vscs mid-year strategy

1

MID-YEAR STRATEGY 2016

What will drive the market to 700?

VCSC RESEARCHJULY 2016

Content

2

● Executive Summary

● Macro and Market Highlights

● Sector Highlights and Top Picks

○ Banks

○ Consumer

○ Property

○ Cement

○ Power

○ Oil & Gas

○ Logistics

● Appendices○ Macro Scorecard

○ Disclaimer

○ Contacts

Executive Summary

3

• First half macro performance was strong.

Low GDP growth resulted largely from weather conditions affecting agricultural output.

Consumption, investment and trade numbers were all strong.

We therefore see good investment opportunities in consumer, logistics, power and cement sectors

and some in banking and property.

• Government should use care in trying to stimulate the economy to hit GDP target.

Government officials have said that the country must take action to achieve 6.7% GDP target.

Increasing credit growth in response to low Q1 GDP already impacted some banks and doesn’t seem

to be a tool for further stimulus.

We are already seeing the return of moderate inflation. Stimulus could potentially push us out of the

moderate range.

• Vietnam equities also performed well in the first half.

The VN-Index increased 9.2%, which is in line with its long-term growth trend.

Market performance was very much in line with neighboring countries and seemed to be heavily

influenced by global trends more than domestic developments.

• While 700 is very possible, current trends could bring the market beyond fair value.

At current levels, valuation multiples are starting to look a bit high and prices are approaching our

targets. We see up to 5% room for price appreciation during H2 before the market is “fully-

intrinsically-valued”.

Technical trends and global markets could push Vietnam markets beyond fair valuation this year but

also pose outside risks.

4

Macro and Market Highlights

VCSC RESEARCHJULY 2016

0.0%

2.0%

4.0%

6.0%

8.0%

200

5

200

6

200

7

200

8

200

9

201

0

201

1

201

2

201

3

201

4

201

5

201

6F

201

7F

201

8F

Industry & Const Services Agri & Forestry

Government’s GDP growth target of 6.7% is hard to achieve

5

VCSC forecast

Source: General Statistics Office of Vietnam, VCSC forecast

6.27%6.75% 6.75%

GD

P G

row

th

• Agriculture, forestry, and fishery sector’s negative growth caused by the historic cold spell in the North and

drought and salinization in Mekong Delta in H1 2016 severely impacts full-year economic growth.

• Domestic demand will stay strong in the second half of the year because of enterprises’ production acceleration

and higher consumer consumption at the end of year, leading to a high growth rate for the service sector.

• The mining sector’s negative growth rate (-2.2%), mainly caused by the decrease in global commodity prices,

greatly contributed to the industry and construction sector’s lower growth rate in H1 2016 compared with H1

2015. Fluctuations in global oil priced and expected weaker global demand resulting from the recent slowdown of

the global economy, including Vietnam’s major export markets such as the US, EU, and China, are believed to

have unfavorable effects on Vietnam’s industry sector in the second half of this year and even in 2017.

0

2

4

6

8

10

12

8

10

12

14

16

18

20

22

24

26

2009 2010 2011 2012 2013 2014 2015 2016F

Disbursed FDI Registered FDI Growth of manufacturing (%)

US

D b

illio

n

Yo

Y G

row

th(%

)

25

Strong FDI flow thanks to free trade agreements

6

Source: Foreign Investment Agency, General Statistics Office of Vietnam

VCSC Forecast

16

• FDI achieved impressive results in H1 2016 as disbursed FDI and registered FDI reached USD7.25 billion

(+15.1% vs H1 2015) and USD11.3 billion (+105.4% vs H1 2015).

• With the government’s efforts to improve business conditions and the benefits gained from the yet-ratified TPP

and ratified Vietnam-EU FTA, we believe that Vietnam can reach USD16 billion of FDI disbursement and USD25

billion of registered FDI in 2016.

• The establishment of ASEAN Economic Community (AEC) in early 2016 is a major milestone in regional

economic integration and improves the region’s competitiveness in attracting foreign investment.

• Constantly rising costs in China drive the investment flow to Southeast Asian countries, including Vietnam.

Real retail sales growth declined slightly but consumer confidence rose

7

Source: General Statistics Office of Vietnam, AC Nielsen

101

119

88

103

98 9796

99

94 95

87 88

96 9597

98 99 98

102

106

112

104105 108 Consumer Confidence

Q1 2016 - 109

80

85

90

95

100

105

110

115

120

125

0%

4%

8%

12%

16%

20%

24%

28%

32%

36%

40%

Ja

n-1

0

Apr-

10

Ju

l-1

0

Oct-

10

Ja

n-1

1

Apr-

11

Ju

l-1

1

Oct-

11

Ja

n-1

2

Apr-

12

Ju

l-1

2

Oct-

12

Ja

n-1

3

Apr-

13

Ju

l-1

3

Oct-

13

Ja

n-1

4

Apr-

14

Ju

l-1

4

Oct-

14

Ja

n-1

5

Apr-

15

Ju

l-1

5

Oct-

15

Ja

n-1

6

Apr-

16

Volume growth Value growth

Real Retail Sales

Growth H1 2016

vs H1 2015 –

7.5%

• Retail sales in H1 2016 grew by 7.5% vs H1 2015, lower than the growth rate of 8.3% in the same period last

year, indicating weaker domestic purchasing power in the first half this year than H1 2015.

• Consumer confidence in Q1 2016 increased by one point from Q4 2015 to 109, the highest level since Q2 2015.

Vietnam’s consumer confidence, which ranks fifth globally in H1 2016, implies the optimistic outlook of

Vietnamese consumers.

Despite a trade surplus in H1 2016, a trade deficit is predicted at year end with the

export growth rate lower than the target of 10%

8

Source: General Statistics Office of Vietnam, Ac Nielsen

176.6180.3

8.9%

-20%

-10%

0%

10%

20%

30%

40%

-50

0

50

100

150

200

2009 2010 2011 2012 2013 2014 2015 2016F

Export Turnover Import Turnover Trade Balance Export Growth (%) Import Growth (%)

US

D

bill

ion

VCSC Forecast

-3.7

9.0%

• In H1 2016, export and import turnover reached USD82.2 billion (+5.9% vs H1 2015) and USD80.7 billion (-0.5%

vs H1 2015) respectively, resulting in a trade surplus of USD1.5 billion. The low export growth rate in H1 2016

was mainly caused by decreases in exports of rice and mining products (coal, crude oil). Imports incurred

negative growth with imports from China decreasing by 2.9% vs the same period last year.

• The recent slowdown of the global economy weakens consumption demand of Vietnam’s big export markets (e.g.

the US, EU, China). Therefore, we believe it will be challenging for Vietnam to reach the export growth target of

10% and we adjusted our forecast to 9%.

• We predict that import turnover will increase by 8.9% in 2016 because of the surge in the import of machinery

and materials for infrastructure building in H2 2016. Consequently, the trade deficit is expected to reach USD3.7

billion, equivalent to 2% of total export turnover.

-1%

0%

1%

2%

3%

-2%

0%

2%

4%

6%

8%

Ja

n-1

3

Ju

l-1

3

Ja

n-1

4

Ju

l-1

4

Ja

n-1

5

Ju

l-1

5

Ja

n-1

6

Ju

l-1

6

CPI MoM (RHS)

CPI YoY (LHS)

We expect the return of moderate inflation in 2016

9

Source: General Statistics Office of Vietnam, VCSC forecast

VCSC

forecast

• Since the beginning of the year, CPI has risen 2.35%, mainly due to high inflation of healthcare service (YTD

+25.4%) and food & foodstuffs (YTD +2.32%).

• Inflation in 2016 is expected at 4.03%, higher than we previously forecast (3.5%). The main factors putting

pressure on inflation in H2 2016 are another increase in healthcare costs and higher education fees when the

new school year starts. Additionally, prices of the food & foodstuffs category will continue to rise, however to a

lesser extent, mainly because of increasing foodstuff prices.

Categories Weighting YTD CPI (%)

Food & catering services 36.12% 2.32%

Beverage and tobacco 3.59% 1.46%

Garment, footgear, hats 6.37% 0.78%

Housing and construction

materials

15.73% 2.03%

Family appliances and tools 7.31% 0.58%

Medicine & healthcare 5.04% 25.37%

Transportation 9.37% -3.52%

Telecommunication 2.89% -0.35%

Education 5.99% 2.27%

Culture, sport, entertainment 4.29% 1.3%

Others 3.30% 1.56%

Year-end inflation: 4.03%

Forex rate: Dong has been the most stable currency in ASEAN region

10

Source: Bloomberg

• VND has appreciated by 0.8% since the beginning of 2016 and is the most stable currency in the region. The

stability of VND amid CNY depreciation in H1 2016 indicates that VND has become less sensitive to CNY

movements.

• Circular 07/2016/TT-NHNN, which allows export firms to borrow short-term funds in USD, and stronger credit

growth will increase demand for US dollars in H2 2016. In addition, the expected trade deficit at the end of the

year will also put more pressure on VND.

• Despite more depreciation pressure in the second half of the year, we expect VND to depreciate by only 1% in

2016. Strong FDI flow, high foreign reserves (currently USD38 billion), and expected strong foreign remittance in

H2 2016 will provide an ample foreign money supply. Moreover, the high possibility of the Fed not raising interest

rates until next year and the US economy’s recent slowdown, which devalues USD, also support our forecast.

-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

6%

CNY

IDR

PHP

THB

VND

Year-end VND depreciation: 1%

20,600

21,000

21,400

21,800

22,200

22,600

23,000Ja

n-1

4

Ma

y-1

4

Sep

-14

Ja

n-1

5

Ma

y-1

5

Sep

-15

Ja

n-1

6

Ma

y-1

6

Interbank Upper band Lower band Reference Rate

22,529

22,304

21,873

21,217

Forex rate: SBV’s actions help to maintain stability

11

Source: Bloomberg

• SBV’s new exchange rate mechanism applied since January 2016 helps the FX rate fluctuate in a more narrow

range and thus would not shock enterprises as it previously has.

