Vcbs - Macro Report - 2017 Outlook Report - 2017.01.05

2017 OUTLOOK
2017 OUTLOOK REPORT
MENU
HIGHLIGHTS .......................................................................................................................................................................................... 2
MACROECONOMICS .............................................................................................................................................................................. 3
2016: Slowdown growth. 2017: Growth impacted by worldwide uncertainty; Government’s orientation and administrative guideline
shall pay important role. .......................................................................................................................................................................... 3
Inflation under controlled ........................................................................................................................................................................ 7
Exchange rate is under global pressure in 2017. However, we expect the stability in exchange rate next year ..................................... 8
Deposit rates slightly increased in 2016. Although under pressure to rise in 2017, interest rates are expected to slightly fluctuate. .. 11
Global Economy ..................................................................................................................................................................................... 13
STOCK MARKET .................................................................................................................................................................................... 17

Market Highlights .................................................................................................................................................................................. 17
Oil & Gas stocks finished 2016 with outstanding performance ............................................................................................................. 19
Foreign tended to withdrew fund after VN Index reached its peak of 690. ............................................................................................ 20
The fund withdrawal of two ETFs was pushed at the end of the year .................................................................................................... 21
Outlook 2017: Opportunities still exist. More risks to take at the 2H.2017. .......................................................................................... 22
PROSPECTS FOR INDUSTRIES/CORPORATIONS ......................................................................................................................... 27

Banking .................................................................................................................................................................................................. 29
Real Estate ............................................................................................................................................................................................. 34
Construction ........................................................................................................................................................................................... 40
Steel ........................................................................................................................................................................................................ 46
Rock Mining ........................................................................................................................................................................................... 54
Facing brick ........................................................................................................................................................................................... 60
Plastic ..................................................................................................................................................................................................... 63
Tire ......................................................................................................................................................................................................... 70
Power Industry ....................................................................................................................................................................................... 75
Retail & Distribution of Consumer Electronics and Technology Products ........................................................................................... 81
Seaport ................................................................................................................................................................................................... 86
VCBS Research Department Page | 1

2017 OUTLOOK REPORT
HIGHLIGHTS
Macro economy: 2016: Slowdown growth. 2017: Growth impacted by worldwide uncertainty; Government’s orientation
and administrative guideline shall pay important role.
Indicators illustrated the Vietnamese economy deceleration in 2016. As aggregate demand and investment did not breakthrough, the
growth motivation was resulted from the FDI group, natural resources exploitation and public investment. As a result, when the global
market movements were unfavourable and the budget disbursement delayed, the economy decelerated.
Regarding bright side, Vietnam is considered an attractive destination for capital flow which resulted from the expansionary monetary
policies in many developed countries, especially Asian ones. Vietnam is famous for its stable politic environment and controllable
inflation. However, there are some global events which may have negative impact on Vietnamese economic growth, including (1)
Expected protectionism policies issued by the new US president, especially the his announcement about TPP, (2) the sharp fluctuation
of major currencies value in response to FED‟s action and such irregular politic event as Brexit, (3) the deceleration of Chinese
economy and related issues consisting of NPLs problem, real estate bubble, and weakened trade which may result in CNY depreciation.
Under such circumstance, we come up with some forecast of macroeconomic indicators in 2017
 It is challenging to achieve the target of 6.7% growth in GDP. The 2017 GDP is expected to grow by 6.3% - 6.5% yoy.
 The government is capable of controlling and regulating the inflation, preventing inflation from rising to 5%. The expected
inflation rate is 4% - 4.5%.
 In 2017, despite being under pressure from global factor, the expected ample supply of foreign currencies may help SBV to
manage the exchange rate in order to accomplish important targets. We believe that VND may depreciate by 2% - 4%
against USD in 2017.
 The 2017 interest rate will be stable, slightly moving around end-2016 rate. The expected maximum rise in interest rate is
50 bps (0.5%).
Stock Market: Opportunities still exist. More risks to take at the 2H.2017.
The year of 2016 experienced shocking events, which derived from worldwide market, beyond investors‟ expectation. Notably, two
outstanding events of BREXIT and Donald Trump win US Presidential election. However, following the short-term effect, we concern
about long-term impact which may cause unpredictable systematic risks.
However, we believe that many central banks (except from FED) will have to maintain their loosening policy because of uncertainty
events. Consequently, it is likely that Vietnam shall benefit from Asian countries such as China, Japan, Taiwan and Korea, etc.
Therefore, in the context of good news and bad news it is important that investors keep up with market in order to scan opportunities for
investors especially sectors:
 Growing stocks with fundamental factors, especially blue chips as investors taking risks in field such as Building materials,
Construction, Retail sales, etc.
 Firms in individual cases, which may attract inflows such as newly listed ones, stocks moving to other stock exchanges, M&A
case, and State divestment plan.
 Firms which benefit from commodities price change, which help to improve financial performance efficiently.
 Defensive tickers when indexes log into downward trend, notably the second-half of 2016.
 Beer and Air services sectors as we consider the fact that financial fund may devote some of their resources as newly listed
large-cap tickers change the relative proportion among sectors.

2017 OUTLOOK REPORT
MACROECONOMICS
2016: Slowdown growth. 2017: Growth impacted by worldwide uncertainty; Government’s
orientation and administrative guideline shall pay important role.
The growth of the economy The growth of Agriculture was laggard due to unfavorable weather condition. As of mid-
was halted by Mining and November, the whole country harvested 1240.5 thousand hectares of winter rice, accounting
Agriculture sector for 67.5% of the cultivated area and equaling 96.7% from the same period last year. The
cultivated area of winter rice in the North reduced 14.7 thousand hectares compared with last
year. According to the preliminary report, the productivity of winter rice this year in the
Northern provinces was estimated to reach 4980 kilograms per hectare, down 30 kilograms per
hectare from the same crop last year. As of mid-November 2016, provinces in the South sowed
388 thousand hectares of early winter-spring rice, equaling 95.9% from the same period last
year. The winter was badly impacted by bad weather.
GDP growth (qoq) GDP growth by Industry

8%
12%
7%
6% 10%
5% 8%
4%
6%
3%
4%
2%
1% 2%
0% 0%
Q1 Q2 Q3 Q4
-2%
6/2008
12/2008
6/2009
12/2009
6/2010
12/2010
6/2011
12/2011
6/2012
12/2012
6/2013
12/2013
6/2014
12/2014
6/2015
12/2015
6/2016
12/2016
2013 2014 2015 2016 GDP
Agriculture
Industry and Construction
Service
Sources: CEIC, VCBS
The situation was different from 2016 as instead of being a driver of growth, Mining industry
shrank and consequently became the main factor to blame for economic slowdown. In detail,
in November, this sector‟s index pulled back phenomenally 13.8%yoy. In the last 11 months,
this sector decreases 6.3% yoy (10 months: pressed lower 5.5%yoy). Notably, regardless of
plan to rise oil extracting oil output, the output sustain significant loss of 10% compared to the
same period last year (10 months 2016: decreased 9.7%. To sum up, the weakness of Mining
pulled back the whole industry approximately 1.3 percentage point.

2017 OUTLOOK REPORT
Industrial Inventory and IIP (yoy)

Manufacturing PMI
Inventory Index
14% 56 20
55
12%
54 15
10% 53
52 10
8%
51
6% 5
50
4% 49
48 0
01/15
03/15
05/15
07/15
09/15
11/15
01/16
03/16
05/16
07/16
09/16
11/16
2%
47
0% 46 -5
01/15
03/15
05/15
07/15
09/15
11/15
01/16
03/16
05/16
07/16
09/16
11/16
-10 Industrial Production Index
Inventory Index (% yoy)
Manufacturing PMI Mining and Quarrying
PMI threadhold (50) -15 Manufacturing
Sources: CEIC, HSBC, NIKKEI, VCBS
Manufacturing was the main Manufacturing was the main driver to promote either Industry or the whole economy in
driver to promote growth. general. In detail, the IIP (Index of Industrial Production) of Manufacturing in November
increased 13.1%, which was much higher than 11.3% growth, recorded same period last year.
In the last 11 months, this index press higher 11%, which was slightly higher than that of 2015
(+10.4%). When it comes to the growth of 7.2% in industrial sector, manufacturing
industry was proved to be the main contributor with 7.7 percentage point added to
overall growth.
According to Nikkei, Vietnam Manufacturing PMI rose to 54.0 in November from 51.7 in
October, also is higher than 49 points in the same period last year due to output and new
orders boosted. Besides the improved production in the past month, we believe that this
increase partly stemmed from seasonal factor as the peak season of production is coming.
Nevertheless, we should bear in mind that the sample in this research was mainly FDI firms.
Therefore, there was a clear segmentation in production sector, in which the main contributors
to economy growth were FDI firms rather than the domestic ones.
Trade surplus was recorded From export side, according to Custom office, total export and import turnover in the first 11
due to a plunge in import months reached 316.9 USD billion, which was 5.8% higher than that of 2015 and was also
activities. better than 4.63% growth recorded last month). However, this figure was relatively lower than
10.3% growth recorded in 2015. Therein, export turnovers was 156.96 USD billion- implied a
growth of 3.7%yoy, which was much lower than last year‟s 12.7% growth. Therefore, we
believe that a trade surplus of 2,98 USD billion was resulted from a plunge in import activities.
Notably, some input for domestic production experienced marginal growth. In detail, machine,
equipment, tools and instruments export turnover was 25.23 USD billion, which grew slightly
0.7%; telephones, mobile phones and parts thereof export turnover was 9.56 USD billion,
which pressed lower 3.9%; chemical export turnovers stood still at 2.87 USD billion; wood
and wood products export value recorded at 1.62 USD billion, stumbled 16.8%; Fertilizer
export value was 1 USD billion, sank 21.2%.

2017 OUTLOOK REPORT
Import - Export Export/GDP

17 90%
bn USD
15
80%
13
11 70%
9
60%
7
50%
5
3 40%
1
01/15 30%
03/15
05/15
07/15
09/15
11/15
01/16
03/16
05/16
07/16
09/16
11/16
-1
-3
-5
Exports Imports Trade Balance
Sources: CEIC, VCBS
Economic growth strongly Vietnam‟s economic growth strongly depended on import activities. The import/GDP ratio
depends on export activities, climbed up year by year. We anticipated that this ratio will be higher than 85%. FDI showed
which was contributed by their crucial role in promoting economy growth as they contributed more than 70% import
FDI. turnover of Vietnam.
Registered FDI capital headed Registered FDI capital in the first 11 months reached 18.1 USD billion, which was 10.5%
lower, which was interpreted lower compared to the same period last year. Therefore, this was the third consecutive month
as a bad signal to economy registered FDI capital pulled back, which indicated a clearer slowdown. This movement might
growth. partly result from phenomenal registered FDI by multinational corporation‟s projects. We
believe that any uncertainty from worldwide market or rising trade protectionism may hurt FDI
inflow to Vietnam next year. As a result, economy growth in the upcoming period may press
lower as the economy at the moment is highly depending on FDI sector. Realized FDI capital
14.3 USD billion - which was 8.3%. However, it was much lower than last year‟s growth of
17.9%.
bn USD FDI
9
8
7
6
5
4
3
2
1
-1
03/13
03/11
06/11
09/11
12/11
03/12
06/12
09/12
12/12
06/13
09/13
12/13
03/14
06/14
09/14
12/14
03/15
06/15
09/15
12/15
03/16
06/16
09/16
11/16
Registered Capital Supplemental Capital Implementation Capital

2017 OUTLOOK REPORT
Sources: CEIC, VCBS
Domestic investment demand Regarding credit growth, by the end of November 2016, total credit grew at 14.57% ytd,
has not improved much since slower than the 15.51% growth in 2015, showing that the capital absorption capability of
2015. the economy, especially the domestic sector, has not improved much since 2015.
According to data from SBV, credit growth in the Industrials sector, a core sector of the
economy, was only 8.2% yoy, which was lower than the economy‟s credit growth of 14.46%.
Meanwhile, several sectors saw impressive credit growth. Credit growth was 17.27% yoy in
the Agriculture sector, 17% yoy in the Commercials, Logistics and Telecommunication
Services sectors, and 24.18% in the Other Services sector.
Retail Sales Credit growth and M2

350 14
Tn. VND
30%
300 13
25%
12
250
11 20%
200
10 15%
150
9
10%
100
8
50 5%
7
0 6 0%
01/15
03/15
05/15
07/15
09/15
11/15
01/16
03/16
05/16
07/16
09/16
11/16
Services & Tourism

Trade Hotel & Restaurant Credit growth (yoy) M2 growth (yoy)
Trade
Growth rate (%)
Sources: CEIC, VCBS
Consumer demand has shown Total retail sales of goods and profit in consumer service in the first 11 months was estimated
moderate growth. to increase by 9,5%, excluding the price growth of 7,6%, lower than the rates of 8,3% as
compared to the same period in 2015. Consequently, the consumer demand has recorded a
moderate growth and yet to breakthrough. Consumers seemed to continue to be cautious and
keep on with the saving up trend. We suppose that the price growth of some essential
commodities such as Education, Medical services and Oil might not be considered as a
positive factor to the consumer demand.
GDP 2017 is expected to grow The economic growth has decelerated sharply based on the clear signs from the market
by 6.3%-6.5%. indicators. The consumer and domestic investment demand have yet developed strongly and
also were highly dependent on the FDI, natural resources and public investment. Accordingly,
since there were difficulties in Government disbursement and the uncertain global risks, slow
economy growth was rather hard to avoid.
In 2017, the economy restructuring goal will continue to be the priority with major focus on
the equitization and listing State enterprises by promoting restructuring of the public
investment. Besides, the route of restructuring the banking system, bad debt, State budget
control, improving the efficiency of the Government spending are going to be crucial
objectives. Therefore, we have yet to recognize the new growth engine for the economy.
Regarding bright side, Vietnam is considered an attractive destination for capital flow which
resulted from the expansionary monetary policies in many developed countries, especially

2017 OUTLOOK REPORT
Asian ones. Vietnam is famous for its stable politic environment and controllable inflation.
However, there are some global events which may have negative impact on Vietnam‟s
economic growth, including (1) Expected protectionism policies issued by the new US
president, especially the his announcement about TPP, (2) the sharp fluctuation of major
currencies value in response to FED‟s action and such irregular politic event as Brexit, (3) the
deceleration of Chinese economy and related issues consisting of NPLs problem, real estate
bubble, and weakened trade which may result in CNY depreciation.
As the 2016 global politic environment was not stable, meanwhile the 2017 outlooks of major
economies are in doubt, we do not expect any breakthrough of export and FDI group‟s
performance next year. This group is believed to remain growing at the same rate as in 2016.
As a result, in accordance with the export and FDI‟s group, government regulation on such
activities as public investment, infrastructure development spending and natural
exploitation (especially crude oil extraction) will play the key role in encouraging
economic growth. The government policies are also required to be close and flexible.
We believe that the target 2017 GDP growth rate of 6.7% is challenging. The expected
GDP growth rate is 6.3% - 6.5%.
Inflation under controlled
2016 inflation rate is about As in previous year, providing that domestic consumption recovered at a medium rate, it is
5%. We forecast the 2017 quite obvious that 2016 CPI mostly depended on the increase in necessity goods and services
inflation rate to be 4% - 4.5% price, especially those under government regulation such as Health Care and Education.
In 1H2016, January CPI (monthly data) did not change much thanks to the decrease in Oil &
Gas price. However, in the next five months, CPI increased mom gradually, attributed to (1)
higher demand from Lunar New Year holiday, which is a seasonal factor, (2) the bounce in Oil
& Gas price, (3) the upward adjustment in Health Care and Education Services charge. On the
other hand, in contrast to 2015, 2016 CPI is also under pressure from the rising food price
which is resulted from the drought in the Southern provinces negatively influencing the supply.
In 2H2016, CPI has sharply increased since September to December 2016, during which there
were many factors influencing inflation rate such as (1) increasing tuition fee in the beginning
of the new semester, (2) soaring Health Care services charges as government‟s plan, (3)
bounce in Oil & Gas price in response to the recovery in Crude Oil price. However, the
Government is capable of controlling inflation rate, ensuring that the 2016 inflation rate
will not exceed 5%. The government has decided not to increase Health Care services charge
since October 2016, relieving upward pressure on CPI in November and December 2016.

2017 OUTLOOK REPORT
2.5%
CPI growth rate 20%
2.0% 16%
1.5% 12%
1.0% 8%
0.5% 4%
0.0% 0%
-0.5% -4%
01/12
04/12
07/12
10/12
01/13
04/13
07/13
10/13
01/14
04/14
07/14
10/14
01/15
04/15
07/15
10/15
01/16
04/16
07/16
10/16
CPI (mom) CPI (yoy)
Sources: CEIC, VCBS
As we believe the demand from consumption will not breakthrough, the adjustment in price of
essential goods and services is considered the key factors influencing overall inflation rate in
2017. The pressure may come from the variety of source such as (1) commodities price
movement, especially the bounce in crude oil price, (2) the government plan of regulating
Health Care services charge and tuition fees. Regarding crude oil price, we do not expect
another bounce in 2017 due to unimproved demand and bleak outlook of the global economy.
On the other hand, the increase in Health Care services charges and tuition fees may
significantly impact CPI. These increases are under government control.
In the final analysis, we believe Government is capable of controlling the inflation in 2017.
The target of less than 5% growth in CPI is likely to be achieved. The inflation rate in 2017 is
expected to reach 4% - 4.5%.
Exchange rate is under global pressure in 2017. However, we expect the stability in exchange rate
next year
The exchange rate and forex Despite some sharp fluctuations during the year, the exchange rate and forex market is
market was stable thanks to quite stable in 2016. In detail, during 9M2016, USD ask price in commercial banks did not
the ample supply of foreign change much, varying in a narrow range from VND 22,330 – 22,350 per USD. In Q4,
currencies in 2016. The VND especially in November, there are 4 sources of pressure which increase the exchange rate,
depreciated by 1.1% against including (1) the surprising outcome of the US president election which announced Donald
USD Trump‟s winning, (2) FED decided to raise the interest rate in December, also declaring the
plan to increase the rate faster than expectation in 2017, (3) the USD appreciated against others
foreign currencies, (4) demand from repayment by the end of the year (seasonal factor). These
pressures resulted in the appreciation of USD against VND, raising its value to VND 22,790 –
22,800 per USD (+1.1% ytd since the end of 2015).
Since the beginning of 2016, the SBV has officially applied new exchange rate regime
which regulates the reference rate based on (1) weighted average exchange rate on the
interbank market, (2) exchange rate between VND and other currencies of close countries in
terms of trade, debt, and investment, (3) the macroeconomic target, monetary policies. Instead
of clear commitment on a stable exchange rate as in recent years, the SBV has come up with a
new flexible regime.

2017 OUTLOOK REPORT
As a result, before the exchange rate in commercial banks market increased, the reference rate
has been rising since the middle of August by the SBV, up to VND 22,155 per USD (+1.2%
ytd since the end of 2015). This upturn may be considered the flexible adjustment by
authorities to orient the market and prepare for exchange rate pressure by the end of the year.
The ample supply of USD was the key factor that kept the exchange rate stable during
2016. In detail, (1) the surplus balance in 11M2016 was estimated at USD 2.98 bn, (2) the FDI
disbursement continued to increase, reaching USD 14.3 bn (+8.3% yoy), (3) the foreign
currencies flow resulted from M&A cases, environment compensation, (4) Vietnam which
country has a stable politic environment and growing economy was an attractive destination
for the capital flow among other countries who maintained the expansionary monetary
policies.
USD/VND Exchange rate

22,900
22,700
22,500
22,300
22,100
21,900
21,700
21,500
21,300
21,100
20,900
20,700
01/14 04/14 07/14 10/14 01/15 04/15 07/15 10/15 01/16 04/16 07/16 10/16
Reference exchange rate Ceiling exchange rate

Floor exchange rate VCB spot bid exchange rate
VCB spot offer exchange rate
Sources: CEIC, VCBS
In 2017, despite pressure from In 2017, we believe the pressure from exogenous factors and global market play the key role in
global market, the expected affecting exchange rate and forex market. Some expected highlights are (1) the appreciation of
ample supply of foreign USD resulted from the US economy recovery and the FED‟s plan of raising interest rate which
currencies may help SBV be the number of increases is higher than in 2016, (2) the depreciation of major currencies in the
active in managing and region. On the other hand, as there are irregular events and sharp fluctuation, the speculation
stabilizing the forex market in sentiment may be strengthened. This factor may cause pressure on market in short term. The
order to achieve important SBV is required to issue reasonable, flexible policies on time.
targets. We forecast the VND
may depreciate against USD by
2% -4%.

2017 OUTLOOK REPORT
Devaluation of some countries' currencies against USD in 2016
8%
6%
4%
2%
0%
-2%
-4%
-6%
-8%
-10%
12/15 01/16 02/16 03/16 04/16 05/16 06/16 07/16 08/16 09/16 10/16 11/16
Vietnam Thailand Indonesia Philippines
Malaysia Singapore China
Sources: Bloomberg, VCBS
On the contrary, we hold our point of view that the foreign currencies supply in 2017 will be
ample, supporting the exchange rate. Except the US, many developed countries, especially in
Asia, are maintaining loosening monetary policies. As a result, Vietnam is expected to be the
investment highlight due to (1) stability in politic environment and economy, (2) favorable
geographic location. Moreover, there will be many equitization and state divestment cases
taking place in 2017, especially in some big state-owned corporations which are concerned by
the foreign investors. These events might attract more foreign currencies to Vietnam.
In the final analysis, in spite of VND being under more pressure than in 2016, the expected
ample supply of foreign currencies may help SBV be active on managing and stabilizing the
forex market if necessary in order to meet such important targets as (1) the stable economy, (2)
ensuring the appeal of Vietnam toward capital flow, (3) maintaining low interest rate in order
to promote growth, (4) acceptable public debt ratio. In conclusion, we forecast the VND to
depreciate by 2% - 4%.

2017 OUTLOOK REPORT
Deposit rates slightly increased in 2016. Although under pressure to rise in 2017, interest rates
are expected to slightly fluctuate.
Deposit rates rose slightly in In 2016, deposit rates increased slightly compared to 2015 by a few dozen basis points,
2016 while lending rates were depending on each tenor from short-term to medium-term and long-term. Therein, two
pretty stable and less volatile. conspicuous corrections fell on Q1 and end of Q4. By the end of 2016, deposit rates of less
than 6M tenor almost from 4.3% - 5.5%/year, from 6M to 12M tenor ranged from 5.3% though
7% / year, more than 12M tenor ranged from 6.5% - 8%/year.
We recognized that the main cause of interest rates hike in Q1.2016 stemmed from some
developments of banking system, which led to the capital mobilization demand. Specifically,
(i) deposit growth (13.59% in 2015) was lower than credit growth (17.3% in 2015), entailing a
high LDR ratio of many banks at this time, (ii) Circular No. 06 amending some articles of
Circular No. 36 tightened regulations on ratio of short term capital source to be used for
medium term and long term loan.
For the slight correction at the end of Q4, beside the competition in mobilization as mentioned
above, deposit rates also faced pressure from (1) the exchange rate heated up after the US
presidential election and FED‟s interest rate hike in December and (2) seasonal factors
including credit growth acceleration in the latter part of the year as well as the liquidity
demand of commercial banks around the year-end and Lunar New Year.
Although deposit rates increased slightly in 2016, lending rates was pretty stable and less
volatile. According to the SBV, the common lending rate for the priority areas ranged from 6%
-7%/ ear for short-term and 9%-10%/year for the medium and long term. Lending rates for
regular business sectors were 6.8%-9%/year for short-term; 9.3%-11%/year for the medium
and long term. For good customers whose healthy financial situation, lending rates were about
4% -5%/year.
Deposit and Lending rates

16%
14%
12%
10%
8%
6%
4%
2%
0%
06/12 10/12 02/13 06/13 10/13 02/14 06/14 10/14 02/15 06/15 10/15 02/16 06/16 10/16
L.R agriculture, rural & exports L.R manufacturing
D.R (<1M) D.R 3M
D.R (>12M) D.R 6M
Sources: CEIC, VCBS
Expected interest rate in 2017 In 2017, the interest rates will still be under pressure due to (1) the existing problems in the
is relatively stable and only banking system as described above and consequence of competition in mobilization and (2)
slightly fluctuate around level fluctuations in worldwide market, especially FED‟s interest rate hike, which accompanies the
at the end of 2016. The exchange rate risk. Therefore, we assess that interest rates will be very difficult to further
increase, if any, will not reduce.

2017 OUTLOOK REPORT
exceed 50 basis points (0.5%). On the opposite side, amid (1) inflation is under control as analyzed above; (2) the foreign
exchange market‟s volatility and the devaluation of VND remain at reasonable levels as
expected and (3) stable and abundant supply of foreign currencies continue to support the
system liquidity, we believe that there is space for SBV to regulate the market and relieve the
pressure on interest rates.
Accordingly, we believe that, the government‟s aim of maintaining low interest rates level to
support the growth is achievable. We expect that interest rates in 2017 will be relatively
stable and only slightly fluctuate around the current level. The increase, if any, will not
exceed 50 basis points (0.5%) and ceiling interest rate 5.5%/year for less than 6M tenor is
likely to be ensured.
In 2016 (until the 16th of The market seemed to catch up quickly in the first few months of 2016, and then became more
December), VND 335,873 bn active in the middle of the year and seemed to slowdown in the last few weeks of 2016. VND
(+31.95% yoy) worth of bond 335,873 bn worth of bond was issued from the beginning to the middle of December in 2016,
was issued and VND 1,517,662 bn which has boosted by 31.95% as compared to 2015. Therein, ST-Bond was accounted for VND
(+73% yoy) was traded on the 281,294 bn. After 2 times amending the bond issuance target, the State Treasury has surpassed
secondary market. We expect to over 0.1% in 2016.
see the bond yield to go sideways
Government bond‟s demand increased significantly in 2016 thanks to (1) credit growth has yet
or tick down in 2017. However,
shown signal of improvement; (2) ample liquidity thanks to SBV‟s continuous USD net-bought
the volatility would be
in the last 11 months and (3) Circular 06.
differentiated to each term.
5Y tenor has taken lead this year with an outstanding issuance at over 57% of the total bond
issuance. Moreover, 30Y tenor has up lifted to over 25% of the target.
Primary market Secondary market

80,000 250,000
70,000
60,000 200,000
50,000
150,000
40,000
30,000 100,000
20,000
50,000
10,000
0 -
10/16
11/16
1/16
2/16
3/16
4/16
5/16
6/16
7/16
8/16
9/16
10/16
11/16
1/16
2/16
3/16
4/16
5/16
6/16
7/16
8/16
9/16
ST VBSP VDB Outright Repo

Sources: HNX, VCBS
In the last 2 years, bond issuance trend seemed to redirect from the short-term tenor to the
medium and longer tenors, which has contributed in determining the market demand to the
longer terms.
Winning rates fluctuation showed clear differentiation between tenors. The longer tenors (20Y-
30Y) has swung in the tight band, moved sideways until the end of Q.3 then slightly ticked
down and afterward stayed stable for the rest of the year. On the other hand, 5Y tenor has
widened fluctuation from a slight decrease in Q.1 then fell sharply in Q.3 and later bounced
back in Q.4. Lastly, 7Y tenor has shifted gently upward in Q.2 and then dropped significantly
by the end of the year thanks to the increasing demand from investors. Therefore, we suppose
that the liquidity and the market tended to improve in the longer terms.

2017 OUTLOOK REPORT
% Winning rates and CPI

10
04/15
01/15
02/15
03/15
05/15
06/15
07/15
08/15
09/15
10/15
11/15
12/15
01/16
02/16
03/16
04/16
05/16
06/16
07/16
08/16
09/16
10/16
11/16
CPI (y-o-y) 3Y 5Y 7Y
10Y 15Y 20Y 30Y
Sources: HNX, VCBS
In 2017, banking liquidity would continue to be the vital factor which could cause serious effect
to the bond market. As expectation of (1) foreign currency supply remained high; (2) exchange
rates risk stayed at a reasonable level and (3) SBV‟s orientation of keeping interest rates at a
low level band, the liquidity in the system (excluding the seasonal factor) might as well
maintain stable and abundant in the upcoming period. Therefore, we expect that bond yield
would rather shift sideways in 2017, however the movement might somewhat distinguish
between terms. 5Y bond yield is likely going to decline further as compared to the trough in
2016 as for now the yield level was relatively close to the inflation rates and the inflation rate
expectation in the long term. Meanwhile, liquidity and the investor‟s demand would swing to
7Y-15Y tenors which could trigger the yield fluctuation to expand.
SBV effectively monitored the SBV accomplished an outstanding job in 2016. Unexpected moves from the global market
money market, ensuring caused hardship to the local market, regarding interest rate and exchange rate; however, SBV
banks’ liquidity. was successful in maintaining interest rate levels and reduced speculation activities on the
exchange market. Banks‟ liquidity was ensured upon market‟s conditions and demand during
holidays.
Global Economy
USA
US economy has continued to Exceptional GDP growth in Q.3 at 3.2% yoy (2.6% in the same period last year) which was
improve in 2016. Donald relatively higher than expectation of 2.9%. This figure has rather reached the highest peak in the
Trump has elected last 2 years due to higher consumer spending, exports and fixed-asset investment throughout the
presidency. In 2017, the period. Meanwhile, the unemployment rates in 2016 has managed to remain at a low level of
tightening monetary policy is 4.9% (even dropped to 4.6% at some points). The weekly number of applications for
likely going to be accelerated. unemployment benefits also reduced to 280.000 submissions per week in month.
Service PMI growth in November has broken the record in the last 13 months and stayed
steadily above 50 points in 2016. Likewise, the PMI manufacturing index posted at the upper
band of 50 points and boosted in October and November (54,1 points in November). Inflation
seemed to tick up by the end of the year and somewhat about to reach the target of 2%. In
details, inflation rates of October was 1.6% yoy.

