnamese Insurers, 9M13 new
business premium of the market reached VND 4,667bn, up by 28.8%
YoY, while new insurance policies growth in 9M13 was 24% YTD.
In terms of market share by new business premium during the
period, new business market share of the top five leading companies
remained significantly high with 81.3% market share (9M12: 82%
market share). Baoviet Lifes new business market share continued
to increase notably, chipping away the market share gap between
Baoviet Life and Prudential.
source: AVI
2014 Outlook:
Sector trend:
Life sector (Bao Viet Life) Growth remains resilient in 2014
given:
(i) Most insurers will focus on agency recruiting/training,
promoting protection-type products) and develop more
distribution channel (bancassurance, agent, online) to
maintain high growth.
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70
Date: 31.01.2014
SECTOR
IN
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(ii) Leadership changes among the bancassurance channel

suggest that the markets focus will shift to New Business
Insurance (NBI) growth potential in 2014 along with Circular
115 (*) guidelines for voluntary pension fund insurance.
Voluntary insurance will generate opportunities to develop
new products and explore new revenue pool for life
insurance companies in the medium-tern.
Thus, we think Bao Viet Lifes higher NBI growth potential (>40%
p.a.), leveraged by strong agency channel/universal life
product/mass client base, should support its price and spur a rerating.
(*) On 20 August 2013, the Ministry of Finance issued Circular
No.115/2013/TT-BTC guiding the implementation of pension
insurance and voluntary pension fund, effective from 15 October
2013. Circular 115/2013/TT-BTC provides key guidance on:
Conditions for the enterprises carrying out products of pension

insurance; products of pension insurance; pension insurance
account;
Requirements on insurance agency, insurance commission and

distribution of pension insurance product;
Requirements on solvency capacity and insurance professional

reserve of insurance enterprises;
Setting up and management on voluntary pension fund, in which

limitation on asset investment of voluntary pension fund must be
noted
Non-life sector (including Bao Viet Insurance, PVI, BMI, BIC)

(i) Challenges:
Claim trends: significant improvement of industry combined
ratio reporting in 2014 is very unlikely.
Interest rate trends: Interest rate will remain shallow in 2014
(ii) Opportunities:
Non-life insurance will benefit from the governments policy in
spurring growth through infrastructure spending. Infrastructure
spending will be one of growth drivers as insurance demand
for aviation, oil refinery plan and electricity projects is expected
to increase and this will serve as an opportunity for insurance
companies combined with niche sector like agricultural which
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71
Date: 31.01.2014
SECTOR
IN
FOCUS
growth remains high.

The market is expected to hold solid until 2015 as
opportunities will arise for top leading insurers to gain
additional market share via M&A when SOEs divest their
investments from non-core businesses (including the
insurance business), which among those are Vinacomin,
Vietnam Airlines, PVN and Lilama issued plans to divest from
their investments in non-life insurers (such as Petro Vietnam
Insurance (PVI), Bao Minh Insurance (BMI), SHB-Vinacomin
Insurance and Aviation Vietnam Insurance (AVI). Besides,
non-life insurers margin is expected to recover as fee
competition has gradually reduced among non-life insurers.
They have shifted focus to upgrading products and services
and shifted their focus to higher margin products with higher
demand such as personal accident and health insurance.
The stock market is expected to recover in 2014 which will
help sustain insurance companies equity investment income
as some insurers will make provision reversal for the entire
year
Risks:
Circular No 101/2013/TT-BTC guiding the management and use of

insurance reserve funds to protect insured people. This regulation
requires insurers to increase their insurance reserve fund from 0% to
5%. The effective date is 15Sep13. As a result, provision cost of
insurers will increase and might reduce the money allocation for
other operation (such as claim compensation or investment
operations). We will see more impact from this Circular in 4Q13 and
2014 earnings.
Sector Call: NEUTRAL

Investment view: We believe sectors fundamental upside for listed
insurers will gradually develop from underwriting losses to a
sustainable improvement, personal health expansion and new
product offering (pension fund etc). We believe leading listed
insurers (Such as Bao Viet Holding, PVI Holding and BIC) will deliver
more earnings improvement through profit source diversification.
Drivers/catalysts to watch
M&A activities in Vietnams insurance industry: Vietnam

insurance business is considered promising in the eyes of
overseas companies. Many foreign companies plan to
penetrate Vietnams insurance industry by way of M&A
We assume that M&A will continue to be an increasing trend in
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72
Date: 31.01.2014
SECTOR
IN
Vietnam in the upcoming years and the insurance industry is no

exception. The market is expected to hold solid until 2015 as
opportunities will arise top leading insurers to gain additional market
share when SOEs divest from their investments from non-core
businesses (including the insurance business).
FOCUS
Table: List SOE divest non-core business

SOEs
Equity
Investment
% Stake
Shares
Petro
Vietnam
Petro Vietnam
Insurance (PVI)
39.78%
83,149,740
SHB Vinacomin
Insurance (SVIC)
19.8%
5,940,000
VNAINSURANCE
10%
5,000,000
Vietnam
Airline
Bao Minh
Insurance (BMI)
5.63%
4,253,200
Lilama
VNAINSURANCE
10%
5,000,000
Vinacomin
Source: company data

Favorite stock:
BVH still owns certain advantages among listed insurers given (i)
sustainable earnings compared with peers given diversified income
sources (Life/non-life/Investment& and banking), (ii) exceptional
growth in life operation & new business income and bancassurance.
Additionally,
the
company
is
leveraged
by
strong
agencychannel/universal life product/mass client base. In our view,
insurance underwriting improvement coupled with robust growth
in the life business will be key drivers for BVHs share
performance in 2014. However, BVH valuation is very demanding:
At our estimate of 2014 NP growth of 27% YoY, BVH is trading at
17.6X 2014 P/E & 2.3X 2014 P/B.
Catalyst to watch: Bao Viet Holding is expected to sell a 20% stake
of BaoViet Bank to foreign investors to reduce its stake in Bao Viet
Bank from 52% to 32%.
Among small mid cap insurers, we like BIDV Insurance given its
capital efficiency (2013 ROE~12%) compared with its peers (BMI:
3.6%, PVI: 4.9%).In our view, their transformation into a holding
company (both non-life, reinsurance and financial investment) will
generate sustainable income with higher premium growth. Currently,
BIC is trading at 2014P/E of 7.9X and 2014P/B of 1.0X. Catalyst to
watch: BIC has no ties with any foreign strategic partner and has
plans to sell a 20% stake to a foreign strategic investor in order to
increase its capital capabilities in 2014.
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73
Date: 31.01.2014
ESTIMATES
Current
Market
Price
on
20th
Jan
2014
(VND)
Net
Profit
2013
(VND
bn)
Net
Profit
2014
(VND
bn)
Ticker
1Y TP (VND)
BVH
42,000
44,200
1,347
%
YoY
BV
2013
BV
2014
EPS
2013
EPS
2014
P/E
2013
P/E
2014
P/B
2013
P/B
2014
ROE
2013
ROE
2014
ROA
2013
ROA
2014
Upside
/Downside
1,711
27%
18,601
19,532
1,981
2,516
22.3
17.6
2.4
2.3
10.9%
13.2%
2.8%
3.3%
-5.0%
PVI
18,500
19,000
315
377
20%
28,570
29,998
1,345
1,609
14.1
11.8
0.7
0.6
4.9%
5.5%
2.8%
3.1%
-2.6%
BMI
13,800
12,800
84
91
9%
31,826
32,138
1,108
1,210
11.5
10.6
0.4
0.4
3.6%
3.8%
2.1%
2.3%
7.8%
BIC
15,000
12,400
91
104
14%
11,818
12,409
1,375
1,573
9.0
7.9
1.0
1.0
11.8%
13.0%
5.8%
6.3%
21.0%
1,836
2,283
24.3%
14.3
12.0
1.1
1.1
8%
9%
3.4%
3.7%
Average
Source: SSIestimates
www.ssi.com.vn
74
Date: 31.01.2014
SECTOR
HEALTH CARE (Pharmaceuticals)
IN
FOCUS
Minh Dinh, +84 8 38242897 ext 2148, minhdd@ssi.com.vn
OVERWEIGHT
2013 Summary: One of the best-performing sector

Healthcare sector performance in 2013
Outperformed the VN Index: The healthcare sector gained

160%
50.72%, compared with 20.62% of the VN Index. All major
150%
pharmaceutical companies saw their stock price advance, such as

DHG (+60.6%), TRA (+84.9%), DMC (+63.7%), OPC (+60.4%).
140%
130%
120%
Encouraging business performance: Most listed pharmaceutical
110%
companies attained double-digit growth. Despite stiff competition,

especially from foreign products, local enterprises maintained their
100%
90%
competitiveness and found appropriate strategies to develop their

businesses.
80%
Vn Index
Health Care
Source: Bloomberg
9M13 earning results of healthcare companies