• SBV’s timely actions to balance USD supply and demand through treasury bill issuance on the OMO market also

plays an important role in stabilizing the USD/VND exchange rate.

Year-end FX rate: VND22,700/USD

Bond yields will be on a slight uptrend in H2 2016

12

Source: Bloomberg

2%

4%

6%

8%

10%

10Y

6.97%

5Y

6.16%

1Y

4.44% Bo

nd

Yie

ld

Year-end 5Y-bond yield: 6.3%

• Low bond yields in H1 2016 were mainly attributed to high bank liquidity and strong demand for bonds.

• Bond supply is expected to be lower in H2 2016 as the government completed over 80% of the full-year bond

issuance target. The lower supply will depress bond yields for the next few months, but tighter liquidity at the

banks heading into year end will nudge up yields.

H1 gains did not put us in a bubble

13

Source: Bloomberg

• H1 2016 gains in the VN-Index were in line with long-term trends.

• At 640, the index did not appear to be overvalued, though recent gains have put us above the trend line.

• Achieving 700 by year-end may put us above the long-term trend line.

0

200

400

600

800

1,000

1,200

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Bubble

700

ASEAN peers seem to be moving together

14

Source: Bloomberg

• While domestic factors did create some differences, the VN-Index’s YTD performance has been in line with our

peers.

• Vietnam and the Philippines were particularly hard hit by turmoil in China’s markets in January.

• Oil prices, which dropped below USD30 per barrel in January, but have since rallied past $50, have been a

driving factor for all four markets.

-16.00%

-12.00%

-8.00%

-4.00%

0.00%

4.00%

8.00%

12.00%

16.00%

04-J

an-1

6

11-J

an-1

6

18-J

an-1

6

25-J

an-1

6

01-F

eb-1

6

08-F

eb-1

6

15-F

eb-1

6

22-F

eb-1

6

29-F

eb-1

6

07-M

ar-

16

14-M

ar-

16

21-M

ar-

16

28-M

ar-

16

04

-Ap

r-1

6

11

-Ap

r-1

6

18

-Ap

r-1

6

25

-Ap

r-1

6

02-M

ay-1

6

09-M

ay-1

6

16-M

ay-1

6

23-M

ay-1

6

30-M

ay-1

6

06-J

un-1

6

13-J

un-1

6

20-J

un-1

6

27-J

un-1

6

Year-

to-d

ate

Perf

orm

an

ce

Vietnam

Indonesia

Philippines

Thailand

Thailand, 12.19%

Philippines, 12.14%

Indonesia, 9.22%

Vietnam, 9.19%

The VN-Index’s rising P/E ratio has been in line with the regional trend

15

Source: Bloomberg

• Vietnam continues to trade at a lower P/E multiple than its peer markets, despite having a strong ROE and ROA.

This is because of its low liquidity and high risk free rate.

• The spread between the VN-Index and neighboring markets’ P/Es has held stable this year.

• Although the VN-Index P/E ratio has been rising and is near the top of its historical range, this movement has

been mirrored in the other markets.

Note: Foreign net inflow includes USD117 million of VIC shares sold by foreign holders of

convertible bonds that converted.

(at June 30) Thailand Indonesia Philippines Vietnam

SET Index JCI Index PCOMP Index Vnindex index

P/E 19.8 26.7 23.0 13.7

P/B 1.8 2.4 2.7 1.8

ROE 9.0 9.7 12.0 13.9

ROA 2.2 2.4 2.8 2.4

Market cap USDm 394,968 409,254 193,337 56,985

Foreign net inflow

-YTD USDm 1,038 984 641 (79)

YTD CPI Increase 0.38% 3.45% 1.90% 2.40%

5 yr Govt bond yield 1.63% 7.19% 3.25% 6.09%

1012141618202224262830

SET Index JCI Index

PCOMP Index VNINDEX Index

Market P/E Ratios

The rise in P/E ratio exceeds levels justifiable by bond yields

16

Source: Bloomberg

• The VN-Index P/E ratio increased significantly compared to a modest decline in 5-year government bond yields.

• We continue to forecast a moderate increase in bond yields and the currently high level of the P/E ratio could

mean that further multiple expansion would bring stocks into overvalued territory.

• Rather, it seems that the P/E ratio is being pulled up by regional factors more than domestic trends.

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

14.00%

16.00%

0

2

4

6

8

10

12

14

16

18

20

Jan

-11

Ma

r-1

1

Ma

y-1

1

Jul-

11

Se

p-1

1

No

v-1

1

Jan

-12

Ma

r-1

2

Ma

y-1

2

Jul-

12

Se

p-1

2

No

v-1

2

Jan

-13

Ma

r-1

3

Ma

y-1

3

Jul-

13

Se

p-1

3

No

v-1

3

Jan

-14

Ma

r-1

4

Ma

y-1

4

Jul-

14

Se

p-1

4

No

v-1

4

Jan

-15

Ma

r-1

5

Ma

y-1

5

Jul-

15

Se

p-1

5

No

v-1

5

Jan

-16

Ma

r-1

6

Ma

y-1

6

Bond y

ield

PE

ratio

VNI PE 5YR Gov Bond yield

Correlation to oil prices demonstrates global influences

17

Source: Bloomberg

• We have manipulated the scale of the axes to demonstrate the point. Actually, Brent Crude has risen 34% YTD

vs 13% for the VN-Index. But the similarity of directional movements has been undeniable this year.

• We also don’t make any claims regarding causality, only correlation. In many instances, factors that cause

changes in oil prices – such as declines in Chinese manufacturing, the Fed not raising rates or Brexit –

simultaneously impact Vietnamese stocks.

• The correlation can be viewed as a result of Vietnam’s integration into the global economy, with heavy reliance

on trade and FDI.

• If this correlation were to hold true throughout 2016, then Brent Crude at USD60/bbl would equate to the VN-

Index reaching 680.

$20

$25

$30

$35

$40

$45

$50

$55

480

500

520

540

560

580

600

620

640

660

1/4/2016 2/4/2016 3/4/2016 4/4/2016 5/4/2016 6/4/2016 7/4/2016

VN-Index Brent Crude

580 was a

technical

resistance

barrier for the

VNI.

Technical barrier has been broken

18

Source: Bloomberg

• As we enter H2, the VN-Index appears to be breaking through its long-term barrier of 640 and now has no

technical barrier until 690, so that 680 – 700 seems quite feasible.

• Positive regulatory developments, such as intra-day trading and the launch of the derivatives market, may help

fuel sentiment further.

• Global trends may be of greater influence though. Foreign investors would have been less concerned by the

technical barrier than local investors, further supporting our view that the rally is based more on global than local

factors.

500.0

520.0

540.0

560.0

580.0

600.0

620.0

640.0

660.0

Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16

Coverage Universe indicates fundamental value at 670

19

Source: Bloomberg & VCSC

• The weighted average upside to TP on June 30 was 4.7%. Applying the same increase to the VN-Index would

bring it to 670, which would make our year-end target of 680 - 700 challenging on a fundamental basis.

• While 700 may be possible before year-end, this may push the index beyond fundamental values.

20

Bank sector: Clear bifurcation surfacing on bank

fundamentals

JULY 2016 VCSC RESEARCH

21

OVERVIEW

• Bifurcation of Q1 2016 results: impressive earnings growth and healthy balance sheet at VCB while other banks either

grouped into middle batch of “distracted but past midway point on restructuring” and far-end batch of “fully absorbed in

restructuring.”

• Movements of provision expense have a big impact on the bottom line, but banks diligent in provisioning started to see

provision expense coming down.

- CTG: + Q1 2016’s provision expense reduced vs Q1 2015

+ but provision expense in FY16 will be higher than FY15 due to increased NPLs and current lagging

of provisioning for VAMC bonds

Banks – clear bifurcation surfacing on bank fundamentals

Y-o-Y growth VCB CTG BID MBB ACB STB

PPOP 21.2% 25.1% 25.1% -28.1% 2.6% -78.3%

Provision -14.0% -4.6% 103.4% -68.6% 5.7% -85.0%

PBT 58.0% 53.8% -8.6% 10.7% 8.4% -75.5%

NPAT 62.3% 54.2% -10.5% 13.8% 10.5% -74.6%

Total provision/total

loan book2.4% 1.0% 1.4% 1.7% 1.2% 1.2%

Source: unaudited financial statements Q1/2016

Figure: Q1 2016 results


22

4

4.5

5

5.5

6

6.5

7

7.5

0

5

10

15

20

Credit growth (left) GDP growth (right)

OVERVIEW (Continued)

Credit growth vs GDP growth• GDP growth is correlated with credit growth. Outstanding

balance was approximately 115% of GDP at the end of

2015.

• Credit growth running roughly in-line with last year (6.2%

H1 2016 vs 6.3% H1 2015 – source: GSO).

• Credit growth is varied between banks, with VCB and ACB

having a high growth rate, BID in the middle, while CTG,

MBB and STB are quite slow.

-10%

0%

10%

20%

30%

2011 2012 2013 2014 2015

Credit growth

VCB

CTG

BID

MBB

ACB

STB

Credit growth Q1/16

VCB 6.3%

CTG 2.8%

BID 4.2%

MBB 2.5%

ACB 7.6%

STB 2.6%

Sector wide 3.0%

23


• Expansion into retail lending has shown positive improvement on loan yields.

Banks - clear bifurcation surfacing on bank fundamentals

5.5%

6.0%

6.5%

7.0%

7.5%

8.0%

8.5%

9.0%

1Q15 2Q15 3Q15 4Q15 1Q16

VCB CTG BID MBB ACB STB

BanksRetail loan

growth

VCB 50%

CTG 52%

BID 72%

MBB 54%

ACB 25%

STB N/A

Figure: Yields on loan Figure: 2015 retail loan growth

Source: VCSC estimates

24


• Insufficient capital evidenced by:

- No cash dividend at 15 of total 23 banks that publish AGM documents

- Nine of these 23 banks have plans to issue stock dividend/bonus/rights

- Many banks are looking to issue primary shares

• Continued delay of banking reform: Basel II is yet to roll out; Cir.06/2016 amended Cir. 36/2014 is less strict than the initial

intention.