2017 OUTLOOK REPORT
After raising interest rate in December 2015, there were many consecutive global events from
China and Brexit which bounded FED to stay cautious and increase interest rates for only 1
time in 2016 at the December monetary meeting. At the same time, FED expected to raise
interest rate by 3 times in 2017. As market‟s expectation before FOMC in Dec, FED made
minimal interest rate adjustment. However, the expected timeline for interest rate lifting in 2017
seemed to be more aggressive. We forecast in the upcoming year, USD should continue to grow
stronger against other major currencies.
US Inflation and Unemployment US PMI

%
11 59
9 57
7 55
5 53
3
51
1
49
-1
Manufacturing PMI Services PMI

Inflation rate Unemployment rate
Sources: Bloomberg, VCBS.

Donald Trump was elected as US President has been by far the most notable in 2016. After the
short-term risks, US stock market has bounced back intensely thanks to the expectation of new
policies, especially for the related matters such as (i) US has strengthened the trade
protectionism entails the risk from extending or even withdrawal from TPP agreement; (ii) the
route of tightening the monetary policy might be accelerated more than expected and (iii)
capital flow would be adjusted to withdraw from the frontier market and emerging market.
However, we suppose time is required in order to examine the actual effect of the policy to the
market. While the withdrawal from TPP might not be as challenging since the decision would
only take the approval of issuance from the President, the National Assembly‟s approval on the
other hand would require more time. Therefore, uncertain risks might be increasing especially
in the medium and long term. Therefore, uncertain risks might be increasing by times especially
in the medium and long term.
US economy is forecasted to We suppose time is needed to test the effectiveness from the policy of the Republican
continue to develop in 2017; candidate. Though, this was rather a double-edged sword since the policy change might not be
however the growth pace able to maintain the US economy‟s growth pace which has been actively functioning well in the
would rather be sluggish as last 2 years. Tightening monetary policy was the remarkable point since it came with the easing
compared to 2016. trend of the other Central Banks from around the world which could cause more pressures to
strengthen USD value.
Europe
EU economy did not seem to Europe economy in 2016 has not yet shown signal of improvement. GDP growth seemed to step
manage well in 2016. Brexit was back from 0.5% qoq in Q.1 to only 0.3% qoq in Q.2 and Q.3. In Q.3, GDP growth of Europe
considered as the most shocking increased 1.6% yoy, which was unchanged from last year. On the other hand, Eurozone‟s GDP
event. growth speed stayed at 1.8% yoy. Manufacture was the highlight of Eurozone since its PMI
index has remained steadily at 51 points which indicated for expanding stable manufacturing. .
Production index was the highlight of the area since the PMI manufacturing index has
2017 OUTLOOK REPORT
maintained above 51 points which showed a stable expanding manufacture speed. Special
manufacturing has developed in the year-end period as seasonal factor while PMI index has
increased consecutively in the last 3 months – reached 53.7 points in November.
Unemployment rates seemed to decline in 2016. In EU19, unemployment rates dropped from
10.4% in January to 9.8% in October – marked the lowest point in the last 7 years. Yet, this
figure was still higher than the trough level of 7.2% in 2008. Meanwhile, the unemployment
rates in EU28 decreased from 8.9% in January to 8.3% in October.
Inflation rates has reached rock-bottom in Q.1 and then shown signals of recovery in November
with + 0.6% yoy, which still quite far from the inflation target of 2%. Core inflation rate stayed
stable at 0.8% yoy.
Brexit has been considered as shocking news to the financial market in the past year. However,
the full impact of Brexit was hardly recognized. Therefore, we are quite concern about the
Europe and UK‟s monetary policy. Negotiation efforts from both the EU and UK were to focus
on building the suitable trade fair to avoid risks from “Hard Brexit”.
Uncertain political risks since Brexit, Greek public debt and immigrants were heavily weighted on the European Economy.
Brexit along with other issues Accordingly, ECB might not terminate the asset re-purchased package in March/2017. We do
might pressure ECB to maintain not exclude the possibility that the program might be extended in terms of duration and
their easing monetary policy in implementation scale.
2017.
We predict that it is only a matter of time before USD value would be equal to EUR 1.
% 6M deposit rate of ECB

0.50 1.00
0.95
0.35 0.90
0.85
0.20 0.80
0.75
0.05 0.70
02/14 07/14 12/14 05/15 10/15 03/16 08/16 0.65
-0.10 0.60
01/15 06/15 11/15 04/16 09/16
-0.25 USDEUR USDGBP
Asia
China economy deceleration has GDP growth rates by the end of Q.3 reached 6.7%. Thereby, 2016 GDP growth might as well
slowed down by the end of 2016. accomplish the target of 6.5%-7%. However, with the growth rates of 6.7%, 2016 would
However, PBOC is likely to continue to grow at the slowest pace since 1990.
continue on devaluating CNY in
In 2016, the manufacturing index has slightly recovered after a major plummet. PMI index has
the upcoming period.
also ticked up to over 50 points in September. For that reason, quite the opposite from the
previous negative perspective since the middle of the year, the manufacture index seemed to re-
bounce by the end of the tear. Industrial output boosted 6.2% in November. Production output
also jumped 10.8% - the highest level in the past 12 months. Fixed asset investment increased
by 8.3% in the first 11 months. Inflation improved by 2.3% yoy in November after a continuous
downtrend of only ticking up by 1.3% in July, thanks to the higher food price.
However, the export-import turnover of China has declined by 6.9%. The trade surplus has
2017 OUTLOOK REPORT
narrowed significantly and slightly improved by November when exports and imports rising up
by 0.1% yoy and 6.7% yoy respectively. At the same time, in 2016, foreign reserves ratio has
bounced back to the lowest level of USD 3,050bn.
We have recognized quite clearly the depreciation trend of CNY in order to promote exports.
According to Bloomberg, CNY has marked downward by 6% as compared to the end of 2015.
Since Donald Trump was elected for US President, CNY has continuously fallen sharply. We
have yet seen the major drive that could cause China to put a stop on devaluing CNY.
Therefore, in the upcoming year, global uncertain risks might become a reasonable
opportunity for PBOC to continue on depreciating CNY (especially in the early period of
2017).
China's foreign exchange reserves

USD bn
3,900 7 130
3,700 6.8 120
3,500 6.6 110
3,300 6.4 100
3,100 6.2 90
2,900 6 80
01/15
03/15
05/15
07/15
09/15
11/15
01/16
03/16
05/16
07/16
09/16
11/16
USDCNY USDJYP

Japan economy has shown Japan economy grew weaker. Quarterly GDP growth pace has slowed down from a 0.7% in Q.1
weak growth. The global to 0.3% qoq in Q.3. Therein, the growth figure in Q.3 has been adjusted to reduce against the
economy events have resulted previous estimated figure of 0.5% because there was no major change in domestic demand
in the uncertain trend of JPY while commerce has less contribution to the economy growth. Unemployment rates in 2016
and hardly pressured the have decreased to around 3% while Japan has great demand for labor to serve the needs of post-
BOJ’s monetary policy. In disaster reconstruction.
2017, easing monetary policy
In 2016, the general trend of Japan has declined rapidly. From April, the inflation rates has
seems to remain to be the key
stayed consecutively at under 0% and only ticked up to 0.1% yoy in November. Inflation core
factor.
has maintained also under 0%.
Japan commercial has shown signals of clear reduction. Therein, exports decreased dramatically
to 10.3% - marked the 13th consecutive month of shifting downward. In November, imports
continued to drop harder than exports at 16.5% yoy. These events have somewhat shaped the
trade surplus for Japan in 2016 instead of the trade deficit as recorded in 2012.
Considering above factors, investors might shift their attention to the BOJ‟s policy. Besides, the
Government has extent time for the inflation growth target as well as lower the GDP growth
level, given BOJ‟s consecutive easing measures. In detail, in the first few months of 2016, BOJ
has proceeded the expanding of asset acquisition package; yield curve impact or unlimited bond
acquisition within the next 5 years. Nevertheless, BOJ monetary policy has shown signals of
decelerate as (i) JPY boosted in Q.3 and (ii) negative impact from disaster factor. Therefore,
we suppose BOJ would continue to precede the easing monetary policy in 2017 – which
extended more time for the growth target and inflation.

2017 OUTLOOK REPORT
STOCK MARKET
Market Highlights
Source: VCBS
2016: A bull market lasted 10 months In the first 11 months, VN-Index and HNX Index rose 16.04% ytd and 2.64% ytd,
before the trend reversal took place respectively. A strong correction in January was quickly overshadowed by growth phase
in Q4. which lasted nearly 10 months. VN Index set the one-year high at 690 points (equivalent
to an increase of 32.69% from the bottom at 520 points). The important motivations
contributing to this trend included (i) the slow recovery of major economies led central
banks to expand their easing programs, creating condition for inflows‟ shift into securities
market, (ii) the recovery of commodities‟ price, especially crude oil, (iii) foreign
investors‟ active trading, and (iv) the abundant liquidity from banking system as well as
stability of interest rate and exchange rate. These supporting factors caused index‟s quick
rebounds after the unexpected movements in worldwide market, especially BREXIT event
in June.
As mentioned in the Equity Market Outlook Q4.2016, the year-end is not the time of
disbursement of foreign investors. In addition, large correcting pressure after a long rally
downward trend is the premise for continuing downward trend at least until the end of Q4.
From the peak recorded in late October, excluding the effect of ROS, VN Index declined
nearly 11% and lost the mid-term uptrend.

2017 OUTLOOK REPORT
Volume VN-Index Volume HNX-Index

90 100
300
690
250 86 80
660
630 200 82 60
600 150
78 40
570 100
50 74 20
540
510 0 70 0
01/04/2016
02/01/2016
03/07/2016
04/04/2016
05/05/2016
06/02/2016
06/30/2016
07/28/2016
08/25/2016
09/23/2016
10/21/2016
11/18/2016
01/04/2016
02/01/2016
03/07/2016
04/04/2016
05/05/2016
06/02/2016
06/30/2016
07/28/2016
08/25/2016
09/23/2016
10/21/2016
11/18/2016
Source: VCBS
2016: A bull market lasted 10 months In the first 11 months, VN-Index and HNX Index rose 16.04% ytd and 2.64% ytd,
before the trend reversal took place respectively. A strong correction in January was quickly overshadowed by growth phase
in Q4. which lasted nearly 10 months. VN Index set the one-year high at 690 points (equivalent
to an increase of 32.69% from the bottom at 520 points). The important motivations
contributing to this trend included (i) the slow recovery of major economies led central
banks to expand their easing programs, creating condition for inflows‟ shift into securities
market, (ii) the recovery of commodities‟ price, especially crude oil, (iii) foreign
investors‟ active trading, and (iv) the abundant liquidity from banking system as well as
stability of interest rate and exchange rate. These supporting factors caused index‟s quick
rebounds after the unexpected movements in worldwide market, especially BREXIT event
in June.
As mentioned in the Equity Market Outlook Q4.2016, the year-end is not the time of
disbursement of foreign investors. In addition, large correcting pressure after a long rally
downward trend is the premise for continuing downward trend at least until the end of Q4.
From the peak recorded in late October, excluding the effect of ROS, VN Index declined
nearly 11% and lost the mid-term uptrend.
Volume VN-Index Volume HNX-Index

90 100
300
690
250 86 80
660
630 200 82 60
600 150
78 40
570 100
50 74 20
540
510 0 70 0
01/04/2016
02/01/2016
03/07/2016
04/04/2016
05/05/2016
06/02/2016
06/30/2016
07/28/2016
08/25/2016
09/23/2016
10/21/2016
11/18/2016
01/04/2016
02/01/2016
03/07/2016
04/04/2016
05/05/2016
06/02/2016
06/30/2016
07/28/2016
08/25/2016
09/23/2016
10/21/2016
11/18/2016
Source: VCBS
P/E of Vietnam market increased In 2016, the P/E ratio on HSX increased sharply due to significant changes in the market

2017 OUTLOOK REPORT
sharply in 2016, peaked in price when many tickers broke their mid-term peaks. At the end of November, P/E on
September and was no longer at HSX rose 38.23% from the end of last year, equivalent to old peak in 2014. Although P/E
attractive level compared to of frontier markets and emerging markets boosted in 2016, growth rate of Vietnam‟s P/E
other frontier markets. As a still grew faster than the average. Accordingly, P/E level of VN Index in November far
result, correcting pressure exceeded the frontier market’s average and was beyond the average P/E of emerging
boosted in the latter part of the markets at a time, indicating that the price level of Vietnam market was no longer
year. too attractive.
P/E of Vietnam compared to some markets

18
16
14
12
10
P/E Vnindex P/E Emerging market P/E Frontier market
Oil & Gas stocks finished 2016 with outstanding performance
Oil & Gas sector was the market 2016 witnessed an impressive return of Oil & Gas sector after the disappointment in 2015
leader by growth rate, followed by with an increase of 71.73% growth yoy. Followed sectors included Real Estate (+ 36.1%
Real Estate, Consumer Goods and yoy), Consumer Goods (+ 31.26% yoy) and Insurance (+ 20.91% yoy).
Insurance.
Oil & Gas: Because business activity depends on the movements of worldwide oil prices,
the group took the leading role after crude oil prices rebounded sharply since the beginning
of the year. But since the end of September, this sector has entered the sideways stage.
In Real Estate sector, amid revenue of many businesses focused on 2016, many stocks in
this sector surged in the second half of the year. Besides, positive signal of Real Estate
received major contribution from leading ticker VIC with strong growth, the share price,
accordingly, also welcomed positive developments.
Consumer goods sector recognized much volatility in 2016. The main dynamic growth of
this group still was VNM with supporting news as loosening room to 100%; SCIC
divestment or VNM was added to the portfolio of two foreign ETFs. The participation of
Beer stocks at the end of the year will open up expectations on this group next year.

2017 OUTLOOK REPORT
100% VCBS Sector Indices

70%
40%
10%
-20%
-50%
-80%
VCBS Oil & Gas Index VCBS Mining Products Index

VCBS Food Products Index VCBS Securities Index
VCBS Real Estate Index VCBS Banking Index
Source: VCBS
Minerals created the biggest drop, especially in the last 6 months as consecutive violations
in raising capital and information disclosure of enterprises such as KSK, KHB, KHL were
penalized by SSC. The downtrend of this group is caused by changes to investor appetite
for stocks with fundamental factors.
After a weak start in Q1, large-cap The trend in 2015 maintained as large-cap group still was the focus attracting inflows. The
group regained the leading role. The first half of 2016 witnessed a surge in mid-cap stocks which benefited directly from the
divergence became stronger in the fundamental factors as commodity prices recovered, loosening room, divestments. Tin the
second half amid small-cap and mid- latter part of the year, beside the shift investment appetite from speculative stocks to
cap gradually halted. fundamental stocks, the advance in the large-cap also received important support from new
listing of some large enterprises.
36% VCBS MarketCap Indices

28%
20%
12%
4%
-4%
-12%
VCBS LargeCap Index VCBS MidCap Index VCBS SmallCap Index
Source: VCBS
Foreign tended to withdrew fund after VN Index reached its peak of 690.
After a net-buying period in the first After 11 months of 2016, the Foreign net-sold of more than VND 5,000 billion on
7 months, (excluding transaction at Vietnam market, terminating a chain of net-buying in four years. Upbeat rhythm in 7
VIC), global unexpected events months of the year received significant support from steady net-buying of foreign
caused net-selling pressure from investors (excluding transaction at VIC). However, the following months witnessed a
foreign investors to heat up in the strong withdrawal trend in the context of (1) the price level has increased dramatically
latter part of the year. since the beginning of the year and was no longer attractive, (2) global unexpected events
such as BREXIT, US presidential election or FED‟s interest rate hike caused negative
effect on inflows in frontier and emerging markets.

2017 OUTLOOK REPORT
VND Mil Monthly net bought/sold value by the Foreign

3,000
1950 1675 1547
2,000 1462
1027
743
1166
776 990 1200
1,000
175 404
78 107
0
-1,000 -308 -141 -180

-454 -435
-943 -919 -1033
-2,000 -1135 -1208 -1241 -1308 -1548 -1450
-3,000
-2121
-2822
-4,000
Source: VCBS
Foreign investors‟ trading continued to focus on large-cap stocks:
- Banking and Oil & Gas stocks accounted for large numbers at the list of top tickers by
net-buying. Therein, MBB ranked first after loosening its room. 2 tickers CII and SSI
whose higher room compared to last year were also located on the list. In addition, with
the strong recovery of Oil & Gas sector, GAS, PVT, PVS were three of ten strongest net-
sold stocks by foreign investors.
Top 10 stocks by net buy Top 10 stocks by net sell value of Foreign
Investors
1800 value of Freign Investors
1545 VIC VNM HPG HSG CTD HBC PVD DPM VSH MSN
1600 0
1400
-1000 -427 -405 -370 -365 -337
1200
956 905 -769 -605 -513
1000 -2000 -1639
800 643 -3000
600 392 331 -4000
400 275 261 257 227
200
-5000
0 -6000
-7000 -6172
Source: VCBS
- Meanwhile, foreign net-selling mainly focused on VIC with the pressure from the
convertible bonds held by foreign organizations. However, many other large-cap stocks
such as HSG, HPG, or MSN also joined the list of top stocks by net-selling value showed
portfolio restructuring trend of foreign investors. Notably, VNM, after loosening its room
to 100%, suddenly became the focus of the net-selling trend. We believe that the attractive
profit in recent years of VNM caused foreign investors‟ priority to profit realization in this
blue chip.
The fund withdrawal of two ETFs was pushed at the end of the year
Moving the same direction with When it comes to 2 main foreign ETFs in Vietnam: FTSE Vietnam UCITS ETF (FTSE)
FIs, the net withdrawal fund from and Market Vectors Vietnam ETF (MVIS), we record a downward trend in the number of
two ETFs boosted at the end of the fund certificates outstanding. The pressure was on especially at the end of the year, and this
year. was also the overall trend in 2015. In the last 11 months, there was 4.65 million was
withdrawn, equivalent to a net-sold of 1,200 billion VND worth in Vietnam. Meanwhile,
there was also 1.72 million fund certificates was withdrawn in FTSE fund, which equal to
877 million VND net-sold value in Vietnam.

2017 OUTLOOK REPORT
Total Asset (mn.USD) No. Outstanding Shares & NAV

500
No. Outstanding Shares (mn)

35 30
450
25
NAV (USD)
30
400
20
350 25
15
300 20
10
250 15 5
200 10 0
06/15
08/15
10/15
12/15
02/16
04/16
06/16
08/16
10/16
150
No. Outstanding Shares of VNM
No. Outstanding Shares of FTSE
VNM FTSE NAV of VNM
NAV of FTSE
Source: Bloomberg, VCBS compiled

The act of adding VNM into both ETFs caused a tremendous change in these two funds‟
portfolio. In detail, that VNM was added to both ETFs at the highest rate resulted in the
remaining tickers in the portfolio was sold out strongly in review procedure in September.
Outlook 2017: Opportunities still exist. More risks to take at the 2H.2017.
The year of 2016 experienced shocking events which derive from worldwide market,
beyond investors‟ expectation. Notably, two outstanding events of BREXIT and Donald
Trump win US Presidential election. However, following the short-term effect, we concern
about long-term impact which may cause unpredictable systematic risks.
However, we believe that many central banks (except from FED) will have to maintain
their loosening policy because of uncertainty events. Consequently, it is likely that Vietnam
shall benefit from Asian countries such as China, Japan, Taiwan and Korea, etc. Therefore,
in the context of good news and bad news it is important that investors keep up with market
in order to scan opportunities for investors especially sectors:
 Growing stocks with fundamental factors, especially blue chips as investors
taking risks in field such as Building materials, Construction, Retail sales, etc.
 Firms in individual cases, which may attract inflows such as newly listed ones,
stocks moving to other stock exchanges, M&A case, and State divestment plan.
 Firms which benefit from commodities price change, which help to improve
financial performance efficiently.
 Defensive tickers when indexes log into downward trend, notably the second-
half of 2016.
 Beer and Air services sectors as we consider the fact that financial fund may
devote some of their resources as newly listed large-cap tickers change the
relative proportion among sectors.
2017: Opportunities lie on some (1) We believe that the situation this year is a little bit different from last year as stocks
spotlights. provided for investors was anticipated to be better-off at either quantity or quality. This
argument is supported by supportive approach of Government in equitization and listing
state-owned firms. Notably, these are the cases, which investors shall be breath-taking for,
(i) officially listed on stock exchange after IPO such as VEAM, Vinatex, Vietnam Airline;
(ii) Firms, which are on IPO procedure such as Vietjet Air, PV Power, Mobifone, etc (iii)

2017 OUTLOOK REPORT
the process of some large-caps firm moving to new stock exchanges after listed on UPCoM
for a while. For example, Hanoi Beer and alcohol and beverage joint stock Corporation
(BHN), Airport Corporation of Vietnam (ACV). The real procedure amid commitment of
divesting scheme in 10 state-owned firms approved by the Government. Therein, following
official offering VNM share held by SCIC, we expect that legislative body will open to
more renovation in offering procedure with a view to (i) underestimating the state-owed
assets‟ value and (ii) creating a win-win deal after divesting scheme, which means that the
growth of firm will be secured.
(2) From the investors‟ viewpoint, we believe that the supportive effect from the loosening
monetary policy from huge state bank (except for FED) such as ECB, BOJ, PBOC, etc. as a
result we expect that in the upcoming year, Vietnam still benefits from foreign inflows,
especially the ones from Asian countries for instance China, Japan, Taiwan, Korean. The
argument which support this idea are: (i) the cost of capital in these countries are relatively
low compared to that in Vietnam; (ii) the comparative advantage of Vietnam is stable
politics; Inflation and Exchange rate are under control; (iii) last but not least Vietnamese
market was not too vulnerable to uncertain events in the market this year.
(3) The expectation of newly released derivatives market shall bring new product to the
market. The plan was that derivatives market may work from Q1.2017. We believe that it is
too early to judge for the success of new products. However, we believe that the
orientations of legislative bodies are keeping up with the plan in both technical and human
resources factor. Consequently, there is probability that this scheme may become spotlight
in 2017.
(4) Many large-caps tickers in Beverage, Airline service, Real estate shall create a huge
change in the level of impact a sector made in the overall indexes. Consequently, to closely
track to indexes‟ movement, the investment funds may have to restructure their portfolio
with. This means bearish pressure to the groups, which have huge impact on the indexes at
the moment for instance, Consumer goods, Banking, Oil & Gas and simultaneously
opportunities for the ones, who newly listed.
(5) From 1st November, Circular No.115/2016/TT-BTC, which regulated IPO process,
managing and administrating revenue from 100% sate-owned firm divestment scheme, took
effect. Notably, after 20 days due date for the investor to pay for auction shares, investors
may trade these shares on UPCoM. This rule is expected to well-promoted listing and
equitation process of state-owned firms.
The biggest risks in 2017 shall In 2017, market may experience systematic risks derived from unpredictable factors. As a
derive from worldwide factor. result, investors may find it out of the control in some ways. Therein, we draw attention to
the following factor:
(1) The policy of newly elected president of the United State mentioned in Global
economy.
(2) BREXIT is considered shocking event to financial market in 2016. However, at the
present, we may not realize all the following effect of this event. To this effect, we will take
into consideration the monetary policy of European State bank as well as Bank of England.
We also bear in mind the negotiation effort from both sides EU and Britain so as to avoid
“hard BREXIT”. Nevertheless, BREXIT will create probability that other countries
may follow Britain’s foot step to leave Eurozone.
(3) Risks that the devaluation of CNY may not come to an end soon and put a lot of

2017 OUTLOOK REPORT
pressure on domestic exchange rate.
Inflow is ready for Inflow is ready for disbursement opportunities. However, competition is on when it comes
disbursement opportunities. to attract resources. Loosen monetary policy shall promote the abundant liquidity in the
However, it will be badly impact market. These results in investors seek for profitable opportunities at risky assets such as
by worldwide events. equity market. Although equity market shall have to compete with other investment
channels such as Real estate, Gold, FOREX, etc. when it comes to attracting inflows. We
believe that the scale of the market will still extend as tickers available for sale on stock
exchanges are clearly better-off either Quantity or quality. However, as numerous large-
caps tickers were listed on the market in a relative short period of time, the market shall be
overwhelmed by newly-listed stock. Consequently indexes may be dragged to correction
phase regarding the fact that it will take time for the whole market to absorb such a huge
amount of shares. This also creates unexpected change to main indexes. This argument is
supported by the fact that correlation between VN Index and VN30 Index dived when ROS
was newly listed on 25 Aug, 2016. To sum up, we believe that newbie stocks may bring
profitable opportunities for risk-lover investors because the outstanding feature of these
newbie is significant volatility.
700
670
640
610
580
550
520
490
VN 30 Index VN Index
The real effect of new inflow is still unknown when investors take exchange rate risk and
interest rate into consideration. As mentioned macro outlook 2017, we believe that interest
rate tended to form its trough in 2016 and therefore unlikely to tick down more. However,
we do not speak highly chance that interest rate will surge. It is likely that interest rate will
tick up marginally. In reality, higher interest rate shall create bad impact on investor‟s
sentiment in the short-term. Nevertheless, the real impact of higher interest rate on the cost
of capital of firms will only show up after 3-6 months due to a time lag. Accordingly, at the
second half of 2017, we are more concern about interest rate risk.
Inflow nay return to the market On the other hand, many tickers logged in impress win in 2016, therefore, P/E ratio of these
after the correction phase, tickers was no longer attractive to investors regardless of gaining momentum in revenue
which help to deem P/E to and profit still remain. We believe that these tickers will keep boosting in 2017.
attractive level.
At the same time, foreign inflow sustain a certain loss as the unpredicted event in
worldwide market showed up out of the blue. Therein, We recorded the trend of net-
withdrawal fund By two ETFs after both NAV number of share outstanding in the market
reached their peaks in 2015. However, as far as the phenomenal growth of the indexes in
2016, we draw attention to the contribution of foreign inflow derived from other countries
especially Asia ones. Nevertheless, the inflow may rush back to the market once again after
correction phase occurs and push P/E ratio to a lower level, of which more attractive

2017 OUTLOOK REPORT
compared to Frontier Market‟s P/E.
Spotlight shall belong to Retail After taking into consideration of the following factors (i) systematic risks from worldwide
sales, Building material, events; (ii) the supportive effect from active inflows and (iii) steadiness of macroeconomics
Construction and indexes, we believe that indexes will press higher while volume will also tick up. However,
Infrastructure, Fertilizer, during the whole process, market may experience a significant downward phase around the
Chemical, Natural Rubber and timing of important international issues as well as domestic ones. Therefore, investors who
Bank. are prudent, sensible to any market movement will stand a high chance of realizing a
certain amount of profit. On the other hand, in terms of economy growth, we have yet
recognized a new growth engine. Accordingly, apart from imports activities, public
investment in infrastructure and Mining was the main driver of GDP growing. Noted that
Oil extracting was the main contributor of Mining sector.
VCBS believes that some firms in Retail sales, Building materials, Construction,
Infrastructure, etc. sector may record outstanding business performance and consequently
become the spotlight of the whole market. Besides, we also recommend keeping an eye on
the commodity price of the global market as it will create a huge impact on sectors for
instance: Fertilizer, Chemical, Natural Rubber, Oil &Gas, and Mining group. Last but not
least, investors are likely to be drawn into tickers, which involved in M&A commercial
affair, State divestment scheme; the newly listed stocks; and firms approved by
stakeholders to switch to new stock exchange. We therefore evaluate the prospect of the
key sectors as followed:
(1) Retail sales: The population of 94 million people with young population is considered
the excellent opportunity for the retailers of multi-industries, who have a professional chain
management and uniformed expansion. Therefore, retail sales firms shall keep growing in
2017.
(2) Construction and Infrastructure: The leading enterprises dominate the market.
Vietnam‟s fast-paced urbanization has secured the steady growth in this group.
Additionally, along with the orientation of continuously promoting public investment in
infrastructure of the Government and National Assembly, P/E ratio of this group has
increased significantly this year. Consequently, the relative attractiveness of this group
dived. Therefore, we believe that it is unlikely that this group once again logs into impress
win next year.
(3) Building material: Diversified in types, categorized, various opportunities and potential
in the upcoming year. Given that these are manufacturing firms, we bear in mind some key
factors, which may determine the effectiveness of the firms‟ core activities for instance
input price, depreciation cost or the ability of pushing higher capacity to promote growth.
For more details, take a look at the outlook of Building material sectors.
(4) The growth capability remains questionable after a cycle of a phenomenal growth in
2015. Next year, we believe that fundamental factors will still the key point to differentiate
the performance of banks. (1) Overall the pressure is on for Banking sectors as Basel II
standard will soon officially enforced; (2) bad debt issues still prevent many banks from
growing again (3) Circular No.06 (the amendment circular of Circular No.36)‟s will take
effect soon and boost deposit demand in some banks to answer liquidity requirement.
However, we should bear in mind that either positive information of any kinds may press

2017 OUTLOOK REPORT
indexes or banking tickers higher as the large-caps tickers of this group secured a strong
enough effect on the indexes. In this case, we assume that the supportive factors may be
legal documents. Therefore, we suppose investors should monitor the Banking sector in
2017.
(5) Oil & Gas: Assuming that the barrier of the production of the coal oil, crude oil, shale
oil in America under President Donald Trump‟s policy would be somewhat removed, we
expect the oil price will fluctuate in a tight band around USD55/barrel (breakeven point of
shale oil), which promote a strong resistance for crude oil price. From the domestic Oil &
Gas firms, we assess that the crude oil price steadily settling above USD50/barrel will be
the chance for these firms to reactivate exploring and extracting activities. We believe that
the positive effect, if any, is likely going to be reflected from Q1.2017 since (i) it will take
time to examine the effectiveness of OPEC‟s output cut deals, which is also promoted by
Russia; (ii) the time lag effect shall create difference impact on listed Oil & Gas firms as
the effect is determined by parent company PVN‟s production plan. Therefore, VCBS
believes that Oil & Gas stocks should be monitored closely. The priority privilege shall
PVN‟s subsidiaries level 1 and then level 2. The suitable timing would be the early 2017.
(6) Fertilizer, Chemical, Natural Rubber, Coal and Mineral. These groups bear a direct
impact from the commodities price changes. Therein, we concern about group which has a
certain correlation with the oil price. Nevertheless, the real effect on the firms shall be
determined by characteristic of these firms. Therefore, in a high-segmented industries like
these ones, investors shall seek for opportunities at individuals firms
(7) Real estate: Highly segmented industries, which means that investors need to classify
clearly among tickers available. Key point of these groups is the capability of boosting
sales and consequently promoting growth in revenue and profit. We believe that these
tickers are more suitable for risk-lover investors with short-term trading strategies.

