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Vietnam Pharmaceutical 08 Sep 2009

HOLD

Hau Giang Pharma JSC

Initiating Coverage

Not exceeding the maximum dose

Head of research

We are initiating coverage on Hau Giang Pharmaceutical Join Stock


Company (DHG) with a HOLD recommendation. Our investment case is
highlighted as follows:

Cheah King Yoong


Cheah.king@kimeng.com.vn
(84) 8 3838 6636 - 161

Analyst
Nguyen Quang Duy
duy.nguyenquang@kimeng.com.vn

Price
Target
VN Index

VND 163,000
VND 165,000
537.8

Historical Chart
DHG (133.000, 139.000, 133.000, 135.000, +2.00000)

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50000

Goliath in the domestic pharmaceutical sector


DHG is the largest pharmaceutical manufacturer listed on the Vietnam
exchange. The Groups revenue last year accounted for about 11.2% of
the total domestic drug sales in 2008, far ahead of its industry peers such
as Mekophar, Sanof-synthelabo and Imexpham. Leveraging on its farreaching domestic distribution channel, DHG provides pharmaceutical
products to about 98.0% of the hospitals and 100% of the community
clinics in Vietnam.
Riding on the growth cycle of the domestic pharmaceutical sector
The growth prospects of the domestic pharmaceutical sector remain
bright, underpinned by rising affluence, increased health awareness and
growing demand for generic drugs. Domestic consumption per capita of
USD16.4/ capita remains low compared with the per capita drug
consumption of Thailand (USD35.0/ capita) and Indonesia (USD32.0/
capita) in 2008. We are optimistic that DHG, being the largest domestic
drug marker, will continue to ride on the growth cycle of the sector.

40000
30000
20000
10000
x10

2006

Feb

Apr

May Jun

Jul

Aug

Sep Oct Nov

Dec 2008

Performance
Absolute (%)
Relative (%)

Mar Apr

May Jun Jul

Aug

Sep Oct

1m
31.5
22.0

Nov Dec 2009

Mar Apr

3m
16.4
7.4

May Jun Jul

Aug Sep

Oct No

6m
55.2
-41.5

Stock Information

VIETNAM

Ticker code

DHG

Market cap (VND bn)


3,259
52-week high (VND)
163,000
52-week low (VND)
94,500
Shares issued (m)
20.0
6m avg d.vol (VND bn)
33.3
Free float (%)
45.4
Major shareholders (%)
SCIC (44.6%)
Citi Group (4.9%)
Vietnam Dragon Fund Ltd (4.0%)
Key Indicators
ROE (%)
Net gearing (%)
NTA (VND)
Interest cover (x)

21.3
Net cash
32,992
96.6

Respectable double digit earnings growth


We expect the Group to continue enjoying double-digit earnings growth
between 2009 and 2011, supported by the ongoing economic recovery
and the commencement of new plant in 2011.
Fairly valued!!
We have derived a target price of VND165,000 based on a forward PER
of 17.0x. Our target PER multiple represents a 20.0% against the
average forward PER of its closest locally listed peers. We believe that
the valuation premium is justifiable given its dominant position in the
market, strong brand name and extensive network. Furthermore, the
Group has consistently attained higher ROE and ROA than its sector
peers.
Year End Dec 31
Sales (VND bn)
Pre-tax (VND bn)
Net profit (VND bn)
EPS (VND)
EPS growth (%)
PER (x)
EV/EBITDA (x)
Yield (%)

2006
868.2
87.1
87.1
5,081
57.2
32.1
26.8
1.5

2007
1,269.3
128.3
128.3
6,571
29.3
24.8
19.0
1.5

2008
1,537.5
153.0
135.9
6,796
3.4
24.0
15.5
1.5

2009E
1,665.1
243.6
217.4
10,873
60.0
15.0
10.4
1.5

2010F
1,972.3
218.3
194.9
9,746
-10.4
16.7
11.8
1.5

SEE APPENDIX IV FOR IMPORTANT DISCLOSURES AND


ANALYST CERTIFICATIONS
Co. Reg No: 198700034
MICA (P): 221/11/2008

Hau Giang Pharmaceutical JSC

8 September 2009

Investment Merits
Goliath in the domestic pharmaceutical sector
DHG is the largest
listed
pharmaceutical
company in terms of
sales, market size,
distribution system
and
market
capitalisation.

DHG is the largest pharmaceutical manufacturer listed on the Vietnam exchange.


The Groups revenue last year accounted for about 11.2% of the total domestic
drug sales in 2008, far ahead of its industry peers such as Mekophar, Sanofsynthelabo and Imexpham. The Groups revenue enjoyed a compound annual
growth rate (CAGR) of 36.7% from 2004 to 2008, surpassing the average industry
growth rate of 19.2%. This is mainly driven by its best-selling products such as
Hapenxin, Hapacol and Eugica, which have enjoyed a higher growth rate than
other similar products in the market.
The Group is the first domestic pharmaceutical manufacturer to produce antibiotic
drugs for children. These products are now being broadly prescribed by
paediatricians in Vietnam. Other than its popular antibiotic and analgesic (also
known as painkiller) products, some of its other drugs that are widely used in
Vietnam hospitals include the following:
Product name
Apitim
Trimetazidin
Atorlip

Benefits
To slow down heartbeat.
To relieve chest pain.
To control cholesterol.