25

OUTLOOK

• More competitiveness in retail segment: suggestive of pressure on margin and less aggressive growth.

• Equity raising is challenging as domestic capital is limited and global appetite for minority bank stocks shrinks.

Figure: Recent banking stock auctions and results


BanksAuction

date

No. of shares for

auction (million)

No. of shares

sold (million)

Clearance

rateStockholder

Clearance

value (VND

billion)

Saigon Bank 04/27/2015 0.50 - 0% Sabeco

AB Bank 10/14/2015 81.58 40.0 49.0% EVN; EVN Hanoi 400.0

Maritime Bank 11/20/2015 71.50 - 0% VNPT

Saigon Bank 12/02/2015 10.00 - 0% Saigon Tourist

TP Bank 04/25/2016 14.29 8.7 61.2% Mobiphone 77.7

SeABank 04/25/2016 33.40 - 0% Mobiphone

VietA Bank 05/12/2016 12.30 0.0003 0.002% SJC

Saigon Bank 06/24/2016 16.88 16.88 100% VietinBank 210.9

Source: HNX; vietstock

STRATEGY

• Our top stock pick is VCB as it possesses sector leading characteristics and the best earnings growth outlook of our

coverage universe.

• We recommend on MBB because of expected reduction of credit cost and active changes the bank is currently

undertaking.


26

Company Ticker Rating Market

Cap

USDmn

Foreign

Avail in

USDmn

Target

price

VND /

share

Current

Price

VND/sh

Upside

%

Div

yield @

current

price

FY15 EPS

growth %

FY16

EPS

growth

%

FY17

EPS

growth

%

FY16

P/E

(x)

MR

QTR

P/B

(x)

Asia Commercial JSB ACB O-PF 797.0 0 21,800 19,000 14.7% 0.0% 9.4% 12.2% 14.2% 16.9 1.5

Vietcombank VCB M-PF 5,635.0 499.4 47,800 47,300 1.1% 1.5% 5.2% 76.1% 7.4% 16.4 2.7

VietinBank CTG O-PF 2,796.3 4.4 18,700 16,800 11.3% 3.0% 20.9% -11.3% 3.1% 12.4 1.1

Military Bank MBB M-PF 1,086.5 0 15,500 14,900 4.0% 3.4% -4.7% -20.7% -2.9% 9.9 1.0

BIDV BID M-PF 2,674.5 745.4 17,000 17,500 -2.9% 0.0% -1.0% 15.7% 7.9% 11.8 1.4

Sacombank (*) STB SELL 911.9 174.4 8,100 11,300 -28.4% 0.0% -54.6% N/A N/A N/A 0.9

Figure: Bank Index vs VN-INDEX

Source: Bloomberg

(*) Unaudited financial statement 2015 (audited FS has not been issued)(*) Unaudited financial statement 2015 (audited FS has not been issued)

-10%

0%

10%

20%

30%

40%

50%

60%

70%

Jan-15 Mar-15 May-15 Jul-15 Sep-15 Nov-15 Jan-16 Mar-16 May-16

Bank Index VNI

VCB – Q1 2016 marks the beginning of good times

27

COMPANY OVERVIEW

• Lends primarily to SOE/large corporates and is given more

commercial freedom vis-a-vis other three SOE banks.

INVESTMENT THESIS

• Impressive Q1 2016 results: NPAT growth of 62%; the

second highest loan growth of 6.3% and NIM continues the

increasing trend starting in Q4 2014.

• Low cost of funds is a competitive advantage as VCB can

charge low loan rates and lend to better customers.

• Consistenly high provision in the survey period from 2008

to 2016 speeds up bad debts cleaning.

• Top position in foreign currency trading, foreign payment

and only bank in Vietnam to operate a foreign currency

interbank settlement system which allows better access to

demand deposit funds.

• Heighten FX interbank activities is a by-product of VCB’s

dominance in interbank settlement system and its ability to

accumulate USD customer deposits, all three areas are re-

enforcing.

• Despite VCB trading close to our target price we still push

clients into VCB as it has the best earnings growth

momentum of the peer group and will always be a prime

beneficiary of foreign inflows into the banking sector.

STOCK INFO

Rating M-PF

Price @ June 30, 2016 47,300

Target, VND/share 47,800

Total Return incl.Div 2.6%

Market Cap, USD mn 5,635.0

Daily Val 30 day, USD mn 1.29

Foreign Room, USD mn 499.4

KEY METRICS 2015A 2016F 2017F

Pre-provision profit growth 23.4% 25.2% 17.0%

NPAT less MI growth 15.7% 59.8% 27.1%

EPS growth 5.2% 76.1% 7.4%

PER @ market price 28.9x 16.4x 15.3x

PBR @ market price 2.8x 2.2x 2.0x

ROE 12.0% 15.8% 16.4%

Dividend Yld @ market price 2.1% 1.5% 1.5%

NIMs 2.5% 2.7% 2.8%

MBB – Q1 2016 put down as a transition quarter

28

COMPANY OVERVIEW

• Traditionally wholesale focused bank specializing in serving

military industrial complex and companies affiliated with

military.

INVESTMENT THESIS

• Low cost of fund advantage.

• MBB has the second highest provisioning buffer of our

coverage universe, after VCB.

• New credit approval system (CRA) promises near seamless

automation and is expected to facilitate better credit quality.

• MBB is one of the highest CAR level (12.8% in FY15) in the

banking sector.

• MBB’s anemic performance will turn once the market sees a

drop off in credit cost.

RISKS

• NIMs is in a declining trend, but will rebound after high yield

government bonds mature and retail loans enter high rate

phase after promotional period.

STOCK INFO

Rating M-PF

Price @ June 30, 2016 14,900



Market Cap, USD mn 1,086.5


Foreign Room, USD mn 0


Pre-provision profit growth 2.5% 2.6% 5.9%


EPS growth -4.7% -20.7% -2.9%



ROE 12.7% 10.8% 10.3%


NIMs 3.4% 3.1% 3.1%

29

Consumer sector: Living up to its potential


FMCG – Urban firmed up to offset rural’s slowing growth due to drought

30

FMCG consumption growth in terms of value

5%

4%

2%

4%

1%

-1%

Dairy Beverages Packaged foods

Urban

Rural

Volume growth in 5M16 vs 5M15 by categories

Source: Kantar Worldpanel

1.9%

8.7%

4.0%

5.4%

Urban Rural

5M15 vs 5M14 5M16 vs 5M15

Surging spending on durable goods is further evidence of consumer optimism

31

34,040

50,363

58,598

5M 2014 5M 2015 5M 2016

Number of passenger cars sold in Vietnam (units)

Source: VAMA, company disclosures

33%

80%

FPT Retail MWG

Top mobile and consumer electronics retailers’ revenue growth in 5M 2016 vs 5M 2015

Modern retail is showing why it is one of the most fascinating spaces to be in

32

9%3% -3%

8%-5%

51%

Med

ium

-siz

ed s

ho

ps

Smal

l sh

op

s

Wet

mar

ket

Spec

ialt

y st

ore

s

Hyp

er &

su

per

mar

kets

Min

imar

ket/

Co

nve

nie

nce

sto

res

FMCG growth (value) in 5M16 vs 5M15 bytrade channels

0

200

400

600

800

1,000

1,200

1,400

2010 2011 2012 2013 2014 9M15 4M16

Shop&Go Circle K B's mart

Family Mart AEON Citimart VinMart+

Number of convenience stores/minimarts in Vietnam

Source: Kantar Worldpanel Source: VCSC’s compilation

Local brands are getting their chance and need to position their products properly

33

% of people considering health as #1

and #2 concern

34%

2Q15

1Q16

4Q15

3Q15

% of consumers who think that local companies are moreattuned to customers' needs and tastes

Source: Nielsen Source: Nielsen

Consumer products need to be health-oriented

69%

60%

55% 60% 65% 70%

Vietnam

SEA

Investment strategy

34

• Investing in best-of-breed platform, management and execution in Vietnam’s underdeveloped retailing sector

• Local players with strong brand names and products addressing consumer health consciousness

• Riding on players with brand and quality-oriented proposition instead of price competition for sustainable growth

MWG – Doing justice to the crown jewel of Vietnam’s retailing sector

35

COMPANY OVERVIEW

• Leader in mobile phone and consumer electronics retailing

• Rolling out new minimart chain in 2017

INVESTMENT THESIS

• The best management and best platform in Vietnam’s

underdeveloped modern retail sector.

• Customer-centric approach, state-of-the-art ERP,

unrivaled store opening capabilities and market-leading e-

commerce form hard-to-replicate competitive advantages.

• Upside potential from the new minimart chain, which is

likely to be scaled up in 2017. Pilot program has delivered

satisfactory results with average monthly sales per store

surging to USD31,000 in May. Store format has been

finalized with fresh produce being a crucial item.

• Stellar 5M 2016 results with revenues +80% and NPAT

+86% vs 5M 2015, underpinned by a 15% SSSG, new

store expansion and doubling online sales.

• Attractive valuation at 10.6x FY16 PER, unjustifiably

cheap given MWG’s growth profile.

RISKS

• Failed experiment with the minimarket chain leading to

growth slowing down after 2017 – low probability.

• Challenges in dealing with logistics issues in minimarts.

STOCK INFO

Rating BUY

Price @ June 30, 2016 123,000

Target 160,000

Total Return incl. Div 31.3%

Market Cap, USD mn 703




Revenue growth 60.3% 60.4% 32.9%

PBT growth 59.6% 54.0% 33.8%


EPS growth 52.8% 52.0% 31.2%

PER @ market price 16.1 10.6 8.1

PBR @ market price 7.3 4.6 3.1

ROE 54.2% 52.7% 45.3%


D/E 82.6% 69.9% 46.1%

FPT – Growth gathers momentum as we look for a much better H2 2016

36

COMPANY OVERVIEW

• First in software outsourcing, second in broadband, and

second in mobile retailing in Vietnam.