2017 OUTLOOK REPORT
PROSPECTS FOR INDUSTRIES/CORPORATIONS

In 2017, Banking industry will witness a slower credit growth rate which is forecast at 16% yoy. The interest rate is expected to rise as a
result of inflation rate and demand for capital raising in prepare for the pilot phase of BASEL 2 application. There will be a sharp
differentiation among the industry. We expect that those banks which have well solved NPLs in the part will have higher growth
potential.
On Real estate market, although the industry transaction volume may slightly decrease, the mid-class and common-class segment will
have growth potential. Meanwhile, we expect a strict competition among high-class segment. In other aspects, we believe that the credit
tightening policy, which will be in effective in 2017, is necessary for the sustainable growth of the real estate market, preventing the
bubble from taking place
The steel industry is expected to grow, attributed to the increase in urbanization rate, and the rise in public investment. The steel price
should increase as the input costs soar. We believe that sale volume will rocket in the 1H2017 resulted from the steel agents‟ stockpiling
activities, decelerating gradually in 2H2017. The BOF steel producers will have more advantages against EAF one. The galvanized
sheet export market will be slow down, while the domestic market grows.
The facing brick industry will be differentiated sharply. The classification bases on products, geographic location, and fuels to be used.
In details, we believe the investment opportunities will lie among those Northern granite producers who use CNG to operate their
factory.
Strict competition on domestic market will force the Vietnamese plastic producers to promote export market. The plastic pellets prices
are expected to increase as the crude oil prices rise in 2017. Moreover, the tariff on PP pellets will increase from 1% to 3% in 2017 may
put more pressure on domestic producers.
The rock miners group is more stable than other mining groups. This group is also invulnerable from the commodities market.
The seaport sectors will benefit from the increase in export-import turnover resulted from the FDI capital grows. However, the degree of
benefit among this sectors will be differentiated
The competition in domestic market is stricter than ever. Domestic producers are promoting export market, especially in the US and
India. we believe that the outlook in 2017 for tire production firms will mainly depend on the volume growth of the Vietnam tire market,
which is forecasted to grow at 12% yoy, and these firms‟ ability to export to markets that are not in direct competition with Chinese tires
such as the US and India markets.
Vietnam‟s power industry structure is to be more heavily weighted toward coal-fired thermal plants. We believe La Nina effect in 2017
may support the production volume of Hydropower group, while the increase in coal and gas prices will narrow the Thermal power
group‟s profit margin.
The construction sector is expected to grow in both civil and infrastructure segments. In detail, the high urbanization rate and the
population mix changing to mid-class will encourage the civil construction. On the other hand, we expect a stable growth in
infrastructure construction thanks to the increase in public investment and the rise of PPP and BOT models.
Demand for electronic and technology products is forecast to grow by 20% in 2017. We believe the expansion of young population and
the rural modernization will be the main growth motivation.

2017 OUTLOOK REPORT
Based on outlook of each sector and enterprise, we propose the following recommendations:
No. Industry Recommendation
1 Banking VCB : Outperform

ACB: BUY
2 Real Estate HDG: BUY
HUT, NLG: Outperform
KBC, SJS, VIC: Hold
3 Construction HBC: Outperform
4 Steel HPG: BUY
HSG: Hold
5 Rock Mining NNC, C32: Hold
DHA, KSB: Outperform
6 Facing Brick VHL, CVT: BUY
VIT: Outperform
TLT: Watch
7 Plastic BMP, NTP, DNP: Outperform
8 Tire DRC: Outperform
9 Power Industry SHP, NT2, PPC: Hold
10 Retail & Distribution of Consumer Electronics and MWG: BUY
Technology Products
11 Seaport VSC: BUY
GMD: Outperform

2017 OUTLOOK REPORT
Banking
2016 highlights Credit showed slower growth rate. Deposit was boosted.
As of 21 Nov 2016, credit grew by As of 21 Nov 2016, credit grew by 13.94% ytd, which was lower than the rate of 14.5% same
13.94% ytd, which was lower than the period last year and year-end plan target of 18%. This came from (1) Economic growth
rate of 14.5% same period last year slowed down; (2) The average Capital adequacy ratio (CAR) has decreased to the minimum
and year-end plan target of 18%. requirement ratio (9%) while the pilot phase of BASEL II application is coming; (3) The fact
that some weak banks were still on restructuring process and restricted credit expansion
Deposit growth was 15.32% ytd,
negatively affected the overall credit growth rate.
which was 1.5 times higher than that
of same period last year (11.14% ytd). Deposit surged right from the beginning of the year and kept a higher growth rate than that of
credit. As of 21st November 2016, deposit growth was 15.32% ytd, which was 1.5 times
higher than that of same period last year (11.14% ytd). The robust deposit expansion clearly
reflected the impact of Circular 06/2016/TT-NHNN, proven by (1) The strongest deposit
growth was from banks with high lending to deposit ratio; (2) Deposit expanded most in
long-term tenors; (3) Solid deposit demand created deposit rate competition among banks in
2016.
Credit and deposit growth Deposit and Lending rates

25% 15%
20%
10%
15%
10%
5%
5%
0% 0%
L.R agriculture, rural & exports

Credit growth (yoy) L.R manufacturing
D.R (<1M)
D.R 3M
Sources: SBV, VCBS summarizes
Banks’ bond portfolio expanded by Since the end of Q1, there was an ample interbank liquidity, which dampened interbank
15%ytd in average in 9M.2016. rate to low record level. In such favorable condition, banks boosted government bond
Besides, bond trading was boosted investment.
Since the end of Q1, there was an ample interbank liquidity, which dampened interbank rate
to low record level. Overnight interest rate at some points decreased to 0.2 – 0.3%. In such
favorable condition, banks boosted government bond investment. Banks‟ bond portfolio
expanded by 15%ytd in average in 9M.2016. Besides, bond trading was boosted and became
an important income for banks in this year.
As of end of October, deposit rate However, interest rate did not follow. Deposit rate was under upward pressure. Lending
increased by 0.05-0.25% comparing rate, though showed decreasing signs as government plan, took little change over the

2017 OUTLOOK REPORT
to the beginning of the year. year.

Lending rate, though showed Given banks boosted deposit, deposit rate continuously took upward adjustment in the whole
decreasing signs as government plan, year. As of end of October, deposit rate increased by 0.05-0.25% comparing to the beginning
took little change over the year of the year.
In contrast, lending rate was quite stable, except for two times of decrease adjustment in
April and October. However, the adjustment showed in short tenors only with minor amount,
which made little impact on the overall lending rate.
NPL ratio kept at high. At present, NPL ratio kept at high. VAMC took as a tool to concentrate rather than efficiently solve
banks still rely on their own by taking NPL. At present, banks still rely on their own by taking provision to resolve bad debts.
provision to resolve bad debts.
The overall NPL ratio at the end of Q2 was 2.58%. The ratio would be 5.21% if we add the
NPLs kept in VAMC. The ratio would be even higher if we account for the NPLs which are
not right classified and adjust the loan rollover to hide bad debts.
Contribution of methods in
Credit balance 5,104,873 solving NPL VAMC
collects
NPL official 131,706 14%
Total NPL sold to VAMC 262,054 Banks
solve
VAMC collected 37,983 NPL Banks
Provision for special bonds 89,628 themselv take
es provision
NPL left in VAMC 134,443 52% for
Official NPL ratio 2.58% special
bonds
Adjusted NPL (with accounts for NPL
5.21% 34%
at VAMC)
Source: VAMC, VCBS summarizes
VAMC took as a tool to concentrate Over the past 4 years, several methods have been used to reduce bad debts including bad debt
rather than efficiently solve NPL. recovery through VAMC, banks took provision for special bonds after selling bad debts to
VAMC, banks solved bad debt by themselves (by bad debt clearance, bad debt recovery…).
We estimated the effectiveness of each method in the above chart (Noted that: NPL, which
was solved to VAMC but had not been recovered or taken provision, was classified as
unsolved). As from the chart, banks still relied on their own to resolve bad debts.
VND bn 2013 2014 2015 10T.2016 Cumulated

NPL value sold to
VAMC 36,257 92,418 107,000 26,379 262,054
Special bonds value 30,947 77,705 99,180 20,016 227,848
Value collected 145 4,875 17,763 15,200 37,983
Collected over total
NPL sold 0.40% 3.90% 9.67% 14.49% 14.49%
Source: VAMC, VCBS summarizes
From the beginning of this year to end of Q3, VAMC bought an amount of VND 26,739 bn
NPL, which was equivalent to only one fourth of the amount they bought in 2015. Given the
NPL increase from 2.55% at the end of 2015 to 2.58% in Q2.2016, we think that the decrease
NPL sold to VAMC was not due to an improvement of banks‟ asset quality. Instead, the
reason was the fact that banks were no longer under pressure to sold NPL to VAMC

2017 OUTLOOK REPORT
when their NPL ratio had been lower than 3%. As explained in previous report, selling
NPL to VAMC was considered as unfavorable selection for banks as (1) VAMC‟s modest
ability to resolve bad debt; (2) high provision pressure to banks after selling NPL; (3) banks
still have to keep their responsibility for bad debt sold.
Several new policies were issued to Since the beginning of this year, several new policies were issued to boost NPL
boost NPL solving. However, the solvement. However, the results were limited such as (1) Circular 08/2016/TT-NHNN,
results were limited which amended and supplemented a number of articles of Circular 19/2013/TT-NHNN,
expanded VAMC‟ rights in buying, selling and solving NPL; (2) Draft of a circular regulated
capital contribution and share purchase by credit institions with some articles on swap bad
debts with shares of the borrowers.
The pilot phase of BASEL II Banks boosted their preparation of the pilot phase of BASEL II application. However,
application was challenged by capital the capital raising countered a lot of difficulty. The majority relied on tier II capital by
raising issue. The majority of banks issued subordinated bonds to comply in short term.
relied on tier II capital by issued
The deadline for the pilot phase of BASEL II application is coming (Sep 9 2017, as
subordinated bonds to comply in short
stimulated in the lastest draft). Therefore, the demand for banks to raise capital is increasingly
term.
high.
Among 10 banks that participated in the pilot phase, private banks are under lower pressure
since they have already had quite high Capital aquadency ratio (CAR) such as ACB, VIB,
TCB... In contrast, state-owned banks (i.e. VCB, BID, CTG) will be under higher pressure.
The success of their capital raising will have the decisive impact on the success of the pilot
phase of the BASEL II application. Of those 3 banks, VCB has largest room to raise capital.
BID and CTG counter more difficulty due to (1) their extremely low CAR, which are roughly
equal to the minimum requirement ratio (9%); (2) they are obliged to pay cash dividend by
the Ministry of Finance rather than keeping retained earnings to raise capital as they planned
since the beginning of this year; (3) CTG has reached foreign ownership limit to call for new
foreign investment while BID has reached tier II capital limit to issue subordinated bonds.
At present, most banks among 10 in plot phase rely on raising tier II capital by issuing
subordinated bonds. This only helps such banks to comply with the orientation of SBC (i.e.
pilot phase of the BASEL II) in 1-2 years. Besides, those banks will have to bear a higher
funding cost since interest rate of subordinated bonds is usually 1-2% higher than deposit
rate.
There was sharp differentiation There was sharp differentiation among business results of listed banks in 2016.
among business results of listed banks
As of Nov 31 2016, while VN Index rallied by 16.01%, bank index fell by roughly the same
in 2016.
rate. This was explained by the unflavored business results of listed banks in 3Q.2016. Most
were negatively affected by provision expense, decrease of NIM due to reversal of accrued
interest and unflavored interest rate trend (rising deposit rate and declining lending rate).
Main driver for net income in 2016 was from non-interest rate income, especially from bond
trading given sharp fall of interbank rate.
While the overall business results look gray, there was sharp differentiation among listed
banks. Notably, few banks such as ACB, VCB, those who had determined to resolve NPL in
the past, showed improvement in business results.
Profit
Net Non- Profit NIM
before Provision NPL
Growth Credit Deposit interest interest before
provision expense ratio
income income tax
expense 3Q.2016 3Q.2015

2017 OUTLOOK REPORT
ACB 19.23% 16.33% 17.0% -63.9% -5.4% -31.3% 14.1% 1.1% 3.30% 3.26%
BID 12.83% 18.57% 21.8% 49.9% 32.2% 71.5% 3.4% 2.0% 2.65% 2.76%
CTG 16.23% 25.62% 18.4% 24.4% 20.1% 30.3% 13.3% 0.9% 2.99% 3.08%
EIB -4.79% 4.66% -2.5% 29.7% -4.3% 85.2% -70.2% 3.4% 2.77% 2.68%
MBB 19.97% 2.79% 4.0% -1.6% -7.9% -33.6% 9.2% 1.3% 3.56% 3.91%
SHB 12.11% 11.78% 6.0% 133.0% 19.4% 44.2% 6.2% 2.3% 1.80% 2.03%
STB 4.94% 9.35% -35.0% 62.7% -61.0% -32.6% -74.3% 2.4% 2.16% 4.21%
VCB 15.69% 14.43% 23.9% 9.1% 15.7% -4.3% 36.1% 1.7% 2.76% 2.63%
Average 12.0% 12.9% 6.7% 30.4% 1.1% 16.2% -7.8% 1.9% 2.75% 3.07%
Source: Banks’ financial statements, VCBS summarizes
2017 outlook The average interest rate is expected to rise despite the orientation of SBV to keep it at
low.
The average interest rate is expected
to rise The orientation of SBV to keep interest rate to decrease further to stimulate economic growth
could be challenged by:
Deposit rate is under upward pressure due to (1) expected higher inflation when commodity
price has hit bottom and bounded back since 2016; (2) Strong demand to mobilize deposit to
comply with Circular 06. As of Q3.2016, many banks still have LDR exceeding the
requirement ratio (80%) such as VIB (89%), TPB (83%), SHB (83%), CTG (96%), BID
(90%), Viet A (87%)…, the ratio of long and medium term loan exceeding the requirement
ratio (50%) such as EIB (60%), MSB (70%), STB (62%), TCB (70%), VPB (74%)…
Given upward pressure of deposit rate, there will be little chance for lending rate to go down.
Noted that the gap between deposit rate and lending rate of Vietnam banks has decreased
sharply over the past 3 years. At present, this gap is lower than that of most countries in
Southeast Asia. The smaller this gap is, the thinner profit margin banks have. As a matter of
fact, Vietnam banks now show little motivation to decrease lending rate further.
Credit growth and funding cost could The pilot phase of BASEL II application will be one of the most important objects of
be negatively affected by the pilot Vietnam banking industry in 2017. To lift up CAR to the requirement threshold, some
phase of BASEL II application. banks could restrict credit growth and boost capital rising, which may put upward
pressure on their funding cost.
According to our calculation, banks need to increase their capital by 10-15% to have their
CAR to rise by 1%. As such, there will be high pressure to raise capital among 10 pilot
banks.
While there are many difficulties to raise tier 1 capital and little regulation support from
authorities, most banks are likely to either restrict their credit growth to keep their CAR not
to go down or choose to raise tier 2 capital by issuing subordinated bonds. In general, such
pilot application could put upward pressure on funding cost of banks and negative affect
credit growth of the whole system.
Therefore, we keep our conservative view in forecasting credit growth in 2017 with the
rate of 16%, which is lower than this year plan of 18%.
It takes time and more efficient It takes time and more efficient methods to solve NPL issue in Vietnam banking system.
methods to solve NPL issue in
NPL issue has been lasting for years but not fully solved. Up to date, the main method to

2017 OUTLOOK REPORT
Vietnam banking system. solve NPL is banks‟ taking provision. If such method continues, meaning VND 80-90 bn will
be taken as provision each year, it will take 6-7 years to fully solve existing NPL. Over past
years of restructuring, NPL has been accumulated to a group of banks (according to our data,
NPL balance of 7 banks accounts for 50% of that of the whole system). This is a suitable time
for SBV to take more action rather than keeping using public budget to support week banks,
which has been showed inefficient over past years.
While new methods to solve NPL problem have not been issued, banks could counter
difficulty when solving NPL by an article in Civil Law 2015, which will take effect in
beginning of 2017. Specifically, as stipulated in the existing related document (Decree 163),
credit institutions, based on contracts with their customers, “have right to handle collateral
assets without delegation of authority made in documents” when customers fail to fulfill their
obligation. As stipulated in the article in Civil Law 2015, credit institutions “have rights to
sue customers”.
As law is higher than decree in regulation ranking, banks will have to refer to Civil Law 2015
rather than Decree 163 since 2017. Therefore, banks‟ rights to deal with collateral assets will
narrow down from “rights as stipulated in contracts” to “rights to sue”.
From above analysis, we believe that Business results of banks are expected to continue sharp differentiation
banking industry could be challenged
As mentioned above, the main method to solve NPL now is taking provision. 2017 is the
in 2017. However, the investment
third year banks taking provision for special bonds, which banks received after selling NPL
opportunities still have in some banks
to VAMC in the past. As such, banks with high special bonds balance will continue being
who have well solve NPL issue in the
negatively affected by provision expense. In contrast, those who have more prudent risk
past now have high income growth
management and determine to solve NPL in the past, now see their provision expense to go
potential
down. As the matter of fact, business results of banks are expected to continue sharp
differentiation.
Recommendation: From above analysis, we believe that banking industry could be

challenged in 2017. However, the investment opportunities still have in some banks who
have well solve NPL issue in the past now have high income growth potential. Based on
such arguments, we recommend VCB and ACB as followed:
Recommend lists
VCB – Outperform 2016: Breakthrough after years of solving NPL issue

VCB reported high business results in 9M.2016 with VND 6.326 bn profit before tax (36%
yoy, completing 84% year-end target). High income growth was due to both improvement
in core business result and decrease in provision expense. We expect VCB could report
VND 8.829 bn in 2016 (+29.31% yoy, exceeding 17.7% plan) (this is 5% deduction from
our latest update). As such, BV at the end of 2016 would be VND 13,528 per share. With
close price of VND 34,150 per share, VCB is traded at PB forward 2016 of 2.52 times.
Due to its high market capitalization and best fundamental base in banking industry, VCB is
usually traded at a premium than the average. Since 2014, VCB is traded at PB between 2 to
3 times and the “safe boundaries” are between 2 and 2.5 times. Therefore, we believe such
PB boundaries are the proper market value for VCB, which is equal to its stock price of VND
30,000 per share to VND 37,000 per share (based on PB forward 2017).
The stock price has declined by 20% from the peak of 2016 when the selling price (which

2017 OUTLOOK REPORT
was believed at VND 29,000 per share) to GIC was released and then the rumor on the failure
of this deal. At present, VCB has extended the time for SBV approval to the end of 2016.
Based on the low selling price and the delay of SBV, we believe this deal may not be done in
the short term. Though, this would put a negative effect on VCB‟s stock price, it could create
attractive opportunities to buy VCB. With target price for VCB between VND 30,000 and
37,000 per share, we recommend OUTPERFORM for VCB at present and could rise to
BUY at a lower price.
ACB - Buy 9T.2016 ACB reported VND 1,244 bn profit before tax (+14% yoy, completing 83%
year-end target). Core business kept positive results. Medium income growth was due to
high provision for NPL issue.
We forecast ACB could report VND 1,570 bn in 2016 (+19.49% and exceeding 4.4%
plan). BV at the end of 2016 will be VND 14,282 bn. With close price of VND 17.500 per
share, ACB is traded at PB forward 2016 of 1.23 times.
2017 outlook: Keeping on growing despite provision for NPL issue.

We forecast ACB could report VND 1,945 bn profit before tax in 2017, which is 21.56%
higher than that in 2016 based on:
(1) Credit growth is expected at 20% since ACB could boost its credit after years of
restricting credit expansion in restructuring process.
(2) Deposit growth is expected at 20% since ACB will maintain a stable LDR complied with
the Circular 06.
(3) Loan yield to customers will slightly increase by 10 bps when the bank continues
expanding loans of long term tenors, which are mainly mortgage loans). Government
bond yield is expected to flat since we forecast the interbank rate will move in tight band.
(4) Deposit cost is expected to increase by 10 bps from 4.6% to 4.7% as we forecast the
overall deposit rate will under upward pressure (see more in VCB). Funding cost from
valuable paper will increase by VND 149 bn, which comes from cost of VND 2,000 bn
bonds ACB issued in 2016 and VND 1,500 bond ACB plans to issue in 2017).
(5) Non-interest income is expected to increase by 14.66%, which will mostly be contributed
from services income (20%).
(6) Provision expense is expected at VND 2,190 bn. ACB plans to solve VND 1,800 bn NPL
from “group of 6 companies” in 2017. We assume that the bank will collect 50% value of
the loan and have to take 50% as provision (i.e. VND 900 ban). ACB will also have to
take provision for special bonds with an amount of VND 418 bn. The remaining value of
VND 879 bn is taking provision for new loan.
We forecast ACB could report VND 1,990 bn, which is 21.56% higher than that in 2016.
BV at the end of 2017 would be VND 15,878 per share. With close price of VND 17,500 per
share, ACB is traded at PB forward 2017 of 1.1 times, which is equivalent to the average.
Given ACB high growth potential after NPL issue, we believe ACB should be traded at 20%
premium than the average, equivalent to the price of VND 21,340 bn. The target price is
21.9% higher than ACB’s current market price. We recommend BUY ACB.
Real Estate
Industry Performance 9M.2016: The real estate industry was on the rise in Q1.2016 but showed signs of slowdown in
Q2.2016 before slightly recovering in Q3.2016. We observed the following developments in
Market liquidity slightly declined
2017 OUTLOOK REPORT
compared with the same period last the industry: (1) market liquidity was still high but lower than in the same period last year, (2)
year. The apartment market’s middle the premium segment of the apartment market continued to see an increase in supply while
segment accounted for most of market the middle segment rose to claim the largest market share in terms of transaction volume, (3)
liquidity. the villas and terraced houses market saw a strong recovery and (4) credit flowing into the
real estate industry was tightened due to SBV‟s new credit management policy.
Tightened credit management policy
led to cautious sentiments among Apartment transaction volume declined. According to CBRE, in 9M.2016, there were
developers and homebuyers. 14,200 apartment transactions in Hanoi (-13.5% yoy) and 22,788 transactions in HCMC (-
11.4% yoy). Transaction volume rose in Q1.2016, declined in Q2 and recovered in Q3.
The villa and terraced houses segment
Overall, apartment transaction volume in 9M.2016 was lower than in the same period last
emerged.
year. The middle segment rose to claim the largest market share, accounting for 40% of
transaction volume in Hanoi and HCMC. The premium segment saw more intense
competitions as transaction volume declined. The low-price segment‟s transaction volume
dropped sharply to less than 20% of total apartment transaction volume the influence from
the expiration of VND30.000 bn low-cost credit package. Meanwhile, the emergence of the
luxury segment became more noticeable in 9M.2016.
Apartment transaction volume by segment in Hanoi and HCMC
Hanoi Ho Chi Minh

40,000 40,000
35,000 35,000
30,000 30,000
25,000 25,000
20,000 20,000
15,000 15,000
10,000 10,000
5,000 5,000
0 0
Low-price Middle Premium Luxury Low-price Middle Premium Luxury
Source: CBRE, VCBS

The villas and terraced houses market saw a strong growth in 9M.2016. The market saw
increases in both selling prices and market liquidity, especially in projects that belonged to
large developers and located in areas with good infrastructure. In HCMC, landed property
projects reported high percentage of property sold at about 80% on average in the first
launch. Notably, there are projects reported 100% properties sold (source: CBRE Vietnam).
The rapid recovery of this segment attracted new project developments, leading to an increase
in supply of villas and terraced houses in Hanoi and HCMC.
Selling prices in the primary market for apartment sales increased while selling prices
in the secondary market slightly decreased. According to JLL Vietnam, selling prices in
the primary market for apartment sales increased compared with the previous quarters in all
segments. By the end of Q3.2016, Hanoi saw the highest selling price growth rate at 3.6%
QoQ while HCMC came second at 2.2% QoQ. In contrast, selling prices in the secondary
market for apartment sales either stayed flat or fell slightly in both Hanoi and HCMC in all
segments except for the villa segment, which has seen price increases in the last 11
consecutive quarters.
Continuous rise in apartment supply, especially in the premium and luxury segments,
2017 OUTLOOK REPORT
created more intense competitions and led to an excess of supply over demand. However,
developers were still attracted to the premium and luxury segments as (1) these segments can
produce high profit margins and (2) their transaction rates, though declining, are still at an
attractive level. The middle segment reclaimed its leading position in terms of apartment
supply as apartment supply increased in line with a surge in the segment‟s transaction
volume. The low-price segment was struggling as both demand and supply were low.
According to Savills, in Hanoi, apartment supply reached 17,000 units (+16% yoy) while
villa supply reached 2,300 units (+10% yoy) in 9M.2016. In HCMC, apartment supply
reached 40,300 units (+54% yoy) while villa supply reached 3,800 units (+128% yoy) in
9M.2016.
Credit flow into real estate increased as the sector recovered in Q3.2016. By mid-
November 2016, Vietnam‟s debt was estimated to reach 5.2 quadrillion VND (+11.81% yoy).
Total debt in real estate accounted for 10% of that amount, according to Deputy Minister of
Construction Do Duc Duy in his October meeting in HCM City. Regulators are concerned
that the credit exposure in the industry is approaching its risk limits. Additionally, it is also a
concern that most of the credit flow into real estate go into either premium or only some large
size projects.
SBV announced new credit management policy for the real estate industry. On May 05,
2016, the State Bank of Vietnam introduced Circular No. 06, which aimed to reduce the
leverage ratios of credit institutions. In October 2016, SBV introduced Document No.
7586/NHNN-TD, requiring banks to tighten their controls over credit growth in the real estate
sector and the flow of credit into premium apartment, resort and large-size projects.
Business performance of companies in the industry in 9M.2016
Net Gross
Total Total Revenue Revenue NI Net profit Trailing
Debt/TA Income profit
No. Ticker Assets Equity 9M.2016 growth Growth ratio EPS P/E
(%) 9M.2016 margin
(bn. VND) (bn. VND) (bn. VND) yoy yoy (ttm,%) (VND)
(bn. VND) (ttm,%)
1 VIC 173,234 25.8% 41 905 34 655 76.1% 1,719 76.8% 31.0% 3.9% 723 58.1
2 VCG 21,476 22.5% 7241 5618 6.9% 343 30,0% 15.5% 4.7% 906 14.6
3 KBC 14,679 14.5% 8664 1567 33.2% 520 46.3% 59.5% 42.9% 1,689 8.0
4 IJC 8,780 20.6% 2,938 1,656 263.1% 93 9.5% 16.1% 7.1% 492 16.3
5 KDH 8,559 28.4% 4418 1662 126.1% 271 56.7% 39.4% 18.1% 1,540 13.1
6 HUT 8,459 51.0% 2,430 1974 212.5% 298 681.8% 21.2% 11.7% 2,381 4.5
7 SJS 6,185 18.4% 2097 505 8.8% 166 46.2% 48.9% 31.2% 2,811 8.4
8 HDG 5,869 41.5% 1554 803 -19.3% 50 -47.2% 21.3% 6.6% 1,196 19.3
9 NLG 5,560 12.4% 2,828 1,672 157.4% 163 116.0% 29.3% 12.9% 2,065 10.8
10 DXG 3,573 9.6% 1,873 1,321 45.3% 144 -41.6% 36.0% 13.0% 925 13.6
11 CEO 3,392 29.1% 1,484 915 164.9% 100 32.1% 40.8% 13.8% 1,697 6.8
12 BCI 3,326 13.4% 1993 123 5.2% -09 -104.8% 52.8% 19.3% 1,042 21.6
2017 Outlook: Transaction volume might decline and prospects of different segments might vary.