(VND bn)
Net sale
DHG
2,387.7
TRA
1,277.3
DMC
1,006.1
IMP
607.1
OPC
410.2
PMC
256.8
JVC
347.9
DCL
490.7
17.9%
28.4%
15.4%
8.0%
13.2%
19.3%
3.8%
7.8%
450.8
120.1
75.0
60.6
47.6
39.4
23.9
29.7
YoY growth
25.5%
43.8%
10.5%
-7.6%
19.2%
23.6%
-63.9%
239.5%
12M Trailing P/E
12.8
12.1
10.4
9.1
12.3
8.3
7.3
7.0
YoY growth
Net income attributable to

shareholders
Stock prices influenced by information about bonus share:

Apart
from
encouraging
business
results,
share
prices
of
pharmaceutical companies are influenced by information about

bonus share.
-
TRA (share price advanced by 84.9%): In 2Q13, the company

increased charter capital from VND 123.5 bn to 246.8 bn by
offering 2:1 bonus share and issuing 6.17 mil shares at VND
20,000/share.
DMC (share price advanced by 63.7%): the company will offer

2:1 bonus share in Jan 2014.
PMC (share price advanced by 112.5%): the company offered

2.27:1 bonus share in 1Q13. In addition, share price increased
because the company was undervalued. P/E was only 4.3x by
the end of 2012.
www.ssi.com.vn
75
Date: 31.01.2014
FOCUS
Pharmaceutical consumption
7,000
6,000
30%
Pharmaceutical consumption
YoY growth
5,000
USD mil
SECTOR
IN
25%
15%
Negative impact from Circular 01/2012/TTLT-BYT-BTC: The
10%
Circular regulates medicine bidding process at hospitals and took

effect from 1 June 2012. In conformity with the circular, if similar
3,000
1,000
5%
0%
Source: Business Monitor International (BMI)
about bonus share, together with the fact that the stock was
undervalued at the end of 2012 (1Y forward P/E was 8.3x).
20%
4,000
2,000
DHG (share price advanced by 60.6%): There was no bonus

share. However, stock price increase was triggered by a rumour
generic drugs are bid for sale to hospitals, the cheapest drug will win
the bid.
Circular 01 aims to save health insurance budget and reduce
medicine cost borne by patients, however, it fails to distinguish
medicine quality during the bidding process as quality of cheap
medicines, even when certified with WHO GMP, is usually inferior.
However, such regulation will prompt profit margin of pharmaceutical
companies to decline, especially those depending on medicine
purchase from hospitals.
The circular had the most significant impact on IMP as 59% of
revenue was sales to hospitals. The effects on DHG, TRA, and DMC
were less significant because sales to hospitals account for a
maximum of 30% of total revenue.
2014 Outlook
Industry growth is expected to reach 17% p.a. during 20142017, according to BMIs forecast. As a result, sales of leading
pharmaceutical companies in Vietnam are expected to advance by
at least 15% annually.
Possible amendment of Circular 01: Criticisms have been raised
against Circular 01. Doctors report that patient treatment duration is
prolonged because they can only purchase the cheapest medicines
which are usually inferior in quality.
Pharmaceutical companies and doctors are requesting for an
amendment of Circular 01. In their opinion, hospitals should
purchase high-quality medicine at reasonable prices, not cheap
medicine with inferior quality. As a result, it is expected that
amendment of Circular 01 will satisfy two requirements: i) prevent
the sales of cheap and inferior medicines to hospitals, ii) give priority
to domestic medicines.
The plan to raise foreign ownership limit to 60%: At present,
foreign ownership at most pharmaceutical companies has reached
49%, the maximum limit. The plan to raise foreign ownership limit to
60% will create upside catalysts for pharmaceutical stocks.
However, it is likely that the companies must get approval from
www.ssi.com.vn
76
Date: 31.01.2014
SECTOR
IN
shareholders before they can increase foreign ownership limit.

State Capital Investment Corporation (SCIC) will divest from
pharmaceutical companies in 2014-15, except DHG. If SCIC
divests, share liquidity will accelerate and it is likely that the plan to
increase foreign ownership will not be rejected by shareholders. In
addition, certain M&A cases within the industry can be expected.
FOCUS
Issues and risks:
Weak R&D activities: No significant R&D projects have been

executed, except some in the vitamin, mineral, and supplement
segments.
Competition from foreign products, which have attained high

level of brand awareness and trusted by high-income
consumers. On the side of local companies, medicines are
cheaper and preferred by lower-income consumers.
Stricter regulations on nutrition supplement business. However,

that may benefit companies which adhere to rigorous quality
control.
Low-beta stocks can underperform in a bull market.

Drivers/catalysts to watch: Amendment of Circular 01; foreign
ownership limit extension; divestment of SCIC.
Favorite stock: DHG
www.ssi.com.vn
Largest domestic pharmaceutical in terms of revenue and

market cap.
Outstanding distribution system with over 1,000 sales person, 37

distribution subsidiaries and branches, and over 20,000 clients
nationwide.
Products compete well against imported medicine.
New plant, which doubles current capacity, will be completed in

1Q14. New products (Spivital, Naturenz, NattoEnzym), which
are supported with aggressive marketing campaigns, are
expected to attain high growth in 2014-15.
Risks: There may be several changes in the board of directors in

2014 AGM; Establishingmany subsidiaries (17 so far) may cause
risks in financial control.
77
Date: 31.01.2014
DHG (23/01/2014)
Stock
DHG
Price
Market cap
(VND)
(mil USD) 2013 2014E 2013 2014E 2013 2014E 2013 2014E 2013 2014E 2013 2014E 2013 2014E
117,000
www.ssi.com.vn
PER
364.2 13.4
13.0
PBR
3.8
EV/EBITDA Dividend yield EPS (VND) EPS Growth Sales growth Net profit growth
3.2 -0.7
8.6
2%
3% 8,745 8,991 17%
3% 15%
25%
2013
17%
2014E
3%
78
Date: 31.01.2014
SECTOR
PLASTIC PIPE (Industrials)
IN
FOCUS
KienTrung Nguyen, +84 4 9366321 ext510, kiennt@ssi.com.vn
2013 Summary: Solid
improvements in PER
Sector performance in 2013

240%
OVERWEIGHT
fundamentals
prompted
Sector in 2013: The plastic pipe sector outperformed the VN
220%
Index and the Industrial sector by 71% and 52% respectively in
200%
2013.
180%
160%
140%
Stable resin price: resin price increased slightly by 2% in

2013. Therefore, gross profit margin of the sector remained
high at 30% in 2013, slightly lower than that in 2012.
120%
100%
80%
Jan-13 Mar-13 May-13
Vn Index
Jul-13
Sep-13 Nov-13
Industrials
2013, compared to 1-2% output growth in 2012 The plastic

pipe market remains dormant as it is highly correlated to the
Pipe plastic
construction and property markets.
Source: Bloomberg
Increasing discounts to agents: In order to push sales,

NTP increased discounts to agents twice in Jul 2013.The
action will erode 3% of profit margin of NTP and indirectly
BMP and NTP performance in 2013

250%
Slight growth in output: output increase slightly by 7-9% in
VN Index 1 year Performance (2013)

NTP
affect profit margin of BMP in the South
230%
210%
High market share finally attracted investors: both stocks

in the sector have more than 50% market share in their
190%
respective locations. Historically, the stocks conventionally

trade at a low PER. However, in 2013, they were re-rated
170%
150%
twice from their historical low of 4x to 8-9x in 2013 to reflect
130%
their market position and increasing plastics pipe demand.
110%
90%
Source: Bloomberg
www.ssi.com.vn
Stocks performance: BMP (+106%) and NTP (+ 76%) both

outperformed the market and sector in 2013 as a reflection of
improvement in earnings and PER re-rating. However, ample
liquidity and strong corporate governance helped BMPs
performances more than NTP.
79
Date: 31.01.2014
SECTOR
IN
FOCUS

Resin price
1600
Sector trend:
-
1500
1400
pipe might benefit from investments in water systems as

water companies are switching from cement pipe to plastic
1300
1200
The sector is expected to enjoy stable growth of 710%/year. In addition, we believe that demand for plastics
PVC
HDPE
pipe.
1100
1000
900
800
06/01/2012
06/01/2013
Although resin price increase by 2% YoY in 2013, we

believe it will not impact gross profit margin of the sector in
2014 as both BMP and NTP are market leaders with high
market share (> 50%) in the South and the North
06/01/2014
respectively. Therefore, they are able to transfer the risk of

increases in input to the end users.
-
Increasing discounts might impact NTP and indirectly affect