The contribution of the major products to its total revenue is illustrated in Figure 10
and 11.

Strong brand name and extensive network


The Group has a
strong brand name
and
extensive
distribution
network.

Throughout the years of dedicated and continuous improvement, DHG has built a
reputable brand name and established an extensive distribution network with five
distribution subsidiaries, 44 sales agents, 44 retail drugstores and eight health
care stores around the nation. In total, the Group recruited more than 700 sales
personnel.
Leveraging on its far-reaching domestic distribution channel, DHG provides
pharmaceutical products to about 98.0% of the hospitals and 100% of the
community clinics in Vietnam. About 30.0% of its sales come from direct sales to
hospitals and the remaining 70.0% from over-the-counter (OTC) channels.
In terms of geographical reach, DHG is able to market its products across 64
provinces and cities in Vietnam. The Group has also developed a strong foothold
in Mekong 2 including Can Tho and An Giang where more than 28.0% of its
revenue is derived from this region. According to Intercontinental Marketing
Services (IMS), DHG is ranked number one in selling generic drugs in Vietnam.
DHG has received numerous accreditations given its continuous emphasis on
improving the Groups product offerings and enhancing its product brand names.
For instance, the Groups products have been voted as Vietnam High Quality
Goods for the past 12 consecutive years. Its product brand is also ranked as one
of the top ten brands in Vietnam.

Hau Giang Pharmaceutical JSC

8 September 2009

Figure 1: Distribution System Diagram

Figure 2: Distribution System

Source: Company data, Kim Eng

Source: Company data, Kim Eng

Bright sector outlook


The bright sector
prospect
underpinned
by
rising
affluence,
increased
health
awareness
and
growing demand for
generic drugs.

The growth prospects of the domestic pharmaceutical sector remain bright,


underpinned by rising affluence, increased health awareness and growing
demand for generic drugs. According to the Vietnam Drug Administration,
domestic drug consumption per capita has tripled from USD5.4/ capita in 2000 to
USD16.4/ capita in 2008, as illustrated in Figure 3. Despite the exponential growth
rate, consumption per capita remains low compared with the per capita drug
consumption of Thailand (USD35.0/ capita) and Indonesia (USD32.0/ capita) in
2008. The Vietnam Pharmaceutical Companies Association (VNPCA) estimates
that the total market value could increase from USD1.4bn in 2008 to US$2.3bn in
2015 and eventually reach $3.5bn in 2020, implying the continued high growth
potential.
As illustrated in Figure 4, Vietnam continues to be highly dependent on
pharmaceutical imports, particularly the high-end segment, with the domestic drug
supply fulfilling only 50.2% of the local demand in 2008. To boost Vietnams drug
supply, the Drug Administration of Vietnam has devised a development plan for
the pharmaceutical sector up to 2015, aiming to expand the market share of
domestic drug supply to 60% in 2010 and 80% in 2015.
Nonetheless, we do acknowledge the several challenges encountered by the local
pharmaceutical manufacturers going forward in view of the ongoing sector
liberalisation and increased production standards. The Government is gradually
liberalising the pharmaceutical sector as a commitment under the WTO
membership.
In 2009, the foreign- invested companies are permitted to import drugs from 1st
January 2009, although they are not allowed to engage in direct retailing in
Vietnam other than through joint ventures with domestic players. Furthermore, the
tariff on imported drugs will be reduced from the current 0-10% to 0-5% and the
average rate will be 2.5% after five years of WTO membership.
On the other hand, we believe that many domestic pharmaceutical manufacturers
may face rising production costs due to increasing compliance expenditure to
meet the Good Manufacturing Practice (GMP) and Good Supply Practice (GSP)
certification required by the Ministry of Health.

Hau Giang Pharmaceutical JSC

8 September 2009

Despite the increased competitive market, we continue to favour the large


domestic manufacturers in view of their dominant position. We believe that the
market pie remains large enough even with foreign participation. Nonetheless, we
foresee that smaller players with poor production facilities and small marketing
outlets may succumb to the competitive pressure and exit from the sector.

Figure 3: Per Capita Drug Consumption


USD/perso
18 n

Figure 4: Historical Drug Expenditure

Percent
25%

16

USD mn
1600

1426

1400
20%

14

1136

1200

12
15%

10

956

1000

817
708

800

10%

6
4

5%

600

526

609

427

400
200

0%
2001 2002 2003 2004 2005 2006 2007 2008
Consumption per capita (USD)

Grow th Rate

Source: Vietnam Drug Administration, Company data, Kim Eng

0
2001 2002 2003 2004 2005 2006 2007 2008
Spent on Medicinines

Domestically Producted Medicines

Source: Vietnam Drug Administration , Company data, Kim Eng

Benefiting from the bright growth prospect of the sector


We are optimistic
that DHG, being the
largest
domestic
drug
maker,
will
continue to ride on
the growth cycle of
the sector.