2017 OUTLOOK REPORT
The market will continue to grow  The premium and luxury segments will see fierce competitions among developers as
stably and sustainably. apartment supply in the primary market increases while demand declines due to (1) low
selling prices in the secondary market and (2) demand for buy-to-let properties reaching
High supply will lead to intense
its saturation point in the short term. Market competitions will favor large-size
competitions in the premium segment.
developers that have good reputations in the industry.
The middle and low-price segments  The middle segment will see the highest transaction volume among all the segments as it
will dominate the market. has the largest target market in Hanoi and HCMC.
 The low-price segment may recover as the segment offers reasonable selling prices that
meet the demand of the low-income population. Additionally, Vingroup‟s introduction of
its affordable housing brand VinCity along with the plan to build 200,000-300,000 low-
price apartments in the next 5 years is a positive signal for the segment.
 The villas and terraced houses segment will continue to grow as the segment‟s supply
increases to meet the popular demand of traditional Vietnamese to own independent
houses that include land ownerships.
Credit management policy is necessary to ensure sustainability in the real estate industry
and prevent the development of a real estate bubble. The impact of SBV’s new credit
management policy will be more noticeable in late 2016 and 2017. While the policy roadmap
had been delayed to reduce its negative impact on the real estate industry, SBV‟s new credit
management policy will still have an apparent impact on the industry in late 2016 as credit
institutions manage to meet the newly required leverage ratios by the end of the year.
Changes due to the new policy will cause certain challenges for both developers and home
buyers as it becomes more difficult to secure credit from banks. Overall, the new credit
management policy is necessary to ensure the industry‟s sustainability.
The market will continue to grow stably and sustainably. The bases for growth in
Vietnam real estate industry include sustainable economic growth, rapid urbanization due to
expanded investment on transportation and infrastructure system, a high demand for property
due to growth in per capita income, and an increase in foreign investment. Industry outlook
may be less optimistic for the premium and villa segments, but a recovery in the middle and
low-price segments will help ensure industry stability and prevent a real estate bubble in
2017.
Potential firms in 2017 Several real estate companies are expected to have positive earnings growth as their projects
are completed and delivered in 2017. Nevertheless, high stock dilutions that are not supported
by net profit growths will hinder the prospects of companies in the industry. The industry will
see intense competitions in 2017 as demand stays flat. Companies with good financial health,
extensive land bank holdings, and sought-after products will stay thriving despite 2017‟s tight
credit environment. We suggest investors to consider the following companies.
Potential firms in 2016 - 2017
No Recommend
Ticker 9M.2016 Performance 2016-2017 Outlook ation
.
HDG‟s growth will be driven by its real estate segment withe Centrosa Garden
Revenue reached 804
project.
billion VND (-19.3%
Revenue in 2016 is expected to reach 2,250 billion VND (+52% yoy), consolidated NI
yoy, 34.7% of 2016
to reach 238 billion VND (+71.2% yoy) and NI to reach 190 billion VND (+54%
1 HDG plan), net income BUY
yoy), which is equivalent to 2,500 VND EPS 2016.
reached 73 billion VND
In 2017, revenue is forecasted to reach 2,800 billion VND (+24% yoy), consolidated
(-47.2% yoy, 31.5% of
NI to reach 300 billion VND (+ 26% yoy) and NI to reach 240 billion (+26% yoy),
2016 plan)
which is equivalent to 3,161 VND EPS forward 2017.
2 HUT Revenue reached 1,974 HUT‟s impressive growth in 2016 is attributed to the company‟s transition from the OUTPERFO

2017 OUTLOOK REPORT
billion VND (+213% construction business to the real estate development business. However, there is risk RM
yoy, 82% of 2016 plan), of dilution from convertible bonds.
net income reached 298 Revenue in 2016 is expected to reach 2,500 billion VND (+10.8% yoy) and net
billion VND (+ 674% income to reach 400 billion VND (+148.4% yoy), an equivalence of 2,350 VND in
yoy, 78.5% of 2016 EPS 2016.
plan) Revenue in 2017 is forecasted to reach 2,800 billion VND (+10% yoy) and net
income to reach 420 billion VND (+5% yoy), an equivalence of 2,382 VND in EPS
forward 2017.
Revenue reached 1,567 KBC‟s land and infrastructure lending segments saw strong growth in 2016. In the
billion VND (+33.2% long term, the company will continue to benefit from its large land holdings and low
yoy, 82.5% of 2016 land clearing costs.
3 KBC plan), net income Revenue in 2016 is expected to reach 2,250 billion VND (+56.8% yoy) and HOLD
reached 627 billion consolidated NI to reach 750 billion VND (+24.6% yoy).
VND (+75.5% yoy, Revenue in 2017 is forecasted to reach 2,500 billion VND (+11.1% yoy) and net
99.6% of 2016 plan) income to reach 850 billion VND (+13.3% yoy).
Revenue in 2016 is expected to reach 3,190 billion VND (+62% yoy) and NI to reach
Revenue reached 1,672
360 billion VND (+75% yoy), an equivalence of 2.533 VND in EPS.
billion VND (+154%
Revenue in 2017 is forecasted to reach 4,000 billion VND (+25% yoy) and net OUTPERFO
4 NLG yoy); net income RM
income to reach 440 billion VND (+22% yoy). NLG will continue to focus on (1)
reached 188.4 billion
apartment sales for Camellia, Fuji Residence, Ehome S projects and (2) completion of
VND (+147% yoy).
Kikyo (Phu Huu), Nguyen Son and Hoang Nam projects.
Revenue 504.6 billion
SJS will not reach its 2016 target as the company has not started selling its new villas
VND (+7.6% yoy,
and has been delaying in delivering its sold villas. SJS‟s Nam An Khanh project will
51.3% of 2016 plan),
benefit from Vinhomes Thang Long project.
EBT 205.8 billion VND
5 SJS Revenue in 2016 is expected to reach 520 billion VND (-39% yoy) and EBT to reach HOLD
(+ 58.1% yoy, 67.9% of
215 billion VND (-26% yoy), an equivalence of 1.685 VND in EPS.
2016 plan), net income
2017 revenue is largely dependent on whether Song Da Corporation divests or
reached 166.7 billion
increases its holding shares in SJS. SJS will be the beneficiary in both scenarios.
VND (+ 54.1% yoy).
Revenue reached 34,655 VIC will surpass its 2016 business targets due to impressive performance in its real
billion VND (+76% estate segment, even though the retail segment has been performing disappointedly.
yoy, 77% of 2016 plan),
consolidated NI reached Revenue in 2016 is expected to reach 47,910 billion VND (+41% yoy), consolidated
6 VIC 3,094 billion VND NI to reach 4,000 billion VND (+167% yoy), an NI to reach 2,500 billion VND HOLD
(+210% yoy, 103% of (+106% yoy) - an equivalence of 948 VND in EPS.
2016 plan), NI reached Revenue in 2017 is forecasted to reach 60,018 billion VND (+25.27 % yoy),
1,719 billion VND consolidated NI to reach 4,500 billion VND (+12.5% yoy), an NI to reach 3,000
(+76.8% yoy) billion VND (+20% yoy).
VIC: Hold 9M.2016 results
Positive business results thanks to Revenue in 9M.2016 reached 34,655 billion VND (+76.1% yoy, 77% target). Consolidated
strong performance in the real estate net income reached 3,094 billion VND (+210% yoy, 103% target). Net income reached 1,719
segment, despite disappointments in billion VND (+76.8% yoy). Net income‟s year-over-year growth was lower than consolidated
the retail segment net income‟s as (1) VIC‟s consolidated net income mostly came from the real estate
segment‟s subsidiaries that VIC had low equity holdings in and (2) earning from StarCity
project divestment in Q2.
Outlook
For 2016, we maintain our previous forecast, projecting revenue to reach 47,910 billion VND
(+41% yoy), consolidated net income to reach 4,000 billion VND (+167% yoy) and net
income available to common shareholders to reach 2,500 billion VND (+106% yoy) – an
equivalence of 948 VND in EPS 2016. VIC will surpass its 2016 business targets due to the
impressive performance in the real estate segment, even though the retail segment has been
performing disappointedly.
For 2017, we forecast revenue to reach 60,018 billion VND (+25.27% yoy), consolidated net
income to reach 4,500 billion VND (+12.5% yoy), net income available to common
shareholders to reach 3,000 billion VND (+20% yoy) – an equivalence of 1,137 VND in EPS

2017 OUTLOOK REPORT
2017. Our 2017 forecast is based on the following assumptions: (1) 25% growth in the Real
Estate Trading, Real Estate Leasing, Healthcare, and Education segment and (2) 30% growth
in Hospitality and Retail segment.
Investment thesis
Vingroup is the industry leader in most of its core businesses. The company‟s long-term
growth is guaranteed by VIC‟s continuous investment in large real estate projects that locate
at first-rate locations in big cities. VIC also had impressive sales results. The company sold
14,000 apartments, villas and townhouses in 2015, and over 11,000 apartments, villas and
townhouses in 9M.2016. Thus, VIC will be able to record high revenue after the delivery of
these properties in the coming years.
Our forecasted EPS forward 2017 of 1,137 VND per share is equivalent to a P/E forward of
36.9 times. Based on our NAV valuation, the intrinsic value of VIC stock is 44,897 VND per
share (or 55,000 VND per share before the 22.5% bonus share was claimed). VIC is an
industry leader with many promising business segments. Additionally, the company owns a
large land bank for future development projects. Based on these factors, we maintain our
recommendation to HOLD on VIC share.
HDG: Buy 9M.2016 results

Strong growth prospect thanks to In 9M.2016, HDG‟s revenue and profit results were unimpressive. Revenue reached 803
Centrosa Garden project billion VND (-19.3% yoy, 34.7% of 2016 target). Consolidated net income reached nearly
73 billion VND (-29.5% yoy, 31.5% of 2016 target). Net income reached 50 billion VND (-
47.2% yoy). There are several key highlights about HDG‟s performance: (1) despite HDG‟s
revenue decline, the company‟s gross margin increased to 27.7% compared with 17.4% in
9M.2015 due to high gross margins in the real estate and hydropower segments, (2) HDG‟s
SG&A and interest expenses changed after the company increased its holdings of Za Hung
Hydropower from 37.5% to 51.5% and consolidated Za Hung Hydropower into its financial
statements, (3) despite HDG‟s increasing gross margin, the interest expense increase of 85
billion VND in 9M.2016 (compared with 4 billion VND in 9M.2015) and SG&A expense
increase of 78 billion VND (+54.4% yoy) led to the company‟s low net income.
Outlook
For 2016, HDG aimed to generate 2,318 billion VND in revenue (+ 56.6% yoy) and earn
231 billion VND in consolidated net income (+65.9% yoy). We forecast revenue in 2016 to
reach 2,250 billion VND (+52% yoy), consolidated NI to reach 238 billion VND (+71.2%
yoy) and NI to reach 190 billion VND (+54% yoy), which is equivalent to 2,500 VND in
EPS 2016. The real estate segment saw the strongest growth in Q4.2016 as the Centrosa
Garden project recorded approximately 800 billion VND in revenue from terraced houses
sales. The real estate segment may generate large revenue of approximately 950 billion
VND in 2016.
For 2017, HDG is still expected to see its revenue and net income grow at 20% thanks to a
growth in its real estate segment, which is heavily weighted toward the Centrosa Garden
project, and stabilization in other segments. In 2017, HDG can achieve revenue of 2,800
billion VND (+24% yoy), consolidated net income of 300 billion VND (+26% yoy) and net
income of 240 billion VND (+26% yoy) - an equivalence of 3,161 VND in EPS forward
2017. The real estate segment can generate 1,300 billion VND in revenue, including 800
billion VND from terraced houses in the Centrosa Garden project. Other projects, such as
Hado Garden Villa (Su Van Hanh), An Khanh - An Thuong, Thoi An and Hado Parkside

2017 OUTLOOK REPORT
(Apartment CC1) could contribute approximately 600 billion VND to the real estate
segment‟s revenue.
Investment thesis
HDG is one of the few real estate companies that have a portfolio of highly promising long-
term projects. HDG‟s strategy is to focus on the three key segments, including: (1) the real
estate segment, which is growing quickly and expects to generate 10 trillion VND in
revenue from the Centrosa Garden project from 2016 to 2020, (2) the construction segment,
which carries out Ministry of Defense‟s projects and (3) the hydropower segment, which
will remain stable over the long term.
With an EPS forward 2017 of 3,161 VND, HDG‟s P/E forward 2017 is 7.2 times. Our price
target for HDG is 30,000 VND per share, an increase of 20% compared with our previous
price target of 26,217 VND per share. We maintain our view that HDG is an attractive long-
term investment option. Therefore, we repeat our BUY recommendation for HDG to long-
term investors. We also expect the HDG‟s stock price will grow in the short term due to the
company‟s likely positive business results in Q4.2016 and 1H.2017. Investors should pay
attention to the HDG‟s low liquidity before trading the stock.
Construction
9M.2016 highlights: According to the General Statistics Office of Vietnam 9M 2016, the total value of
construction industry reached VND 747.4 trillion (+13.1% yoy) and the growth rate
tends to improve in comparison with the same period of 2015, 2014 and 2013 when the
growth rate reached 12.5%, 10.5% and 8.8% respectively.
In term of type of construction, residential construction accounted for 40.8%, the non-
residential segment accounted for 16% and civil engineering and technical construction took
a part of 43.2%.
400 250
313
291 200
300 267 300
255
220 9M 2016 9M 2015
150 250
202
200 174
200
100
150
100
50 100
0 0 50
Q1.15 Q2.15 Q3.15 Q4.15 Q1.16 Q2.16 Q3.16
Total value of construction industry Residential sector

Non-residential sector Civil construction
Specilized engineering construction
Source: GSO, VCBS
Residential construction segment was the largest sector in the Vietnamese construction
industry in 2016, continued to play an important role in structure of the industry. Value of
this segment was estimated to be VND 305.2 trillion, which increased 14.5% over the period
of 9M of 2015. The growth of real estate market was the main driver of that of residential
sector. Especially, market for condominiums was traded actively with high supply volume.

2017 OUTLOOK REPORT
According to Colliers, newly launched projects provided 18,635 units in HN and 29,010
units within 9 months of 2016 and the numbers of successful transactions were almost 23
thousand units and over 14 thousand units in HCM and HN respectively.
The infrastructure construction sector recorded a moderate growth rate of 12.1% yoy,
accounting for 43.17% of the total value of VND 322.6 trillion in 9M 2016. Bridge and road
sub-sectors are the main subject of infrastructure construction. The investment in urban
infrastructure becomes a significant challenge for most of developing cities such as HCMC
and Hanoi.
State budget expenditures for capital investment in construction rose sharply in the first 9
months of 2016. In the 3rd quarter, the expenditure grew faster than the first two quarters of
the year and reached VND 55,700 billion (+ 60.1% yoy). 9M 2016, the expenditure for
construction hit the point of VND 130.2 thousand billion (+ 15% yoy), while 2015 and 2014
growth rate were -8.5% and + 12% respectively.
Progress of some key projects: the expansion project at Tan Son Nhat airport is being
carried out (plan to increase capacity from 26.5 million to 40 million passengers); Noi Bai
International Airport expansion is under planning (the number of passengers raised from 25
to 50 million); Da Nang airport expansion is under construction (an increase of passengers
from 5 million to 13 million). Metro lines have relatively slow construction process for the
elevated section: Metro line No.1 (Ben Thanh - Suoi Tien) is in slow progress. Metro Line
No.2A Hanoi (Ha Dong - Cat Linh) has been completed 80% and expected to be in trial in
Q3 2017. Metro Line No.3 (Nhon - Hanoi) has been completed 45% and expected to be in
trial in 2020. The project of Thu Thiem Bridge including four major roads are taking shape
(4 bridges connecting District 1, 4, 7, Binh Thanh and Thu Thiem new urban area – district
2): Thu Thiem 2 – TT2, which started construction on February 2015, is scheduled for
completion in Q2 2018; TT3 is in the research process and TT4 is under planning.
According to BMI, Vietnam‟s energy and utility sector will grow moderately with most of
the expansion coming from coal-fired power plants. Renewable energy markets will
continue to be a regional underperform and hydropower development will remain
pessimistic, while water projects will gain traction due to droughts.
In terms of funding sources, private sector still lead the entire industry with the total
investment of VND 651 trillion, making up over 87% of the industry value and rising by
16% over last year.
Value of construction industry continue to growth:
1200
900
5% 8%
600
300
87%
0
2011 2012 2013 2014 2015 9T.2016
Gorvernment sector Private sector Foreign sector 9M 2016

2017 OUTLOOK REPORT
Source: GSO, VCB
The Vietnamese construction industry experienced a moderate growth rate during the review
period, recorded a growth rate of 9.1% and contributed the third-highest value in GDP of
country. The construction sector contributed 0.5 point percent to the economic growth of
Vietnam‟s GDP 9M 2016 (5.93% yoy).
9M 2016 construction activity growth remained high in comparison with GDP growth
but has slowed somehow compared to last year.
GDP AND CONSTRUCTION INDUSTRY GROWTH
12% 10.8%
9.1%
9%
GDP growth
6%
6.7%
5.9%
3% Construction
industry growth
0%
2012 2013 2014 2015 9M 2016
Source: GSO, VCBS
FDI real estate within the first 10 months of 2016 remains moderate: total registered
FDI in the real estate sector gained only 982.6 million, less than a half of last year,
(attracting USD 2,136 billion). Real estate was the second contributor with 46 new projects,
accounting for 5.58% of the total registered FDI. FDI poured into real estate carefully shows
that the international investors careful in choosing projects to invest in Vietnam.
Source: GSO, FiinPro, VCBS
2017 outlook: The favorable economic conditions boost the construction industry: strong economic
environment and improvement of regulatory framework help promote foreign direct
investment, gradually improving business environment of the country; conductive monetary
conditions boost construction activity.
Moreover, sustained urbanization, rapid industrialization, the structural shift to the urban
population and growing tourism sector as well as recent governmental measures to reduce
restrictions on foreign ownership of property have made the residential and non-residential
building sector more attractive toward foreign investors. Furthermore, the government
decree (15/2015 / ND-CP) of the public-private partnership (PPP) provides greater
opportunities for the private businesses to be involved in infrastructure, industrial and

2017 OUTLOOK REPORT
energy projects.
Residential sector: Vietnam’s urbanization rate is lower than other countries in ASEAN:
Vietnam population increased from 66 million in 1990 to 91 million in 2016, making
Vietnam the third-biggest population in the ASEAN area, following Indonesia and
Philippines. However, it is also the third-lowest urbanization rate in ASEAN which reached
34% in 2015.
For the last 30 years, Vietnam has had the fastest urbanization speed in Southeast Asia
(+3.4%/year). The process of urbanization in Vietnam is running quickly, by the end of this
June urban population rate was 36%. By 2020, about 40% of Vietnam‟s population will
have lived in urban areas and it is expected to reach 60% by 2050.
Vietnam now has the golden demographic structure with working age population (15-64)
accounts for 70.15%, a relative competitive advantage factor for demand in housing. The
average age was 28.9 for males and 31.2 for females. According to the Brookings
Institution, Vietnam is a country with the number of middle-class people increasing the
fastest in Southeast Asia and expected to grow 18% annually in the period 2016-2020,
compared to the increase of 15% over the period 2005-2015.
High demand for housing in the large cities is created by the structural shift of population
from rural areas to industrial and services area. Urbanization rate increased 1% each year in
VN, equivalent to 1-1.2 million people moving to urban. There is a strong correlation
between urbanization and economic growth along with an increase in construction and
investment of the Government in infrastructure.
Conductive monetary conditions: recent easing monetary conditions will help lower the
cost of capital for construction companies and ease liquidity in real estate market, and
further boost construction activity.

2017 OUTLOOK REPORT
Lower & upper mortgage rate

40 25%
12%
20%
30
11%
15%
20 10%
10%
10 9%
5%
8%
0 0%
2009 2010 2011 2012 2013 2014 2015 2016
Credit growth (%) Lending interest rate (%)
Sources: SBV, Savills, VCBS
Growth in residential construction sector depends heavily on the growth of the real
estate market.
According to Jones Lang LaSalle (JLL) in late August 2016, there were approximately
80,000 units in HCM city from new projects, in which affordable, mid-end and high-end
segments attained 43%, 42% and 15% respectively. JLL forecasts that for the next 3 years,
the supply is expected to increase to 74%, especially in the supply of high-end and luxury
(price> $ 2,000 / m2) even to double.
With such a high-level supply, we assume that the residential sector in 2017, especially
housing apartments, will remain active but still concern because the sales volume may not
catch up with the new launch supply.
Infrastructure: Infrastructure construction in Vietnam is gradually improving and expects steady

growth over 2016-2025.
Vietnam is facing a serious shortage in infrastructure of transportation, energy, electricity,
water and telecommunications. In the next 5 years, Vietnam needs an estimated amount of
USD 200 billion so as to invest in infrastructure, and the same amount for the next 5 years.
On the other hand, the fiscal deficit was up to more than 5% in the last 5 years which means
that spending increased more sharply than income. Vietnam's public debt must increase to
offset the deficit (currently approaching the 65% level of safety given by the National
Assembly). In the context that ODA (infrastructure investment accounted for more than
30% of the total ODA) will not be sufficient in 2018. Besides, the state budget and other
forms can only meet 40-50% of the required capital for infrastructure in the next 10 years.
Therefore, private investment will be more necessary for promoting growth in the
construction sector and infrastructure.
According to the Ministry of Transport, it is estimated that 66.5 trillion VND shall be used
for disbursement of infrastructure projects in 2016, half of which is coming from the private
sector. About USD 48 billion will be require for transportation since 2015 to 2020, but the
state budget can only afford 28%. Therefore, the government aims at boosting the public-
private partnership project pipeline, providing opportunities for private investors.
Infrastructure sector is expected to continue to lead the industry in 2017. Roads and
bridges are expected to outperform, followed by airports. The Ho Chi Minh City People's

2017 OUTLOOK REPORT
Committee submitted a list of priority transportation projects that will be developed in a

Public Private Partnership (PPP) format between 2016 and 2020, including a monorail line
project, to the government for approval, underscoring the significant growth potential of the
sector.
7.5%
Residential and non-

residential value real
5.0% growth %
Transport infrastructure
value real growth %
2.5%
Energy and utilities value
real growth %
0.0%
2015 2016f 2017f 2018f 2019f 2020f
Source: BMI Vietnam Infrastructure report Q4/2016

According to the Ministry of Planning and Investment, the total investment for the 68
projects in the list of priority PPP projects in the period 2016-2020 amounted to VND
334,655 billion in which state capital is up to VND 114,211 billion and the rest is expected
to utilize private capital.
According to BMI, road sub-sector is the focus of the government, followed by airports and
ports. In particular, the government has stated to priorities finances for Dau Giay – Phan
Thiet – Nha Trang and Ninh Binh – Thanh Hoa – Vung Ang expressways, and Long Thanh
international airport in the period of 2016-2020. In addition, 23 large-scale transport
infrastructure projects are to be financed without the state budget under PP and build-
transfer (BT) models. According to the government, investors of these projects will be
selected in 2016 and of the total price tag of VND 39.9 trillion (USD 1.83 billion), VND
39.4 trillion (USD 1.8 billion) will be investors‟ equity.
According to BMI‟s database, 47% of companies involved in Vietnam‟s road projects are
foreign companies in which the dominants are South Korean, Japanese and US companies
with a market share of 13%, 11% and 8%, respectively.
800 8%
600 6%
400 4%
200 2%
0 0%
2015e 2016f 2017f 2018f 2019f 2020f 2025f
Construction industry value Infrastructure industry value

Construction industry growth Infrastructure industry growth
Source: BMI VN Infrastructure Q4 2016
We forecast that the investment demand for large infrastructure sectors of the government in

2017 OUTLOOK REPORT
the future along with the limitation of state budget will lead to the fact that PPP or BOT
models shall continue to be positive in 2017.
However, apart from the above favorable factors, there are some factors that need improving
such as the weak fiscal health of Vietnam's central, high public debt level of Vietnam
together with the time that could weaken the infrastructure positive outlook.
70%
65%
64%
65%
60%
60%
56%
55% 54%
55%
51%
50%
2010 2011 2012 2013 2014 2015 2016
Debt level of VN government/GDP
Source: VCBS
HBC Updates of business results of Hoa Binh Construction and Real Estate company.
3Q.2016 results: revenue reached VND 7,002.5 billion, an increase of 98.8% yoy. Gross
profit margin was improved at 10.3%, twice as high as that of the same period in last year.
These impressive results owe to strong booking residential projects and consolidation with
its subsidiary (HBI). In cumulative 9M 2016, net income was VND 320.9 billion, a rise of
495.2% yoy. Net profit margin was 4.6% compared to 1.5% of the same period in the
previous year. Hence, HBC completed 97% of the revenue target and 126% of the net
income target for 2016.
Total value of new signed contract in 2016 stayed impressively. At the present, the total
value of new HBC-signed contract amounts to around VND 14,700 billion, twice as much as
that last year and the size of contracts becomes bigger and bigger. The proportion of D&B
contracts in total increasingly accounted for 33%, which helps to improve the gross margin.
However, high debt ratio and dilution effect due to the plan of issuing 20 million shares to
strategic partners (26.5% of current outstanding shares) will be a notable point in next year.
We believe that the outlook of HBC for next year shall be positive and forward EPS will be
VND 2.956 per share in 2017.
Steel
2016 Highlights 1. Raw materials prices sharply increased

3 main raw materials of steel industry including iron ore, hard coking coal and scrap
have their price soared due to the expected tightened supply by big producers. In detail,
China declared to cut down on their coal production, while Vale (the biggest Brazilian iron
ore producers) declined their forecast on 2017 production by as 5% as the previous forecast.

2017 OUTLOOK REPORT
Iron ore price movement Australian coal price

350
90
USD pẻ ton
Stockpiling 300 Stockpiling

80 Stable period Stable period
period period
70 250
USD per ton

60 200
50
150
40
100
30 Vale Vale reduce
reduce their 50 their
20 forecast of forecast of
2017 0 2017
10
production production
0
thermal coal Coking coal
Source: Bloomberg, VCBS compiled

Other semi-product such as billet and HRC moved close to iron ore but there was a lag
period among them.
Price movement of Iron ore and other semi-products

90 500
Scrap, HRC, and billet, USD per ton

80 450
70 400
Iron ore, USD per ton
350
60
300
50
250
40
200
30
150
20 100
10 50
0 0
Iron ore Scrap steel HRC Billet
Source: VCBS
2. Steel industry update

Construction steel sales volume grew by 21.5% yoy in 10M2016, reaching 6.44 MN ton.
The steel price bounced sharply, especially in March when the temporary safeguard tariff
was imposed. However, the growth rate of each month as compared to the previous period
gradually decreased, and the industry gross margin fell in 3Q2016. We believe, the dramatic
sale volume was resulted from the stockpiling activities of steel agents, but from the real

2017 OUTLOOK REPORT
demand of the market.
Production and Sale volume of Steel market share in 10M2016

domestic producers in 10M2016
1200
Thousand ton
1000
800 Others VNSteel

21% 21%
600
PoscoSS
400
7%
VNSteel
200 Affiliate
Pomina 18%
13%
0
01/2016
02/2016
03/2016
04/2016
05/2016
06/2016
07/2016
08/2016
09/2016
10/2016
Hoa Phat
21%
0%
Production Sale
Sources: VSA, VCBS

Steel pipe sales volume grew by 31.7%, reaching 1.52 MN ton. The steel pipe price has
increased recently, which was attributed to the demand from industry sector and huge
amount of finishing construction project. Also, the HRC material price increased,
contributing to the increase in pipe price.
Galvanized sheet sales volume grew by 34.1%, reaching 2.29 MN ton, 1mn ton of which
was exported. The dramatic increase in sales was contributed to the sharp growth of the
Southern market (+32% yoy) and export activities (+42% yoy). Especially, 9M2016 export
volume to the US market rose as 21 times as the previous period, reaching 707.700 ton.
There was no significant change in market structure. Hoa Sen group (HOSE: HSG) and
Nam Kim group (HOSE: NKG) took the lead in the market with 32% and 14% share,
respectively.
Import volume of steel tent to grow slowly, meanwhile the import volume of billet sharply
increased by the end of the year. The safeguard tariff has been effective , which is illustrated
by the decreasing imported volume of billet in 1H2016. However, the billet imported
volume bounced in September, rocketing by 148.6% mom and 227% yoy. On the contrary,
the imported volume of scrap decreased in September, falling to 280.000 ton (-23.3%, -7.6%
yoy). We believe that the soar in scrap price has made the EAF steel producers to import
cheaper billet from China.