BMP: the high discount will impact PBT margin of NTP in 2
years. Although revenue will increase as NTP gains more
market share, it will limit profit growth. BMP is also affected
as output of BMP in the North (which contribute 10% of
output to the consolidated BMP) declined 25% due to
expansion of NTP.
Risks: (1) discount increase from NTP might erode profit before
tax margin, (2) liquidity risk , (3) high shares supply from SCIC
as SCIC has plan to completely divest from NTP and BMP.
Sector Call:
Investment view:
In 2014, we expect NTPs revenue will augment faster than BMP at
10% YoY as the new discount policy will help NTP gain more market
share in 2014. However, PBT margin will decline due to high selling
expense. PBT is expected to reach VND 408bn, increasing only
5.6% YoY.
In 2014, we expect BMPs revenue will increase by 7% YoY, lower
than that in 2013 due to the effects of NTPs new policy. PBT is
expected to reach VND 507bn (5% YoY), equivalent to PBT margin
of 14.8%, lower than in 2011 and 2012 (if excluding tax penalty).
We still prefer BMP to NTP thanks to its (1) lower debt position (2)
higher profit margin (3) better corporate governance
www.ssi.com.vn
80
Date: 31.01.2014
SECTOR
IN
Drivers/catalysts to watch: (1) NTPs discount policy, (2)SCICs

divestment plan from NTP and BMP
FOCUS
Favorite stock: BMP
BMP and NTP (23/01/2014)
Stocks
Price
(VND)
- 23
Jan
Market
cap
(mil
USD)
2013
E
2014E
2013
E
2014E
BMP
76000
164.6
12.10
9.57
2.36
1.99
-0.9
4.9
3%
3%
6283
7942
NTP
64500
133.1
9.26
8.10
2.10
1.76
0.3
5.1
3%
3%
6963
7964
www.ssi.com.vn
PER
PBR
EV/EBITDA
2013
E
2014E
Dividend yield
2013
E
2014E
EPS (VND)
2013
E
2014E
EPS growth
2013
E
2014E
39%
26%
2%
14%
Sale growth
2013
E
2014E
11%
7%
8%
12%
Net profit
growth
2013
E
2014E
20%
26%
2%
14%
81
Date: 31.01.2014
SECTOR
PORTS AND SHIPPING (Industrials)
IN
FOCUS
KienTrung Nguyen, +84 4 9366321 ext 510, kiennt@ssi.com.vn
Ports and Shipping sub-sectors performance in

2013
NEUTRAL
2013 Summary: Ports remain at maximum capacity

and shipping companies performances recovered
given improved financials
220%
The sub-sectors advanced by 99% in 2013 as both key stocks

in the sector nearly doubled in 2013.
200%
180%
160%
140%
Port sector in 2013: although most port companies experienced
120%
modest sales growth in 2013 as most were operating at
100%
maximum capacity, VSCand DVP advanced more than 90% in

2013. We believe that their high cash and stock dividends and
80%
Vn Index
Industrials
earnings actually supported their prices in 2013.
Dry bulk
Shipping sector in 2013: although BDI (Baltic Dry Index) say

modestimprovements in 2013, this was mostly driven by capsize
Source: Bloomberg
index indicating high demand for materials ships for China. Most
of the dry bulk shipping companies recorded losses while liquid
shipping companies benefitted from customers that are happen
to be their parent companies and guaranteed rates. On the other
VSC DVP performance in 2013

350%
300%
hand, shipping companies actually benefited more from
VN Index 1 year Performance (2013)

DVP
VSC
declining interest rate and stable FX as most of them borrowed

USD denominated loans.
250%
200%
Stocks performance: VSC and DVP advanced by 90% in 2013
150%
thanks to their high cash/stock dividend profiles and profit growth
100%
resulted from their logistics businesses. DXP advanced by 39%

as room for growth has reached maturity.
50%
0%
PVT increased by 172% YoY in 2013 as its net profit increased

by 180% YoY in 2013 thanks to improved financial position.
Source: Bloomberg
2014 Outlook: NEUTRAL
www.ssi.com.vn
Sector trend: limited growth as (1) ports are running at

maximum capacity and (2)most of the ships are operating under
time charter contracts, (3) DzungQuat refinery will be under
maintenance for 2months in 2014 and this will directly affect PVT
and GSP.
82
Date: 31.01.2014
SECTOR
IN
FOCUS
Throught put volume in Haiphong Province
According to Vietnam Seaports Association (VPA) and our

own statistics, through put volume in the HaiPhong port area
has expanded at 7.2%/year from 2010-2013. We expect
from 2014-2020, volume will increase at 7%/year similar to
capacity growth in the area. However, current listed ports,
including VSC, DXP and DVP are operating at maximum
designedcapacity; therefore, they are expected to
experience lower growth than new ports.
Dry bulk shipping companies will still face challenges in

2014 as the Handysize Index hasnt shown any
improvement thus far. On the other hand, liquid shipping
companies businesses remain stable as most of their ships
are operating under time charter contracts and their rates
are guaranteed by their parent companies.
Through put Volume in Haiphong 5,000,000

Growth
4,000,000
15%
10%
3,000,000
2,000,000
5%
1,000,000
0%
5000
4500
4000
3500
3000
2500
BDI
Baltic Handysize Index
Baltic Dirty Index
Baltic Panamax Index
Baltic Capsize Index
Risks: (1) increase in interest rate or a USD/VND appreciation,

(2)limited improvements in the shipping index will force dry bulk
shipping companies to liquidate their fleets.
2000
1500
1000
500
0
04/01/2011
04/01/2012
04/01/2013
04/01/2014
Sector Call:
Investment view:
We still favor DVP and VSC over DXP as they still have room for
growth through their logistics businesses and high stock/cash
dividend profiles.
For the shipping subsector, we hold a neutral view on the sector as
drybulk shipping will not recover in 2014 while liquid shipping
companies will not experience high growth as in 2013. We see VIP
to have short-term upside thanks to its stable cash flow, zero
capexplan, and high value of their two container berths available for
sale and the potential for cash/stock dividend thanks to high retained
earnings.
Drivers/catalysts to watch: (1) BDI and Baltic Handysize Index, (2)
FX and interest rate
Favorite stock: VSC, VIP
www.ssi.com.vn
83
Date: 31.01.2014
DVP, VSC, VIP (23/01/2014)

Dividend
yield
2013
2014
E
E
Net profit
growth
2013
2014
E
E
Stocks
Price
(VND)
- 23
Jan
Market
cap
(mil
USD)
DVP
44100
84.0
8.65
8.20
2.00
1.76
-0.3
4.6
3%
5%
5101
5377
9%
5%
9%
4%
9%
5%
VSC
62500
85.3
8.21
1.89
1.64
-0.6
5.0
5%
5%
7613
8071
-5%
12200
34.7
4.83
0.75
0.74
1.6
4.6
6%
6%
2526
1050
178%
6%
58%
0%
12%
7%
VIP
7.74
11.6
1
-5%
186
%
6%
58%
www.ssi.com.vn
PER
2013
2014
E
E
PBR
2013
2014
E
E
EV/EBITDA
2013
2014
E
E
EPS (VND)
2013
2014
E
E
EPS growth
2013
2014
E
E
Sale growth
2013
2014
E
E
4%
84
Date: 31.01.2014
SECTOR
ENERGY (Oil & Gas)
IN
FOCUS
Thuy Nguyen, +84 4 9366321 ext 526, thuyntt@ssi.com.vn
OVERWEIGHT
2013 Summary: Impressive performance in 2013

Energysector performance in 2013
Energy sector in 2013: The energy sector gained 68.57%,

compared with 20.62% of the VN Index. Major oil and gas
companies recorded impressive performances in 2013, such as
GAS (+79%), PVD (+80%), and PVS (+59%).
180%
160%
140%
120%
100%
80%
Jan-13
Vn Index
May-13
Energy
Sep-13
Source: Bloomberg
LPG price in 2013
Total natural gas consumption increased 7% YoY and reached

approx 9.7 bn m3 (exceeded 2013 plan by 0.5 bn m3); new blocks in
Nam Con Son basin (HaiThach MocTinh blocks) commenced
operation in 2013, which led to an increase in gas capacity in the
Southeast region by 2bn m3/year, In addition, total oil production
reached 16.7 mn tons (exceeded 2013 plan by 700,000 tons). In
2013, PetroVietnam Corporation (PVN) had 5 new oil and gas
discovery and exploited 9 new oil and gas blocks.
Energy stock performance:
Margin expansion combined with stable revenue helped oil and gas
companies record positive financial results
GAS: Increase in volume and average selling price (increase

rate in selling price washigher than the increase rate in input gas
price); revert of approx. VND 1,000 bn in the development fund;
9M13 net income of GAS parent companies reached VND 9,979
bn (+36.4% YoY)
PVD: Increase in drilling day rate (approx. 10% YoY) and full
operation of PVDs owned rigs (In 2012, PV Drilling I had a
periodic major maintenance and PV Drilling V commenced
operation since mid-February 2012); 9M13 net income reached
VND 1,393 bn (+26% YoY)
PVS: Stable core business, sharp increase in income from

associates/JVs(thanks to income from PTSC Sea); 9M13 net
income reached VND 1,024 bn (+16% YoY)
Source: Bloomberg
Crude oil price in 2013
Source: Bloomberg
www.ssi.com.vn
Attractive dividend policy of oil and gas companies contributed to the

positive performance of the sector
GAS: 2013 dividend is estimated at VND 5,000/share (GAS

already paid VND 2,000/share)
PVD: 2012 dividend, which was paid in 2013, was VND

1,000/share and 10% stock bonus
85
Date: 31.01.2014
SECTOR
IN
FOCUS

Expectation of stable international oil price in 2014: The World
Bank expects that crude oil will see a slight increase of 0.6%
YoY(Commodity markets Outlook Oct 2013) while EIA (US Energy
Information Administration)forecasts a decrease of approx. 3%
Expectation of no significant change in input natural price to
GAS, increase in total natural gas consumption: We assume that
input pricing schedule would remained the same compared to the
previous plan, implying 9% increase in Cuu Long basin and 2%
increase in Nam Con Son basin. In 2014, PVN targets total gas
volume of approx 9.8 bn m3.
Continuous positive earnings outlook in 2014 would support
the performance of the sector
GAS: Increase in both volume and average selling price;

Increase rate in average selling price will be slightly higher than
the increase rate in input gas price. 2014 net income growth is
expected at +15% YoY if we exclude approx. VND 1,000 bn of
extraordinary profit in 2013
PVD: Increase in drilling day rate of PVDs owned rig (approx.