INVESTMENT THESIS

• 5M 2016 EPS dropped 2% but we look to a much better

H2 as last-mile depreciation winding down will prop up

Telecom’s margins while more domestic IT projects will be

finished and booked in H2 2016.

• Telecom Services’ top line +26% vs 5M 2015 implies

significant profit growth after last-mile costs in HCMC and

Hanoi finish depreciation by the end of June 2016.

• Software Outsourcing (SO): Revenues +38% while PBT

+26% in 5M 2016 vs 5M 2015 with margin improvements

seen in April-May. Japan remains the strongest market.

• Lost sales in Distribution (PBT -40% vs 5M 2015) dragged

down 5M performance although Retail (PBT +37% vs 5M

2015) partly offset that on the back of new store openings.

• Potential catalyst from the sell-down of ICT Trading and

Retail segment (likely in Q4 2016).

• Undemanding valuation at FY16F PER of 9.0x, 18%-50%

discount to regional peers across business segments.

RISKS

• Insufficient human resources to foster SO growth – FPT

University can meet 30-40% of FPT Software’s HR needs.

STOCK INFO

Rating BUY

Price @ June 30, 2016 41,800

Target 54,000







PBT growth 15.9% 9.4% 15.2%


EPS growth 17.8% 9.4% 15.3%



ROE 23.4% 23.3% 23.8%


D/E 86.5% 73.8% 62.8%

VNM – A regional scale player, stock should see further multiple expansion

37

COMPANY OVERVIEW

• Leader of Vietnam dairy industry with > 50% market share

INVESTMENT THESIS

• Compelling long-term growth potential with Vietnam’s dairy

consumption/capita only one-fourth of APAC’s average.

• Most extensive distribution channel in rural areas to

capitalize on this hot spot of consumption.

• Potential for multiple expansion with FY16 PER of 19.3x,

compared to regional peers’ 24x, given that VNM has

reached a regional scale in terms of profits and market

cap, and that VNM should remain a foreign inflow magnet

when it finally opens up its FOL.

• 25% EPS growth estimated in FY16 vs FY15, driven by

volume growth and profit margin expansion on the back of

lower input milk powder cost base.

• Impressive Q1 2016 results with NPAT +39% vs Q1 2015

reaffirm our upbeat projection. Volume growth in domestic

market is displaying strong momentum, +18% vs Q1 2015

while export also rose 20% vs Q1 2015.

RISKS

• Fluctuations in input milk price - VNM is expanding cow

farms to increase self-supply capabilities.

STOCK INFO

Rating O-PF

Price @ June 30, 2016 141,000

Target 161,000


Market Cap, USD mn 7,524



KEY METRICS 2015F 2016F 2017F


PBT growth 23.0% 25.1% 8.7%


EPS growth 28.1% 25.0% 8.0%



ROE 38.5% 43.9% 41.7%


D/E 8.8% 1.5% 1.4%

DQC – A new lighting era for Vietnam, a new growth era for DQC

38

COMPANY OVERVIEW

• Leading lighting company in Vietnam

INVESTMENT THESIS

• Vietnam’s lighting industry is forecast to grow >10% with

LED growing >30% per annum.

• DQC is at the forefront to benefit from the transition from

traditional to LED lighting, through:

o A commitment to quality products and services that has

proven to be a winning model.

o One of the most recognizable brands in Vietnam

supported by a nationwide distribution network.

o Aggressively launching LED products, to be introduced to

consumers via a new showroom network.

• Bad debt collection to end by YE2016, creating strong

financial backing for capacity expansion. Cash is currently

19% of total assets.

• VCSC forecasts revenue and EBIT CAGR of 13% in next

five years based on a conservative basis.

RISKS

• Price competition from domestic low-scale, assembly-

oriented players to weigh on margins.

• Exports will struggle further as DQC has to prove its LED

products to partners while working to reduce costs further.

STOCK INFO

Rating M-PF

Price @ June 30, 2016 75,500

Target 73,500


Market Cap, USD mn 107.3




Revenue growth -11.5% 13.7% 14.5%

PBT growth -12.9% -0.2% 22.4%

NPAT less MI growth -12.9% 2.0% 28.4%

EPS growth -12.8% 2.0% 26.2%



ROE 20.0% 18.5% 21.2%


D/E 0.0% 0.0% 0.0%

39

Property Sector: Entering the other side of the cycle


-

1,500

3,000

4,500

High-end transactions - units

HCMC Hanoi

High-end: Uncertain outlook with key factors moving in opposite directions

40

Source: CBRE, VCSC research

-

1,500

3,000

4,500

Mid-range transactions - units

HCMC Hanoi

Mid-range: Transactions to pick up in H2 2016 on the back of durable demand and

low interest rates

41

Source: CBRE, VCSC research

Mid-range segment: A new era with the booming number of sizeable projects,

reflecting strong market advancement and developers’ expectation…

42

Source: VCSC compilation – HCMC market

Celadon City – 9,000 units

River City – 8,000 units

Diamond City – 3,000 units

Venice City – 3,000 units

Richstar – 2,000 units

Diamond Riverside – 2,000 units

Gold View – 2,000 units

Sunrise Riverside – 2,000 units

East Gate – 2,000 units

Aquamarine – 7,000 units

Hoang Nam – 5,000 units

Palm Heights – 4,000 units

Townhouse/villa: Strong demand but rapid jump in supply has been depressing

absorption rate

43

Source: Savills – HCMC market

200 300 400

700

1,000 1,100 1,100

1,700 1,900

2,100

3,200

18% 19%

51%

35% 37%32% 35%

25%31%

22% 25%

-100%

-80%

-60%

-40%

-20%

0%

20%

40%

60%

0

1,000

2,000

3,000

4,000

5,000

Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016

Townhouse/villa supply in HCMC - units

Supply Absorption rate

Townhouse/villa: New supply to flood the market in 2016-2018. Projects at

reasonable prices (USD130k – USD200k per unit) will continue to do well

44

Source: Savills, VCSC compilation and estimate for sizeable projects in HCMC market

Novaland – 1,000 units

KDH – 2,000 units

VIC – 5,000 units

Novaland – 1,500 units

Dai Quang Minh – 2,000 units

Pho Dong – 500 units

M.I.K – 1,000 units

Cityland – 1,000 units

BCI – 1,000 units

NLG – 500 units

Him Lam – 1,000 units

DXG - Keppel – 500 units

NLG – 500 units

An Phu – 500 units

Real Estate Index vs. VN-INDEX

Real Estate: Entering the other side of the cycle

Company Ticker Rating

Market

Cap

USDmn

Foreign

Avail in

USDmn

Target

price

VND /

share

Current

Price

VND/sh

Upside

%

Div

yield @

current

price

FY15

EPS

growth

%

FY16

EPS

growth

%

FY17

EPS

growth

%

FY16

P/E

(x)

MR

QTR

P/B

(x)

Vingroup VIC M-PF 4,404 720 47,300 49,400 -4.3% 0.0% -65.4% 60.0% 189.7% 50.9 3.9

Dat Xanh Group DXG BUY 80 7 23,200 15,300 37.9% 0.0% 43.5% -15.6% -25.6% 7.0 0.9

Khang Dien House KDH O-PF 183 0 24,800 22,800 11.8% 3.1% 49.1% 26.6% 76.2% 9.9 1.2

Source: Bloomberg

-20%

-10%

0%

10%

20%

Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16

VNINDEX Real Estate

45

24

16

50

60

72

2013 2014 2015 2016F 2017F

VIC's residential contract sales – VND’000bn

VIC – Prime developer but fairly priced on risk-adjusted return basis

46

INVESTMENT THESIS

• The largest high-end developer with a strong track

record of building mega projects.

• Benefiting from a diverse product portfolio across

Vietnam to mitigate liquidity risk.

• But the stock is fairly priced while risks are rising.

• Key risks: oversupply pressue may decelerate VIC’s

sales progress while consumer retail segment will continue

to make huge losses.

•

STOCK INFO

Rating M-PF

Price @ June 30 49,400


Total Return incl.Div -4.3%

Market Cap, USD mn 4,404





PBT growth -47.3% 40.3% 189.7%

NPAT less MI growth -61.5% 60.0% 189.7%

EPS growth -65.4% 60.0% 189.7%



ROE 5.6% 8.1% 20.2%

Dividend Yld @ market price 0.0% 0% 0%

500 1,300

2,800

6,400

500 900

1,600

3,200

(1,000)

0

1,000

2,000

3,000

4,000

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

2014 2015 2016 2017

Sales value (VNDbn) Sales volume (Units)

DXG – Good market insights lead to right choice of market positioning

47

INVESTMENT THESIS

• Right choice of new strategy with expansion into

low/mid-range property development at less than

VND25mn/m2.

• Proven sales capabilities with 20% market share in

nationwide brokerage market.

• Solid financials with net cash positon of 30% equity,

supportive of its acquisition strategy.

• Key risks: unproven capabilites in managing numerous

projects at the same time. Oversupply pressure in mid-

range segment.

STOCK INFO

Rating BUY



Total Return incl.Div* 37.9%





Revenue growth 175.5% 58.2% -2.7%

PBT growth 102.9% 25.5% 3.8%


EPS growth 43.5% -15.6% -25.6%

PER @ market price* 5.9x 7.0x 9.4x

PBR @ market price* 0.9x 0.9x 0.7x

ROE 19.0% 12.8% 11.3%


* Adjusted for the upcoming 1:1 rights issue

900

1,700

2,600

3,900 320 530 490

2,150

(3,000)

(2,000)

(1,000)

0

1,000

2,000

3,000

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

2014 2015 2016F 2017F

Sales value (VNDbn) Sales volume (units)

KDH – Bright long-term outlook but lacking short-term catalysts

48

INVESTMENT THESIS

• The most reputable townhouse developer in HCMC,

proven execution and attractive products.

• Strong growth forecast in 2016-2020 but fairly priced

in one-year horizon.

• Bright long-term prospects with new 400ha land bank

through BCI acquisition but restructuring process could be

lengthy.

• Key risks: Surging supply across the city may put

pressure on KDH’s sales progress.