2017 OUTLOOK REPORT
Import steel
2500 700
Thousand ton
600
2000
500
USD per ton

1500 400
1000 300
200
500
100
0 0
01/2015
02/2015
03/2015
04/2015
05/2015
06/2015
07/2015
08/2015
09/2015
10/2015
11/2015
12/2015
01/2016
02/2016
03/2016
04/2016
05/2016
06/2016
07/2016
08/2016
09/2016
10/2016
Import volume Average price
Source: Customs
3. Industry performance
Most steel companies reported a dramatic growth in 1H2016 and then slowdown in 3Q2016.
Those firms with worse performance in 2015 have the better growth rate in 1H2016.
Stock Total assets Equities Debt/Assets NPM ROA (ttm) ROE (ttm) EPS (ttm) BVPS
(VND bn) (VND bn)
HPG 28,468 18,068 36.5% 19.6% 18.3% 28.9% 6,192 21,439
VIS 2,112 637 69.8% 1.5% 0.4% 1.2% 156 12,942
TIS 10,894 2,824 74.1% 3.1% 3.3% 12.7% 1,262 9,944
POM 6,520 2,501 61.6% 1.9% 2.0% 5.2% 693 13,423
VGS 1,417 576 59.4% 2.0% 5.9% 14.5% 2,215 15,309
DNY 2,109 346 83.6% 1.1% 0.9% 5.4% 696 12,815
TVN 14,383 7,359 48.8% 3.8% 3.7% 7.1% 775 10,854
Median 9,415 4,616 62.0% 4.7% 4.9% 10.7% 1,713 13,818
Average 6,520 2,501 61.6% 2.0% 3.3% 7.1% 775 12,942
NPAT 9M.2016 growth (yoy)

Construction steel Galvanize 2297% Retaile
BOF
EAF
542%
341%
109% 100% 179% 149% 100%
59%
HPG TIS VIS(*) POM DNY HSG NKG TLH SMC(*)

2017 OUTLOOK REPORT
Source: VCBS
(*) VIS and SMC reported loss in 9M0215. Therefore we denoted the growth rate as 100%
3. Raw material price outlook
Iron ore price is expected to fall again in 2017. We hold our point of view that the iron ore
price should decrease in the next year because (1) Chinese government declared to cut down
on their steel production, which decreased the demand for iron ore, offsetting the effect from
the decrease in expected iron ore supply, (2) the big iron ore exporters from Australian and
Brazilian who have the production cost advantage are expected to enhance capacity to gain
more market share, (3) Inventories volume in Chinese port has sharply increased recently.
Therefore, we believe the iron ore (62% Fe) price should fell back to USD 65 per ton in
2017.
We expect the hard coking coal price to decrease as well which is contributed by the
recovery in Australian supply. The big exporters from Australian will increase their
productivity after the accident in the mine and weather problem have been solved. The
additional supply from Australian may offset the impact of production cut in China, (2)
the plunge in iron ore demand also lead to the decline in coal demand as these 2
commodities are considered complimentary good.
Scrap price is forecast move at the opposite direction as iron ore and hard coking coal.
We believe the impact of the soar in iron ore and hard coking coal price on scrap price
should be reflected in the next year. In addition, demand for scrap will decrease as China is
shifting their steel production technology from BOF to EAF. Therefore, the scrap price is
expected to maintain at USD 280 per ton
Based on the calculation of production cost and producers‟ reaction to the raw material price
movement, we forecast the average steel price in 2017 to be VND 10.8 mn per ton.
Forecasting of steel price movement in 2017

11.4
VND mn per ton
11.2
11
10.8
10.6
10.4
10.2
10
Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17
Base case Strong case Weak case
2017 outlook The construction sector continue to grow in both civil and public segments. Vietnam has the h
region, which keeps demand for civil construction ample. In addition, the public investment i
government has been set up completely. According to the report of Ministry of Industry and Com
short of 15 mn ton of construction steel per year, which means the demand for construction steel may
The steel price increases, affecting the industry in different ways. Because the increase in ste
production cost, but from the excess demand. Therefore, we believe those BOF steel producers with

2017 OUTLOOK REPORT
industry. Meanwhile, the EAF steel producers will hardly gain any profit from the increasing steel
point. Regarding sale volume, we believe that the expected steel price movement should result in
raising the sale volume in the 4Q2016 and 1Q2017.
Vietnam Steel Association (VSA) suggests the Ministry of Industry and Commerce should impo
wire rod. In the best scenario assuming the tax is imposed, we believe that the impact is not as signif
the portion of HS 7213.91.90 wire rod in product mix is not big. However, the expected tariff sh
sentiment toward steel industry stock, also supporting the increase in steel price.
Formosa plans to operate in December 2016. The first phase of the complex with 4.350 m3 furn
2016. The main product is semi-finished steel including HRC and slab. We believe that Formosa is n
in short term because it does not produce any construction steel in the 1 st phase. However, if Fo
domestic market, the EAF producers will have another source of billet other than taxed import o
the steel producers may be narrowed.
b) Galvanized sheet – Steel pipe
Steel pipe sector is potential, but its size is quite small. The steel pipe is expected to grow at a rate
(1) steel pipe is complementary good with construction steel, (2) additional growth from furnitur
among the steel pipe market is not as high asconstruction steel
Galvanized sheet producers expand their domestic market share. The growth is contributed by
urbanization growth rate. In addition, the anti-dumping tax on galvanized sheet (on September
Commerce)should build a barrier against Chinese original product, supporting domestic producer
dumping tax applied is varied from 4.02% to 38.34%.
Higher protectionism level from many export markets may negatively impact galvanized sheet
US decided to impose tariff against Vietnamese products, we think that the direct influence is not to
sheet producers (including HSG and NKG) because their main export markets are Indonesia and Mal
Thailand market are quite small, about tens of thousands ton. However, the indirect impacts are (1)
new potential markets, and the competition degree in traditional export market rises, (2) those FD
CSVC may go back to compete in domestic market. Therefore, we come up with a conclusion that
enhance their sale network to expand domestic market share, and export volume is expected to grow a
48.000 per share.
Potential firms in 2017 1. Hoa Phat Group (HSX – HPG)

HPG - Buy Potential of the steel sectors. The phase 3rd of the Hai Duong complex will operate at its
full capacity in the whole 2017, increasing the output up to 2mn ton of crude steel. In
addition, by the middle of 2017, HPG will complete its capacity enhancement in Da Nang
and Binh Duong – Long An, increasing its steel pipe production up to 900.000 tpa. We
expect HPG‟s sale volume in 2017 of construction steel and steel pipe to reach 1.9 mn ton
and 550.000 ton, respectively
Gross margin narrows. The increase in steel price is mainly attributed to (1) higher
production cost, (2) the appreciation of USD against VND. Meanwhile, the low-cost
inventories should be exhausted in 2017, which mean HPG cannot enjoy the margin
expansion from the low-cost material and increasing steel price.
The new welding rod product is not expected to breakthrough. The new product of
welding rod has been produced in Q3.2016. We think that this product should face some
beginning difficulties such as:

2017 OUTLOOK REPORT
(1) The welding rod market is ruled by the cheap imported products. In addition, the
Ministry of Industry of Commerce is currently imposing no tariff on the raw
material of welding rod in 2017.
(2) Demand for welding rod is not high. According to Viwelco‟s estimation, if the
market consumes 10 mn ton of construction steel, it should consume 0.1 mn ton
of welding rod only. Therefore, we think that welding rod contribution to HPG‟s
sales is not too significant.
Animal feed factories begin to operate stably and effectively. In 2017, the Dong Nai
factory and Phu Tho factory should start their engines as planned, and the Hung Yen
factory should have been operating for 1 year. Currently, this sector is reaching its break-
even point and generating a small amount of profit. However, HPG has to make more
investment in their pig farms, and these 2 new factories need more time to operate at full
capacity. Therefore, we keep our point of view that agriculture sector should not perform
any better in the next 2-3 years.
Breakthrough in 2018. We consider 2017 a slow year of HPG because all new projects,
which are under construction, are expected to run at full capacity in 2018, including (1)
steel pipe capacity enhancement, (2) galvanized sheet production line, (3) Mandarin
Garden 2 real estate project
(1) Steel pipe capacity enhancement. By the middle of 2017, the expansion of Da
Nang and Binh Duong- Long factories should be finished as planned, improving
the steel pipe production per year up to 900.000 tpa (+80%). Under the
circumstance that sale volume accounts for 90% of production, the increase in
capacity would create more room for revenue of this product to grow. We expect
the HPG‟s steel pipe sales volume to reach 550.000 ton in 2017, and 800.000 ton
in 2018.
(2) Galvanized sheet factories project. This factory with capacity of 400.000 tpa is
expected to run in the beginning of 2018. We are quite doubtful about this
project‟s potential because (a) HPG has had no experience in operating the
galvanized sheet production line before, (b) the northern area of Vietnam is not
in favor of galvanized sheet products. Therefore, we expect sale volume of
galvanized sheet should reach 350.000 ton (¬85% full capacity).
(3) Realize revenue from real estate project. As planned by HPG, revenue from
the Mandarin Garden 2 project should be realized in 2018. With the price of
VND 25 mn per m2, HPG should generate VND 1,800 bn of revenue from the
real estate project in 2018.
The USD 3 bn steel production project in Dung Quat industrial park. Recently, HPG
has announced that they will not expand the Hai Duong Complex. Instead, they are going
to acquire the Quang Ngai – Guang Lian project in Dung Quat industrial park. This
project is expected to have 4mn tpa capacity. The 1 st phase will start in 2017-2019,
producing steel bar with 2 mn tpa capacity. And HPG plans to produce hot rolled coil and
sheet in the 2nd phase of the project. In addition, HPG is suggesting the project should
enjoy tax rate of 10% per year and rent exemptions in 18 years.
Forecasting in 2017, we come up with some assumptions including (1) steel sale volume
reach 1.9 mn ton, (2) steel price reaches VND 10.9 per ton and gross margin reaches 24%,
(3) other sectors grow by 10%. In conclusion, HPG should generate VND 37,365 bn of

2017 OUTLOOK REPORT
net revenue and VND 5,895 bn of NPAT. EPS forward is estimated as VND 6,958
We recommend BUY HPG stock with the target price of VND 53.707 per share.
HSG - Hold 2. Hoa Sen Group (HSX - HSG)

Expansion in sale network. As we analyzed above, main competitive factors in
galvanized sheet market are inventories management policies and sale network. HSG has
the largest network with 212 agents (9M2016). In the next year, HSG plans to increase its
number of agents up to 300 and expand to the Central and the Northern market. We
believe that HSG consider export market less attractive than the domestic market.
Therefore, they expand the domestic agent‟s network to gain more market share in the
Central and the Northern area.
Capacity enhancement in Ha Nam and Binh Dinh factories. In 2017, the new factory
in Ha Nam which produces steel pipe and plastic tube and the factory in Nhon Hoi (Binh
Dinh) which produces galvanized sheet will go into operation.
Product Capacity Factories
Galvanized sheet 270.000 tpa Nhon Hoi
Steel pipe 250.000 tpa Ha Nam
Plastic tube 39.000 tpa Ha Nam
Source: HSG
Ha Nam factory‟s capacity up to 600.000 tpa of steel pipe, ranking 2 nd in the market
(following HPG with expected capacity of 900.000 tpa). On the other hand, its plastic tube
capacity should reach 54.000 tpa, equivalent to 60% of BMP‟s max capacity. By locating
these 2 factories in the Central and the Northern area, HSG may implement their strategies
to expand market to these regions.
Large inventories reserve. By the end of 3Q2016 (4Q of fiscal year 2015-2016), HSG
reported a huge amount of inventories, up to VND 4,500 bn. In detail, the raw material
and on-the-way goods reached VND 2,714 bn. We believe that HSG has reserved a huge
amount of low-cost HRC, up to 320.000 ton according to our estimation, equivalent to one
quarter production. As the HRC price has increased by 22.6% recently, the first quarter of
2016-2017 fiscal year should realize a dramatic profit.
New growth catalyst from Ca Na complex. The first phase of this project is planned to
start in 2017-2018. The project capacity is up to 1.5 mn tpa, using BOF technology. The
total capital expenditure for this phase is USD 500 mn (VND 11,150 bn). We believe the
impact of this project is expected tube not significant in 1-2 years ahead. However, the
project may increase the financial leverage of the group. We currently exclude the project
in our HSG valuation.
Forecasting in 2017, we believe the plan VND 21,495 bn of net revenue (+22% yoy) and
VND 1,400 bn of NPAT (+4% yoy) is conservative because (1) HSG will expand their
consumption market to the Central and the Northern area with 2 new factories. Additional
250.000 tpa of steel pipe, 39.000 tpa of plastic tube, and 270.000 tpa of galvanized sheet
should result in VND 4,000 bn – 5,000 bn of net revenue in 2017 (assuming the new

2017 OUTLOOK REPORT
factories run at 80% max capacity), (2) the gross margin is expected to expand thanks to
the low-cost HRC reserve in the first quarter. In conclusion, HSG may generate VND
22,300 bn of net revenue (+25% yoy) and VND 1,700 bn of NPAT (+15.4% yoy).
Therefore, we recommend HOLD HSG with the target price of VND
Rock Mining
2016 Highlights Infrastructure development outlook. According to the Department of Statistics, the value of
infrastructure construction by the end of Q3.2016 in the South reached 747.4 trillion VND
(+13.1% yoy). The stable growth shows a tendency to continue in the next 2-3 years thanks
to (1) governmental regulations/policies which boost the development of transportation
infrastructure construction, (2) the recovery of real estate market, and (3) the improvement
of FDI inflow. Key infrastructure projects in the South including the Metro system 1, 2, 3, 4;
Long Thanh – Dau Giay highway, Vo Van Kiet road, Thu Thiem tunnel, Saigon Bridge 2,
and the Inner Ring Road project will be main catalysts for the surge of rock demand.
Value of constructions in the South of Vietnam

1,200 30%
1,000 25%
800 20%
600 15%
400 10%
200 5%
- 0%
2011 2012 2013 2014 2015 9T2016
Value of construction (trillion VND) Growth (%)
(Department of Statistics)
Stable price with gradual growth trend. In 2016, rock price varies in regions across the
country. Specifically, rock price showed a slight upward-trend in the Central of Vietnam,
while it was a downward-trend in the South & the North. By the end of Q2.2016, the
average price in the South was the highest with 279,031 VND/m3, which is 98.8%
compared to last year. Despite recording a slight increase, average rock price in the Central
area still remain the lowest price compared to other regions with 189,074 VND/m3 - 90,000
VND lower than the average price in the South.
Average rock price across regions (VND/m3)
2014 2015 2016

Regions
Q4 Q1 Q2 Q3 Q4 Q1 Q2
North 190,610 188,343 192,390 201,443 197,776 193,388 197,256
Central 193,575 190,142 192,417 192,292 184,167 185,367 189,074

2017 OUTLOOK REPORT
South 283,430 285,114 282,362 284,171 275,600 273,560 279,031
(Ministry of Construction)
After a long time being depleted, the decrease of rock capacity in the South leads to high
selling price of rock in this region. Due to the high transportation cost, rock in the
North/Central areas is rarely transported to long-distance regions such as the South, this is
the main reason why rock price in the South stay higher than other regions. As a result,
rock-mining companies in the South have more potentials than others.
Market Price
310,000
290,000
270,000
250,000
North
230,000
Central
210,000 South
190,000
170,000
150,000
Q4.2014 Q1.2015 Q2.2015 Q3.2015 Q4.2015 Q2.2016
(Ministry of Construction)
The potential of rock-mining companies depends mainly on the capacity and the
exploitation-period of rock-mines. As a result, some companies are extending the
exploitation-period, or applying for permission to exploit new mines. Specifically, Nui Nho
& Tan Dong Hiep rock-mines are close to their exploitation-period, which is by the end of
2017. These mines play the key roles in performances of KSB, NNC and C32 with high
quality rock (1x2 rock has high demand with high price) as well as strategic location (close
to the financial/industrial center such as HCMC, Binh Duong, Dong Nai). Although new
mines can compensate for capacity when old mines expires, to some extent, revenue will be
affected because at the beginning of mining period, newly-exploited mines can only produce
low-quality rock with low selling-price.
Southern rock-mines updates
Remaining
Capacity
capacity Exploitation
Rock-mine Location Company (million
(million period
m3/year)
m3)
KSB &
Tan Dong Hiep Binh Duong 1.95 1 2017 (Extending)
C32
Phuoc Vinh Binh Duong KSB 0.1 3.3 2017 (Extending)
Tan My Binh Duong KSB 0.54 3.9 2029

Applying for
Tam Lap Binh Duong KSB
mining license
Nui Nho Binh Duong NNC 2.1 2.5 2017

2017 OUTLOOK REPORT
Mui Tau (Tan Lap) Binh Phuoc NNC 0.5 13.5 2030
Thanh Phu 1 Dong Nai BBCC
Thien Tan Dong Nai BBCC

10
Doi Chua Dong Nai BBCC
Soklu Dong Nai BBCC
Binh Loi Dong Nai CTI 0.3 10 2033
Xuan Loc Dong Nai CTI 0.3 10 2033
Tan Cang 8 Dong Nai CTI 1 10 2020
Doi Chua 3 Dong Nai CTI 2 16.5 2033
Thanh Phu 2 Dong Nai DHA 1 6.5 2020
Tan Cang 3 Dong Nai DHA 0.49 5.8 2024
Nui Gio Binh Phuoc DHA 0.2 6.9 2025

HTX Binh
Thanh Phu 3 Dong Nai 1
Thanh
(VCBS)
2017 Outlook Infrastructure Development

Rock demand in 2017. According to the governmental planning for construction material
from 2016 to 2030, the total demand for rock material is around 135 million m3 in 2016,
and it is estimated to reach 181 m3 in 2020. In which, rock‟s demand in the South (the main
market of rock mining companies such as KSB, NNC, C32, and DHA) is around 35 million
m3 in 2016, and it is estimated to reach 45 m3 in 2020. Also, according to the Ministry of
Transport, from 2016 to 2020, Vietnam will need around 1,015,000 billion VND (roughly
$48 billion) to develop the transportation infrastructure mainly in HCMC and Hanoi. In
which, 651,000 billion VND will be used for road infrastructures.
Insignificant effect from the world market. The mining industry has been severely
affected by the downward-trend of the world‟s demand due to the instability of China‟s
economy. However, thanks to (1) the nature of rock-mining industry which rarely competes
with imported products, (2) the recovery of real-estate market, and (3) plans for
transportation infrastructure improvement, there are positive signals for the potential growth
of rock-mining companies. Compared to other regions across the country, the growth
demand for rock in the South is higher (10%-12% compared to 6%-7%).
Potential firms in 2017 Stable growth. Four rock-mining companies have published Q3.2016 financial statements.
In which, three companies including KSB, KSB and C32 recorded sales growth. Besides
stable financial health, the recovery of real-estate market as well as development plans for
transportation infrastructures will be significant catalysts for roc-mining industry growth.
Low debt ratio with stable cash flow. Besides positive sales performance, the advantage of
investing in rock-mining companies is that they have low debt ratio. Specifically, rock-
mining companies in the South maintain low Debt/Total Assets ratio, most of them have no
bank loan. Also, companies in this industry such as KSB, NNC and C32 tend to have stable

2017 OUTLOOK REPORT
business performance with positive cash flow from operating activities.
NNC – Hold 9M.2016 Overview

NNC – Nui Nho rock-mine maintains stable sales growth. The comparative advantage of
Nui Nho mine is that it has strategic location, high quality rock, and stable sales growth due
to the increasing demand from construction projects such as My Phuoc – Tan Van highway,
Suoi Tien Metro, etc.
In Q3.2016, NNC‟s revenue was VND 148 billion (+11% yoy). Despite increasing 11% in
revenue, cost of goods sold increased only 6%, which led to 20% increase in gross profit
compared to last year. Also, income tax has been down from 22% to 20%, which
contributed to the 18% growth of NPAT – VND 45 billion. NNC‟s accumulated 9M.2016
revenue was VND 414 billion (+18% yoy), and NPAT was VND 136 billion (+55%yoy) -
equivalent to EPS of VND 10,400/share.
Outlook
Currently, NNC is investing in M&C Binh Duong – Binh Duong Construction Material &
Construction Ltd (10% - equivalent to VND 103 billion) so that NNC can sign mining-
contract with M&C Binh Duong‟s rock-mines in the future. Specifically, M&C Binh
Duong‟s main operation is construction material & construction (brick, cement, sand, rock,
etc). Currently, the company has mining-licenses of four rock-mines including Tan My,
Thuong Tan (Tan Uyen province), and 2 other mines in Phu Giao province – the average
capacity of each mine is about 10 million m3 and can start mining-activities by the end of
2016. According to VCBS, this is an effective investment so that NNC can mitigate the risk
of not being able to extend the exploitation-period of Nui Nho mine – Nui Nho mine yields
the majority of revenue/profit for NNC, and will expire on December 31st 2017.
Recommendation
2016 estimated mining capacity of NNC could reach 3.2 million m3, in which 85.2% of the
total capacity is from Nui Nho rock mine. 2016 estimated revenue and NPAT is VND 606
billion (+19% yoy) and VND 189 billion (+53% yoy) respectively – equivalent to EPS of
VND 11,524/share and PE 6.25. In 2017, estimated revenue and NPAT is VND 691 billion
(+14% yoy) and VND 210 billion (+11% yoy) respectively – equivalent to EPS of VND
12,220/share and PE 5.9.
C32 – Hold 9M.2016

Tan Dong Hiep rock-mine remains the main revenue contributor of C32 in 2016, the
average selling price of rock from this mine is around VND 180,000/m3. In Q3.2016, C32
recorded slight revenue growth which reached VND 134 billion (+2% yoy). Thanks to the
decrease of cost of goods sold, gross profit increased by 33% reaching VND 40 billion.
Gross profit margin increased from 22.6% in Q3.2015 to 29.6% in Q3.2016. As result,
C32‟s NPAT was up 24% compared to last year reaching VND 26 billion.
By the end of Q3.2016, accumulated revenue and NPAT was VND 368.3 billion (slight
growth compared to last year) and VND 75 billion (+23% yoy) – equivalent to EPS of VND
9,884/share.
Outlook
According to the latest update, C32 has just become a major shareholder at DHA.

2017 OUTLOOK REPORT
Specifically, C32 has increased its ownership at DHA to 8.16%. Both C32 and DHA are
rock-mining companies in Binh Duong. Currently, DHA has mining-licenses of 3 rock-
mines with the total capacity of 18 million m3. With the exploitation-period up to 2020-
2025, DHA has comparative advantages compared to other companies such as NNC, C32 or
KSB. According to VCBS, this can be a promising investment as C32 could secure its rock
resources for the future. In case Tan Dong Hiep rock-mine expires by the end of 2017, C32
can still corporate with DHA to conduct mining-activities as a major shareholder at DHA‟s
rock-mines.
Recommendation
2016 C32‟s estimated revenue and NPAT is VND 560 billion and VND 106 billion
respectively (slight growth compared to last year) – equivalent to EPS of VND 9,464/share
and PE 5.8. In which, revenue from rock-mining accounts for 40% of the total revenue –
VND 225 billion, revenue from construction service accounts for 35% - VND 193 billion,
sewer-pipe sales accounts for 10% - VND 56.7 billion, and revenue from other services
accounts for 15% - VND 85.3 billion. C32 is likely to be able to accomplish its 2016 target
because:
1. By the end of Q3.2016, accumulated rock-capacity reached the expectation, and is
estimated to achieve the 2016 target – 1.2 million m3, which accounts for 40% of the total
revenue and 70% of the total NPAT.
2. Sewer-pipe production shows positive signals thanks to quality improvement as well as
demand surge due to infrastructure construction such as National Route 1. Sewer-pipe
production activity is estimated to account for 30% of the total revenue and 20% of the total
NPAT.
2017 estimated revenue and NPAT is VND 569 billion and VND 108 billion respectively
(slight growth compared to 2016) – equivalent to EPS of VND 9,642/share and PE 5.7.
DHA – Positive 9M.2016

DHA – Mining activities have been slowdown recently. Although rock mined from Nui Gio
has high quality with huge demand, other rock-mines of DHA have been operating
perfunctorily due to intense competition – especially Thanh Phu 2 which contributes up to
60% of DHA‟s revenue.
In Q3.2016, DHA‟s revenue reached VND 48 billion (slightly down compared to last year),
increase in COGS leads to 18% decrease in gross profit which reached VND 12 billion.
Gross profit margin was down from 29.4% to 24.6%, NPAT was VND 7.3% (-19% yoy)
due to the increase of administration expense. By the end of Q3.2016, accumulated revenue
was VND 139 billion (+1% yoy), NPAT was VND 30 billion (-10% yoy) – equivalent to
EPS (ttm) of VND 2,733/share.
Outlook
Currently, DHA operates mining activities on 3 rock-mines including Nui Gio, Tan Cang 3
and Thanh Phu 2. These mines‟ exploitation-period will last for the next 8-10 years, which
is a strong comparative advantage for DHA. Unlike other companies, DHA is not under
pressure to look for new rock-mines to replace the old ones.
According to the latest update, C32 has just become the main shareholder of Hoa An JSC
(DHA). Specifically, C32 has increased its ownership at DHA up to 8.16%. As both C32

2017 OUTLOOK REPORT
and DHA are operating in rock-mining industry, this could be an effective strategy for both
companies to co-operate with each other.
Recommendation
2016 estimated revenue and NPAT will be VND 210 billion (+4% yoy, 122% annual target)
and VND 48.6 billion (+8% yoy, 118% annual target) respectively – equivalent to EPS of
VND 3,240/share and PE 9.1.
VCBS ranks positive outlook for DHA due to the potential from Nui Gio rock-mine as Tay
Ninh & Binh Phuoc is on the development planning. 2017 estimated revenue and NPAT will
be VND 270 billion (+28% yoy) and VND 50.4 billion (+3% yoy) respectively – equivalent
to EPS of VND 3,360/share and PE 8.76.
KSB – Positive 9M.2016

Due to the high quality rock at Tan Dong Hiep, KSB‟s 2016 estimated total rock capacity is
around 3.7 million m3. By the end of Q3.2016, KSB‟s revenue was VND 327 billion (+28%
yoy) and NPAT was VND 64 billion (doubled compared to last year), low COGS also lead
to increase in gross profit margin which reached 57%. Accumulated revenue by the end of
Q3.2016 was VND 641 billion (+17% yoy), and NPAT was VND 154 billion (+59% yoy) –
which is equivalent to EPS (ttm) of VND 7,820/share.
Outlook
Besides positive outlook due to potential rock demands in 2017, Tan My and Phuoc Vinh
extension plan as well as Tan Dong Hiep exploitation-period extension plan are catalysts for
KSB to reach the rock capacity of over 4 million m3 each year. This is KSB‟s comparative
advantage as other companies‟ rock mines are going to expire.
Besides rock-mining activities, KSB is planning to extend Dat Cuoc industrial park for
another 340ha. Specifically, Dat Cuoc industrial park is planned to be extended for 136ha
until 2018, and the remaining 214ha extension is planned until 2021. According to KSB, the
company will record VND 505 billion in revenue from selling 53.2ha, and another 1,865
billion in revenue (VND 467 billion in gross profits) from selling the remaining areas until
2020. Also, KSB is currently negotiating with its strategic partner about selling Binh Duc
Tien real-estate project. In case KSB can finish the deal on schedule, it will record revenue
of VND 120 billion and gross profit of VND 37 billion in Q4.2016.
Recommendation
With positive performance during 9M.2016, VCBS expects that by the end of 2016, KSB‟s
revenue will reach VND 850 billion (+15.2% yoy, 106% annual target) and NPAT of VND
204 billion (+63% yoy, 142% annual target) – equivalent to EPS of VND 7,846/share and
PE 8.67. The above forecast is without profit from real-estate segment. In case KSB record
profit from real-estate segment in this year, KSB‟s revenue will reach VND 970 billion
(+31% yoy) and NPAT of VND 237 billion (+90% yoy) – equivalent to EPS of VND
9,115/share and PE 7.46.
In 2017, VCBS maintains positive outlook for KSB because (1) exploitation-period of Tan
Dong Hiep and Phuoc Vinh rock-mines are planning to be extended for another 2 years, and
(2) Phuoc Vinh‟s capacity is expected to double due to the contract with Bau Bang industrial
park. KSB‟s 2017 forecasting revenue is VND 1,040 billion and NPAT is VND 250 billion