7% YoY), 2014 net income growth is expected at +18% YoY
PVS: Increase in income from associate/JVs thanks to the profit

from PTSC AP; rumor on the possibility of reverting approx. VND
400 bn in 2014, which could spawn extraordinary profit. 2014 net
income growth is expected at +11.3% YoY based only on the
core business
Issues and risks: Political risk remains a threat facing companies in

the gas industry. The sustainability of earnings growth for gas
companies in the future is dependent on the pricing schedule, which
is contingent on the governments decision.

Drivers/catalysts to watch: changes in pricing schedule in the gas
sector; PetroVietnams intention to divest from GAS.
Favorite stock: GAS, PVD, PVS
www.ssi.com.vn
Positive earnings outlook in 2014
Expectation of attractive dividend policy: 2013 dividend of GAS,
86
Date: 31.01.2014
SECTOR
IN
FOCUS
PVS and PVD are estimated at VND 5,000/share; VND

1,500/share and VND 1,500/share respectively (please note that
GAS has already paid VND 2,000/share and we assume that
PVD could pay additional stock bonus)
Risks: Corporate governance and political risks
Stock call (23/01/2014)
Price
(VND)
Market
cap
(mil
USD)
PER
2013
2014
E
E
PBR
2013
E
2014
E
EV/EBITDA
2013
2014
E
E
Dividend yield
2013
2014
E
E
EPS (VND)
2013
2014
E
E
EPS growth
2013
2014
E
E
Sale growth
2013
2014
E
E
Net profit
growth
2013
2014
E
E
GAS
75500
6813
11.3
10.7
4.8
4.1
6.5
6.7
7%
5%
6670
7074
28%
6%
-5%
11%
28%
6%
PGS
34600
63
6.5
5.9
1.4
1.2
1.7
1.4
3%
3%
5350
5849
38%
9%
12%
8%
35%
9%
PVD
73000
957
10.7
8.8
2.0
1.7
5.2
4.9
2%
2%
6843
8338
20%
22%
25%
10%
40%
20%
PGD
44700
91
9.2
8.5
1.9
1.6
2.0
2.9
4%
6%
4874
5257
-8%
8%
17%
19%
-8%
8%
PVS
28100
598
10.2
9.2
1.5
1.5
2.2
2.8
5%
5%
2751
3061
10%
11%
3%
1%
8%
11%
www.ssi.com.vn
87
Date: 31.01.2014
SECTOR
TECHNOLOGY & TELECOMUNICATION (IT)
IN
FOCUS
Kien Nguyen +84 4 9366321 ext 510, kiennt@ssi.com.vn
OVERWEIGHT
2013 Summary: FPT remains the incumbent

130%
120%
110%
100%
90%
80%
IT sector in 2013: The IT sector advanced by 18.6% in 2013,

slightly under performing the VN Index. Although FPT advanced
by 30% thanks to improvements in earnings and the expectation
of FOL easing, other IT stocks drastically underperformed due to
decline in earnings and ICT spending cut.
-
Telecom segment: FTELs subscribers increased by 1718% in 2013 despite that the market only expanding by 1%
in 2013. This is an indication that FTEL gained more market
share from VNPT, the largest internet provider in Vietnam
with more than 60% of the market share.
Software outsourcing: Vietnam exported more than USD

100mn units of software in 2013. Japan remains the largest
importer. FPT Software exported USD 50mn to the market,
an incomparable figure to Japans Software market size of
28bn USD. Thanks to low cost advantage, improving skill,
and China+1 strategy, the software outsourcing holds a lot
of potential.
Mobile distribution: The mobile distribution market

increased by 30% in terms of value in 2013, mostly due to
growing consumer preferences for smart phones. In terms of
volume, the market only expanded by 2% YoY in 2013.
However, vendors are likely to switch from distributors to
retailers as FTGs revenue only expanded by 8% while
revenue of The Mobile World, the largest phone retailer in
Vietnam, is expected to amplify by 25% in 2013.
70%
60%
Vn Index
Information Technology
Source: Bloomberg
FPT performance in 2013

140%
135%
VN Index
130%
125%
120%
115%
110%
105%
100%
95%
90%
Stock performance: FPT

approximately 8% thanks to:
the
market
by
Stable earnings given sound fundamentals: net profit is

expected to increase by 7% in 2013 on the low base of
2012, compared to negative growth in 2012
FOL easing expectation: expectation for additional foreign

ownership room once FOL eases and the FTEL deal.
Although the FTEL deal is likely to fail, it did however help
support the stock price during the year.
Source: Bloomberg
www.ssi.com.vn
outperformed
88
Date: 31.01.2014
SECTOR
IN
FOCUS
IT market
120,000
IT Market Value (VND bn)
2014 Outlook: POSITIVE

Growth
25.0%
23.1%
100,000
20.0%
17.6%
16.2%
15.0%
14.1%
13.5%
12.9%
12.5%
80,000
60,000
10.0%
40,000
Sector trend: continuous improvement on the low base

IT market: According to Business Monitor International (BMI), in
2013, the IT market (including hardware. Software and services)
reached VND 62,082 bn, increasing 17% YoY. BMI expects
strong growth will persist over the medium term with a
compound annual growth rate (CAGR) of 14.1% 2013 to 2017,
20,000
5.0%
0.0%
with the value of the market reaching VND 102,126 bn in 2017.

In 2013, the IT market accounts for 1.9% of GDP. IS companies
will still benefit from IT market growth and increasing ICT
spending demand from the government.
Telecom market: The market is expected to become saturated
Telecom Market
according to BMI, there are nearly 5 million internet subscribers.

VNPT and FTEL accounts for approximately 60% and 20% of
6,000
18.0%
16.0%
14.0%
12.0%
10.0%
8.0%
6.0%
4.0%
4.0%
3.0%
2.0%
2.0%2.0%2.0%
0.0%
16.9%
5,000
12.1%
4,000
3,000
2,000
1,000
0
the market in 2015 with CAGR of 2%/year. However, we believe

that the Internet bundled with cable TV will become a new trend
in the next 2-3 years. Viettel, although only accounting for below
10% of the market share, will re-emerge with a mass investment
in Cable TV to gain market share from both VNPT and VTV Cab.
Software outsourcing: as Vietnam market remains too small in
the global outsourcing market, we believe the segment will
continue to enjoy approximately 30% CAGR in the next 3-5
years.
No of Subscribers
Growth
Trading margin declining: under fiercer competition amongst
distributors and between and large retailers, profit margin of
distribution will continue to be squeezed.
Risks: (1) declining profit margin of distribution, (2) increasing
competition in internet broadband as Viettel refocus on the
segment, (3) increasing exposure to governments projects with
delay risks.
Sector Call: POSITIVE

Investment view: we still remain bullish on most of IT segments in
2014: (1) Software outsourcing remains high growth( >30%) as the
market share is still small as compared to Japan outsourcing market
and Japanese companies are applying China+1 strategy, switching
their contracts to Vietnamese Software companies. (2) high
penetration rate of Internet Broadband(33% of population) promising
opportunities for online gaming and advertising services, (3) demand
www.ssi.com.vn
89
Date: 31.01.2014
SECTOR
IN
FOCUS
to upgrade cumbersome government system

enterprises creates high demand for IS services.
and ERP by
Drivers/catalysts to watch: (1) FISs contract value signed in 2014,

(2) recovery of the Online segment.
Favorite stock: FPT
We still remain bullish on 2014 performance of FPT based on high
growth rates of FTEL (23%) and Software Outsourcing (26% YoY) ,
FO (13% YoY). Other segments including IS and Trading are
expected to experience single digit growth in 2014. In 2014, we
expect revenue and PBT will reach VND 31,847bn and 3,030bn,
increasing by 16.5% and 16% YoY. EPS is expected to reach VND
7,065/share, increasing by 17% YoY thanks to lower tax expense.
Management expects revenue and PBT will increase by at least
15% YoY in 2014.
FPT (23/01/2014)
FPT
Price
(VND)
- 23
Jan
Market
cap
(mil
USD)
2013
E
2014E
2013
E
2014E
54500
714.0
8.83
7.61
2.13
1.84
www.ssi.com.vn
PER
PBR
EV/EBITDA
2013
E
2014E
-0.3
4.1
Dividend yield
2013
E
2014E
5%
5%
EPS (VND)
2013
E
2014E
6172
7158
EPS growth
2013
E
2014E
9%
16%
Sale growth
2013
E
2014E
6%
18%
Net profit
growth
2013
E
2014E
10%
18%
90
Date: 31.01.2014
SECTOR
UTILITIES (Electricity)
IN
FOCUS
Kien Nguyen, +84 4 9366321 ext 510, kiennt@ssi.com.vn
NEUTRAL
2013 Summary: No two stocks were alike
Utilities performance in 2013

180%
Utilities sector in 2013: the sectors performance was nearly
160%
doubled that of the VN Index (+20.62%) in 2013. The top five
140%
best performers included PPC, VSH, TBC, TMP and BTP.