We are optimistic that DHG, being the largest domestic drug marker, will continue
to ride on the growth cycle of the sector. As illustrated below in figure 5 and 6, the
Group has enjoyed a strong growth rate over the past few years.
In 2008, the Groups earnings rose marginally by 5.9% y-o-y to VND135.9bn,
despite the revenue growth of 21.1% y-o-y to VND1,537.5bn. We understand that
the single-digit growth rate in earnings was explained by the imposition of a 10%corporate tax rate from 2008 to 2013 upon the expiration of its tax-exempt status
in 2007. Should we exclude the 10.0% tax expense, the Group would have
continued to register an uninterrupted double-digit growth in terms of revenue and
earnings. This represents a commendable set of financial results given the
challenging operating environment last year.
For the first half of 2009, the Groups net earnings surged by 34.9% y-o-y to
VND92.4bn, despite the marginal expansion of its revenue by 3.5% on a y-o-y
basis to VND791.4bn. We gather from the management that the modest revenue
growth was mainly due to the change in accounting policies in recording its sales
discount, which normally amounted to around 10.0% of its total sales. This is
because the management has previously recorded the sales discount by
increasing its selling expenses, but has now decided to deduct directly from its
revenue.
Readjusting DHGs sales discount by increasing selling expenses, rather than
offsetting it against the revenue, shows that the Group continued to enjoy doubledigit growth in both revenue and earnings in the 1H09. This indicates the
resilience of the domestic pharmaceutical sector and its potential for growth.
The management is currently constructing a new Non Beta-Lactam plant to cope
with rising domestic demand. The total construction cost is estimated to be about
VND252.6bn (approximately USD15.0mn). The plant is expected to be completed
by 2Q11 with a total production capacity of 4.0bn units of drugs per annum.

Hau Giang Pharmaceutical JSC

We expect the Group


to continue enjoying
double-digit
earnings
growth
between 2009 and
2011.

8 September 2009

We forecast DHGs net earnings to reach VND217.4bn and VND194.9bn,


respectively in 2009 and 2010. Our earnings model for 2009 has included gains
from the reversal of the impairment of raw materials, selling expenses and
administration expenses, which amounted to VND57.0bn, in the second half of
2009. Excluding this one off exceptional gains, we expect the Group to continue
enjoying double-digit earnings growth between 2009 and 2011, supported by the
ongoing economic recovery and the commencement of new plant in 2011.

Figure 5: Revenue Growth

Figure 6: Net Income Growth

1,800

250.0

1,600
200.0

1,400
1,200

150.0

1,000
800

100.0

600
50.0

400
200

2004

2005

2006

2007

2008

2009E

Source: Company data, Kim Eng

2004

2005

2006

2007

2008

2009E

Source: Company data, Kim Eng

Investment Risks
We believe that investing in DHG is subject to the following risks:
Highly dependent on imported raw materials
We understand that DHG imports around 80.0% of its raw materials mainly
from Europe. This exposes the Group to the volatility of imported raw
material prices, which is beyond the managements control. Furthermore,
we understand that it takes a considerable time lag for DHG to increase
the average selling price (ASP) of its products given that the Group needs
to obtain approval from the relevant authority in Can Tho and the process
could be lengthy. Therefore, a sudden surge in the cost of imported raw
materials could put downward pressure on the Groups profit margin. DHG
is also highly vulnerable to the potential depreciation of VND/USD given
that the purchase prices of imported raw materials are quoted in
greenbacks. Therefore, the weakening of the VND could escalate the costs
of imported raw materials.
Intensified foreign competitions
Despite the current constraint that prohibits foreign players from direct
retailing (except through a joint venture), foreign interest has not subsided
given the strong potential offered by the domestic market. Besides that, the
gradual liberalisation of the sector such as reducing the import tax
gradually from 10.0% to 2.5% in accordance with the WTO Commitment
has also allowed foreign pharmaceutical companies to distribute their
products with competitive pricing. We gather that there were 68 additional
foreign pharmaceutical companies that registered to set up operations in
Vietnam last year. This has increased the number of foreign players to
438. Among the foreign players, the top three are from India (98 units, or
22.4%), Korea (45 units, or 10.3%) and China (41 units, or 9.4%). In 2008,
foreign-invested drug manufacturing plants produced about 22% of the
total domestic production.

Hau Giang Pharmaceutical JSC

8 September 2009

Focus on producing low- to medium-end generic drugs


Similar to its domestic peers, DHG is mainly focused on the manufacturing
of low- and medium-end generic drugs, which do not require extensive
research and development. Although this strategy may work well in the
near term, it could restrict the ability of the Group to build a strong foothold
in the high-end product segment that typically commands a higher margin.
At present, the contribution of high-end products like Ophathalmic,
Nervous system and Beauty care to its total revenue remains low.
Furthermore, its inability to develop and patent new drugs could restrict the
Groups long-term potential, particularly with the sectors liberalisation.

Valuation
A defensive stock. Being a defensive stock with a comparatively low beta of 0.7,
DHG has outperformed the VN-Index from March 2008 to February 2009 during
the market downturn. Nonetheless, the Group has underperformed the VN-Index
in this liquidity-driven rally. We are not surprised by such an underperformance
given that many low beta and defensive stocks have lagged behind the high beta
and speculative stocks, particularly the bombed out stocks during the run-ups.