2017 OUTLOOK REPORT
– equivalent to EPS of VND 9,615/share with PE 7.07.
Facing brick
2016 Highlights There was a sharp bounce in brick producers’ performance. Thanks to the recovery of
the real estate sector and a large amount of construction project since 2014-2015 coming to
completing stage, the brick producers‟ performance had their gross margin expanded and
their sale volume increased sharply. All the factories had to operate at full capacity to meet
the market demand.
Consumption
Capacity Main brick
Producers in 9M2016 Expansion plan
(sqm/year) products
(sqm)
VIT 4.55 mn 6.5 mn +2 mn/year in 2017-2018 Granite
+3mn of granite/year in Ceramic,

CVT 9.2 mn 15 mn
2017 Porcelain
+6 mn of porcelain/year
TLT* 4.44 mn 8.5 mn Ceramic
in 2018
+4 mn of clinker/year in
VHL 7.5 mn Cotto, clinker
2016
TTC 5,5 mn Expansion plan delayed Ceramic, granite
Source: VCBS compiled

(*)sqm is square meter
Revenue NPAT Equiti
Produ ROA ROE EPS
9M2016 %yoy 9M2016 %yoy es/ P/E
cers TTM TTM TTM
(VND bn) (VND bn) Assets
VHL 1,320 18.0% 85.7 13.6% 8.9% 21.6% 41% 7,422 7.4
VIT 660 33.6% 37.6 43.4% 6.3% 23.6% 27% 3,250 8.8
CVT 757 47.8% 88.6 99.5% 11.4% 33.0% 34% 5,562 7.7
TLT 338 3.7% 28.5 -3.1% 14.4% 284% 5% 4,850 3.3
TTC 268 -8.1% 18.1 11.0% 12.3% 22.5% 55% 3,950 5.2
GMX 150 19.0% 14.4 28.3% 17.8% 24.8% 72% 3,811 6.5
TCR 1,158 -27% -1.3 n/a 3.6% 7.4% 48% 1,055 3.9
HLY 40 -0.1% 3.2 172x 11.9% 18.1% 66% 4,100 4.9

2017 OUTLOOK REPORT
Brick producers' net profit margin and products price

14.0% 145 160
Thousand VND per sqm

NPM
12.0% 140
65
120
10.0%
95
74 100
8.0%
60 80
6.0%
60
4.0%
40
2.0% 20
0.0% 0
VHL VIT TLT CVT TTC GMX
2014 2015 9M2016 Products price VND/sqm

Encourage granite brick production. According to the Vietnam Construction Association,
total brick production capacity has reached 500 mn sqm per year, 84% of which is ceramic
(420 mn sqm per year), 12% of which is granite (60 mn sqm per year). The rest 4% is
occupied by others tile such as cotto, porcelain. In the plan of Ministry of Construction, the
ceramic production should be limited, meanwhile granite production should be encouraged.
In this plan, until 2020, granite brick capacity of the industry should rise up to 140 mn sqm
per year (equivalent to the CAGR of 23.5% pa). However, the Ministry also creates an
entrance barrier, which state capacity of new granite brick factories must above 6mn sqm
per year. Therefore, the minimum capital expenditure for new granite producers may rocket
up to VND 500 bn – 600 bn. We believe that this is an opportunity for granite tile
manufacturers to expand their production
Tile industry has more room to growth. As being construction material in completing
stage, brick producers are expected to keep on growing thanks to the completion of
construction projects since 2015-2016. In 2017, the supply of real estate in Ha No is forecast
to gradually grow at 9% in office segment, 4% in apartment segment and 10% in mansion
segment. Especially, many Shop houses under construction can be the huge source of
demand for brick products in the North area.
Brick industry is being protected by State. Tariff imposed on brick is up to 35%, which
creates a barrier against the new entrance from abroad. Therefore, the market share of
imported brick has sharply reduced from 80% (2010) to 35% (2015) (according to VIBCA).
High taxes help maintaining brick price at high level, also supporting domestic producers to
fight against Chinese original products.
Tariff on bricks classied by origin
Origin Tax rate Applied since
Preferential tariff 35% 1/1/2014

2017 OUTLOOK REPORT
ASEAN (ATIGA) 5% 1/1/2015
ASEAN – China (ACFTA) 20% 1/1/2015
ASEAN – Korea (AKFTA) 10% 1/1/2015
ASEAN – Japan (AJCEP) 20% 1/4/2015
Vietnam – Japan (VJEPA) 22.5% 1/4/2015
ASEAN – Australia – New Zealand (AANZFTA) 10% 1/1/2015
ASEAN – India 22.5% 1/1/2015
Source: Customs
The whole industry enhances capacity, which makes the brick price decrease. During
2015-2016, total production has reached 500 mn sqm, rocketing from 300 mn sqm in 2014.
The industry leaders (unlisted) increased their capacity to quickly gain more market share.
The ample supply decreases brick price, even such trendy products as cotto, granite, and tile
price has fallen by 3% - 4%, meanwhile ceramic products price has declined by about 10%.
Brick producers' capacity

100
80
Mn sqm per year
60
40
20
0
CVT Dong Tam Taicera Catalan Hoan My Toko Prime
2014 20115

Using CNG as a replacement of coal in factories operation. According to our estimation,
the cost of CNG which is as 10% higher as coal help increase the average quality of the
product, raising the A1 (the best quality with 15% - 20% higher price) portion. CNG also
provide heat more gradually, protecting environment and machine. The coal price has risen
recently. Therefore, those producers who has shifted to using CNG may avoid the negative
effect from coal.
According to those prospects, we come up with some criteria to invest on brick producers,
including (1) enhance capacity in 2017, producing new brick with higher margin, (2) use
CNG to operate factories, (3) granite and cotto producers are preferred.
Producer Catalyst Recommendation
VHL Main products are cotto and tile BUY with target price of

2017 OUTLOOK REPORT
Increase capacity from clinker factories VND 65,956 per share

Shifting product mix to tile with higher
margin
Exclusive sale to VGC
Main product is granite

Higher efficiency of Thai Binh factories
phase 2. OUTPERFORM
VIT Operate by CNG Target price VND 32,772 per
Tien Son factory has been fully share
depreciated (our estimation)
Exclusive sale to VGC
Do not increase capacity yet HOLD

TLT We expect a breakthrough in 2018 when Target price VND 18,590 per
the Phu Ha factory is completed share
Increase capacity of granite by 3mn sqm

per year in 2107
Flexible production line BUY
CVT Good merchantability Target price VND 47,640 per
share.
Profit margin is expected to narrow due
to higher raw material cost and lower
brick price
Plastic
2016 Highlights
Vietnam plastic industry is still a new sector compared to others such as mechanical,
chemical or textile industry, but it has grown rapidly in recent years. In the period of 2010-
2015, plastic industry is an industry which had the highest growth rate with an annual
growth rate of 16-18%. This came from a high demand because plastic products are widely
used in all sectors such as consumer goods, construction, telecommunication… We can see
that the amount of plastic per capita increased significantly from 33kg/year in 2010 to 41
kg/person in 2015, which shows a strong demand in domestic market. However, this figure
is relatively low compared to an average of the Asian region and the World (48.5kg/year and
69.7 kg/year respectively).

2017 OUTLOOK REPORT
Consumption in Vietnam plastic Production by quantity and

industry and Global value of Vietnam plastic
industry
155
160 146
9
140 128
8
120 7
100 6
5
80 69.70
4
60 48.50 3
38 40 41
37 37
33 2
40
1
20
0
0 2010 2011 2012 2013 2014
Quantity (million tons) Value (billion USD)
Note: Data of Asia, USA, EU and the World was in 2015

Source: VPA, VCBS
Export turnover of plastic products increased by 5.3% yoy in the first 9 months, and
Japan has been the largest export market. Since 2005, export of plastic industry has
grown steadily, reaching the CAGR of 20%. Plastic products are now exported to over
150 countries and territories around the world including Japan, China, Middle East,
Africa, Europe and America. In the first 9 months of 2016, export turnover of plastic
products achieved USD 1,618 mn (+5.3% yoy). Japan has been the largest importer with
import turnover of USD 375.7 mn, accounting for 23.2%. The US market is the second
largest exporter with import turnover of USD 246.4 mn, making up 15.2%. Meanwhile,
the Netherlands is the largest EU importer in the first 9 months with import turnover of
USD 92.7 m, accounting for 5.73% of total export turnover of Vietnam plastic industry.
Structure of the export market by Export turnover of plastic

value in 9T.2016 industry (million USD)
3.79% 2.59%
4.13%
2.12% 250
23.22%
4.36%
200
5.24%
5.50% 150
5.73% 15.23%
100
50
0
T1
T2
T3
T4
T5
T6
T7
T8
T9
T10
T11
T12
Japan US Netherlands Korea
German Cambodia UK Indonesia
Phillipine Thailand 2015 2016
Source: VPA, VCBS
Plastic resin prices declined in the first half of year in tandem with oil prices, but has
recovered since Q3.2016. Most plastic resins are produced by crude oil and natural gas,
only a modest amount is produced by corn or some other biological products, so plastic
resins price depends on oil prices volatility as well as natural gas prices. Packaging segment
accounts for the largest share, so PP and PE resins are two types of materials accounting for

2017 OUTLOOK REPORT
the largest proportion in import turnover.
In 2015, plastic firms have benefited greatly from the decline in world oil prices. Brent oil
prices plummeted by 47.5% compared to 2014 leading to a downward trend in the prices of
plastic resin (PVC resin price fell by 13.6% yoy, PP resin price fell by 27.6% yoy and PE
resin price was down 24% compared to 2014). In the first half of 2016, resin prices remain
downward trend, but by the end of Q3, oil prices have rebounded from the bottom of USD27
to over USD 50, so that resin prices have increased compared to Q2. In particular, PVC resin
price rose by 4.4% qoq, PP prices increased by 14.6% qoq, only HDPE resin price was down
slightly by 1.3% compared to Q2.
Structure of plastic resin Plastic resins and oil price

imported volatility
100%
1800 70
90% 6.3% 1600
6.1% 60
80% 11.6% 1400
11.9% 50
70% 5.9% 5.4% 1200
8.1% 8.3% 5.6% 1000 40
60% 8.1%
28.8% 31.7% 8.8% 800
6.6% 30
50% 26.4% 24.7% 600
40% 22.8% 20
22.0% 400
30% 200 10
20% 40.4% 40.5% 0 0
32.6% 32.1%
01/01/15
01/03/15
01/05/15
01/07/15
01/09/15
01/11/15
01/01/16
01/03/16
01/05/16
01/07/16
01/09/16
01/11/16
27.0% 27.5%
10%
0%
2010 2011 2012 2013 2014 2015
PE PP PET PVC PS HDPE PVC PP Brent oil
Sources: VPA, VCBS Source: Bloomberg
2017 Outlook Export turnover is expected to increase in 2017 with the main markets of Japan and
the US. Look at the positive developments in the first 9 months, export turnover of plastic
products is projected to rise in 2017. However, the EU market is likely difficult for domestic
firms because of unfavorable evolution of EUR which causes damage on the number of
orders as well as domestic firms. They are subject to competition from goods produced in
the region due to the cost of goods and raw materials fell as the EUR down. Japan and the
US are still potential markets for exporting with huge demands.
 Packaging segment - growth potential depends on the end - product industry such
as food and beverages.
 Consumer segment - great potential but is under competitive pressure from
foreign rivals.
 Construction segment – the recovery of real estate and construction industry
supports growth of this segment.
 Recycled plastic – a new trend in future.
Plastic resins price is expected to increase in the last months of 2016 and stay at this
level in 2017. The explanations are below:

2017 OUTLOOK REPORT
- Oil prices are expected to fluctuate between 50-55USD in 2017. The agreement to
cut oil production of the members of OPEC made oil price rebound sharply to more
than 50 USD/barrel. OPEC will reduce by 1.2 million barrels per day from 33.6
million barrels/at present and it will take effect since the early of 2017. However,
this likely leads to the fact that shale - oil manufacturers in the US will increase oil
production which will have negative impact to oil price. Meanwhile, demand for
crude oil in China has risen strongly in the last months, but perhaps that imports
surged by the decline of oil prices, rather than the increase in actual demand.
Hence, the effort of OPEC to increase oil price may not be effective.
- The US market: PPIPRAM Index which evaluates raw material and plastic resins
in the US market has risen since September.
- Other markets: PE and PP resins price in Turkey increased in November compared

to the previous months due to pressure of being less profitable than other markets.
Prices have fluctuated between 10-40USD/tons. The decline in supply can be
because factories in Saudi Arabia, Oman, India and Egypt closed. Another reason
contributing to this upward trend is due to the Chinese market has recovered and
pulled prices up. At the same time, the import tax of PP resin which will increase to
3% in 2017 also have impact to the resin price when suppliers likely increase PP
resin price in tandem with adjusted tax rate.
According to this analysis, we think that plastic resins price will rise in the last months of
2016 and remain at this level or increase slightly in 2017. However, most Vietnamese
plastic firms have reserved raw materials to produce within 2 to 6 months, especially in the
peak season. Therefore, there is a certain lag and firms must be flexible in order to avoid
significant impact of the volatility of raw material costs.
Tax policy affecting to Vietnam plastic firms. Decree 122/2016/NĐ-CP on the import
tariff for PP:
- Since 01/09-31/12/2016: Import tariff of PP is 1%
- Since 01/01/2017: Import tariff of PP is 3%
This leads to difficulties in raw materials source for manufacturing enterprises, especially
food and construction packaging. According to the VPA, if the import tariff increase to 3%,
domestic plastic firms have to pay for importing materials around VND 1,870 bn in 2017.
Hence, domestic plastic firms are subject to not only increase in plastic resin price but also
the import tax cost. Meanwhile, PP manufacturers in some countries such as Asian nations,
Korea, China has advantages.
Competitive pressure in domestic market. There are more than 2,000 companies operating
in the plastic industry, of which approximately 84% are concentrated in the South where
intense competition occurs, and 14% are located in the North. Packaging plastic which
competition does not take place directly because of having four small segments has
remained the highest proportion (37.4% in 2015). However, we note that with an increase in
import tax rate of PP resin, domestic firms in food and construction packaging will likely
come under pressure competition from foreign rivals as we have mentioned above.
Construction segment is under pressure of intense competition when two leaders which are
NTP and BMP have begun to expand their market share into rival‟s market as well as the

2017 OUTLOOK REPORT
central market which has no leader. The acquisition of Five Star Plastic JSC and the merger
plan of Da Nang Plastic JSC show this strategy. Apart from BMP and NTP, other firms have
begun to penetrate into the construction plastic market such as Hoa Sen Binh Dinh plastic
factory of Hoa Sen Group, Stroman Hung Yen plastic factory of Tan A Dai Thanh and
Europipe. Although domestic plastic enterprises remain dominant due to large-scale and
strong brand, we believe that, if there is no reasonable policies to adapt to competitive
market, the market share of them will be affected negatively.
9M.2016 Performance In the first 10 months, the majority of plastic stocks has risen significantly, caused by
(1) Raw materials prices declined which supports profit margin.
(2) Production has increased because of rising capacity and expanding scale of
operation.
(3) Real estate and construction market have recovered in recent years.
(4) Demand for plastic products worldwide increases or the trade agreement will be
signed (FTA ...).
Market cap Net sales NPAT GPM

Ticker Segment (VND bn) 9M.2016 % yoy 9M.2016 % yoy 9M.2016 D/E
AAA Soft package 1,520.67 1,476,234 27.82% 101,476 427.29% 14.11% 104.61%
RDP Soft package 621.84 890,007 6.46% 50,288 9.48% 13.56% 175.23%
SPP Soft package 309.06 612,752 -0.38% 11,498 65.99% 13.35% 447.82%
NNG PET package 771.94 1,246,216 -6.29% 8,876 -76.28% 32.94% 191.95%
TPC Food package 185.04 532,434 4.39% 16,221 112.93% 6.96% 60.35%
TPP Food package 204.59 383,410 -10.05% 18,977 71.30% 20.93% 211.83%
DTT Food package 81.52 93,983 5.94% 5,423 20.65% 16.72% 17.26%
VPK Food package 123.20 148,024 -35.30% 3,528 -82.40% 15.30% 121.25%
BPC Construction package 79.04 239,668 16.27% 13,445 93.45% 16.42% 62.71%
BXH Construction package 78.31 151,209 22.03% 7,137 78.92% 15.93% 66.34%
DPC Construction package 88.82 52,335 -13.08% 1,744 62.84% 19.63% 0.00%
VBC Construction package 234.00 508,334 6.03% 22,286 13.85% 11.85% 177.38%
BMP Construction plastic 9,186.65 2,478,640 19.80% 539,648 38.72% 34.69% 2.26%
NTP Construction plastic 5,793.21 3,102,643 21.89% 284,463 8.87% 35.27% 50.95%
DNP Construction plastic 678.04 1,079,784 65.40% 68,498 92.83% 20.68% 336.47%
DAG Construction plastic 590.37 1,032,646 6.13% 43,271 33.35% 8.79% 74.08%
Source: FS of firms, VCBS
Potential firms in 2017 Based on the potential as mentioned above, we recommend investment opportunity in 2017
including: NTP, BMP and DNP.
 Tien Phong Plastic JSC (HNX-NTP)

NTP – Positive
Results in 9M.2016
In the first 9 months, NTP recorded a positive growth in its performance. Net revenue was
VND 3,102.6 bn (+21.9% yoy, 79.5% of plan), NPBT reached VND 319.6bn (+8.5% yoy,
77% of plan) and NPAT increased by 8.8% yoy to VN284.4 bn.

2017 OUTLOOK REPORT
Net profit after tax recorded a modest growth. NPAT reached VND 87.7 bn (+2.2% yoy) in
Q3.2016, and VND 284.4 bn (+8.8% yoy) in 9 months. Despite a positive growth of revenue,
NPAT increased moderately due to the fact that (1) plastic resins price has recovered which
made COGS rise (2) NTP tries to protect and expand market share by boosting selling activity
through increasing discount rate for dealers and contributors in the intense competition in
plastic industry. This leads to an increase in selling expense and higher proportion of net sales.
(2) Financial expenses increased mainly due to interest from bank loan. Hence, the net profit
margin of NTP only achieved 9.17% compared to 10.27% of the same period in 2015.
Central Tien Phong Plastic JSC: Benefit from tax incentive. Nghe An factory focuses on
production of uPVC, PE, PPR pipes which is divided into 2 phases with total capacity of
40,000 ton/year. This firm benefits from tax incentive: 0% for the first 4 years (2014-2017),
7.5% for the next 10 years (2017-2028) and 15% for the following years.
2017 outlook
In 2017, we forecast:
- Net revenue is projected to achieve VND 5,131.2 bn (+18,1% yoy) with an increase
by 17% yoy of production, reaching 99,549 ton.
- Gross profit margin is forecasted to reach 34.2% due to the recovery of oil prices
which leads to an increase in plastic resin prices.
- Selling expense/sale ratio rises slightly to 20.5% because in 2017, NTP will subject
to intense competition from other rivals such as Hoa Sen Group, Europipe and Tan
A Dai Thanh. Hence, it is likely that NTP will increase selling expense to protect
and expand market share.
- We forecast 2017 NPAT of VND 424.2 bn (+9.39% yoy). EPS in 2017 will reach
5,134 dong/share (after provision). With a price of 77,000 VND/share in 13,
December 2016, NTP is trading at a PE forward 2017 of 15.
NTP is a leading enterprise in Vietnam plastic industry with positive revenue growth and
steady annual profits, cash flow and strong financial health. They are making efforts to protect
and expand market share using a different strategy compared to BMP. While BMP focuses on
profitable growth, NTP minimizes competitive risks by switching to a new strategy focusing
on plastic pipes for projects with higher growth rates. We think that this is an important and
reasonable strategy in this situation. However, NTP also has some risks, such as (1)
fluctuations in raw material prices, (2) the high discount rate affecting profit and (3) the
exchange rate risk. In terms of SCIC divestment, it is likely that Thailand shareholders - The
Nawaplastic Industries with the percentage of ownership of 23.8% will increase ownership
rate. However, the share price has surged 64% since the beginning of year due to information
of this divestment. Using the discounted cash flow methods (FCFF, FCFE), we determine the
price of NTP after one year is 88,238 VND /share. We recommend POSITIVE for NTP.
 Binh Minh Plastic JSC (HSX – BMP)

BMP – Positive
Results in 9M.2016
The first 9 months results recorded positive growth. Net revenue reached VND 2,478.6 bn
(+19.8% yoy, 74.4% of plan, NPBT was VND 663.1 bn (+34.8% yoy, 110% of plan) and

2017 OUTLOOK REPORT
NPAT reached VND 539.6 bn (+38.7% yoy). The positive performance came from:
- Consumption increased compared to the same period.
- Plastic resins price reduced which made gross profit margin improve.
Conducting Phase 2 of Long An plant.
 Phase 1: capacity of 5,000 tons/year was put into operation from 10/2015.
 BMP will implement Phase 2, with a capacity of 90,000 tons/year.
 In 2 years from 2017 to 2018, BMP will install machinery, production lines according
to the ability of the company and increase capacity to match the demand of the
market. BMP estimates in Phase 2 of Long An, plant, BMP will disburse more than
VND 300 bn each year.
2016 Outlook
In 2017, we forecast:
- Net revenue is projected to achieve VND 3,649.6 bn (+12.9% yoy) with an increase
by 13% yoy of production, reaching 90,444 tons.
- Gross profit margin is forecasted to decline from 34.3% to 33% in 2017. We believe
that similar to NTP, BMP will be affected when oil prices rise.
- Selling expense/sale ratio rises slightly to 4.7% and G&A/sales ratio remains 3.44%.
- We forecast 2017 NPAT of VND 707.1 bn (+12.4% yoy). EPS in 2017 will reach
13.995 dong/share (after provision). With a price of 195.000 VND/share in 13,
December 2016, BMP is trading at a PE forward 2017 of 13.9.
BMP is one of two leaders in Vietnam plastic industry with an extensive distribution system
and reputable brand for more than 38 years of operation. Besides, BMP has maintained steady
growth, sales production and ensured reasonable discount policy for dealers as well as good
customer care regime. Financial health has maintained a healthy state with no long-term debt
and only a small amount of short-term debt to finance the production and core activities.
Moreover, BMP is one of 10 companies on the list SCIC divestment in the future, so when
completing the internal procedures to open room to 100%, BMP will become more attractive
to foreign investors. Using the discounted cash flow methods (FCFF, FCFE), we determine the
price of BMP after 1 year is 222,500 VND/share. We recommend POSITIVE for BMP.
Note: The prices of NTP and BMP exclude premium for investors' expectations after the
SCIC divestment.
 Dong Nai Plastic JSC (DNP)

DNP – Positive
Results in 9M.2016
DNP recorded an outstanding performance in 9T.2016. Net revenue reached VND 1,081.6 bn
(+65.3% yoy) and NPAT increased 72.6% yoy to VND 52.9 bn. Gross profit margin of DNP
also raised from 17.8% to 20.7% in the first 9 months. Thus, DNP has completed 67% of
revenue plan and 70.3% of the profit plan. DNP has two plants with total capacity of 48,000
tons/year, loyal customers and a good relationship with suppliers and dealers. The company‟s
products are used mainly in construction segment rather than consumer segment which helps
them avoid competing directly with BMP and NTP.

2017 OUTLOOK REPORT
Gross profit margin has maintained a high level despite plastic resin price recovery. This
could be because, DNP has reserved raw materials since the beginning of the year, making
inventory in the first 3 quarters maintain at a high balance. This low price of raw materials will
improve profit margin when oil prices rise. As we discussed above, oil prices have recovered
and reaching over 50 USD/barrel, DNP will therefore benefit from cheap raw materials.
Water sector will help to improve overall profit margin of DNP. DNP owns Binh Hiep
Water Plant - one of the leading profitable companies in the water supply with two plants Ca
Giang and Tan Thanh with total capacity of 30,000 m3/day supplying water for Phan Thiet
city, Binh Thuan province. With the advantage of Ca Giang lake located near the plant, Binh
Hiep does not need to invest pipeline (accounting for 50-60% of total investment cost). DNP
has just completed the acquisition of the Dong Tam Water plant (DTW), but it works quite
lower than capacity of 35,000m3/day. However, DNP expects to restructure DTW and increase
capacity to 50,000 at the end of Q1.2017 and to 70-80,000 m3 at the early of 2018. Due to lack
of financial information, we will not evaluate effectiveness of this investment.
2017 outlook
Main growth drivers of DNP in 2017 still come from manufacturing plastic products
estimated to grow by about 10%. Besides, in 2017 DNP will start selling accessories and pipes
in construction and consumer market which is expected to increase revenue. DNP is improving
the system of plastic pipe production plants in all three regions, and continue to invest in
northern plant systems to reduce transportation costs from the central to the north, and
complete contribution network in all three regions.
The water sector will also create good cash flow with revenue and profit mainly come from
Binh Hiep Plant. After water plant in Long An, Tien Giang put into operation and the capacity
expansion of Binh Hiep Plant completes (+20,000 m3/day), this will contribute higher profit to
total profit of DNP at the end of 2017 onwards.
Recommendation
We believe DNP is a POSITIVE stock in 2017, caused by:

 DNP is one of the leading enterprises in drainage pipes sector used in construction in
the Central and the South.
 Profit margins remains stable thanks to reserving raw materials at low price.
 M&A activities in recent years help to increase revenue and profit.
- Water production is forecasted to have a high potential and contribute to the
profitability and sustainability of DNP.
Tire
2016 Highlights: Tire consumption The strong growth of the domestic market for automobiles and motorcycles is a
continued to grow; however prerequisite for growth in production and consumption of tires. According to the
domestic firms had to face many Vietnam Automobile Manufacturer‟s Association - VAMA, total automobile sales volume in
difficulties due to unfair the first 11 months of the year reached 243,675 vehicles (+32% yoy), including 140,921 units
competitions posed by imported from sales of passenger cars (+36% yoy), 90,227 units from sales of commercial vehicles

2017 OUTLOOK REPORT
tires from China. (+25% yoy) and 12,527 units from sales of special-purpose vehicles (+37% yoy). In
particular, sales volume of CKD reached 205,355 units (+33% yoy) and sales volume of CBU
reached 65,768 units (+7% yoy). Not having a strong double-digit growth as the automobile
market, the motorcycle market maintained a stable growth with 1,444,182 units sold (+8%
yoy) in the first 6 months of 2016 (Source: Vietnam Association of Motorcycle Manufacturers
- VAMM). According to the Traffic Police Department, there were about 2.5 million cars and
49 million registered motor vehicles, of which motorcycles accounted for 95% (~46.5 million
units), at the end of 2015. Therefore, we have estimated that, there will be about 2.8 million
cars and about 49.5 million motorcycles at the end of 2016.
The fact that the Ministry of Transport has enhanced its measures to control truck load limits
since 2014 has become one of the key drivers for tire consumption growth in the domestic
market. Because of these measures, production of domestic firms in the tire industry had
increased positively. According to the 6M.2016 data of Vinachem, automobile tire
production reached 1,214,527 units (+10.9% yoy); motorcycle tire production reached 3.8
million units (+20.1% yoy); and bicycle tire production reached 5.6 million units (+1.9%
yoy). Specifically, automobile tire exports reached 353 thousand units (+23.3% yoy). The
truck load limits, however, helped reduce weight pressure on tires and extend life cycles of
tires. Hence, the growth of tire consumption was somewhat slower than the growth of
automobile sales.
Although the market looked positive, domestic tire manufacturers were struggling for
sales due to some main reasons:
(1) Pressure to lower selling prices in order to compete with tire imports from China.
According to Vinachem, selling prices of some major domestic tire manufacturers had to
be discounted by 16-19% for bias tires and 4-6% for radial tires since the beginning of
2016 as the Chinese tire tax fraud was still happening. Currently, a majority of tires in
Vietnam are imported with Chinese tires, which are mainly radial tires, accounting for
60-70% of tire imports. The import tax for these products is officially set at 10-25%.
However, stated values of Chinese tires are usually declared at 70% lower than their true
values at the Custom. Hence, with lower expenses from import tax, these tires can be sold
at more attractive prices than domestic tires. Meanwhile, the production scale of domestic
manufacturers though has been expanded significantly, remains small compared with the
scale of Chinese manufacturers. Thus, domestic production costs per product are not yet
at an optimal level. Moreover, since radial tire is a new business line of domestic
manufacturers, selling prices still have to bear depreciation and interest expenses, which
are very high in the early stage of the business. Accordingly, selling prices of domestic
tire manufacturers become less competitive compared with prices of products imported
from China.
(2) Sharp increase of input prices. As one of the main materials in tire production, natural
rubber accounts for 30-40% of tire component. Hence, the fluctuation of natural rubber
has an important impact on profit margins of tire manufacturers. Prices of natural rubber
have started to rebound strongly (+36.63% ytd) compared with at the beginning of 2016,
but still remain at a low level. After bottoming out in the final months of 2015 and early
2016, natural rubber prices have rebounded strongly, reducing gross profit margins of
domestic tire manufacturers in the last 6 months of 2016 compared with in the previous
months.