STOCK INFO

Rating O-PF








Revenue growth 69.1% 101.9% 80.1%

PBT growth 209.1% 81.8% 69.2%


EPS growth 49.1% 26.6% 76.2%



ROE 8.0% 11.7% 17.1%


CII – Real estate is a new key growth driver

49

STOCK INFO

Rating BUY








Revenue growth -32.8% 8.1% 186.6%

PBT growth 56.0% 1.2% 53.1%


EPS growth -11.8% -4.6% 24.2%



ROE 21.2% 20.8% 22.3%


COMPANY OVERVIEW

• The largest and most reputable private infrastructure

development company in Vietnam.

• Focuses on four essential segments: bridges & roads,

water, construction, and real estate.

INVESTMENT THESIS

• Good relationship with government and vertical integration

helps them get infrastructure projects and compete with

lower costs. In addition, financial structuring increases the

projects’ IRRs and improves cash flows.

• We expect high returns from real estate projects in the

Thu Thiem New Urban Area, District 2, HCMC due to the

low input costs and attractive location.

• No more dilution risk with high cash dividend.

• We forecast full-year results to rebound from low Q1

numbers and report 2016F NPAT growth of 21% Y-o-Y.

RISKS

• Lack of experience in developing real estate projects.

• Possibility of getting BOT and BT projects depends

heavily on relationship with government.

• Due to high leverage ratio, interest rate movement will

impact earnings.

50

Cement sector: Industrial Construction to drive

sales volume


Cement – Industrial construction to drive sales volume

51

OVERVIEW

• Cement consumption is on resilient recovery in tandem with the boom in construction activities. In the 5M 2016, total

domestic consumption increased 17% over the same period last year (vs 1% 5M 2015 YoY growth)

• Growth skewed to the South due to concentration of construction projects here (e.g. the metro line); The Northern market

remains lackluster with oversupply being an unsolved issue.

• Industry capacity increases, mainly concentrated in the North, leading to more severe oversupply situation in the North in

the future.

Source: VNCA

-

10

20

30

40

50

60

70

80

90

2010 2012 2013 2014 2015 2016F

14 16 9 8 10 11

Total industry capacity Domestic consumption Export Industry's oversupply

Million tons


52

OUTLOOK

• The IPO of Vietnam Cement Industry Corporation (VICEM) possibly in 2016, but more likely in 2017.

• H2 2016 likely to see the addition of 6 million tones of output capacity, but all will be in the North of Vietnam.

• FDI inflows into Vietnam’s manufacturing sector will boost factory construction.

• Healthy real estate market will spur domestic cement consumption.

• Government has allocated capital for public utility infrastructure.

STRATEGY

• We favor cement producers operating in the South due to the favorable supply-demand dynamics of this market and lucrative

growth opportunities from strong pipeline of construction projects.

• HT1 is the leader in this market with 28.5% market share and should benefit most from this trend along with their efforts to

boost sales to gain more market share this year.

-

5

10

15

20

25

30

2013 2014 2015 2016F

FDI into Viet Nam(USD billion)

Government's development capital expenditure (USD billion)

-

10,000

20,000

30,000

40,000

50,000

60,000

2011 2012 2013 2014 2015 2016F

Successful property transactions in Ha Noi and Ho Chi Minh


53

Figure: Cement Index vs VN-INDEX

Source: Bloomberg – includes HT1, BCC,BTS, HOM and VTV


Cap

USDmn

Foreign

Avail in

USDmn

Target

price

VND/

share

Current

Price

VND/sh

Upside

%

Div

yield @

current

price

FY15

EPS

growth

%

FY16

EPS

growth

%

FY17

EPS

growth

%

FY16

P/E

(x)

MR

QTR

P/B

(x)

Ha Tien 1 HT1 BUY 371 39 36,300 29,900 21.4% 0% 138.6% 15.4% 22.2% 14.3x 2.1x

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16

Cement Index VNINDEX

HT1 – Riding the slipstream of a construction boom

54

COMPANY OVERVIEW

• HT1 is the leading cement producer in southern Vietnam

with a 28.5% market share and a 9% market share in

Vietnam.

• Over the course of 2016, utilisation will be 100% of 6

million tonnes of cement capacity, 100% self-sufficient in

clinker needs.

INVESTMENT THESIS

• Enjoys strong foothold in the southern market with more

benign supply-demand balance and robust demand growth

vs the oversupplied northern region.

• Q1 2016 result was impressive with better than expected

cement sales volume of 20.3% YoY and HT1’s efforts to

expand the market share in FY16, with the company

projecting sales volume growth of 31.6%.

• FX impact on HT1’s P/L will decline while HT1 will pay

down its EUR debts over the next five years. Current EUR

weakness favourable for HT1.

• Valuation still attractive: target FY16 PER of 15.1x on an

EPS forecast of VND2,413. Implied EV/EBITDA of 7.3x vs.

11.0x of regional peers.

STOCK INFO

Rating BUY

Price 29,200








PBT growth 140.1% 12.1% 22.2%


EPS growth 138.6% 15.4% 22.2%



ROE 18.1% 17.2% 19.0%

Dividend Yld @ market price

D/E

0.0%

1.3

0.0%

0.9

0.0%

0.8

(*) Earnings per share figures have been adjusted for non-dilutive

share capital expansion events such as share dividends and rights

issues, where applicable.

55

Power sector: Bet on hydro recovery and gas

thermal capacity expansion


Power – revised PDP calls for a tripling of gas thermal capacity by 2030

56

• Vietnam’s electricity consumption per capita is one fifth of the average in Asia Pacific; the price of electricity is 50% lower

than other Asia Pacific countries.

• Revised PDP VII was approved in April 2016, which reduces the sector’s total targeted capacity by 12% mainly due to coal

and nuclear thermal capacity reduction; capacity for gas & solar power raised by 10% as the government prioritizes clean

energy.

• Under new power plan, gas thermal capacity is expected to nearly triple by 2030.

-

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

2030 Old 2030 New

Hydro Coal Gas Wind Solar Others Nuclear

MW

-

20,000

40,000

60,000

80,000

100,000

120,000

140,000

2015A 2030 New

Hydro Coal Gas Wind Solar Others Nuclear

Fig: Power generation mix revised Fig: Capacity outlook

Source: MOIT, EVN & VCSC

MW

Power – Severe drought in H1 exacerbated already tight supply conditions

57

• H1 recap: Robust demand: Nation’s five-month consumption grew 12.3%; Consumption in the South was up 13.3% YoY

driven largely by industrial production.Tight supply: Not many new plants; hydro contribution fell due to drought.

• Robust CGM price in the South, CGM price in the North was weak in the first half.

• Government targets no retail electricity price increase in 2016.

• Long term outlook: demand is still robust at 10%-12% p.a and expected to surpass supply growth of less than 10% in the

next two years.

• Expected serious power shortage in the South with slow progress of Long Phu and Song Hau coal thermal plants.

• Wholesale competitive generation market is currently in pilot mode and is expected to officially operate from 2019 onward.

0

20

40

60

80

100

120

140

160

180

2010 2011 2012 2013 2014 2015 2016F

Fig: Vietnam’s electricity consumption

Bn kWh

Source: EVN & VCSC

0%

20%

40%

60%

80%

100%

120%

1Q15 1Q16

Hydro Coal Gas Oil Import Others

Fig: Q1 2016’s generation mix

Source: EVN & VCSC

Power – Increasing possibility that La Nina will lead to a strong hydro recovery

58

0%

10%

20%

30%

40%

50%

60%

70%

80%

MJJ2016

JJA2016

JAS2016

ASO2016

SON2016

OND2016

NDJ2016

DJF2017

JFM2017

5.4%

7.3% 7.3%

10.5%

16.5%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

-

10,000

20,000

30,000

40,000

50,000

60,000

70,000

2016 2017 2018 2019 2020

Capacity (MW) Capacity growth (%)

Fig: La Nina probabilityFig: Vietnam’s electricity capacity outlook

Source: International Research institute for Climate & SocietySource: EVN & VCSC

STRATEGY

• Choose good and undervalued hydro stocks like SJD, VSH, SHP now that drought has ended and La Nina is a real

possibility.

• We like well-run thermal plants that still benefit from the South’s electricity shortage despite La Nina, are undervalued and

have concrete capacity expansion plans – e.g. NT2, which aims to double capacity by 2021.

• Consider participating in IPO of Genco 3, PV Power.

• Consider consulting and construction companies like TV2, VNE which will benefit from huge project pipeline.

RISK

• Forex translation loss on foreign currency – denominated loans (JPY, USD).

• Further changes in gas input mechanism and a sustained rise in oil prices could pose a threat to gas thermal players.

Power – Weak hydro performance has been a major drag on the sector

59

Fig: Power stock vs VN-Index

Source: Bloomberg

-15%

-10%

-5%

0%

5%

10%

15%

20%

VNINDEX Power

Ticker Rating

Market

Cap

US$mn

Foreign

Avail in

US$mn

Target

price

VND /

share

Current

Price

VND/sh

Upside

%

Div yield

@

current

price

FY15 EPS

growth %

FY16 EPS

growth %

FY17 EPS

growth %

FY16 MR QTRP/E P/B

(x) (x)

NT2 O-PF 417.8 121.1 39,900 34,700 15.0% 7.5% 57.0% 5.1% -13.1% 7.5 1.9

PPC O-PF 258.0 92.1 15,600 14,400 8.3% 9.7% 59.7% -7.8% -8.4% 9.7 0.8

Non-rated picks: Some hydropower stocks are looking attractive

60

Ticker Short NameMarket Cap

(USD mn)Div yield (%) ROE (%) P/B (x) TTM P/E (x)

30 Day trading val

(USD'000)

VSH

VINH SON – SONG

HINH 138 7.1 8.3 1.1 13.2 8,614

CHP

CENTRAL

HYDROPOW115 7.8 20.5 1.6 8.2 7,963

SHP

SOUTHERN

HYDROPOW84 7.5 9.9 1.6 16.0 3,521

TMP

THAC MO

HYDROPOW82 9.6 13.6 1.7 12.5 459

TBC

THAC BA

HYDROPOW68 7.6 12.0 1.7 13.7 604

SJD CAN DON HYDRO PO57 9.1 15.6 1.2 7.8 7,405

KHP KHANH HOA POWER18 10.0 15.6 0.7 4.5 4,826

SBA SONG BA JSC26 10.3 6.5 0.9 13.3 2,053

• SJD: solid yield, lowest P/E.