Figure 7: DHG outperforms the VN-Index


from March 2008 to March 2009 during
market downturn

Figure 8: DHG underperforms the VN-Index


from March 2009 to August 2009 during the
market rally

140

270

120

220

100

170

80

DHG

VN-Index

DHG

Source: Company data, Kim Eng

Sep-09

Aug-09

Jul-09

Jun-09

May-09

Mar-09

Mar-09

Jan-09

Sep-08

Nov-08

20

Jul-08

20
May-08

70

Mar-08

40

Apr-09

120

60

VN-Index

Source: Company data, Kim Eng

We initiate coverage on DHG with a HOLD rating and a target price of


VND165,000 based on a forward PER of 17.0. Our target PER multiple represents
a 20.0% against the average forward PER of its closest locally listed peers.
We believe that the valuation premium is justifiable given its dominant position in
the market, strong brand name and extensive network. Furthermore, the Group
has consistently attained higher ROE and ROA than its sector peers.

Figure 9: Peers relative valuation of domestic companies


Mkt Cap
(VND bn)

ROA
(%)
11.9

DHG PHARMACEUTICAL JSC

3,258.8

13.4

DOMESCO MEDICAL IMPORT EXPOR

1,050.2

11.9

IMEXPHARM PHARMACEUTICAL JSC

812.2

10.8

Name
Average

Source: Bloomberg, Company Data, Kim Eng

ROE
(%)

P/B

PER
2008

PER
2009

PER
2010

17.6

2.3

16.3

15.7

13.3

21.3

4.2

24.0

15.0

16.7

16.5

2.2

11.9

17.3

12.8

12.5

1.5

13.1

14.8

10.5

Hau Giang Pharmaceutical JSC

8 September 2009

APPENDIX
Corporate Profile
DHG was founded in 1974. The Group was equitised in 2004 and subsequently
st
listed on the 21 of December 2006 with an initial charter capital of VND80.0bn.
The Group is situated in the Ninh Kieu District, Can Tho Province. At present,
DHG manufactures around 406 products including 327 pharmaceutical products,
four cosmetic products and 75 dietary supplements. Its product range is mainly
divided into 12 groups including:

Antibiotics, antifungals, antiparasites,


ENT, Asthma, Coryza;
Analgesics and Antipyretics and;
Vitamin and Minerals.

At present, the Group owns five manufacturing plants and one packaging
processing plant that are all GMP-WHO compliant. The manufacturing plants have
a combined production capacity of 3.0bn units per annum. Four plants are
involved in the manufacturing of pharmaceutical products and the other
manufacturing plant produces pharmaceutical bio-chemistry materials. DHG has
about 2,126 employees. About 33.0% of them are in production, with 37.0% in
selling and distribution and the remaining in the office.
The salient information of the Group is illustrated below:
Key management team
Board of Directors
Mrs. Pham Thi Viet Nga
Mrs. Le Minh Hong
Mr. Le Chanh Dao
Mr. Pham Gia Tuan
Mr. Donh Dinh Duy Khuong
Mrs. Huynh Thi Kim Tuoi
Mrs. La Ngoc Van
Mrs. Nguyen Thi Hong Loan
Mrs. Ha My Dung
Board of Supervision
Mrs. Tran Thi Anh Nhu
Mr. Tran Quoc Hung
Mr. Nguyen Nhu Song
Board of Management
Mr. Bui Minh Duc

Chairwoman, Chief Executive Officer (CEO)


Vice General Director
Vice General Director, Chief Financial Officer (CFO)
Member
Marketing Director
Sales Director
Director of Investment and Development
Production Director
Quality Control Director
Personnel Director
Member
Member
Chief Accountant, Manager of Financial Management
Department

Major Shareholders
Domestic
Shareholders
(Excluding
SCIC), 12.5%
Foreign
Shareholders,
42.9%

SCIC, 44.6%

Hau Giang Pharmaceutical JSC

8 September 2009

DHGs quasi subsidiaries

%
Owner
Company Name
Song Hau Pharma
51%
CM Pharmaceutical One-member Limited 100%
HT Pharmaceutical One-member Limited 100%
DT Pharmaceutical One-member Limited 100%
ST Pharmaceutical One-member Limited
100%
DHG Travel One-member Limited
100%
DHG Packing & Printing One-member
Limited
100%
DHG Nature One-member Limited
100%

Chartered
Capital
(VND bn)
5.0
5.0
5.0
5.0
5.0
3.0

Established
Year
2008
2008
2008
2008
2009
2008

5.0
5.0

2098
2009

Main Products
The Group produces about 406 products including:
Hapacol. Hapacol is a group of DHG Pharmas products for Quick analgesic
antipyretic for all ages. The product group of Hapacol contributed about
VND197.0bn to DHGs revenue and VND17.9bn of its profit before tax (PBT) in
2008.
Klamentin and Haginat. These are two groups of new-generation antibiotics
Antibacterial power. Klamentin and Haginat contributed a combined total of
VND215.0bn to the Groups revenue and VND31.8bn of its PBT.
Spivital Daily nutrition source. Spivital is a supplementary nutritional
product that provides protein, vitamin and minerals. Although It was only first
introduced in September 2008, it has become a major revenue driver by
contributing VND 586.0mn and VND40.0mn to DHGs revenue and PBT,
respectively in 2008.
Euguca Natural remedy for cough. This is a product that treats cough. It
combines different types of herbal extracts from peppermint, cajuput and ginger.
Eugica contributed VND72.0bn and VND8.7bn to the Groups revenue and PBT in
2008.
Other major products of the Group include Davita Bone, Unikids Helps Children
have a good appetite, Eyelight For healthy eyes daily, and Glumeform
Helps stabilize glycemia.
The revenue breakdown of DHG for 2008 is illustrated below:

Figure 10: Breakdown by Products in 2008

Figure 11: Breakdown by Areas in 2008

Vitamin - Minerals
Ophathalmic

10.5%
7.0%

45.5%

8.4%

7.0%

Musculoskeletal

Mekong 1
Digestives & hepatic and
biliary

27.6%

28.7%

Analgesics - Antipyretics

Mekong 2

ENT - Asthama - Coryza

Central Region

Diabetic

Western Region

Nervous system

North Region
Cardiovascular
13.9%

HCM City
Beauty care

14.1%

12.5%

Dermatological
Antibiotics, Antif ungals Antiparasites

Source: Company data, Kim Eng

Source: Company data, Kim Eng

15.8%

DHG

28 July 2009

Profit and loss


YE Dec (VND bn)
Sales
COGS exclude Dep.
Depreciation
Gross profit
Operating exp.
EBIT
Net fin. incomes (loss)
Net Income (loss) fr. jv
Net extraodinaries
PBT
Income tax
Minority interest
Net profit
EPS
EBITDA

Cash flow
2006
2007
2008 2009E 2010F
868.2 1,269.3 1,537.5 1,665.1 1,972.3
-391.4 -576.7 -713.4 -737.0 -945.2
-11.3
-24.1
-28.6
-25.4
-25.4
465.4
668.5
795.5
902.7 1,001.8
-367.8 -529.1 -629.4 -646.3 -770.8
97.6
139.4
166.1
256.4
231.0
-10.7
-11.5
-15.7
-16.1
-15.9
0.0
0.0
0.0
0.0
0.0
0.1
0.5
2.7
3.2
3.2
87.1
128.3
153.0
243.6
218.3
0.0
0.0
-16.0
-24.4
-21.8
0.0
0.0
-1.1
-1.8
-1.6
87.1
128.3
135.9
217.4
194.9
5,081
6,571
6,796 10,873
9,746
109.1
163.9
197.3
285.0
259.6

2006
25.0
87.1
11.3
-35.6
-47.6
-100.1
-102.5
-1.5
3.8
-75.1
84.5
0.0
94.5
-10.0
-0.5

2007
51.3
128.3
24.1
-74.2
-197.9
-139.2
-104.7
-36.6
2.1
-87.9
353.9
498.8
-124.4
-20.5
94.9

2008
154.1
135.9
28.6
48.1
-58.4
-55.0
-26.2
-28.5
-0.4
99.1
-17.3
-0.3
-35.0
17.9
81.8

2009E
86.8
217.4
25.4
-84.5
-71.5
-70.5
-100.3
36.4
-6.7
16.3
1.9
0.0
1.5
0.4
18.1

2010F
50.9
194.9
25.4
-2.0
-167.3
-108.4
-104.8
-2.7
-0.8
-57.4
1.0
0.0
1.0
0.0
-56.4

2007

2008

2009E

2010F

46.2
42.8
50.2
47.4
29.3

21.1
19.2
20.4
5.9
3.4

8.3
54.4
44.4
60.0
60.0

18.5
-9.9
-8.9
-10.4
-10.4

52.7
11.0
12.9
10.1
18.0
31.2

51.7
10.8
12.8
8.8
13.1
19.3

54.2
15.4
17.1
13.1
17.4
25.6

50.8
11.7
13.2
9.9
13.2
19.2

6.8
-21.8
8.1
5.0
10.6
5.8
2.3
1.4
1.8
107.0
60.9
22.5
0.2

1.1
-27.1
31.8
52.1
37.8
60.9
2.3
1.2
1.5
132.4
67.3
32.3
0.0

1.1
-25.3
49.2
54.3
54.6
32.9
2.5
1.7
1.2
164.3
80.8
35.6
0.0

1.0
-16.8
44.3
40.5
49.8
25.8
2.4
1.5
1.2
164.3
88.9
39.1
0.1

6,571
2,628
26,524
65,003
8,392
2,500

6,796
8,890
32,078
76,901
9,869
2,500

10,873
7,919
40,054
83,285
14,255
2,500

9,746
6,555
46,302
98,651
12,983
2,500

Source: Company data, Kim Eng estimates

Source: Company data, Kim Eng estimates

Key ratios

Balance sheet
YE Dec (VND bn)
Total assets
Current assets
Cash
ST investment
Inventories
Trade receivable
Others
Other assets
LT Investment
Net fix assets
Others
Total liabilities
Current liabilities
Trade payable
ST borrowings
Others
Long-term liabilities
Long-term debts
Others
Shareholders' equity
Paid in capital
Reserve
Other provisions
Minority interests

YE Dec (VND bn)


Operating cash flow
Net profit
Depreciation
Change in working capital
Others
Investment cash flow
Net capex
Change in investment
Change in other assets
Cash flow after Investment
Financing cash flow
Change in share capital
Net change in debt
Others
Net cash flow

2006
482.8
329.6
35.0
0.0
121.4
166.4
6.8
153.3
1.6
148.1
3.5
312.4
291.1
18.5
167.9
104.8
21.3
0.0
21.3
170.4
80.0
81.3
9.1
0.0

2007
942.2
673.8
130.0
52.0
230.3
257.4
4.2
268.4
38.2
228.8
1.4
290.6
289.8
55.6
43.4
190.7
0.8
0.0
0.8
651.6
578.8
57.0
15.8
0.0