However, each stock has its own story in 2013 and no two
120%
stocks were alike:
100%
Vn Index
80%
Utilities
Currency depreciation: The Japanese Yen depreciated

approximately 17% in 2013, resulted in VND 1,000 bn in FX
60%
gain for PPC. BTP also benefited from KRW deprecation in

1Q13
Source: Bloomberg
Improving output: except for VSH, other power companies

generated 10% more output in 2013.
PPC performance in 2013
250%
Expectation on PPA: expectation of VND 250 bn in

retroactive profit for VSH supported the stock price during
2013.
200%
150%
Utilities stock performance: PPC doubled its market capital in

2013 thanks to a 15% increase in output and VND 1,000bn in FX
gain resulted from JPY depreciation.
100%
2-Jan 2-Mar2-May 2-Jul 2-Sep 2-Nov
Source: Bloomberg
2014 Outlook: NEUTRAL

Electricity output
180
16.0%
160
14.0%
140
12.0%
120
10.0%
100
8.0%
80
6.0%
60
40
4.0%
20
2.0%
Sector trend: 2013 positive catalysts are unlikely to repeat in

2014:
Hydro power sources preferred over thermal power
sources: coal price increased by more than 50% in 2013 and
continued to do so by 7-12% since 1 Jan 2014. Selling prices of
thermal power sources are now nearly double that of
hydropower sources. Therefore, hydropower sources will be
mobilized more than thermal sources.
0.0%
2011 2012 2013f2014f2015f2016f

total output
www.ssi.com.vn
Growth
New formula to calculate selling prices: new regulation

requires PPC, NBP, TPC, TMP, and VSH to calculate its selling
price based on charter capital after accumulated depreciation
instead of charter capital. The new regulation might erode some
profit in 2014 and onwards. Those companies need to
renegotiate Power Purchase Agreement (PPA) with EVN in
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2014.
Output is unlikely to advance in 2014: as most of the utility
companies generated high output in 2013, we do not believe
they will generate additional output in 2014.
The Japanese Yen is unlikely to record another
depreciation: as the Yen has reached a 5 year record low, we
believe it is difficult to depreciate any further or decline by 17%
as it did in 2013.
Risks: new regulation limits profit of power companies.
Sector Call: NEUTRAL

Investment view: Although the demand for electricity remains
robust and expanding about 10-11%/year, we believe that most of
listed power companies are already operating at maximum capacity.
In addition, PPC is unlikely to record another VND 1,000 bn in FX
gain in 2014. Therefore, net profit of the sector is likely to decline in
2014.
In 2014, we expect PPC will continue to generate high output (at
least 6.1bn KWH in 2014,declining approximately 2% YoY). We
conservatively assume that JPY will appreciate against VND by 6%
in 2014; PBT and net profit will reach VND 971.5bn and 910bn,
respectively, declining 42% YoY. However, core 2014 EPS is
expected to reach VND 3,419/share, increasing by 12% YoY.
VSH: In 2014, we believe output will achieve the conventional level
of 850mn KWH. Revenue and net profit are expected to reach VND
483bn and 339bn, increasing by 21% and 14% YoY, Profit margin is
expected to decline due to depressed financial income as VSH will
aggressively disburse cash for the Upper Kontum Project
Drivers/catalysts to watch: (1) PPA renegotiation between EVN
and power companies (2) JPY/KRW flucuations.
Favorite stock: none
PPC, VSH (23/01/2014)
Stocks
Price
(VND)
- 23
Jan
Market
cap
(mil
USD)
PPC
26200
396.9
VSH
16500
162.0
www.ssi.com.vn
PER
2013
2014
E
E
5.54
10.4
6
9.52
10.6
4
PBR
2013
2014
E
E
EV/EBITDA
2013
2014
E
E
Dividend yield
2013
2014
E
E
EPS (VND)
2013
2014
E
E
1.70
1.60
0.0
4.2
8%
6%
4731
2753
1.32
1.28
1.4
11.8
6%
6%
1578
1550
EPS growth
2013
2014
E
E
149%
42%
39%
-2%
52%
-2%
Net profit
growth
2013
2014
E
E
149
%
42%
25%
15%
39%
Sale growth
2013
2014
E
E
-2%
92
Date: 31.01.2014
SECTOR
PROPERTY (Commercial Developer)
IN
FOCUS
Huong Vu, +84 4 9366321 ext 624, huongvl@ssi.com.vn
NEUTRAL
Mai AnhDinh, +84 4 9366321 ext670, anhdtm@ssi.com.vn
2013 Summary:
Property sector in 2013:
Prices further softened

In 2013, selling prices in both primary and secondary
markets in Hanoi and HCMC further deteriorated, becoming
much more affordable than the 2011 and 2010 peak.
According to a report published by the Ministry of
Construction (MoC), selling prices at most projects have
declined from 10% to 30%, especially at higher end projects,
prices have plunged up to 50%, returning to 2006s level.
We also witnessed that together with the price reduction;
several projects that were developed by capable developers
with strong capital and commitment in construction progress
had more competitive advantages against other developers
and achieved better sale results. Additionally, 2013 was also
a year where many developers promoted various marketing
strategies; in which, the most popular method was to loosen
payment method coupled with several promotion packages.
Shell apartments became more favorable. This apartment
type was not only popular in the Grade C segment,
developers of Grade A and B projects have also gravitated
toward them. Shell apartments are utilized to decrease
prices without devaluing the properties.
Source: Bloomberg
Sub-sector performance in 2013
Source: Bloomberg
Liquidity remains weak:

According to report published by the MoC, 6,450 successful
transactions transpired in Hanoi and 6,360 in Ho Chi Minh
City; in which a major portion was in the affordable segment.
This has helped reduce market inventories by 26.5%
compared with that in the first quarter and totaled
approximately VND 95 trillion. Though transactions have
unfolded, inventories remained at a high level, in which
apartments accounted 31% and the rest were in landed
properties. The property market saw modest liquidity in 2013
since market demand remained anemic and buyers are still
reluctant to make investments in property due to the fact that
selling prices are still higher than their real financial
capability.
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Social housing projects have yet to spearhead the

recovery:
2013 was a year where the social housing segment was
placed on a high pedestal and received widespread
recognization from the Government and developers alike.
Social housing was designated as the anecdote to revive the
property market. Many developers applied to convert their
on-going projects from commercial to social developments,
especially in Hanoi in order to benefit from Governments
incentives offered to social housing developers such as tax
reduction, LUF exemption, preferential loan, ect. According
to the MoC, there are 124 social housing projects nationwide
providing 78,700 units with total investment of over VND
35.6 trillion. In addition, 57 projects have been proposed to
convert from commercial to social housing which may flood
the market with an additional 34,837 apartments with total
investment of VND 20.5 trillion.
However, sale performance at several social housing
projects
did
not
exhibit
encouraging
results
given
complicated procedural processes and object limitations.

Addtionally, the supply of social housing projects somehow
increased the competitiveness of the already-depressed
market with high inventories in the mid-high end apartments,
exerting additional pressure to reduce prices.
-
Governments initiatives did not exhibit fruitful results

as initially expected:
2013 saw a series of new regulations issued by the
Government in order to resuscitate the market which
attracted the attention of developers, buyers and investors
including:
Circular No.02/ND-CP: encourage social housing

developments with a VND 30 trillion preferential loan
package (6% p.a) applied to social apartments or
commercial apartments with sizes smaller than 70 sqm
and prices lower than VND 15 million per sqm. In
addition, according to the Circular, prerequisite demands
to qualify for the loan were loosened.
Decree No.02/2013/TT-BXD issued by the MoC

providing instructions on the conversion of commercial
residential projects into social housing ones.
www.ssi.com.vn
Decree No.18/2013/TT-BXD issued by the MoC on the
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IN
FOCUS
loosening of criteria for loan application in order to

expedite the disbursement of VND 30 trillion preferential
package
The Ministry of Finance also applied a tax cut for

businesses and investors of social or commercial
apartments with sizes smaller than 70 sqm and prices
lower than VND 15 millions from from July 1, 2013 to
June 30, 2014. According to the tax cut, 50% of VAT tax
will be curtailed for social housing developers and 30%
for businesses, applicable for apartments with less than
70 square meters of living space and cost of less than
$15 million per square meter. In addition, businesses
and developers of the social housing sector can enjoy a
corporate income tax of 20 percent, instead of the
current 25 percent, and the value-added tax slapped on
home buyers will be slashed from 10 to 5 percent to
encourage purchase.
We have concluded that measures implemented have not address

the core problem in the sector yet as it remains difficult for those
who have real housing demand to approach the preferential financial
source and settle payment coupled with the fact that developers
have found the conversion process to be complicated and timeconsuming. The respective Decrees still need to address the
changes in land planning, rate of land compensation and
resettlement and a stable lending interest rate. As a result of
insufficient land planning, compensation and resettlement laws, by
end of November, 2013, only 1.56% of the VND 30 trillion package
was disbursed which fell far behind the target of VND 10-15 trillion
set by the SBV. Thus, although the above initiatives generated
impacts on re-shaping the market trend, its impacts have yet to
exhibit fruitful results as initially expected.
Property stock performance:

The property sector advanced 11.88%, below the VN Index
of 20.62% in 2013 since several large caps including VIC, PDR,
SJS, NTL, NLG, DIG, HAG, TDH, ect., underperformed the
whole market. In an attempt to boost liquidity of the physical
market, the sector has received strong support from the
Government by means of a VND 30 trillion preferential package
for social & affordable housing projects and the execution of
VAMC but results have fell short of expectation which mainly
caused the sectors performance to lag the VN Index in 2013.
VIC & HAG represent the largest market cap in the sector, in
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which VIC accounts for 62% and HAG accounts for 14.34%. In
2013, VIC advanced 13.52% thanks to its impressive earnings
growth triggered from asset disposals and the grand openings of
two largest mega malls in Vietnam. HAG advanced 5.27%
during 2013. In 2013 HAG implemented a strategic restructuring
plan which dramatically altered its revenue stream and business
profile. Because HAGs restructuring plan consists of multiple
stages, new revenue sources from projects in Myanmar and the
rubber plantation have failed to significantly impact the Groups
earnings in 2013, and this have prompted investors to be
skeptical on HAGs performance. However, even if HAG and
VIC were to display encouraging results, their performances
alone would not aid the property sector against the VN Index.
HQC was the best performer in the property sector in 2013:
Specifically, HQC gained 135.7% while the VN Index gained
20.62% in 2013. HQC was favored by investors as it became the
first private firm to receive a preferential loan from BIDV in an
amount VND 540 bn to develop HQC Plaza a social housing
project in HCMC and its promising earnings from the firms ongoing projects which have been handed over also triggered the
expectation that the firm may successfully hit its 2013 target.
Outlook:
Sector trend:
Affordable housing remains in the spotlight

Since affordable housing is the segment that is considered to
meet the real demand and suits the financial capability of most
buyers in the market, it will continue to be in the spotlight for
both Government and developers in 2014. Specifically, the VND
30 trillion preferential package is expected to be more
aggressively disbursed and it is expected that more projects will
be converted into social housing in 2014. However, since the
procedures relating to social housing projects remain
problematic to buyers and most are located in the outskirts of the
city, we maintain our view that this segment is ill-equipped of
resuscitating the overall market since the majority of existing
market supply is predominantly in the mid-end segment which
will require time to rebalance and absorb.
Additionally, we think that increases in affordable housing
coupled with more completed projects will intensify competition
among the segments which can ultimately lead to a further price
reduction, therefore, putting buyers in the drivers seat to pick
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and choose. The market will see completed or nearly completed

projects to avoid delays or issues upon handover.
More comprehensive support from the Government to boost
liquidity
In an attempt to further support market performance, a series of
policies will become effective in 2014, including the following:
-
Interest rate applied for social housing loans reduced to

5% p.a:In January 2014, the State Bank of Vietnam (SBV)
issued Decision No. 21/QD-NHNN pertaining to the interest
rate at commercial banks applied for social housing loans.
The SBV has directed that the lending interest rate of 5% p.a
be applied in 2014 (reducing 1% p.a compared with previous
rate of 6% p.a in 2013). With such reduction, the
Government expects that the disbursement of the stimulus
package be expedited.
Decree
188/2013/ND-CP
on
the
development
and
management of social housing became effective on 10

January 2014 with the expectation to increase the
prospective social housing supply as well as regulate the
property market with stronger support and clearer
procedures. According to that the Decree, social housing
projects would be exempt from Land Use Taxes, developers
in such projects would also benefit from VAT & CIT tax
reductions and exemptions. Additionally, under the Decree,
commercial banks and credit institutions would also be
responsible for providing at least 3% of their total debt
balance for social housing projects, offering assistance to
low-income buyers with further preferential lending rate.
Moreover, developers would also be supported for land
clearance and infrastructure improvements from the State
budget; they will also be allowed to issue bonds guaranteed
by the Government to fund their projects. On the buyer side,
the purchase of social housing will be transferred after 5
years from the signing date of the sales contract with
developers (instead of 10 years) which could be an
important driver for buyers to make a purchase decision.
-
www.ssi.com.vn
On 21st November 2013, the Ministry of Construction (MoC)

- Ministry of Home Affairs issued a Joint-circular No.
20/2013/TTLT-BXD-BNV guiding several contents of
Decree No. 11/2013/ND-CP dated 14 January 2013 of the
Government on Urban Development Investment. The
Circular took effect on 5th January, 2014 and replaced
Circular No. 04/2006/TT-BXD dated 18th August, 2006 of
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Date: 31.01.2014
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the Ministry of Construction guiding the implementation of

regulations on new urban areas. According to the Decree,
construction management organizations, professional
organizations and individuals involved in activities related to
urban development investment are its applied objects.
Specifically, property developers may sell land plots in a
project without the need of rough construction of houses,
provided that they obtain the approval from the MoC and
overall infrastructure of the project (internal roads, lighting
system, electricity & water system) are completed. This
will definitely benefit property developers that develop
landed properties for sale by shortening the transfer process
and reducing financial burden of rough construction.
th
On November 29, 2013, the 13 National Assembly adopted

the Revised Land Law which features a number of
important elements that will take effect starting on July 1,
2014. Notably, under the revised law, the Government will
establish a land price bracket every 5 years while provincial
Peoples Committees will calculate land price of each
specific case; additionally, it also requires a land pricing
advisory agency to take part in the land price appraisal
council to ensure fairness in land valuation. Also according
to the adopted law, foreign investors are given more
opportunities to purchase housing projects for residence,
lease or sale purposes.
Risks:
Fierce competition may persist:
Since the markets liquidity has yet to exhibit any strong
improvement in 2013, we believe that developers will
ammend tight operating cash flow by curtailing selling prices
to satisfy actual market demand. Thus, while price cuts
would induce more advantages to buyers, it may trigger
fiercer competition among developers, and siphoning off too
much selling price will ultimately harm gross profit margin.
Distressed project sell-offs may trigger:
The perrenial NPL issue in the banking system which will
require further actions to be ammended in 2014 may trigger
the sell-offs of distressed projects held by developers with
poor financial capabilities to settle debt payments
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Investment view:
2014 is expected to be a better year for real estate developers with
stronger support from the Government. However, the market still
requires additional time for correction with further adjustments in
pricing and product allocation so as to enhance liquidity and we do
not expect for results to be reflected sooner than 2H2014. Thus, we
reiterate our current NEUTRAL investment view on the whole sector
in 2014.
However, measures aim to enhance the current low market liquidity,
high inventory level and bad debts will presumably generate positive
catalysts for property stocks before the real improvement in the
physical market. Therefore, we recommend investors to closely
monitor property stocks to gain positive return.
Favorite stock:
DIG (Development Investment Construction JSC)
DIC GROUP is based in Vung Tau, a neighboring province of HCM
City. The company was founded in 1990 as a small business unit
under the Ministry of Construction. DIG is relatively a healthy
property firm with low debt financing with a strong focus on
developing new urban areas, industrial zones, real-estate,technical
infrastructure of urban area, industrial and hi-tech zones. In addition
to a strong and experienced management team, DIG has a closeknit relationship with the MoC and local authorities which has
brought about competitive advantages for DIG than its peers in
regards to land acquisition and project development.
In 2014, we expect that earnings from the firms on-going projects in
landed properties which have been sold previously would be
recognized thanks to the recent issuance of the Joint-circular No.
20/2013/TTLT-BXD-BNV amending several contents of Decree No.
11/2013/ND-CP on Urban Development Investment. Thus, DIGs
2014 earnings are expected to greatly enhance.
In the longer term, DIGs sizable landbank will also enable the firm to
maintain its profit and revenue for the long haul, especially when the
real estate industry recovers in the coming years. Despite the
stagnant property market, DIGs vast landbank will enable it to
benefit from the sales of land to secondary investors and/or cooperate with other developers for immediate profit.
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BCI (BinhChanh
Company)
Construction
Investment
Shareholding
BCI originated as a stated owned property developer and was

equitized in 1999. BCI is a real estate developer possessing a large
land bank in BinhChanh and Binh Tan areas of Ho Chi Minh City.
Large land bank holds the opportunity for further development in the
near future. Int he past, BCI has tried to launch one project each
year. Additionally, BCI offers both apartments and land plots,
diversifying the companys product mix. Furthermore, BCI has
secured a stable income from IP leasing and JV. BCI maintains a
stable cash flow generated from leasing Le Minh Xuan IP which
occupancy rate is almost 100%. BCI also plans to deliver more
added value services to the IP in order to enhance revenue from
services and profit margin. Apart from Le Minh Xuan IP, a joint
venture with Big C also helps generate a stable income. These two
sources of income have sheltered BCI during the real estate
downturn period. This is one of BCIs advantages over its peers.
In 2014, BCI expects to launch An Lac Plaza, a mid-range
apartment building in a well-established community. BCI is seeking
for approval of a new construction license in 1Q14. Previously, BCI
has completed An Lacs foundation. Therefore, once the
construction license is obtained, BCI is able to immediately start presales. As BCI has already paid the LUR for An Lac Plaza project, it
has lessened capital burden and accelerate the construction
process.
In the longer term, with a sizeable land bank in Ho Chi Minh City,
BCI has a great advantage on deploying new land plot and
apartment projects once the market resuscitate.
DIG, BCI (23/01/2014)