• VSH: Upper Kon Tum is well on track to be completed by end 2018; Q3 is lowest

season of VSH, suggesting that this might be a good entry point.

• SHP: Key catalyst to watch is output of Da M’bri plant.

Other stock ideas: Jump on the IPO band wagon or invest in E&C providers.

61

Genco 3 IPO:• One of three generating arms of EVN, capacity of

nearly 8,000 MW (20% of Vietnam power sector’s

installed capacity).

• Targeting to IPO in August 2016.

• Will equitize 49% stake.

• Possible share capital: USD1 billion.

• Enterprise value determination was completed, is

waiting for Prime Minister to approve equitization

plan.

• Will benefit from the operation of Wholesale

Competitive Generation Market.

PV Power IPO:• Power arm of PetroVietnam Group.

• Targeting to IPO in October 2016.

• Will equitize 49% stake.

• Current share capital: ~ USD1 billion

• Enterprise value determination is work-in-progress.

• PV Power is in talks with Tohoku (Japan), SK,

Kospo (Korea) and Tan Power.

• Will benefit from the operation of Wholesale

Competitive Generation Market.

• TV2 (Power Engineering Consulting JSC 2- PECC2): Will benefit from the tripling of Vietnam power

sector capacity in the next 15 years as PECC1234 has 85% market share in planning & grouting and pre-

feasibility study phase.

• VNE (Vietnam Electricity Construction JSC) & SJE (Song Da 11 JSC): Transmission line constructors

which will benefit from demand for transmission lines and transformer expansion worth USD10 billion in

the next five years. VNE has 35%-40% market share and competes with Power Construction JSC No 1,

2, 4.

• L10 (Lilama 10) & LM8 (Lilama 18): Power plant construction companies which will benefit from the

capacity expansion of coal (quadruple) & gas (triple) thermal plant capacity expansion.

NT2 – Visibility on second plant and possibility of a third plant raise valuation

62

COMPANY OVERVIEW

• Nhon Trach 2 is one of the newest and most modern gas

thermal plant in the South of Vietnam, providing an

average 4.5 billion kWh of electricity every year and

accounting for 4.5% of national power supply.

INVESTMENT THESIS

• Good asset. The most modern gas-fired power in Viet

Nam. Highest efficiency ratio. Low investment capital of

USD0.9 million/MW.

• Ideal PPA contract. 10 – Year PPA contract locked for

80%-90% volume with 100% pass-through of the biggest

input cost to EVN (gas cost). Gas feedstock is guaranteed

under a 25-year contract .

• With the application of floor price NT2 is still competitive

vs coal thermal plant, good Q2 result with core NPAT

growth of 19% YoY.

• License application for Nhon Trach 3 is on track to be

approved late this year and will be a major share price

catalyst.

• The operation of Wholesale Competitive Market and Nhon

Trach 4 possibility are other solid long-term drivers.

RISKS

• Economic slowdown and weather. 5% change in sales

volume will result in a 14% change in TP.

• Forex translation loss risk with EUR and USD-

denominated loans but they are paying down their debt.

STOCK INFO

Rating BUY

Price @ June 30, 2016 34,700







Revenue growth -4.7% -3.0% -1.3%

PBT growth -24.5% 6.1% -4.8%

NPAT less MI growth (adj) 57.0% 5.1% -13.1%

EPS growth (adj) 57.0% 5.1% -13.1%

Gross D/E 1.2 0.9 0.7



ROE 25.3% 24.1% 19.1%


(*) NPAT and EPS figures have been adjusted for forex

translation loss/gain.

63

Oil & gas: Bet on predictable catalysts rather than oil prices


Oil & Gas – Low oil prices heavily dented exploration and production activity in H1

64

• In H1 2016, PetroVietnam’s (PVN) crude oil production declined 6.1% to 7.9 million tons as low oil prices

fell below Vietnam’s average production cost; however, natural gas production climbed 5.9% to 5.7bcm.

• Exploration & development activity (except deep-water) ground to a halt, resulting in idle rigs, and

headcount/salary cuts.

• Crude production should recover partially in H2 2016 due to the recent recovery in prices and a push by

the government.

Source: MOIT, VCSC estimates

Fig: Vietnam oil & gas production

0

4

8

12

16

20

2010 2011 2012 2013 2014 2015 1H16 2016FLowcase

2016FBasecase

2016FHighcase

Crude oil (m tons) Natural gas (bcm)

0

20

40

60

80

100

120

140

0

10

20

30

40

50

60

70

80

2011 2012 2013 2014 2015 2016

Myanmar

Brunei

Thailand

Malaysia

Australia

Indonesia

Vietnam

Brent oil price(USD/bbl) - RHS

Source: Bloomberg

Fig: Historical SEA rig count vs oil price

Oil & Gas – Block B and Blue Whale projects will proceed, nonetheless

65

• PVN announced the resumption of Block B project in April 2016. The field development plan was

completed and is waiting for the Government’s approval; this project is a strategic priority to meet

Vietnam’s gas needs and so is unlikely to be impacted by any fresh weakness in oil and gas prices.

• Blue Whale received a push during Obama’s recent visit to Vietnam; the project is awaiting gas price

finalization and overall development plan, and PVN and Exxon Mobil are targeting first gas from 2021.

• Refineries: Nghi Son refinery (capacity 10 million tons, 1.5x of Dung Quat refinery) is 80% completed and

expected to commence production in Q2 2017. Gazprom Neft backed-off from a planned 49% stake

acquisition in Dung Quat; PTT Thailand and Saudi Aramco postponed a USD22 billion refinery project.

Source: VCSC’s research, “undiscovered” indicated probable by not

proven reserves.

Fig: Vietnam reserves status by basin as of FY14 (MM

scm oil equivalent)

Figure: Existing gas pipeline (red line) and Block B’s gas

pipeline (Blue dotted line)

Source: PVN & VCSC

Block B

Blue Whale

Oil & Gas – Consensus still calls for a price recovery but uncertainty abounds

66

• Vietnam’s oil & gas operators are waiting for oil prices to rise to USD60/bbl-USD65/bbl to kick off

development of new fields and, potentially, discovery activities too.

• Based on the consensus of expert estimates, our base case assumption for oil prices is USD45/bbl for 2016

with an increase of USD10/bbl each year to flatten out at USD65/bbl in 2018.

• Resolution of coinciding and temporary supply disruptions (eg. Nigerian terrorist attacks, Canadian wildfires)

and renewed uncertainty following Brexit create headwinds to continued oil price recovery.

Fig: Brent oil price forecasts

Source: GS, Bloomberg, EIA, Moody’s. Reuters,

VCSC

45

55

65 65 65

-

10

20

30

40

50

60

70

2016F 2017F 2018F 2019F 2020F

Average of experts' forecasts

VCSC's oil price base case

35

47 46 50

52 55 58 59

-

10

20

30

40

50

60

70

1Q

16

2Q

16

3Q

16F

4Q

16F

1Q

17F

2Q

17F

3Q

17F

4Q

17F

2016 2017

Bloomberg consensus on oil prices(USD/bbl)

Fig: Quarterly Brent oil price forecasts

Source: Bloomberg

Fig: Goldman forecasts oil deficit from

Q2 2016

Source: Goldman Sachs

-0.6

-0.2

0.2

0.6

1.0

1.4

1.8

2.2

1Q

14

2Q

14

3Q

14

4Q

14

1Q

15

2Q

15

3Q

15

4Q

15

1Q

16

2Q

16

3Q

16

4Q

16

1Q

17

2Q

17

3Q

17

4Q

17

Oil surplus (Mil bbl/day)

Oil & Gas – We recommend betting on predictable catalysts rather than oil prices

67

STRATEGY

• If you are an oil price bull and have a high degree of confidence in a continued recovery, bet on PVD,

whose business – and share price – is highly sensitive to oil prices; however, PVD’s valuation now looks

stretched given the recent rally, with risks to the downside. Average oil prices for 2016 would have to

come in at around 60USD per barrel for PVD to be re-rated a BUY.

• A less risky strategy, in our view, is to ride more predictable catalysts such as the Block B and Blue Whale

projects which are now almost certain to go ahead and will benefit oil field service providers.

• If you are betting on a more tepid oil price recovery, we recommend PVS: it is likely to be the first

beneficiary of contract awards from Block B (expected in 2016 or 2017) and is somewhat shielded from oil

price volatility given its large M&C order backlog and the long-term nature of its FPSO/FSO contracts;

valuation also looks compelling.

Source: VCSC’s forecast,

(*) subject to change in our upcoming update report **we model a USD10/bbl increase in oil prices for each year through to 2018, starting from our

2016 oil price assumption under each scenario

2016** Oil price (USD/bbl) 35 45 55

PVS M-PF O-PF BUY

DPM O-PF O-PF O-PF

PLC* O-PF O-PF M-PF

GAS* U-PF M-PF O-PF

PVD SELL U-PF O-PF

68

Figure : Oil & Gas Index vs VN-INDEX

Oil & Gas: Poised for a recovery


Cap

USD

mn

Foreign

Avail in

USD

mn

Target

price

VND /

share

Current

Price

VND/sh

Upside

%

Div

yield @

current

price

FY15

EPS

growth

%

FY16

EPS

growth

%

FY17

EPS

growth

%

FY16

P/E

(x)

MR

QTR

P/B

(x)

OIL & GAS (1) -8.6% -27.5% 18.0% 13.5 1.5

PVN Tech Services PVS O-PF 357 76 19,900 18,000 10.6% 5.6% -23.2% -34.4% 6.0% 9.2 0.8

Phu My Fertilizer DPM O-PF 482 120 30,200 27,700 9.0% 10.8% 30.1% -14.3% -1.3% 9.7 1.2

Petrolimex Petrochemical PLC O-PF 106 45 34,300 29,500 16.3% 10.2% 24.9% 4.2% 12.2% 7.4 2.0

PVN Gas GAS M-PF 5,102 2,369 47,800 60,000 -20.3% 5.0% -39.6% -23.9% 13.0% 17.9 2.8

PVN Drilling PVD U-PF 469 59 27,600 30,300 -8.9% 0.0% -35.1% -69.1% 60.3% 23.2 0.8

Source: Bloomberg

-40%

-30%

-20%

-10%

0%

10%

20%

Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16

VNINDEX Oil & Gas

Non-rated stock ideas

69

• Beneficiaries of Block B: PVC, PXS and PVB. Contract values equivalent to two, two and

three years of revenue, respectively.