Source: Company data, Kim Eng estimates

2008
1,133.5
838.6
211.7
2.3
308.2
309.9
6.4
294.8
66.7
226.4
1.8
376.6
361.4
75.9
8.5
277.1
15.2
0.0
15.2
756.9
578.5
180.0
-5.2
3.6

2009E
1,363.6
1,023.6
229.9
16.1
343.2
427.4
7.1
340.0
30.3
301.3
8.4
420.6
405.4
72.8
10.0
322.6
15.1
0.0
15.1
943.0
578.4
352.8
7.8
4.0

2010F
1,592.1
1,169.1
173.4
17.8
436.9
533.3
7.8
423.0
32.9
380.8
9.3
509.3
494.1
135.4
11.0
347.7
15.1
0.0
15.1
1,082.8
578.4
492.6
7.8
4.0

YE Dec
2006
Growth (YoY %)
Sales
56.7
63.3
EBIT
51.9
EBITDA
57.2
Net profit
57.2
EPS
Profitability (%)
Gross margin
53.6
11.2
EBIT margin
12.6
EBITDA margin
10.0
Net margin
22.5
ROA
57.8
ROE
Stability
Gross debt/equity (%)
104.1
82.4
Net debt/equity (%)
8.7
Interest coverage (x)
0.6
Int.&ST debt coverage (x)
10.2
CFO int. coverage (x)
0.7
CFO int.&ST coverage (x)
1.1
Current ratio (x)
0.7
Quick ratio (x)
2.2
Assets turnover (x)
106.6
Avg. inventories (days)
50.9
Avg. receivables (days)
15.8
Avg. payables (days)
4.8
Net cash (debt) (VND bn)
Per share data (VND)
EPS
5,081
1,459
OCFPS
5,793
BVPS
50,666
SPS
6,366
EBITDA/share
2,500
Cash Div/share

Source: Company data, Kim Eng estimates

ANALYSTS COVERAGE / RESEARCH OFFICES

SINGAPORE

MALAYSIA

TAIWAN

Stephanie WONG Head of Research


Regional Head of Institutional Research
+65 6432 1451 swong@kimeng.com

Strategy

Small & Mid Caps


Gregory YAP
+65 6432 1450 gyap@kimeng.com

Conglomerates

Technology & Manufacturing

Transport & Telcos


Rohan SUPPIAH
+65 6432 1455 rohan@kimeng.com

Airlines

Marine & Offshore


Pauline LEE
+65 6432 1453 paulinelee@kimeng.com

Bank & Finance

Consumer

Retail
Wilson LIEW
+65 6432 1454 wilsonliew@kimeng.com

Hotel & Resort

Property & Construction


Anni KUM
+65 6432 1470 annikum@kimeng.com

Industrials

REITs
James KOH
+65 6432 1431 jameskoh@kimeng.com

Infrastructure

Resources
David LOOMIS
+65 6432 1417 dloomis@kimeng.com

Special Situations

YEW Chee Yoon Head of Research


+603 2141 1555 cheeyoon@kimengkl.com

Strategy

Banks

Telcos

Property

Conglomerates & others


LIEW Mee Kien
+603 2141 1555 meekien@kimengkl.com

Gaming

Media

Power

Construction
Research Team
+603 2141 1555

Oil & Gas

Food & Beverage

Manufacturing

Plantations

Tobacco

Technology

Gary Chia
Co-Head of Greater China
+886 2 3518 7900 gary.chia@yuanta.com
Ti-Sheng Young, Ph.D., CFA
Co-Head of Greater China
+86 21 5239 5793 ti-sheng.young@yuanta.com
John Brebeck, CFA
Head of Taiwan Strategy
Head of Research, Taiwan
+886 2 3518 7906 john.brebeck@yuanta.com
George Chang, CFA
Head of Upstream Tech
+886 2 3518 7907 george.chang@yuanta.com
Jack Chang
Head of Taiwan Non-Tech & Cyclical
+886 2 3518 7905 jack.chang@yuanta.com
Vincent Chen
Head of Downstream Tech
+886 2 3518 7903 vincent.chen@yuanta.com
Dennis Chan NB Supply Chain
+886 2 3518 7913 dennis.chan@yuanta.com
Andrew C Chen IC Backend
+886 2 3518 7940 andrew.chen@yuanta.com
Danny Ho Taiwan Petrochemical
+886 2 3518 7923 danny.ho@yuanta.com
Teyi Kung, Ph.D. Taiwan Healthcare
+886 2 3518 7921 teyi.kung@yuanta.com
Min Li Solar
+852 3969 9521 min.li@yuanta.com
May Lin Taiwan Telecom
+886 2 3518 7942 may.lin@yuanta.com