2017 OUTLOOK REPORT
Natural rubber price (USD cents/kg)

90
85
80
75
70
65
60
55
50
Jun-15
Aug-15
Nov-15
Oct-15
Jun-16
Aug-16
Nov-16
Oct-16
Feb-15
May-15
Jul-15
Sep-15
Mar-15
Apr-15
Dec-15
Feb-16
Apr-16
May-16
Jul-16
Sep-16
Jan-15
Jan-16
Mar-16
Source: Index Mundi
Accordingly, business results of listed companies in the industry are also less positive
than in the same period in 2015 and the possibility that these companies will not reach their
yearly guidance is quite high. Specifically, the 9M 2016 business results are as follows:
Net revenue (billion VND) Net income (billion VND)
9M 2016 % yoy % guidance 9M 2016 % yoy % guidance

DRC 2,428.4 -1.39% 64.28% 352.3 -4.86% 66.22%
CSM 2,278.8 18.01% 66.63% 225.3 -17.53% 68.29%
SRC 661 -9.41% 65.78% 66.3 -17.14% 69.08%
Source: VCBS
2017 Outlook: Competition in the The automobile market will maintain its steady growth, but can hardly achieve a surge
industry is getting fiercer; the as in previous years. While the import tax rate for vehicles from ASEAN countries will fall
outlook in 2017 will depend largely from 40% to 30% in 2017, this rate will fall further to 0% by the beginning of 2018. Thus,
on the mechanical growth rate of consumers‟ resistance behavior might arise and slow down the growth of personal vehicle
the sector and exports. sales, which account for approximately 57.29% of total of vehicle sales (Source: VAMA).
With the macroeconomic environment forecasted to be as stable as in 2016, we believe that the
sales volume of trucks in 2017 will not sharply increase. Besides, the motorcycle market will
likely be saturated. Since the registered motorcycle volume in the whole nation today (about
49 million units) has outweighed the traffic planned for 2020 (36 million units), we believe
that the State will create new policies to limit the number of motorcycles. Therefore, the
demand for tires in the domestic market is expected to maintain a steady growth as in 2015 at
12% yoy.
However, export activities have shown positive signals as the US and India markets will
apply anti-dumping duties to truck tires from China, lifting tariffs to 42-45%. In 2015, the
number of Chinese tires for trucks exported to the US market is about 9 million tires, which
are worth USD 1.07 billion (Source: Tire Business). Therefore, the opportunity to expand
market share in the US for Vietnamese tires is quite bright. Current sales of light truck tires
from Vietnam show a strong growth in the US market with a selling price 12.11% lower than
the price of the same type of tires from China and 15.88% lower than the average price of the

2017 OUTLOOK REPORT
same type of imported tires to the US.

Light truck tire imports to the United States
2015 2014 Average

% change
(Units) (Units) $ value
Canada 7,525,713 9,181,733 -18.0% $66.04
Japan 3,025,421 2,408,078 25.6% $97.39
South Korea 2,973,774 2,711,770 9.7% $78.96
China 2,973,051 6,346,082 -53.2% $60.88
Thailand 1,858,374 1,061,806 75.0% $68.51
Vietnam 1,341,331 771,687 73.8% $53.51
Mexico 1,239,053 1,040,365 19.1% $62.45
Indonesia 928,518 589,636 57.5% $73.69
Chile 714,578 1,018,622 -29.8% $64.21
Taiwan 541,904 306,620 76.7% $102.06
Others 1,136,463 480,132 136.7% $89.85
Total 24,258,180 25,916,531 -6.4% $72.37
Source: U.S. Department of Commerce

As for the Indian market, imported tires from China accounted for 90% market share of Indian
imported tire for truck market, which sold about 708 thousand tires in the fiscal year of 2015-
2016 (Source: ATMA). We believe that there is a chance for Vietnamese tire manufacturers to
increase their market shares in the US and India markets.
Natural rubber prices may rise but will remain at a low level in 2017. The possibility for
rubber prices going uptrend in the long term is not high because:
 Currently, rubber prices are in the low range at around USD 0.76/kg, lower than the
average price of rubber in the last 5 years at USD 1.05/kg (Source: Index Mundi).
 The fact that the US and India will adopt anti-dumping taxes on imported tires from China
in 2017 will reduce the consumption of Chinese tires, and as a result, the demand for
rubber.
Therefore, we believe that in 2017, rubber prices will not increase sharply and will maintain at
a low level. However, tire manufacturers will now no longer benefit from the reduction of
input costs as seen in the early months of 2016.
The competition with Chinese products will be intense, especially when Chinese truck tires
that are usually exported to the US and India markets (estimated 10 million truck tires in
volume) will be difficult to sell due to anti-dumping taxes in these markets and will be dumped
to Asian markets, including Vietnam. However, we believe that this pressure will not last in
the long run since the Chinese government is also planning to shrink its tire industry size by
raising barriers to entry such as quality and environmental requirements.
In addition, interest rates are expected to increase in 2017 and the USD/VND is likely to go
uptrend even though the rate will still be controlled within a small fluctuation. As a result,
production costs of domestic manufacturers will rise and selling prices will be less attractive
compared with Chinese products‟.

2017 OUTLOOK REPORT
Therefore, we believe that the outlook in 2017 for tire production firms will mainly depend on
the volume growth of the Vietnam tire market, which is forecasted to grow at 12% yoy, and
these firms‟ ability to export to markets that are not in direct competition with Chinese tires
such as the US and India markets.
Due to the difficult market environment, there is a high probability that publicly-listed tire
production companies such as DRC, CSM and SRC will not meet their business targets for
2016. We forecast business results of these 3 companies as follows:
Net revenue (billion VND) Net income (billion VND)

2017F 2016F % yoy 2017F 2016F % yoy
DRC 4,199 3,298 26.57% 371 373 -0.44%
CSM 3,203 3,030 -17.39% 256 280 -8.57%
SRC 843 882 -4.42% 80 89 -10%
The facts that all publicly-listed tire companies could not maintain positive growth rates in
2016 and that the outlook for 2017 of the tire industry is not quite as optimistic as in the
previous years have clearly reflected on the stock prices of DRC, CSM and SRC. The stock
values of these tickers have dropped by as low as -20.22%; -26.71% and -11.70% respectively
since the beginning of October. We think that the tire industry is in a pretty attractive price
range and investors should pay attention to stocks with good fundamentals and clear business
strategies.
Potential firms in 2017 Regarding the three listed companies, we maintain our HOLD recommendation for DRC
in a long term perspective because the firm still has potential for growth, considering the
DRC
increase in its production capacity of radial tires and the firm‟s opportunity to expand its target
market by exporting to the US and Indian markets.
Business results in 9M 2016
In 9M 2016, DRC had shown a good performance in sales volume with 163,587 units of radial
tire (+30.76% yoy) and 667,164 units of bias tire (+5.24% yoy) sold but a downtrend in sales
with VND 2,428.4 billion in revenue (-1.39% yoy, 64.28% of 2016 target) and VND 352.3
billion in PBT (-4.86% yoy, 66.22% of 2016 target). The main reasons for these results are:
(1) The bias tire segment, which had high profit margins (from 25.93% to 37.60%),
declined because that were gradually being replaced by radial tires and demand for
tires in general were slow down since the product life cycle was greatly improved
thanks to stricter truck load limits‟ policy by government.
(2) The radial tire segment‟s production had yet to reach the breakeven volume and its
gross margin is still negative (-10.32%).
(3) The pressure to further discount its selling prices to compete with Chinese tires had
made DRC drop the average selling prices of radial tires and bias tires –by 17.04%
yoy and 13.90% yoy respectively.
Therefore, DRC‟s gross margin fell from 24.93% a year ago to 20.84% this year. Interest
expenses decreased by 22.98% yoy thanks to the decrease in borrowings and the stability of
the VND/USD rate, considering that 50% of DRC‟s borrowings were denominated in USD.
Consequently, debt to total assets ratio was at 0.45 times, lower than that a year ago at 0.51
times.

2017 OUTLOOK REPORT
Outlook in 2017
Despite DRC‟s pressure to compete with Chinese tires and the possibility that its gross margin
will be negatively impacted due to increasing depreciation costs after Phase 2 of the radial tire
plant starts, we still believe that DRC's outlook remains positive in the long term. In particular,
the major growth drivers of DRC in 2017are the following:
(1) Reducing fixed costs per radial tire. DRC began to start Phase 2 of its radial tire
plant with an extra production capacity of 300,000 units/year (100% higher than the
current capacity). The total investment costs of this Phase 2 are only half the
investment costs of Phase 1, at approximately VND705 billion, an equivalence of
VND 502 billion was borrowed in dollars with an interest rate of ~4%/year to finance
Phase 2 operation. As planned, the first batch of Phase 2 radial tire project will go on
sale in Q3.2017. This will help DRC‟s radial tire sales volume reach the breakeven
point soon. However, the facts that the phase 2 of DRC‟s radial tire plant will go into
operation next year and that DRC has shortened its depreciation policy for equipment
from 17 years to 8 years on average since 2015 mean that DRC‟s depreciation
expenses will increase, while depreciation expenses/total revenue and depreciation
expenses/unit will decrease. Hence, gross profit margin will be affected negatively in
short-term before improving gradually in long-term. The gross profit margin is
projected to fall from 20.6% to 18.4% in 2017.
(2) Opportunity to expand the market for car tires to the US and India. Although the
shifting trend from bias tires to radial tires is taking place gradually in the domestic
market, selling prices of DRC‟s radial tires are not yet attractive compared with prices
of the same products from China. Therefore, in light of the anti-dumping policy for
Chinese truck tires in the US and India market, DRC is expected to boost exports to
these two markets in the near future in order to avoid direct price competitions with
Chinese truck tires. Currently, DRC has been testing its products in the US market by
exporting around 4 containers/month (~240 units/month). Moreover, DRC has also
found potential customers whose orders for the coming year can be as big as the
company‟s entire radial tire production (600,000 units) in these markets and is under
the process of negotiating prices with these potential customers.
We project that revenue of DRC in 2017 will reach VND 4,199 billion (+26.57% yoy) and
net income will be VND 371 billion (-0.44% yoy). Forward EPS for 2017 is VND 1,702
according to Circular 200 (or ~VND 2,837/share based on the old EPS calculation method),
corresponding to a P/E of 18.80x (~11.28x based on the old EPS calculation method). We
assume that the fair price for DRC in 2017 is VND 34,917/share.
Power Industry
2016 Highlights: Overview

Hydrological developments As of October 2016, the power industry in Vietnam has total installed capacity of around
adversely affect hydropower plants 38,676 MW. According to Vietnam Electricity (EVN), power output in Vietnam grew at
in the first half of 2016 while 10.84% CAGR in the period from 2011 to 2015. In the first 10 months of 2016, total power
leaving a positive impact in the output reached 132.6 billion kWh - 11.34% higher than total power output in the same period
second half. in 2015. EVN‟s forecast of Vietnam‟s total power output in 2016 is 159.1 billion kWh -
10.72% higher than total power output in 2015.
Fuel prices tend to rise for both
coal-fired and gas thermal plants, Changes in structure of the industry between 2015 and 2016

2017 OUTLOOK REPORT
reducing these plants’ profits in the

second half of 2016. 2016 2016
2015 2015
Power output 11M.2015 vs 10M.2016 Installed capacity 2015 vs 2016
(Source: NLDC, EVN, VCBS)

Vietnam’s power industry structure is to be more heavily weighted toward coal-fired
thermal plants. According to the adjusted Power Development Plan VII (PDP 7), the
Vietnamese government aims to increase the share of capacity from coal-fired thermal plants
(32.8% in October 2016) to 42.7% in 2020 and 49.3% in 2025. The share of power output
from coal-fired (37.05% in 10M 2016) is targeted to increase to 49.3% in 2020 and 55% in
2025. The main reason behind this emphasis on coal-fired plants is that the utilization of the
river system in Vietnam for hydropower is close to its maximum level. As a result, the
industry needs to shift toward building more coal-fired plants to catch up with the double-digit
growth of power demand.
Geographically, as of October 2016, total installed capacity is 15,516 MW in North Vietnam,
9,275 MW in Central Vietnam and 15,455 MW in South Vietnam. There is not much change
from 2015 regarding the structure of power demand in these three regions. The South
continues to have high power demand, resulting in power transmission from the North and
Central to the South.
Average daily electricity price in Vietnam competitive generation market
2000
1000
0
1/2015 4/2015 7/2015 10/2015 1/2016 4/2016 7/2016 10/2016
Average price SMA 30 day SMA 30 day - max price
(Source: NLDC, VCBS)

Electricity prices in Vietnam competitive generation market (VCGM) in 2016 decreased
compared with in 2015, reducing profits of companies in the industry. The price cap of the
market in 2016 was 1,171 VND/kWh while the price cap in 2015 is 1,280 VND/kWh.
Performances of companies in the industry
Total Net profit Revenue Revenue EV/
Stock Debt/ Gross profit EV/ EBIT
Assets margin ROE 9M 2016 9M 2016 EBITDA P/E ttm P/B
ticker Assets margin ttm ttm
(VND bn) ttm (VND bn) yoy ttm
SHP 2,719 51.8% 48.2% 18.1% 6.3% 341 -18.2% 14.5x 8.0x 25.2x 1.6x
VSH 5,836 48.5% 61.8% 54.4% 8.2% 329 -9.4% 20.1x 15.2x 13.8x 1.2x
CHP 2,890 45.3% 59.8% 34.7% 14.0% 291 -32.7% 12.2x 8.2x 12.7x 1.8x
TMP 1,503 28.2% 44.2% 24.7% 10.5% 348 -29.3% 9.9x 5.5x 18.5x 2.0x
SJD 1,482 18.0% 58.0% 35.9% 11.4% 265 -13.3% 10.2x 7.1x 9.3x 1.0x
SBA 1,429 49.4% 67.5% 29.1% 8.8% 105 + 6.1% 10.4x 8.1x 11.5x 1.0x
S4A 1,258 62.4% 50.3% 9.2% 3.9% 127 -25.6% - - 30.9x 1.5x

2017 OUTLOOK REPORT
TBC 937 0.0% 62.4% 49.1% 15.4% 222 + 15.5% 7.8x 6.0x 11.0x 1.7x
HJS 510 42.9% 41.0% 23.2% 16.0% 123 + 2.0% 9.3x 5.6x 8.1x 1.2x
DRL 118 0.0% 54.3% 47.9% 22.1% 35 -13.6% 10.3x 7.5x 13.9x 3.2x
Mean 11.6x 7.9x 15.5x 1.6x
Median 10.3x 7.5x 13.2x 1.6x
NT2 11,383 46.8% 26.4% 21.2% 27.7% 4,461 -11.2% 9.6x 6.6x 6.0x 1.6x
BTP 2,055 29.2% 13.1% 8.9% 15.7% 1,248 -5.5% 2.1x 1.9x 5.0x 0.8x
PPC 10,054 47.2% 8.8% -5.3% -6.3% 4,489 -25.7% 14.2x 12.0x - 1.2x
NBP 431 0.0% 13.1% 4.3% 11.2% 504 -4.0% 4.6x 3.8x 8.2x 0.9x
Mean 7.6x 6.1x 6.4x 1.1x
Median 7.1x 5.2x 6.0x 1.0x
(Source: Bloomberg, VCBS - updated on 12/15/2016)

Hydropower plants In 9M 2016, hydrological conditions have major changes, affecting the hydropower
segment’s earnings. El Nino has ended in May 2016 and no longer caused adverse impacts on
the hydrological condition in Vietnam. In addition, La Nina, which has opposite conditions to
those seen in El Nino, is confirmed to start in October 2016. Current statistics predict a mild
La Nina that will end around February 2017.
Overall, revenues in 9M 2016 of hydropower companies declined year-over-year due to El
Nino‟s extreme conditions peaking in the first half of 2016. As El Nino ended in May 2016,
business results in Q3 2016 have shown positive signs with many companies reporting year-
over-year revenue growth.
Oceanic Nino Index (ONI)
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
El Nino Neutral La Nina
(Source: Climate Prediction Center - CPC, VCBS)
Thermal plants In 9M 2016, besides falling electricity prices in VCGM, fluctuations in fuel prices and foreign
exchange rates are the main factors affecting earnings of thermal power companies. It should
be noted that fluctuations in fuel prices only affect the profits from electricity sales in VCGM
while generally leaving contractual electricity sales untouched. Therefore, the impact of
changes in fuel prices on the profits of thermal power companies is not too substantial.
Thermal coal prices in China and Australia had risen up since June 2016 before
dropping down in November 2016. Due to the upward trend of international thermal coal
prices, coal prices in Vietnam began to increase in Q4 2016. According to Vietnam Energy,
VinaCoMin decided in November 2016 to increase the prices for some classes of thermal coal,
including class 1, 2, 3, 6, 7a, 7b, and 7c. This increase began in Q4 2016 as domestic coal
prices remained stable during the first three quarters of 2016 and did not affect earnings of
coal-fired power companies.
Natural gas sold by PetroVietnam Gas Corp is priced at 46% of fuel oil price quoted in
Singapore commodity market. Therefore, natural gas prices in Vietnam followed the

2017 OUTLOOK REPORT
general trend of global oil prices, falling sharply in 2015 and slowly recovering in 2016.
Low natural gas prices in the first half of 2016 helped improve the earnings of NT2 and BTP.
However, as natural gas prices rebound and hydrological conditions have been favorable for
hydropower in the second half of 2016, we expect the earnings of NT2 and BTP in Q4.2016 to
be not as impressive as in the previous quarters.
The influences of fluctuating foreign exchange rates on thermal power companies varied
in 2016. By the end of 2015, NT2 had approximately 125 million USD and 117 million EUR
in foreign debt. BTP had around 32.5 billion KRW while PPC had around 23.7 billion JPY in
foreign debt. The earnings of these companies are all influenced by performances of the
currencies that their debts are denominated in. Notably, in 9M 2016, the JPY rose sharply,
leading to PPC‟s loss due to changes in foreign exchange rates of 762 billion VND. However,
this loss should shrink by the end of 2016 as the JPY has been declining in Q4 2016.
2017 Outlook: Based on the forecast of PDP 7, the year-over-year growth of power consumption in 2015
(11.4%) and of 10M 2016 (10.3%) as well as the stable GDP growth of Vietnam, we forecast
As power demand in Vietnam is
power demand in Vietnam to grow at 10.7% CAGR in the next few years. We forecast power
expected to grow by double digits in
demand in Vietnam to reach 176 billion kWh in 2017 and 195 billion kWh in 2018.
the coming years, power supply will
not catch up with power demand. Based on the construction progress of several power plants planned to launch in 2016 as well
Companies in the industry will as the construction plans for new power plants in 2017 and 2018, we believe that the domestic
continue to operate at maximum power supply in Vietnam will fail to meet the country‟s power demand during this period
capacity to meet industry demand. despite favorable hydrological conditions in 2017. Therefore, thermal power plants will
continue to be mobilized to operate at high capacity in the coming years to cater to the power
hunger of the economy.
Power demand and domestic power supply forecast (billion kWh)
300
250
200
150
100
50
0
2015 2016E 2017E 2018E 2019E 2020E 2021E
Power demand Domestic power supply
(Source: VCBS)
Hydropower companies will have positive prospects in 2017 due to favorable hydrological
conditions under the impact of La Nina. However, due to the cyclical characteristic of
hydrological conditions, we believe that hydrological conditions will not have significant
impacts on hydropower companies from a long term perspective.
A probable increase in domestic thermal coal prices in 2017 will negatively affect profits
of coal-fired power companies. As of December 2016, the increasing trend of international
thermal coal prices has ceased as factors led to the reduction of thermal coal supply in China
and Indonesia have eased off. Specifically, (1) production of thermal coal in China began to
increase again since August 2016, (2) Indonesian coal production is strengthened due to
increasing coal prices and (3) the appreciation of USD has reduced USD-quoted coal prices.
International thermal coal prices in 2017 are expected to not deviate much from the price level

2017 OUTLOOK REPORT
in December 2016. While international thermal coal prices have stopped growing, the current
price level is still higher than a year earlier. We believe that domestic coal prices will tend to
rise in 2017 due to the pressure from higher international coal prices, negatively impacting
earnings from electricity sales in VCGM of coal-fired companies.
Thermal coal prices in China and Australia (USD/ton)
150
100
50
0
1/2016
2/2016
3/2016
4/2016
5/2016
6/2016
7/2016
8/2016
9/2016
10/2016
11/2016
12/2016
Price of 5500 kcal/kg coal at Qinghuadao port China
Price of 5500 kcal/kg coal at Newcastle port Australia
(Source: Bloomberg, VCBS)

Natural gas price level in 2017 is expected to be higher than in late 2015 early 2016,
reducing profits of gas thermal power companies. The natural gas price of PetroVietnam
Gas follows global oil price movements. The Organization of the Petroleum Exporting
Countries (OPEC) has reached an agreement to cut oil output in December 2016. Accordingly,
oil production by OPEC is cut by 1.2 million bpd to 32.5 million bpd. However, as this is a
reduction from the high production level in October, the new production level is not too
different from the OPEC oil production forecast in the past. In addition, the world economy
has not shown clear positive signs that can influence global oil demand. We believe that oil
prices will likely continue to rise in the short term. In the medium and long term, oil prices
will remain stable. As the current oil price level is higher than in late 2015 early 2016 and is
unlikely to go down, natural gas prices in Vietnam will follow this trend. NT2 and BTP‟s
gains in VCGM due to low fuel prices in the first half of 2016 will not be sustained in 2017.
Singapore fuel oil price (USD/ton)
400
300
200
100
0
Price of FO 380 Cst Singapore

Price of FO 180 Cst Singapore
(Source: Bloomberg, VCBS)

Foreign exchange rates‟ fluctuations are difficult to predict. Regarding thermal power
companies that have large foreign-denominated debts (NT2, PPC, BTP), investors should
closely monitor developments in the specific foreign exchange rates before making investment
decisions
Potential firms in 2017
SHP - Hold Business result 9M 2016: In the first 9 months of 2016, revenue reached 341 billion VND (-
18.23% yoy, 58.66% of 2016 target). Profit reached 47 billion VND (-60.63% yoy, 28.25% of
2016 target). SHP's business performance is quite poor in 9M 2016 as (1) Da Dang 2 produced
2017 OUTLOOK REPORT
significantly low power output due to the impact of El Nino and (2) reducing electricity prices
in VCGM negatively affected Da Dang 2 and Da M'bri.
Outlook: We forecast that SHP‟s revenue in 2016 will reach 522 billion VND (-11% yoy, 87%
of 2016 target). Net profit is forecasted to reach 95 billion VND (-44% yoy, 58% of 2016
target) –equivalent to 928 VND in EPS. For 2017, we forecast that revenue will reach 649
billion VND (+24.3% yoy), net profit will reach 230 billion VND (+142% yoy) – equivalent to
2.367 VND in EPS. We believe that SHP‟s 2017 earnings will be positive due to the favorable
impact from La Nina.
Evaluation: We believe that the SHP is a low-risk investment option that would also not bring
impressive returns to investors. Nevertheless, we identified two factors that could positively
influence the value of SHP: (1) the proportion of power output sold in VCGM may increase in
the future and (2) Da M'bri‟s power output in the coming years can bring surprise as the
maximum power output of the power plant is not yet revealed. We price SHP‟s stock at 19,500
VND per share and recommend to HOLD the stock.
NT2 - Hold Business result 9M 2016: In the first 9 months of 2016, revenue reached 4,461 billion VND (-
11.2% yoy, 74.3% of 2016 target). Profit reached 911 billion VND (+25% yoy, 119% of 2016
target). In the first half of 2016, NT2 benefited from low natural gas price, which allowed the
company to have better earnings from its sales in VCGM.
Outlook: For 2016, we forecast that revenue will reach 6,130 billion VND (-8.9% yoy, 138%
of 2016 target). Net profit 2016 will reach 1,158 billion VND (-4% yoy, 151% of 2016 target)
- equivalent to 3,866 VND in EPS. For 2017, we forecast that revenue will reach 6,330 billion
VND (+3.3% yoy) and net profit will reach 799 billion VND (-31% yoy) - equivalent to 2,594
VND in EPS. We believe that net profit in 2017 will be reduced significantly compared with
2016 as NT2 power plant will have a major overhaul, leading to a power output loss of
approximately 300 million kWh during the overhaul period. In addition, we believe that
natural gas prices in 2017 will remain at Q4 2016 level, reducing NT2‟s earnings from
electricity sales in VCGM. Despite this probable decline in 2017, we remain optimistic about
NT2 over the long term.
Evaluation: In recent years, NT2 has stable operation, gradually increasing its power output
from 4,649 million kWh (2012) to a peak of 5,499 million kWh (2015). Due to the contract
between NT2 and EVN, the company is not affected much from fuel price volatility. NT2‟s
foreign-denominated debt is paid on schedule and therefore, the company‟s credit risk has
been decreasing over the years. We price NT2‟s stock in the range from 26,000 VND to
33,000 VND per share and recommend to HOLD the stock.
PPC - Hold Business result 9M 2016: In the first 9 months of 2016, total revenue reached 4788 billion
VND (-23.94% yoy, 68.03% of 2016 target). The company reported a net loss of 347 billion
VND, compared with 9M.2015‟s net profit of 472 billion VND. PPC‟s disappointing business
result in 9M.2016 is due to (1) Pha Lai 1 plant did not finalize a sales contract with EVN in the
first half of 2016, and (2) the JPY raised sharply causing huge loss due to foreign exchange
differences for PPC (762 billion VND).
Outlook: For 2016, we forecast that total revenue will reach 6.410 billion VND (-20.2% yoy,
91.1% of 2016 target). Net profit before gains (losses) due to foreign exchange differences will
reach 577 billion VND. Net profit is expected to reach 391 billion VND (-35.3% yoy, 62.7%
of 2016 target). In our forecast, we assume that PPC will receive payment from EVN in Q4
2016 for the difference between the contract electricity selling price and the temporary

2017 OUTLOOK REPORT
electricity selling price of Pha Lai 1 plant in 1H 2016. We also consider that JPY is declining
in Q4 2016, reducing PPC‟s loss due to foreign exchange differences. In 2017, PPC‟s power
output will resume to its average level of around 5,500 million kWh per year. We forecast
revenue in 2017 of 6,929 billion VND (+14.8% yoy). Net profit before gains (losses) due to
foreign exchange differences can reach 696 billion VND (+77.6% yoy).
Evaluation: In the long term, PPC will continue to operate stably. Both plants of PPC
currently have sales contracts with EVN. Thus, we believe that from 2017, PPC‟s power
output will resume to its average level of around 5,500 million kWh per year. The sales
contracts with EVN will play a critical role in ensuring PPC‟s stable cash flow from operations
in the coming years. We recommend to HOLD PPC stock.
Retail & Distribution of Consumer Electronics and Technology Products
Industry outlook: International Consumer Electronic Market continues showing signals of maturity.
Volume sales of retail consumer electronics are expected to continue struggling over the
Mixed signals
2016-2021 forecast period. Maturation among many of the high-growth categories such as
tablets and smartphones has left consumer electronics without a clear growth category. Based
on a research of Euromonitor, retail sales of consumer electronics failed to record volume
growth for the fourth consecutive year and failed by 3% yoy as of Q2.2016. A number of
former growth categories such as tablets and smartphones reached maturity in the later part
of the review period. Worldwide PC shipments were at 62.4 million units in Q2.2016,
showing a decline of 4.5% yoy. Smartphone sales volume will reach 1.46 billion units in
2016 based on IDC‟s estimation, an increase of 1.6% yoy, which is lower than the previous
year‟s growth rate of 3%. Growth in the smartphone market is quickly becoming reliant on
replacing existing handsets rather than seeking new users. New products such as wearable
electronics did not grow fast enough to generate overall sales improvement. Additionally,
some new popular products such as sound bars and wireless speakers have cannibalized
several substitutive categories, often eliminating the need for more than one product in the
home and lowering volume sales of consumer electronics as a whole.
Vietnam consumer electronic market: remains growing positively in the next few years:
(1) As of 2016, Vietnam population is 94 million, with the median age of 31. According to
Boston Consulting Group (BCG), population of the middle class and wealthy class with
average income of at least $714/month in Vietnam will increase to 33 million in 2020. As the
median income and young people‟s demand for advance technology and brand-named
products increasing, consumer electronics retail market will continue to be beneficial. (2) The
trend of switching from featured phone to smart phone continues to happen, yet at a slower
rate than the past. Moreover, the average switching time from feature phones to smart phones
is from one to two years for young Vietnamese customers. According to IDC, by 2020, the
total number of mobile phones will be 33.855 million, while the number of featured phones
will only be 5 million. GFK expects the market to grow by 20% yoy in 2017 from both
volume growth and value as users switch from lower-priced feature phones to higher-priced
smart phones. (3) Retailers locate intensively in big cities, yet rural areas. Majority of
Vietnamese population locates in rural and suburban areas where the demand for consumer
electronics devices is still high. We believe that the increasing demand of consumer
electronics products in rural areas will be the key growth driver of the consumer
electronics/technology retail industry.