• Robust demand for gas from industrial parks: PGD, CNG, PVG, PGS.

• Beneficiaries of Nghi Son refinery completion: PVT (the monopoly in transportation of crude

oil & oil products, coal transport for Vung Ang thermal plant).

Ticker Short NameMarket Cap

(USD mn)

Div yield

(%)Net D/E (x) ROE (%) P/E (x) P/B (x)

PVC DRILLING MUD JSC 33.0 8.2 1.5 16.3 11.4 0.7

PXS PETROLEUM EQUIPM 33.6 10.2 45.2 14.7 6.6 0.9

PVB PETROVIETNAM

COAT19.6 9.9 (2.7) 25.0 9.0 0.9

PGD PETROVIET LOW

PRESSURE GAS 184.0 2.8 0.2 19.0 30.1 3.3

CNG CNG VIETNAM JSC 47.3 7.7 (35.9) 35.1 9.2 2.8

PGS SOUTHERN GAS

TRANSPORT37.9 18.3 (22.4) 20.4 3.5 0.8

PVG PV GAS NORTH JSC 9.7 7.7 78.0 11.4 9.4 0.5

PVT PETROVIET TRANSP 148.0 2.8 18.4 5.6 8.8 0.9

Source: Bloomberg

70

COMPANY OVERVIEW

• Leading provider of non-drilling technical services, from

upstream to downstream, including seismic survey,

Mechanical & Construction (M&C), Operation &

Maintenance (O&M), Offshore Support Vessel (OSV),

supply base and Floating Oil Storage (FSO/FPSO).

INVESTMENT THESIS

• Less impacted by oil prices than PVD; resilient FPSO/FSO

segment with stable day rates due to 10-year contract

despite risk of marginal declines in Lam Son FPSO day

rate.

• Big Mechanical & Construction order backlog of USD1.1

billion which could even double with Block B contract

awards.

• Oil price-sensitive segment -- Seismic Survey – has

signaled improvement with new contract wins and is

expected to narrow its losses in 2016.

• Trading at a 1YF PER 9.3x and a big discount to book

value; we see upside due to: (1) improving business

prospects on the back of the oil price recovery (2)

uncaptured potential upside from Block B project and (3)

an attractive dividend yield of 5.5%.

STOCK INFO

Rating O-PF

Price@ June 30, 2016 18,200

Target 19,900






Revenue growth -26.3% -20.0% -1.3%

PBT growth -20.8% -34.0% 6.0%

NPAT less MI growth -23.2% -34.4% 6.0%

EPS growth % normalized -23.2% -34.4% 6.0%

D/E (gross) 21.9% 19.6% 17.0%



ROE 13.3% 8.2% 8.3%


PVS – A safer bet and likely beneficiary of Block B project progress

(*) EPS growth normalized is calculated based on EPS

normalized (less extraordinary items and less contribution

to employee bonus and welfare fund per Circular 200).

71

COMPANY OVERVIEW

• Leading urea producer with 48% market share and trader

of other fertilizers (NPK, SA, DAP).

INVESTMENT THESIS

• 2016 has been tough so far due to urea selling price

declines despite the continued benefit from oil-linked input

price mechanism.

• Potential application of a floor price on input gas is not a

major risk as it will not kick in before 2017 and will only be

marginally above our base case oil price assumption for

that year

• Potential recovery in urea prices, end of drought and

continued local supply disruptions from Ninh Binh should

ease local oversupply and lift prices.

• New NH3-NPK plant diversifies DPM’s product porfolio

and will hedge against future urea price swings.

• We think the risk of urea price slides and application of a

floor price on input gas are now already priced-in as DPM

is trading at a TTM PER of 8.3x, a compelling 40%

discount to peers.

• Stellar dividend yield of 10.8% and high ROE of 17.0%.

STOCK INFO

Rating O-PF

Price@ June 30, 2016 27,700

Target 30,200






Revenue growth 2.3% -7.5% 11.2%

PBT growth 45.3% -12.1% -1.3%

NPAT less MI growth 34.6% -11.7% -1.3%

EPS growth % normalized 30.1% -14.3% -1.3%

D/E (gross) 2.8% 16.6% 30.1%



ROE 17.0% 15.2% 14.6%


DPM – Long-term prospects intact despite current urea price weakness

(*) EPS growth is calculated based on EPS normalized

(less extraordinary items and less contribution to employee

bonus and welfare fund per Circular 200).

72

Logistics sector: Bet on the leaders and capacity

expansion


Logistics - Hai Phong port zone growth slowed despite strong nationwide growth

73

• Port operations: In Q1 2016, Vietnam’s total cargo throughput volume surged by 28% YoY to reach 112,382 tons, with

container cargo-handling volume touching 28,957 tons, up 16% YoY.

• Transportation: cargo transportation volume rose by 7% YoY in Q1 2016. Rail transport fell sharply by 21% while air

transport and road transport volumes saw robust growth of 13% and 8%, respectively.

• Despite strong system-wide port cargo throughput growth, Hai Phong port zone saw flat throughput volumes as the Tet

holiday spilled over into February, which is normally the busiest time for port operations in the region in Q1.

-

50,000

100,000

150,000

200,000

250,000

300,000

350,000

Q12015 Q12016Thousands tons

+8%

+5%

+2%-21% +13%

+7%

-

20,000

40,000

60,000

80,000

100,000

120,000

Q12015 Q12016

Vietnam's total throughput

Vietnam' s container throughput

Source: GSO Source: GSO

+28%

+11%

Vietnam transportation volume in Q1 2016 Vietnam total port cargo throughput in Q1 2016

Thousands tons

Logistics – We expect a strong H2 across all sub-segments

74

• Hai Phong portzone is expected to achieve 12%-13% growth in cargo throughput in H2 2016 on the back of rising trade and

new capacity coming on stream. All key players in the region such as GMD, VSC and PHP have capacity expansion

projects which are currently under construction and coming online between Q2 and Q3.

• Aircargo transport is expected to sustain double digit growth through 2016, given surging trade of electronics, machinery

and devices, which grew by 10% YoY in Q1; the continued ramp up of Samsung’s first factory and ongoing construction of

its second factory should provide a boost.

• Warehousing business will continue to stay strong in H2 2016 in the face of strengthening retail sales growth and increasing

FDI disbursements into the manufacturing sector.

Source: GSO, VCSC forecasts

-

1.00

2.00

3.00

4.00

5.00

6.00

2008 2009 2010 2011 2012 2013 2014 2015 2016F 2017F 2018F

Million TEUs

Forecasted 12%

CAGR

Forecasted cargo throughput of Hai Phong port zone

Logistics – Capacity expansion to be a key earnings catalyst

75

STRATEGY

• Choose port and warehouse operators with new capacity expansion projects coming on stream in H2

2016, such as GMD, VSC and TMS.

• Choose port operators located in the downstream part of Cam area in Hai Phong (GMD, VSC ), which is

far away from Bach Dang bridge.

• Pick diversified and fully-integrated logistics players that will benefit broadly from the growth of the

economy, FDI and trade (eg. GMD).

RISKS

• China’s economic slowdown poses some risks to border trade between Vietnam and China, thereby

indirectly impacting Hai Phong port zone, through which container cargo is exported into China.

• The continued slowdown in global trade or any slowdown in FDI inflows into Vietnam might impact exports

although this is partly mitigated by Vietnam’s growing export market share.

Logistics – Strong cargo volumes and TPP anticipation have boosted stocks

76

Ticker Rating

Market

Cap

USD

mn

Foreign

Avail in

USD mn

Target

price

VND /

share

Current

Price

VND/sh

Upside

%

Div yield

@

current

price

FY15

EPS

growth

%

FY16

EPS

growth %

FY17

EPS

growth

%

FY16 MR QTR

P/E P/B

(x) (x)

GMD BUY 213 0.0 31,000 26,900 15.2% 5.7% 741.0% 14.4% 20.9% 10.2 1.0

Fig: Logistics sector vs VN Index

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

Logistic sector VN index

GMD – 2016 to be another fruitful year with NHDV port capacity expansion

77

COMPANY OVERVIEW

• In the 25 years since its establishment, GMD has grown

steadily to become one of the biggest domestic logistics

service providers in Vietnam and one of the few local

players that has capabilities across the logistics value

chain and a range of different logistics assets, such as

ports, distribution centres, depots and ICDs.

INVESTMENT THESIS

• Port operations reached full capacity by the end of Q1

2016, but NHDV capacity expansion in Q2 to be a major

growth catalyst for the year.

• The commencement of a slew of DCs has created

synergies across the logistics value chain of GMD,

benefiting trucking, barging and 3PL segments.

• SCSC air cargo terminal is the fastest growing air cargo

terminal in Vietnam.

• The cooperation with MPC can be a milestone in GMD’s

guest for logistics market leadership and an entry into the

high-potential cold-chain niche.

RISKS

• Potential FX losses on USD-denominated debt if there is

VND depreciation against the USD.

• Dilution risk from VIG convertible bonds might not be fully

priced-in by the market (already factored in our TP though)

• Continued investment in the rubber plantation business.