HONG KONG / CHINA


Edward FUNG Head of Research
+852 2268 0632 edwardfung@kimeng.com.hk

Power

Construction
Ivan CHEUNG
+852 2268 0634 ivancheung@kimeng.com.hk

Property
Ivan LI
+852 2268 0641 ivanli@kimeng.com.hk

Bank & Finance


TAM Tsz Wang
+852 2268 0636 tamtszwang@kimeng.com.hk

Small Caps
Emily LEE
+852 2268 0631 emilylee@kimeng.com.hk

Small Caps
Jacqueline KO
+852 2268 0633 jacquelineko@kimeng.com.hk

Food & Beverage


GUICE Fei Ling
+852 2268 0635 feiling@kimeng.com.hk

Ports & Shipping

INDIA
Jigar SHAH Head of Research
+91 22 6623 2601 jshah@kimeng.com

Oil & Gas

Transportation
Anubhav GUPTA
+91 22 6623 2605 agupta@kimeng.com

Property

Capital goods
Urmil SHAH
+91 22 6623 2606 urmil@kimeng.co.in

Software

Telecom
Ankit THAKKAR
+91 22 6623 2606 ankit@kimeng.co.in

Healthcare

Consumer goods
R SRINIVASAN
+91 22 6623 2625 rsrinivasan@kimeng.co.in

Banking and Financial services

INDONESIA
Katarina SETIAWAN Head of Research
+6221 2557 1125 ksetiawan@kimeng.co.id

Consumer

Infra

Shipping

Strategy

Telcos

Others
Ricardo SILAEN
+6221 2557 1126 rsilaen@kimeng.co.id

Auto

Energy

Heavy Equipment

Property

Resources
Teguh SUNYOTO
+6221 2557 1127 tsunyoto@kimeng.co.id

Cement

Construction

Pharmaceutical

Retail
Rahmi Marina
+6221 2557 1128 rmarina@kimeng.co.id

Banking
Adi N. WICAKSONO
+6221 2557 1130 anwicaksono@kimeng.co.id

Generalist
Arwani PRANADJAYA
+6221 2557 1129 apranadjaya@kimeng.co.id

Technical analyst

VIETNAM
King Yoong CHEAH Head of Research
+84 838 38 66 36 x 161 cheah.yoong@kimeng.com.vn

Strategy
Nguyen Thi Ngan Tuyen, Research Manager
+84 838 38 66 36 x 163 tuyen.nguyen@kimeng.com.vn

Pharmaceutical

Confectionary and Beverage

Oil and Gas


Ngo Bich Van
+84 838 38 66 36 x 164 van.ngo@kimeng.com.vn

Bank

Insurance
Nguyen Quang Duy
+84 838 38 66 36 x 162 duy.nguyenquang@kimeng.com.vn

Shipping

Seafood

Rubber
Trinh Thi Ngoc Diep
+84 838 38 66 36 x 166 diep.trinh@kimeng.com.vn

Property

Construction

THAILAND
David BELLER
+662 658 6300 x 4740 david.b@kimeng.co.th

Banks

Shipping
Naphat CHANTARASEREKUL
+662 658 6300 x 4770 naphat.c@kimeng.co.th

Energy
Piya ORANRIKSUPHAK
+662 658 6300 x 4710 piya.O@kimeng.co.th

Property
Supattra KHONGRUNGPHAKORN
+662 6586300 ext 4800 supattra.k@kimeng.co.th

Electronics

Automotive

Tourism
Kanchan KHANIJOU
+ 662 658 6300 x 4750 kanchan@kimeng.co.th

Construction

KELIVE Thailand (for retail clients)


George HUEBSCH Head of Research
+662 658 6300 ext 1400 george.h@kimeng.co.th

PHILIPPINES
Ed BANCOD Head of Research
+63 2 849 8848 ed_bancod@atr.com.ph

Strategy

Banking
Laura DY-LIACCO
+63 2 849 8843 laura_dyliacco@atr.com.ph

Utilities

Conglomerates
Lovell SARREAL
+63 2 849 8871 lovell_sarreal@atr.com.ph

Consumer

Cement

Media
Robin SARMIENTO
+63 2 849 8831 robin_sarmiento@atr.com.ph

Ports

Mining
Ricardo PUIG
+63 2 849 8846 ricardo_puig@atr.com.ph

Property

Telcos

REGIONAL
Luz LORENZO Economist
+63 2 849 8836 luz_lorenzo@atr.com.ph

Economics

Recommendation definitions
Our recommendation is based on the
following expected price
performance within 12 months:
+15% and above: BUY
-15% to +15%: HOLD
-15% or worse: SELL