Stock
BCI
DIG
Price
Market
cap
(VND)
(mil USD)
2013
2014E
2013 2014E 2013 2014E 2013 2014E 2013 2014E 2013 2014E 2013 2014E 2013
19,000
65.4
16.10
11.93
0.76
0.74
89.2
47.8
1
34.5
6
0.7
5
0.7
3
13,100
www.ssi.com.vn
PER
PBR
EV/EBITDA
Na
Na
Na
Na
Dividend
yield
5%
Na
5%
Na
EPS (VND)
EPS Growth

2014E
1180 1592
-51%
35%
119%
25%
-48%
35%
274
45%
38
%
19%
3%
-56%
48%
379
100
Date: 31.01.2014
SECTOR
INDUSTRIAL PARK DEVELOPER (Real Estate)
IN
FOCUS
NEUTRAL
AnhDinh, +84 4 9366321 ext 670, anhdtm@ssi.com.vn
2013 Summary: Reaping from FDI

Industrial zone developers performance in 2013
Benefit from a surge in FDI with investment from
200%
multinational giants. 2013 saw a surge in FDI to Vietnam,
180%
both in terms of FDI new commitment and capital
160%
disbursement. In 2013, Vietnam saw a 54.5% YoY surge in
140%
FDI commitment and expansion with USD 21.6 bn. FDI

sector also disbursed USD 11.6 bn in 2013, an increase of
120%
100%
9.9% YoY. Compared to a negative growth of 4.9% in 2012,

2013s disbursement figure is an impressive improvement.
80%
The increase in FDI capital is partially due to a number of

big projects from multinational giants. Out of 1,742 new
Vn Index
Real Estate
Industrial zone developer
commitment and expansion FDI projects, nearly half of the

total value derived from 7 projects including Samsung
Electronics Thai Nguyen, Samsung Electronics BacNinh,
Source: Bloomberg
Samsung Electro-mechanics BacNinh, LG Electronics, and

Nghi Son Oil Refinery. According to the MPI, until the end of
October 2013, Industrial Parks (IP) have attracted USD 69.2
bn FDI registered capital or 80% of total FDI investment in
Outstanding stock performance in 2013
industrial field. Throughout the country, there are 283

registered IP. However only 178 industrial parks are under
operation. Although the overall occupancy rate is 63%,
200%
180%
industrial parks with good infrastructure and are wellconstructed attract more foreign investors.
160%
140%
120%
100%
A shift from human intensive industries to high

technology industries: For the first time, mobile phone
80%
export has overpassed textile in terms of export value and

ranked first in the export industries list. Samsung contributed
a significant portion of the national USD 21.5 bn mobile
Vn Index
KBC
export. After textiles, electronics export ranked third with

USD 10.6bn, surpassing USD 8.3bn in shoes export. The
transition trend is expected to continue in the coming years
with several big on-going FDI projects.
Vietnam Government, also, are making an effort to

attract high quality investors who are in the green
technology business, high technology and capital-intensive
sectors while trying to discourage polluting projects using
obsolete technologies.
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Intensive support regarding investment and legal

administration process, coupling with attractive tax and
operation incentive have helped Northern provinces in
calling FDI investors. As a result, a number of megaprojects have resided in Northern area. Thai Nguyen
province is the most aggressive area and it has succeeded
in attracting Samsung to settle Samsungs world biggest
mobile phone factory with total registered capital of USD
2bn. Besides Thai Nguyen, BacNinh, HaiPhong and
ThanhHoa also ended 2013 in high note with several big
name investors like LG, Samsung, Idemitsu Kosan and
Kuwait Petroleum Intl.
Industrial Park Development (IPD) Stock performance: Unlike

commercial development, IPD stocks saw strong performances
compared to the VN Index with 52% growth YoY. As IPD business is
greatly influenced by FDI movement, IPD stock performances have
also parallel with growth in FDI trend during 2013. Among IPD
stocks, KBC saw the strongest growth with 66% YoYthanks to the
expectation of improved business performances compared with
excessive losses incurred in 2012 after finalizing the deal with LG
Electronics at Trang Due IP. This deal was said to be closed in
4Q13, and not only does it enhanced firms cash flow but also
generated competitive advantage to KBC in regards of attracting
LGs auxiliary firms to settle the factory in this IP.
2014 Outlook:
FDI commitment and disbursement (2005-2013)
Sector trend: the game for well-prepared IPD. Due to the

government's strategy on focusing on high technology and
eco-friendly projects, foreign investors will now find it more
challenging to receive adequate investment licenses.
Therefore,massive IPDs that provide adequate infrastructure
and thoroughly understand investment procedures would
attract FDI flows. As FDI increases, so will the requirements
from foreign investors, and the requirements can only be
satisfied by high-profile local IPDs. It is expected that IPDs
that are equipped for high standard requirements would
benefit much from the new FDI inflow in 2014.
Risks: complicated administrative procedures may impede

the disbursement process therefore slowing down IPDs
ability to recognize sales and generate cash flow.
Source: FIA,, Dec-2013
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Investment view: Although there are several IPDs offering land and
warehouse for rental, only those that are able to satisfy high
standard requirements of big-name multinational giants would
benefit from this FDI trend. Once an IPD is able to attract and secure
big-name FDI investors, it can benefit from clustering associate
companies providing supports to the main investors. Therefore, we
maintain our enthusiasm in KBC, who has succeeded in attracting
LG to their Trang Bang IP.
Drivers/catalysts to watch: Due to the importance of FDI
investment, news on disbursement of a bigproject would be a
positive catalyst for IPs in the chosen invested area. In particular,
announcement of big investor signing land and warehouse rental
contract with an IPD would give a strong impact on the IPDs stock
performance.
Favorite stock:
KinhBac City Group (KBC:HOSE) was established in 2002
specializing in industrial park business and development. In the past
10 years, KBC has been very successful in both land bank
acquisition and foreign direct investment attraction. Currently, KBC
is holding several IPs with vast land bank of approximately15,000 ha
across the country including its associates. This ensures enough
land bank for the firm to maintain development in the next 10-20
years. 80% of KBCs customers are foreign investors; therefore, FDI
has a direct impact on the firms business performance. In addition
to core business of IPs development, the firm also owns several
commercial projects at prime locations throughout Hanoi. However,
in the context of the stagnant property market and distraught
monetary policies in the past 2 years, the firm has yet to develop
those projects.
We expect that KBCs 2013 earnings result which triggered from the
deal with LGE and other leasing contracts of factories will be
significantly improved compared with the excessive loss in 2012. In
2014 and longer term, we expect that KBC will further reap benefit
from the presence of LGE in Trang Due IP and improvement in FDI,
which may result in better business performance. However, we are
quite concerned about KBCs corporate bonds of VND 1,200 billion
which will come due in 1H14. Payment of this amount may exert
high pressure on the company in leveraging cash. Hence, though we
are positive on the firms business performance, we are still concern
about how the firm thoroughly settles its debt burden in the coming
year.
www.ssi.com.vn
103
Date: 31.01.2014
KBC (23/01/2014)
Stock
KBC
Price Market cap

PER
(VND) (mil USD) 2013
2014E
10600
146.3
84.80
41.41
www.ssi.com.vn
PBR
EV/EBITDA Dividend yield EPS (VND) EPS Growth Sales growth Net profit growth
2013 2014E 2013 2014E 2013 2014E 2013 2014E 2013 2014E 2013 2014E 2013 2014E
0.77 1.01 Na
Na
0%
0%
125 256 Na 105% 205% 10%
Na
174%
104
Date: 31.01.2014
SECTOR
INFRASTRUCTURE & CONSTRUCTION (Industrials)
IN
FOCUS
OVERWEIGHT
Kien Nguyen, +84 4 9366321 ext 510, kiennt@ssi.com.vn
2013 Summary: A challenging year

Sector performance
Sector performance
150%
140%
Construction companies remained on the sidelines with

minimal demand as the property market remained stagnant.
Additionally, construction companies struggled with longer
130%
120%
110%
payment period. This trend is more or less visible from small

contractors like LCG to big contractors like CTD.
100%
90%
80%
Vn Index
Industrials
Infrastructure & Construction
To maintain sales and cash flow, construction companies

placed more emphasis on industrial clients. Industrial
clients are predominantly from the public sector or FDI
sector. Because most infrastructure and industrial projects
require a certain number of years to complete, shifting focus
Source: Bloomberg
to this segment has helped construction companies to

secure income for the coming years.
Stock performance
To remain afloat, construction companies shifted portions of

their businesses and sales to industrial and infrastructure
developments, however, the stagnant and illiquid real estate
market still managed to generate great adversities for most
Outstanding stock performance