STOCK INFO

Rating BUY









PBT growth -28.7% 36.8% 4.6%

NPAT less MI growth (adj) 741.0% 14.4% 20.9%

EPS growth (adj) 741.0% 14.4% 20.9%



D/E 0.38 0.34 0.30

ROE 9.3% 12.0% 11.9%


(*) NPAT and EPS growth figures have been adjusted for

forex translation loss/gain, stock dividends and non-

recurring items such as gains on disposal; EPS numbers

above are calculated assuming full conversion of VIG loan

78

Appendices


Appendix: Macro Scorecard

79

MACRO INDICATORS 2009 2010 2011 2012 2013 2014 2015Previous

2016FUpdated

2016F UNITS SOURCE

GDP growth (real) 5.4 6.4 6.2 5.2 5.4 6.0 6.7 6.8 6.27 % YoY GSO

Export growth (8.9) 26.5 34.2 18.2 15.4 13.8 8.1 10.0 9.0 % YoY Customs, GSO

Import growth (13.3) 21.3 25.8 6.6 16.0 12.0 12.1 11.0 8.9 % YoY Customs, GSO

Inflation (year-end) 6.5 11.7 18.1 6.8 6.0 1.8 0.6 3.5 4.0 % YoY GSO

Unemployment rate 3.2 2.7 2.0 2.0 2.2 2.1 2.3 2.2 2.2 % YoY GSO

VND depreciation (5.7) (5.5) (7.9) 0.9 (1.2) (1.4) (5.1) (5.4) (1.0) % Bloomberg

Lending rates 16.4 20.5 20.0 14.0 10.5 8.5 8.5 9.5 9.5 % SBV

M2 growth 29.0 33.3 13.1 21.0 18.8 17.7 18.2 19.0 19.0 % YoY SBV

Credit growth 37.7 29.8 10.9 8.9 12.5 14.2 17.1 18.0 18.0 % YoY SBV

5Y G-bond yield 11.7 11.5 12.6 9.8 8.5 6.2 6.6 7.2 6.3 % Bloomberg

Nominal GDP 97.2 106.4 123.5 141.7 170.0 186.2 191.3 200.0 204.2 USD bn GSO

FDI disbursement 10.0 10.0 11.0 10.5 11.5 12.5 14.5 16.0 16.0 USD bn FIA

Foreign reserves 16.8 12.9 14.0 26.1 26.3 34.6 30.5 28.0 35.0 USD bn SBV

Goods trade balance (12.9) (12.6) (9.8) 0.7 (0.8) 2.0 (3.2) (5.2) (3.7) USD bn Customs, GSO

Exports 53.8 62.1 70.8 73.4 78.8 80.6 85.0 89.3 86.5 % of GDP Customs, GSO

FDI disbursement 9.4 8.6 8.1 6.7 6.8 6.7 7.6 7.8 7.8 % of GDP FIA

FX reserve 15.3 10.7 6.6 14.8 20.6 21.5 20.0 14.0 17.1 % of GDP SBV

Budget deficit (6.9) (5.8) (4.9) (4.8) (6.6) (5.7) (5.4) (5.4) (5.3) % of GDP MOF

Gov. debt 41.9 44.6 43.2 39.4 42.3 43.2 48.9 50.4 49.4 % of GDP MOF

Public debt 52.6 56.3 54.9 50.8 54.2 53.7 61.3 63.2 63.0 % of GDP MOF

External debt 39.0 42.2 41.5 37.4 37.3 39.9 41.5 44.7 43.7 % of GDP MOF

Appendix: Disclaimer

80

Analyst Certification of Independence

I, Barry Weisblatt, hereby certify that the views expressed in this report accurately reflect my personal views about the subject securities or issuers. I also certify that no part of my compensation was, is, or will be,

directly or indirectly, related to the specific recommendations or views expressed in this report. The equity research analysts responsible for the preparation of this report receive compensation based upon various

factors, including the quality and accuracy of research, client feedback, competitive factors, and overall firm revenues, which include revenues from, among other business units, Institutional Equities and

Investment Banking.

VCSC and its officers, directors and employees may have positions in any securities mentioned in this document (or in any

related investment) and may from time to time add to or dispose of any such securities (or investment).VCSC may have, within the last three years, served as manager or co-manager of a public offering of

securities for, or currently may make a primary market in issues of, any or all of the entities mentioned in this report or may be providing, or have provided within the previous 12 months, significant advice or

investment services in relation to the investment concerned or a related investment.

Copyright 2013 Viet Capital Securities Company “VCSC”. All rights reserved. This report has been prepared on the basis of information believed to be reliable at the time of publication. VCSC makes no

representation or warranty regarding the completeness and accuracy of such information. Opinions, estimates and projection expressed in this report represent the current views of the author at the date of

publication only. They do not necessarily reflect the opinions of VCSC and are subject to change without notice. This report is provided, for information purposes only, to institutional investors and retail clients of

VCSC in Vietnam and overseas in accordance to relevant laws and regulations explicit to the country where this report is distributed, and does not constitute an offer or solicitation to buy or sell any securities

discussed herein in any jurisdiction. Investors must make their investment decisions based upon independent advice subject to their particular financial situation and investment objectives. This report may not be

copied, reproduced, published or redistributed by any person for any purpose without the written permission of an authorized representative of VCSC. Please cite sources when quoting.

U.K. and European Economic Area (EEA): Unless specified to the contrary, issued and approved for distribution in the U.K. and the EEA by VCSC issued by VCSC has been prepared in accordance with VCSC’s

policies for managing conflicts of interest arising as a result of publication and distribution of investment research. Many European regulators require a firm to establish, implement and maintain such a policy. This

report has been issued in the U.K. only to persons of a kind described in Article 19 (5), 38, 47 and 49 of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (all such persons being

referred to as "relevant persons"). This document must not be acted on or relied on by persons who are not relevant persons. Any investment or investment activity to which this document relates is only available

to relevant persons and will be engaged in only with relevant persons. In other EEA countries, the report has been issued to persons regarded as professional investors (or equivalent) in their home jurisdiction.

Australia: This material is issued and distributed by VCSC in Australia to "wholesale clients" only. VCSC does not issue or distribute this material to "retail clients". The recipient of this material must not distribute it

to any third party or outside Australia without the prior written consent of VCSC. For the purposes of this paragraph the terms "wholesale client" and "retail client" have the meanings given to them in section 761G

of the Corporations Act 2001. Hong Kong: The 1% ownership disclosure as of the previous month end satisfies the requirements under Paragraph 16.5(a) of the Hong Kong Code of Conduct for Persons

Licensed by or Registered with the Securities and Futures Commission. (For research published within the first ten days of the month, the disclosure may be based on the month end data from two months prior.)

Japan: There is a risk that a loss may occur due to a change in the price of the shares in the case of share trading, and that a loss may occur due to the exchange rate in the case of foreign share trading. In the

case of share trading, VCSC will be receiving a brokerage fee and consumption tax (shouhizei) calculated by multiplying the executed price by the commission rate which was individually agreed between VCSC

and the customer in advance. Korea: This report may have been edited or contributed to from time to time by affiliates of VCSC. Singapore: VCSC and/or its affiliates may have a holding in any of the securities

discussed in this report; for securities where the holding is 1% or greater, the specific holding is disclosed in the Important Disclosures section above. India: For private circulation only, not for sale.Pakistan: For

private circulation only, not for sale.New Zealand: This material is issued and distributed by VCSC in New Zealand only to persons whose principal business is the investment of money or who, in the course of

and for the purposes of their business, habitually invest money. VCSC does not issue or distribute this material to members of "the public" as determined in accordance with section 3 of the Securities Act 1978.

The recipient of this material must not distribute it to any third party or outside New Zealand without the prior written consent of VCSC. Canada: The information contained herein is not, and under no

circumstances is to be construed as, a prospectus, an advertisement, a public offering, an offer to sell securities described herein, or solicitation of an offer to buy securities described herein, in Canada or any

province or territory thereof. Any offer or sale of the securities described herein in Canada will be made only under an exemption from the requirements to file a prospectus with the relevant Canadian securities

regulators and only by a dealer properly registered under applicable securities laws or, alternatively, pursuant to an exemption from the dealer registration requirement in the relevant province or territory of

Canada in which such offer or sale is made. The information contained herein is under no circumstances to be construed as investment advice in any province or territory of Canada and is not tailored to the

needs of the recipient. To the extent that the information contained herein references securities of an issuer incorporated, formed or created under the laws of Canada or a province or territory of Canada, any

trades in such securities must be conducted through a dealer registered in Canada. No securities commission or similar regulatory authority in Canada has reviewed or in any way passed judgment upon these

materials, the information contained herein or the merits of the securities described herein, and any representation to the contrary is an offence. Dubai: This report has been issued to persons regarded as

professional clients as defined under the DFSA rules. United States: This research report prepared by VCSC is distributed in the United States to Major US Institutional Investors (as defined in Rule 15a-6 under

the Securities Exchange Act of 1934, as amended) only by Decker&Co, LLC, a broker-dealer registered in the US (registered under Section 15 of Securities Exchange Act of 1934, as amended). All responsibility

for the distribution of this report by Decker&Co, LLC in the US shall be borne by Decker&Co, LLC. All resulting transactions by a US person or entity should be effected through a registered broker-dealer in the

US. This report is not directed at you if VCSC Broker or Decker&Co, LLC is prohibited or restricted by any legislation or regulation in any jurisdiction from making it available to you. You should satisfy yourself

before reading it that Decker&Co, LLC and VCSC is permitted to provide research material concerning investment to you under relevant legislation and regulations.

Appendix: VCSC Contacts

81

RESEARCH INSTITUTIONAL SALES

Head of Research Head of Institutional Sales

Barry Weisblatt Michel Tosto, M. Sc.

[email protected] [email protected]

(84) 3914 3588 ext. 105 (84) 3914 3588 ext. 102

Senior Manager Head of Vietnam Sales

Anirban Lahiri Dung Nguyen


(84) 3914 3588 ext. 130 (84) 3914 3588 ext. 136

Senior Manager Manager - Industry Relations

Long Ngo Quynh Cao


(84) 3914 3588 ext. 145 (84) 3914 3588 ext. 148

vscs mid-year strategy

Economy & Finance