10

DHG

28 July 2009

APPENDIX IV: TERMS FOR PROVISION OF REPORT, DISCLOSURES


AND
DISCLAIMERS
This report, and any electronic access to it, is restricted to and intended only for clients of Kim Eng Research Pte. Ltd.
("KER") or a related entity to KER (as the case may be) who are institutional investors (for the purposes of both the
Singapore Securities and Futures Act (SFA) and the Singapore Financial Advisers Act (FAA)) and who are allowed
access thereto (each an "Authorised Person") and is subject to the terms and disclaimers below.
IF YOU ARE NOT AN AUTHORISED PERSON OR DO NOT AGREE TO BE BOUND BY THE TERMS AND
DISCLAIMERS SET OUT BELOW, YOU SHOULD DISREGARD THIS REPORT IN ITS ENTIRETY AND LET KER OR
ITS RELATED ENTITY (AS RELEVANT) KNOW THAT YOU NO LONGER WISH TO RECEIVE SUCH REPORTS.
This report provides information and opinions as reference resource only. This report is not intended to be and does not
constitute financial advice, investment advice, trading advice or any other advice. It is not to be construed as a
solicitation or an offer to buy or sell any securities or related financial products. The information and commentaries are
also not meant to be endorsements or offerings of any securities, options, stocks or other investment vehicles.
The report has been prepared without regard to the individual financial circumstances, needs or objectives of persons
who receive it. The securities discussed in this report may not be suitable for all investors. Readers should not rely on
any of the information herein as authoritative or substitute for the exercise of their own skill and judgment in making any
investment or other decision. Readers should independently evaluate particular investments and strategies, and are
encouraged to seek the advice of a financial adviser before making any investment or entering into any transaction in
relation to the securities mentioned in this report. The appropriateness of any particular investment or strategy whether
opined on or referred to in this report or otherwise will depend on an investors individual circumstances and objectives
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is or varied). You agree that any and all use of this report which you make, is solely at your own risk and without any
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using this report AT YOUR OWN RISK.
This report is being disseminated to or allowed access by Authorised Persons in their respective jurisdictions by the Kim
Eng affiliated entity/entities operating and carrying on business as a securities dealer or financial adviser in that
jurisdiction (collectively or individually, as the context requires, "Kim Eng") which has, vis--vis a relevant Authorised
Person, approved of, and is solely responsible in that jurisdiction for, the contents of this publication in that
jurisdiction.
Kim Eng, its related and affiliate companies and/or their employees may have investments in securities or derivatives of
securities of companies mentioned in this report, and may trade them in ways different from those discussed in this
report. Derivatives may be issued by Kim Eng its related companies or associated/affiliated persons.
Kim Eng and its related and affiliated companies are involved in many businesses that may relate to companies
mentioned in this report. These businesses include market making and specialised trading, risk arbitrage and other
proprietary trading, fund management, investment services and corporate finance.
Except with respect the disclosures of interest made above, this report is based on public information. Kim Eng makes
reasonable effort to use reliable, comprehensive information, but we make no representation that it is accurate or
complete. The reader should also note that unless otherwise stated, none of Kim Eng or any third-party data providers
make ANY warranties or representations of any kind relating to the accuracy, completeness, or timeliness of the data
they provide and shall not have liability for any damages of any kind relating to such data.
Proprietary Rights to Content. The reader acknowledges and agrees that this report contains information,
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copyrights, trademarks, or other proprietary rights, and that these rights are valid and protected in all forms, media, and
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this report is the exclusive property of Kim Eng and is protected by Singapore and international copyright laws. The
reader may not copy, modify, remove, delete, augment, add to, publish, transmit, participate in the transfer, license or
sale of, create derivative works from, or in any way exploit any of the Content, in whole or in part, except as specifically
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provided that the copy is made only for personal, information, and non-commercial use and that the reader does not alter
or modify the Content in any way, and maintain any notices contained in the Content, such as all copyright notices,
trademark legends, or other proprietary rights notices. Except as provided in the preceding sentence or as permitted by
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distribution is restricted to such distribution not being in violation of the copyright of Kim Eng only and does not in any
way represent an endorsement of the contents permitted or authorised to be distributed to third parties.

11

DHG

28 July 2009

Additional information on mentioned securities is available on request.


Jurisdiction Specific Additional Disclaimers:
THIS RESEARCH REPORT IS STRICTLY CONFIDENTIAL TO THE RECIPIENT, MAY NOT BE DISTRIBUTED TO
THE PRESS OR OTHER MEDIA, AND MAY NOT BE REPRODUCED IN ANY FORM AND MAY NOT BE TAKEN OR
TRANSMITTED INTO THE REPUBLIC OF KOREA, OR PROVIDED OR TRANSMITTED TO ANY KOREAN PERSON.
FAILURE TO COMPLY WITH THIS RESTRICTION MAY CONSTITUTE A VIOLATION OF SECURITIES LAWS IN THE
REPUBLIC OF KOREA. BY ACCEPTING THIS REPORT, YOU AGREE TO BE BOUND BY THE FOREGOING
LIMITATIONS.
THIS RESEARCH REPORT IS STRICTLY CONFIDENTIAL TO THE RECIPIENT, MAY NOT BE DISTRIBUTED TO
THE PRESS OR OTHER MEDIA, AND MAY NOT BE REPRODUCED IN ANY FORM AND MAY NOT BE TAKEN OR
TRANSMITTED INTO MALAYSIA OR PROVIDED OR TRANSMITTED TO ANY MALAYSIAN PERSON. FAILURE TO
COMPLY WITH THIS RESTRICTION MAY CONSTITUTE A VIOLATION OF SECURITIES LAWS IN MALAYSIA. BY
ACCEPTING THIS REPORT, YOU AGREE TO BE BOUND BY THE FOREGOING LIMITATIONS.
Without prejudice to the foregoing, the reader is to note that additional disclaimers, warnings or qualifications
may apply if the reader is receiving or accessing this report in or from other than Singapore.
As of 04 Sep 2009, Kim Eng Research Pte. Ltd. and the covering analyst do not have any interest in DHG company.
Analyst Certification:
The views expressed in this research report accurately reflect the analyst's personal views about any and all of the
subject securities or issuers; and no part of the research analyst's compensation was, is, or will be, directly or indirectly,
related to the specific recommendations or views expressed in the report.
2009 Kim Eng Research Pte Ltd. All rights reserved. Except as specifically permitted, no part of this presentation
may be reproduced or distributed in any manner without the prior written permission of Kim Eng Research Pte. Ltd. Kim
Eng Research Pte. Ltd. accepts no liability whatsoever for the actions of third parties in this respect.

12

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Tel: +66 2 658 6817 (sales)


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