140%
120%
construction companies. As a result, infrastructure and

construction sub-sector underperformed the VN Index with
110%
only 8% return during 2013.
130%
100%
90%
80%
70%
Performances differ among companies. While FCN enjoyed

a significant price surge of 81%, LCG suffered a forfeited
22%. CII, a big contributor in the subsector, saw a negative
growth of 18.6%. Because of CIIs immense weight it
adversely affected the whole subsector. CII declined by
60%
50%
18.6%, drastically underperforming the the industrial sector

Vn Index
CII
and the VN Index as profit last year was dormant, only
Source: Bloomberg
reaching 10% of 2012s profit. Primary reason for depressed

earnings was that CII altered its accounting policy and
investment policy. To take benefit of tax incentives, CII will
no longer record accrued revenue before completion of
projects and transfer the projects before expiration date.
www.ssi.com.vn
105
Date: 31.01.2014
SECTOR
IN
FOCUS
Infrastructure projects in 2014 in

Transportation
:
Total
2014
disbursement of roughly USD 4 bn (VND

86 tn), 33% YoY
Sector Call:
Investment view:
National Road: 1A, 14.
Expressway: Noibai-Laocai, Hanoi-Thai

nguyen, Hanoi-Haiphong, Da nang-
the Government has increased the public spending budget to

5.3% of GDP; there are high chances that infrastructure and
Quangngai,
TPHCM-Long
thanhDaugiay, Ben luc-Long thanh, Daugiay-
energy will receive a good chunk of the budget. Disbursement of
Increase in public spending budget: Since November 2013,
Phanthiet, Ninhbinh-Baivot (PPP).
transportation projects are planned to increase 33% YoY at USD

4bn while disbursement of energy projects are expected to
Bridges: VinhThinh, Nhat Tan, Vam
increase by 12% YoY. The execution of strategic projects would

support construction and infrastructure companies in securing
Cong, Cao Lanh.
Airports: Noi Bai Terminal 2, Cat Bi.
Ports: LachHuyen
contracts in 2014. Companies that are experienced and have

good working relationships with the Government will stand to
benefit in the bidding of contracts and will be equipped to
manage the payment process.
Surge in FDI registration and disbursement: Moreover, with
Infrastructure projects in 2014 in Energy:

EVN 2014 net CAPEX (excluding debt
payment) at VND 90.4 trillion, 11.7% YoY
several immense industrial FDI projects registered, construction

companies can tap into this promising source in the coming
Refineries: Nghi Son (USD 9bn), Vung
years. A surge of more than 50% in FDI capital commitment in

2013, together with an 11% increase in FDI disbursement are
Ro (USD 3.2bn). Nam Con Son 2, Ham
positive signals of great potential demand for construction
Rong (pipeline)
companies in 2014 and onwards. However, in order to benefit

from the surge in FDI, construction companies need on field and
Power plants:
Mong Duong 1-2,
industry experience as most of FDI and infrastructure projects

relate to civil engineering and construction. Therefore, this
DuyenHai 3, Vinh Tan 1-2, VungAng 2,

Thai Binh 2, QuangTrach 1, Long Phu 1
nd
opportunity will only benefit those with experiences and sound

reputation.
500kV grid
Risk:
Infrastructure
projects
require
massive
investment
therefore project financing is always a challenge. Issue in capital

arrangement may lead to delay and problematic execution.
Failure to execute immense industrial projects due to legal
impediments and lengthy administration procedures for FDI
industrial projects may lead to delays in contract bidding and
revenue recognition for construction and infrastructure
companies.
Launching and disbursement of big FDI and infrastructure projects.
Successes in contract bidding would boost stock performances.
www.ssi.com.vn
106
Date: 31.01.2014
SECTOR
IN
FOCUS
Favorite stock: CII and FCN

Due to their direct involvement in the infrastructure and construction
field, we favor CII and FCN.
FCN (Foundation Engineering and Underground Construction
JSC.)
FCN is a private company and has been listed since mid-2012.
During 2013, FCN received widespread attention from investors due
to its unique business strategy of soft soil foundation improvement
and high-technology piling works. Although a considerably young
company with ten years establishment, FCN has participated in
several mega projects in industrial and energy sectors that use ODA
and FDI finance. Due to fiercer competition which has squeezed
margins across all business activities, FCN expects to maintain
earnings growth by expanding to the infrastructure segment. FCN
Holding (FCNH), an entity soon to be established, would participate
in government infrastructure projects such as the Hanoi metro lines
and only subcontracts the piling works and foundation improvement
to FCN. FCNH would hold a controlling stake in FCN and FCNH has
no intention of going listed. In the coming years, with support from
FCNH, FCN is expected to tap into the promising infrastructure
sector requiring high-technology such as the metro lines in Ha Noi
and Ho Chi Minh City.
CII (Ho Chi Minh City Infrastructure Investment Joint Stock
Company)
In 2014, CII will start collecting payments for the SaiGon II BT
project and benefit from increases in toll fees for the RachChiec and
BinhTrieu II projects. Profit is expected to improve significantly in
2014. However, due to a lengthy project pipeline, which will
consume VND 20-30K bn in the next 5 years, cash flow will remain
brittle, affecting dividend policy and spurring dilution risks for existing
shareholders.
We believe that CII is a good investment choice for long term
investors, who investment time window reaches well into 5-10 years,
when its projects begin generating cash flow.
CII and FCN (23/01/2014)

Stock
CII
Price Market cap

(VND)
(mil USD)
20100
108
PER
PBR
EV/EBITDA Dividend yield EPS (VND)
EPS Growth
Sales growth
Net profit growth
2013 2014E 2013 2014E 2013 2014E 2013 2014E 2013 2014E
2013
2014E
2013
2014E
2013
2014E
51.41
-89%
447%
184%
141%
-88%
330%
9.4
1.64
1.52
11.9
8.9
6%
6%
391
2137
FCN
www.ssi.com.vn
107
Date: 31.01.2014
RATING
Within 12-month horizon, SSIResearch rates stocks as either BUY, HOLD or SELL determined by
the stocks 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 negative 9%,
while a HOLD rating implies returns between negative 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 1-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.
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. 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.
www.ssi.com.vn
108
Date: 31.01.2014
CONTACT

Phuong
Hoang
Director
Strategy
409
phuonghv@ssi.com.vn
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637
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Research Manager
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1951*
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430
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2148*
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2014 MARKET OUTLOOK: Six investment themes for 2014

3. Time to revisit the banking sector?

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2014 median EPS growth of 9% (2013: -5%)

2014 dividend yield of 5% (2013: 5%)

6. Turnaround stocks are sexy.

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FERTILIZER (Basic Materials)

SUGAR (Consumer Goods)

DAIRY (Consumer Goods)

CONFECTIONERY (Consumer Goods)

OTHER F&B (Consumer Goods)

TIRES (Consumer Discretionary)

Textile & Garment (Consumer Discretionary)

HEALTH CARE (Pharmaceuticals)

PORTS AND SHIPPING (Industrials)

TECHNOLOGY & TELECOMUNICATION (IT)

PROPERTY (Commercial Developer)

INDUSTRIAL PARK DEVELOPER (Real Estate)

INFRASTRUCTURE & CONSTRUCTION (Industrials)

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2013 Macro Review: FDI-led growth

Services posted the highest growth rate of 6.56% YoY,

would serve as Vietnams macroeconomic hope, and

and contributed 2.85 percentage points to the overall

behind Vietnams economic growth given its

with an increase of 2.09% YoY; meanwhile, Agriculture,

manufacturing, and exports amid a deprecate private

unfavorable weather conditions. On the expenditure

sector. In particular, 2013 GDP growth finished at

side, final consumption edged up 5.36% YoY, and gross

years level of 5.25%. Among GDPs constituents,

FDI-led growth is staunchly reflected in the below data.

GDP growth (%- 2010p)

convalesced, and registered a modest growth of 5.9%;

indicators are still alluding to challenges ahead

and responses despite modest improvement. For

instance, retail sales growth was designated at a 4-year

Vietnams trade posted a persuasive performance

low of 12.6% YoY in nominal terms or 5.6% in real

at around 71.1% in spite of continuous efforts to lessen

level of 18.2%. However, the majority chunk of export

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accounted for 61.4% of total export value and increased

continued to gravitate towards high value added

FDI inflows helped the central bank strengthened its

exports amounting up to 24.35% of total exports. On the

or 12.7 weeks of imports. Consequently, the Vietnamese

other hand, imports experienced slightly higher growth of

Dong recorded the best performance against other

modestly positive at USD 10 million. But it is worth

VND/USD exchange rate

Trade Balance (RHS)

Unofficial VND/USD Rate

Source: GSO, & SSI