2017 OUTLOOK REPORT
Number of Smartphone and Function Phone in Vietnam Overtime

33,855
32,473
30,636
28,367 28,855
26,025 26,473
23,636
21,906
18,999 19,867
14,174
12,766 11,851
11,001
8,500
10,905 7,000
6,233 6,000
5,000
2013 2014 2015 2016E 2017E 2018E 2019E
Smart Phone
Featured Phone (smart-mobile phone)
Total number
Source: JFK
Online sales volume is growing rapidly. As of Q3.2016, FPT shop‟s online sales grows at
50% yoy and accounts for 11.2% of total retail revenue, while MGW‟s online channel
accounts for 9% of total revenue. In the next five years, the online sales volume is estimated to
account for 20% of total market sales, increasing from the current online market share of 5%.
The Consumer Electronic Market: Market share is divided between big players.
Industry structure and current
Competition is fiercely. The estimated value of Vietnam consumer electronic and technology
situation
market is USD 6.2 billion. Value of the smartphone market is approximately USD 3 billion.
While MWG is leading the market of mobile phone with market share of 40%; the consumer
electronic market is divided among main players: Tran Anh, Nguyen Kim, HC, Pico, Media
Mart, etc. These main players are competing fiercely for market share.
Mobile Phone Market Share Consumer Electronic Market

share
Mom & Dien
Pop mayxanh
Others 16% Mom &
Shops
27.70% Pop
20% shops,
5%
FPT
Others
retail thegioidi 79%
shop dong
12.30% 40%
Source: MWG, VCBS organized.

Domestic retailers continue to place an irreplaceable role in the supply chain. Entry
Barriers for international brands: It is relatively easy for foreign retailers to enter the

2017 OUTLOOK REPORT
Vietnam market and set up their first retail outlet. However, the opening of subsequent retail
outlets requires permission of the local Departments of Industry and Trade. The decision on
whether to grant the licenses for subsequent outlets is based on a set of considerations. The
authorities have been refused foreign retailers because under their interpretation of the ENT
framework, the localities do not require additional retail outlets. As the ENT has been
interpreted and applied differently between locations. The ENT framework could be
considered a trade barrier for foreign investors interested in the Vietnam market. A lack of
transparent guidelines causes lengthy and costly delays to foreign investors. Economic
Barriers for international brands: In VCBS opinion, companies such as Apple and Samsung
would prefer to deliver their products through distribution channels operated by local retailers
instead of setting up their own retail stores in Vietnam. Vietnam is currently not their primary
market and acquiring prime retail real estate remains a challenge due to disproportionately
high rents and a shortage of reliable property managers. There are also problems with poor
logistic networks, resulting in hidden costs which have the potential to derail Vietnam as a
low-cost market. International brands in consumer electronic/consumer technology market
would be more economically beneficial by selling to local retailers and distributors.
Distributors’ role in the supply chain is shifting toward providing value added services to
new international brand names. In the previous years, distributors were able to benefit by
being the middle guys between international manufactures and local retailers. The retailers
needed distributors in the supply chain due to their lack of capacity in inventory management.
The role of distributors has no longer been as significant as before since modern retailers
started to expand and improve their technology in professional retail management. Retail
chains such as Thegioididong and FPT retail shops are purchasing directly from international
manufacturers. Distributors such as DWG are shifting their services to providing market
analysis, market planning, and after sales services.
Chart: The Supply Chain
International Local
Brands Distributors Products Retailers Buyers
Moms and Pop shops

Samsung DGW Smartphone (4000 stores) Consumers
Network operators
(Mobiphone, Vinaphone,
Apple Vietel)
Online Retailer Small to medium
Dell PSD Laptops and Tablets (LAZADA.vn, tiki.vn) businesses
Telecom retailer chains
(Thegioididong, FPT shop)
Lenovo 2000 stores
Consumer electronic stores

(CES) (Nguyenkim,
Hp ST8 Office Equipment dienmayxanh,Trananh)
Sony IT reseller Enterprise
Consumer
Nokia Electronics Products Value added retailer
Government &
System Integrator Education
Source: DGW, VCBS

2017 OUTLOOK REPORT
Net
Number of Number of Revenue/Store
Retail Number
Tickers Coverage Average m2/ store stores in stores in 9T.2016
Chains of Stores
Hanoi HCMC
(Billion VND)
Thegioid
950 63/63 100-2000 m2 116 160 23.02
idong
MWG
Dienmay 600-1000 m2 and
191 63/63 17 24 46.04
xanh 300-400 m2
FPT FPT
370 63/63 110-120 m2 46 56 19.81
retail shop
TAG Trananh 39 21/63 2000-5000m2 14 0 22.5
Mom
and pops N/A 4000 63/63 20-100m2 N/A N/A 3.83
shops
Source: MWG, FPT, TAG. VCBS organized, Updated November 11, 2016
Potential firms in 2017 Business Performance growing impressively

MWG – Buy As of 9T.2016, MWG recorded net revenue of VND 30,776 bn (+76% yoy, 90% of 2016
target), and NPAT of VND 1,222 bn (+64% yoy, 88% of 2016 target). Detailed business
performance of each retail chains is presented as following:
9T.
Criteria Target (%
9T.201 2015
Q3 Target % yoy
(Unit: Billion VND) 6
)
2016 Actual
11,126 30,776 34,166 90% 17,506 76%
Thegioididong 7,849 21,870 24,957 88% 14,666 49%
DienmayXanh 3,207 8,794 9,209 95% 2,840 210
Bachhoaxanh 70 112 N/A N/A N/A N/A
Gross profit 1,843 5,042 5,403 93% 2,641 91%
NPAT 387 1,222 1,388 88% 744 87%
Thegioididong 316 1,025 N/A N/A 686 64%
DienmayXanh 64 197 N/A N/A 57 245%

2017 OUTLOOK REPORT
Bachhoaxanh 7 0 N/A N/A N/A N/A
Thegioididong retail chain

As of 9T.2016, Thegioididong retail chain recorded net revenue of VND 21.870 billion
(+49%yoy, 88% target), and NPAT of VND 1,025 billion (+64% yoy). (1) MWG has
proceeded with aggressive purchasing strategy which resulted to the improvement in gross
profit from ~15% in 2015 to 16.5% in 2016. (2) MWG has been continuing to expand
aggressively retail chain Thegioididong. As of 9T.2016, MWH opened 338 new stores of
Thedioididong which boost the total number of stores for this chain to be 950.
Dienmayxanh retail chain
In VCBS opinion, Fiscal year 2016 is definitely a milestone of Dienmayxanh retail chain due
to its rapid expansion of new stores during this year. Net revenue 9T.2016 reached VND
8,794 billion (+210% yoy, 95% of 2016 target). NOPAT reached VND 8,794 billion (+210
yoy, 95% of 2016 target), specifically: (1) As of 9T.2016, MWG opened 66 new stores,
boosting the total store number to be 150. (2) MWG implemented aggressive buying strategy
for cost of goods sold, meaning buying with higher volume and paying off rapidly to
manufacturers in order to reap the discount.
Bachhoaxanh retail chain
As of 9T.2016, net revenue of Bachhoaxanh reached VND 42 bn MWG has opened 46 stores
and currently testing customers‟ reaction for this store chain. This is a relatively new sector
for MWG so that the company is in the process of learning to operate it efficiently.
Bachhoaxanh has not been profitable yet. Bachhoaxanh has been showing positive signals as
average revenue per store improving to VND 1.25 bn in July of 2016 which is 7 times higher
than average revenue per store in February 2017.
2017 Outlook and Recommendation
For 2016, we forecast that MWG‟s net revenue will be VND 42,430 billion (+70% yoy,
107% of 2016 target). Net profit 2016 will reach VND 1,510 billion EPS forward is estimated
to be VND 10,244.
For 2017, MWG will continue its expansion plan for both retail chains: Thegioididong and
Dienmayxanh. In conservative scenario, VCBS estimates that net revenue will be growing at
20 to 30 % yoy in 2017. We forecast MWG‟s net revenue will reach VND 51.516 bn
(+20%yoy), NPAT 2017 will reach VND 1,734 billion an equivalent of VND 11,807 EPS.
Our forecast is based on following reasoning:
MWG’s mobile phone revenue growth is likely to slow down since the trend of switching
from featured phone to smartphone has decelerated. Besides, MWG has captured a stable
market share in the retail mobile phone market (40% as of 9T.2016). VCBS believes that
MWG is likely to generate lower growth rate for this segment in the next few years.
Expanding market share is the main driver for growth for Dienmayxanh retail chain.
MWG has set the target market share of 40% for Dienmayxanh in the next two years. As
market share of this retail chain improves, gross profit margin is expected to go up by 1% to
1.5% according to CEO of MWG.
MWG is currently exploring opportunities in other sectors: (1) MWG already had

2017 OUTLOOK REPORT
permission from Cambodia‟s government to invest 100% of MWG capital in this market. (2)
Expansion of BachhoaXanh continues to accelerate in the next few years. (3) Online
shopping website vuivui.com is under trial performance, testing in HCM city market.
However, these potential growth drivers will not yet likely contribute significantly to MWG‟s
business performance in 2017.
Overall, MWG‟s performance in recent years has brought satisfaction to its investors. MWG
has stood out from others by its strong growth and large national footprint with more than
1000 stores in all 63 provinces nationally. MWG is the leader in the market of retailing and
distributing smartphone and consumer electronics market. We recommend BUY for MWG
with a target price of VND 187,000.
Seaport
2016 Highlights: Vietnam export and import activities slightly increased in 2016. According to the General
Department of Vietnam Customs, total export and import turnover reached 284.56 billion
Port operating companies in Hai
VND (+4.6% yoy) in the first 10 months of 2016. Export and import growth is improving in
Phong showed business slowdowns
Q4.2016, but still lower than the growth of 10.8% in the same period last year. Notably, the
in 2016.
Vietnam – Korea free trade agreement came into force on January 1, 2016, boosting
Hanjin Shipping bankruptcy did not export/import between Vietnam and Korea by 15.6% yoy in the first 10 months of 2016.
have a large impact on Vietnam’s Besides, the Vietnam – EAEU FTA also took effect on October 5, 2016.
ports.
Port operations saw a steady increase in the demand for goods and container handling
services in 10M 2016. According to the Vietnam Maritime Administration, total port
throughput in the first 10 months of 2016 reached 387.6 million tons (+10 yoy, 83% of 2016
target), including 12.6 million TEUs in container traffic (+17% yoy, 88% of 2016 target). Dry
bulk still accounted for the largest share in terms of weight, at 46%, while container cargo
took second place at 31%. While dry bulk and container cargo continued maintaining
impressive growth, liquid bulk only rose by 8% yoy and transit good fell by 18% yoy.
Total throughput at Vietnam's ports Cargo types going through

Vietnam's ports 10M.2016
500 16
Mil. Tonnes
Mil. Teus
450
14
400
12 Transit
350
goods
10 9% Cont
300
cargo
250 8 31%
200
6
Dry Bulk
150
4 46%
100
Liquid
2
50 bulk
0 0 14%
2012 2013 2014 2015 2016E
Total volume Container Volume
(Source: Vietnam Maritime Administration)

In Ho Chi Minh City, total cargo throughput is forecasted to continue its high growth rate

2017 OUTLOOK REPORT
due to the growth of 7.4% yoy in total export and import value in 10M 2016. In the first 6
months of 2016, ports in HCMC handled 230 tons of goods (28% of Vietnam ports market),
including 2.7 million TEUs of container traffic (41.3% of container cargo market). In the
area around Hai Phong, total cargo throughput reached 71 million tons (+14.1% yoy) in the
first 11 months of 2016. Notably, private port operation grew by 22% yoy. In 1H 2016,
container throughput reached 1.98 million TEUs, accounting for 30.2% of total container
market. In Da Nang, total throughput in 9M 2016 reached 5.4 million tons (+12% yoy,
76.6% of 2016 target), including 233 thousand TEUs (+22% yoy, 77.8% plan) of container
throughput.
Operations of port operating companies in Hai Phong slowed down in 2016. Cross-
border trade in the North has been on the rise throughout this year, leading to a decrease in
demand for reefer containers. Storage time of reefer containers in Hai Phong is normally
affected by China‟s trade policy. In 9M 2016, total refrigerated container throughput
decreased by over 50% yoy, substantially shrinking profits of port operating companies in
Hai Phong.
Hanjin Shipping bankruptcy on August 31, 2016 does not have a significant impact on
port operations in Vietnam. Hanjin controlled 3% of total container capacity in the world,
serving 10% of Trans–Pacific trade volume. However, Hanjin only held 5% market share in
Vietnam. Each week, there were 3 to 5 container vessels of Hanjin docking in Ho Chi Minh
City‟s ports, including Tan Cang Cat Lai (2-3 ships/week), Tan Cang Hiep Phuoc and
Vietnam International Container Terminal (VICT). In the Hai Phong area, there was only one
Hanjin vessel docking in Green Port (VSC) every two weeks. Meanwhile, Tan Vu Port
(PHP), Doan Xa Port (DXP), Dinh Vu (DVP), PTSC (PSP) only received vessels of Hanjin‟s
alliances with total container throughput of about 700 - 800 TEUs/week.
9M.2016 Update PHP, GMD and DVP, which have main ports in Dinh Vu Industrial Zone, still reported
container throughput and net sales at the same level as in 2015. Meanwhile, ports in the North
of Cam River such as DXP and HAH saw a decrease in their container throughput due to the
limited navigation clearance. VSC, while reported a growth in revenue thanks to the
operation of Vip Green Port, saw a decline in its net income due to the company‟s high
depreciation and interest expenses. Generally, low refeer container throughput led to a
decrease in net income of port operating companies in Hai Phong.
Meanwhile, PDN still maintained a high growth rate due to an increase in cargo throughput,
which was mostly contributed by a growth in container goods. In 2016, the growth of CLL
was mostly attributed to handling and transportation services as its revenue from port
operations in partnership with Sai Gon New Port is fixed annually.
Ticker Total assets D/A Net sales % yoy NPAT % yoy GPM (%) NPM (%) EPS-ttm P/E
GMD 9,457 22.8% 2,706 1.8% 284 -7.4% 28% 10.5% 2,181 13.6
PHP 5,178 17.3% 1,764 0.3% 308 -16% 39.7% 17.5% 1,169 13.7
VSC 2,383 27.2% 786 12.8% 185 -18% 35.5% 23.5% 6,130 11.1
DVP 1,095 6.3% 477 -3.3% 220 -3.3% 53.7% 46.2% 7,027 10.7

2017 OUTLOOK REPORT
HAH 968 16.6% 343 -19% 97 -20% 34.8% 28.3% 6,904 6.4
DXP 326 0% 90 -43% 30 -31% 37.9% 35.4% 2,988 8.1
PDN 695 35% 296 28.8% 51 24% 33.2% 17.4% 3,872 12.4
CLL 685 10.6% 218 12.3% 65 22.3% 41.8% 30.1% 2,398 10.4
2017 Outlook: In 2017, Vietnam’s FDI inflow is expected to boost total cargo throughput. Many
multinational companies (such as Samsung, Bridgestone‟s, LG, Foxconn, and Ohsung)
In 2017, Vietnam’s FDI inflow is
continue to move their factories to Vietnam in expectation of new FTAs between Vietnam
expected to boost total cargo
and other countries in the near future. In 9M 2016, Hai Phong was the largest attraction to
throughput.
FDI with total newly–registered FDI valued at about 2.66 billion USD, increasing by 5 times
Tan Vu Terminal, Nam Hai Dinh Vu compared with the same period last year. Notably, LG Display will invest 1.5 billion USD
and Vip Green Port are directly into its new project at Trang Due Industrial Park.
benefited from the growth of
However, there are only some specific ports that can take advantage of this trend due to
container throughput in the Hai
the following reasons: (1) Currently, there are only 4 ports including Tan Vu Terminal
Phong area..
(PHP), Chua Ve Terminal (PHP), Nam Hai Dinh Vu Port (GMD) and Vip Green Port (VSC)
that are not running at full capacity. Vip Green Port came into operation in the end of 2015.
Nam Hai Dinh Vu Port has just expanded its designed capacity after the opening of Nam Hai
Logistics. (2) The current trend of vessel upsizing might have negative impacts on ports in
the upstream area of Cam River (including Chua Ve), especially when Bach Dang Bridge‟s
construction is expected to complete by the end of 2017. This is due to the fact that upstream
ports are only able to receive vessels of maximum 20.000DWT.
Competition level among ports in Hai Phong is not expected to increase significantly in
2017. According to Hai Phong‟s Seaport investment plan 2020 - 2030, total cargo throughput
in Hai Phong in 2020 is expected to reach 109-114 million tons/year, including about 5.84 to
6.2 million TEUs/year of container traffic, growing at about 9% - 10.3% CAGR. This might
lead to equal supply and demand at about 4.7 million TEUs in 2017. However, there will be a
significant increase in the supply in 2018 as Lach Huyen Port will begin operating in phase 1
with a total capacity of 1.1 million TEUs. Besides, Nam Dinh Vu Port (GMD) will complete
its first two berths with a total capacity of 600,000 TEUs by the end of 2017.
According to “Vietnam’s new master plan for seaport system development 2020 - 2030,”
Lach Huyen is expected to become the main terminal in Hai Phong. Specifically, total cargo
throughput in Lach Huyen is expected to reach about 45-50 million tons/year – equivalent to
45% market share in Hai Phong. The market share is expected to increase to 60-65% in 2030.
Meanwhile, Dinh Vu port will account for about 40% market share in the 2020 - 2025 period
and 25% in 2030. Particularly, ports in the upstream of Cam River will not be expanded.
Notably, Hoang Dieu Port will gradually change its function as the contructions of Nguyen
Trai Bridge and Lach Huyen progress. In addition, Hai An Port (HAH) and Tan Vu Port
(PHP) will transition to handling general cargoes. In Dinh Vu Industrial Zone, there will be
two new ports, including Nam Dinh Vu (2 berths/440m length by 2020 and 7 berths/1.760m2
by 2030) and another container port (1 berth/220m length by 2020).
In HCMC - Vung Tau area, the merger of international shipping companies will have a
positive impact on Cai Mep - Thi Vai. On October 31, 2016, Japan‟s K Line, MOL and NYK
planned to establish a new join-venture company (J Lines) to synergize their container
shipping businesses. This joint venture is expected to increase the cargo volume in Cai Mep –

2017 OUTLOOK REPORT
Thi Vai area since MOL is a main customer of Tan Cang Cai Mep (TCIT) deep-water
seaport. At present, Vung Tau‟s ports are operating at 30% of their designed capacity (if we
exlcude barge throughput), while the figure for Cat Lai in HCM city is about 70%.
Potential firms in 2017
Ticker 9M 2016 result 2016 – 2017 Outlook Recommendation
VSC Net revenue: In 2016, net revenue is forecasted to reach 1,092 bn VND (+17.7% yoy, EPS forward 2017 is
786.4 bn VND 108% of 2016 target) and NPAT attributed to parent company to reach expected to reach 6,411
(+12.8% yoy) 240.3 bn VND (-14% yoy) - equivalent to 4,942 VND in EPS forward VND – equivalent to a
2016. P/E forward 2017 of
NPAT: 184.8 bn
8.81 times, which is
VND (-17.9% In 2017, net revenue is expected to reach 1,287 bn VND (+17.8% yoy) and
lower than the current
yoy) NPAT attributed to parent company is expected to reach 316.1 bn VND
industry P/E of 10.67
(+36.3% yoy).
times. We upgrade our
Vip Green Port will be a key growth driver due to (1) its favorable rating from HOLD to
geographical location in Dinh Vu Industrial Zone, (2) the benefit from the BUY for GMD.
vessel upsizing trend and (3) the growth of container throughput in the Hai
Phong area.
GMD Net revenue: In 2016, net revenue is expected to reach 3,656 bn VND (+1.9% yoy, EPS forward 2017
2.706 bn VND 98.8% of 2016 target) and NPAT attributed to parent company will reach expected to be 2,715
(+1.8% yoy, 386 bn VND (-4.1% yoy) - equivalent to 2,446 VND in EPS forward 2016. VND . If GMD sells the
73.1% of 2016 remaining 15% stake of
In 2017, we forecast net revenue to reach 3,999 bn VND (+9.4% yoy) and
target) Gemadept Tower, EPS
NPAT attributed to parent company to reach 506 bn VND (+31.2% yoy).
forward 2017 will be
NPAT: 284 bn GMD‟s positive results in 2017 will come from its core business as (1) its
3,163 VND . We
VND (-7.4% distribution centers‟ operating capacity increases and (2) Nam Hai
recommend HOLD for
yoy). Logisitics comes into operation, leading to an expansion of Nam Hai Dinh
GMD.
Vu Port‟s designed capacity.
Abnormal porfit: GMD will receive 100 bn VND PBT if it divests its
remaining 15% stake in Gemadept Tower in 2017.
Potential risk: The conversion rights of VIG„s convertible bonds might
lead to a decrease of 17.7% in GMD‟s stock price.
DVP Net revenue: 477 In 2016, we expect net revenue and NPAT to reach 625 bn VND (-4.2% EPS forward 2017 is
bn VND (-3.3% yoy, 89.3% of 2016 target) and 292 bn VND (+4% yoy) respectively. forecasted to be 7,345
yoy, 68.1% of Therefore, EPS forward 2016 will be 7.170 VND. VND. We expect that
2016 target) DVP will keep a high
In 2017, net revenue is forecast to reach 625 bn VND (+0% yoy) and
dividend payout ratio of
NPAT: 220 bn NPAT to reach 294 bn VND (+0.5% yoy). We keep our 2017 forecast in
about 70% next year,
VND (-3.3% the same level with our forecast in 2016 because DVP has already operated
equivalent to a dividend
yoy) at full capacity.
yield of around 10%.
We recommend HOLD
for DVP.
VSC – Buy 2016 Outlook

2017 OUTLOOK REPORT
 In 9M 2016, VSC reached 786.4 bn VND (+12.8% yoy) in net revenue and 184.8 bn
VND (-17.9% yoy) in NPAT attributed to parent company. In 2016, the operation of Vip
Green Port resulted in VSC‟s significant increase in container throughput. However,
VSC‟s net income was lower than in the same period last year due to (1) low reefer
container throughput and (2) high depreciation and interest expenses of the new port.
 VSC is likely to record a provision of 5 bn VND for doubtful debts from Hanjin in Q4
2016. Hanjin had been a customer of Green Port for about 5 months before its filing for
bankruptcy protection on August 31, 2016. VSC‟s chairman said Green Port had
received only one Hanjin‟s ship per week, which contributed to around 3-5% of VSC‟s
revenue. According to VSC‟s report, Hanjin owes VSC 100,000USD. However,
Viconship is also holding 513 containers from Hanjin, which worth more than 1 million
USD.
 In 2016, net revenue is forecasted to reach 1,092 bn VND (+17.7% yoy, 108% of 2016
target) and NPAT attributed to parent company to reach 240.3 bn VND (-14% yoy).
Therefore, EPS forward 2016 will be 4,942 VND.
2017 Outlook
 In 2017, net revenue is expected to reach 1,287 bn VND (+17.8% yoy) and NPAT
attributed to parent company to reach 316.1 bn VND (+36.3% yoy). Vip Green Port will
be a key growth driver due to (1) its favorable geographical location in Dinh Vu
Industrial Zone, (2) the benefit from the vessel upsizing trend and (3) the growth of
container throughput in the Hai Phong area. We forecast total container throughput of
VSC to reach 716,000 TEUs (+23% yoy), including 450,000 TEUs from Vip Green Port
(75% of designed capacity). In addition, fluctuation in the refeer container sector could
be a growth catalyst for port operating companies in Hai Phong.
 EPS forward 2017 is expected to reach 6,411 VND - equivalent to a P/E forward 2017 of
8.81 times, which is lower than the current industry P/E of 10.67 times. We upgrade our
rating from HOLD to BUY for GMD.
GMD - Hold 2016 Outlook

 In 9M 2016, GMD reported 2,706 bn VND in net revenue (+1.8% yoy, 73.1% of 2016
target), 757 bn VND in gross profit (+2.6% yoy) and 284 bn VND in NPAT (-7.4% yoy).
In 2016, the logistics segment replaced the port operations segment as GMD‟s main
growth driver as (1) DC3 Song Than, DC Hai Duong and Nam Hai Logistics went into
operation, (2) gross margin of the transportation segment improved due to low global oil
price. By contrast, (1) low reefer container throughput, and (2) a loss from liquidating
assets and rubber segment led to a decrease in net profit.
 In 2016, net revenue is expected to reach 3,656 bn VND (+1.9% yoy, 98.8% of 2016
target) and NPAT attributed to parent company to reach 386 bn VND (-4.1% yoy) – an
equivalence of 2,446 VND in EPS forward 2016.
2017 Outlook
 In 2017, we forecast net revenue to reach 3,999 bn VND (+9.4% yoy) and NPAT
attributed to parent company to reach 506 bn VND (+31.2% yoy). GMD‟s positive
results in 2017 will come from its core business as (1) its distribution centers‟ operating
capacity increases and (2) Nam Hai Logisitics comes into operation, leading to an

2017 OUTLOOK REPORT
expansion of Nam Hai Dinh Vu Port‟s designed capacity. Besides, GMD will receive
100 bn VND PBT if it divests its remaining 15% stake in Gemadept Tower in 2017. As a
result, GMD‟s net icnome can reach 587 bn VND (+52.1% yoy), an equivalence of 3,163
VND in EPS forward 2017. As in the case of VSC, fluctuation in the reefer container
sector would be a growth catalyst for the stock in the short-term
 However, investors should consider the potential dilution risk that Vietnam Investment
Fund II (VIG) convertible bonds (worth USD 40 million) might create. The conversion
price is equivalent to 88% of the one-month average price before converting. The
conversion might lead to a fall in GMD‟s stock price by about 17.7% (assuming VIG
converts at the present time).
 GMD‟s focus on its core-business and its divestiture of non-core businesses lead to the
company‟s improving revenue and gross margin. In the long term, GMD plans to expand
into the distribution centers and logistic centers segments while also focus on Nam Dinh
Vu Port and Gemalink. We recommend HOLD for GMD.
2017
Unit: billion dong 2016
Excluding divestment Including divestment
Net revenue 3.656 3.999 3.999
NPAT attributed to parent company 386 506 587
EPS forward (dong) 2.446 2.715 3.163
EPS forward after convertible bonds 1.943 2.233 2.602

2017 OUTLOOK REPORT
DISCLAIMER
This report is designed to provide updated information on the fixed-income, including bonds, interest rates, and some other related. The VCBS analysts
exert their best efforts to obtain the most accurate and timely information available from various sources, including information pertaining to market
prices, yields and rates. All information stated in the report has been collected and assessed as carefully as possible.
It must be stressed that all opinions, judgments, estimations and projections in this report represent independent views of the analyst at the date of
publication. Therefore, this report should be best considered a reference and indicative only. It is not an offer or advice to buy or sell or any actions
related to any assets. VCBS and/or Departments of VCBS as well as any affiliate of VCBS or affiliate that VCBS belongs to or is related to (thereafter,
VCBS), provide no warranty or undertaking of any kind in respect to the information and materials found on, or linked to the report and no obligation
to update the information after the report was released. VCBS does not bear any responsibility for the accuracy of the material posted or the
information contained therein, or for any consequences arising from its use, and does not invite or accept reliance being placed on any materials or
information so provided.
This report may not be copied, reproduced, published or redistributed for any purpose without the written permission of an authorized representative of
VCBS. Please cite sources when quoting. Copyright 2012 Vietcombank Securities Company. All rights reserved.
CONTACT INFORMATION
Ly Hoang Anh Thi Tran Minh Hoang
Chief Economist
Head of Research
Deputy Head of Research
lhathi@vcbs.com.vn
tmhoang@vcbs.com.vn
Truong Anh Quoc Mac Dinh Tuan Nguyen Nguyen Phuong Nguyen Nam Nga
Senior Analyst Senior Analyst Senior Analyst Senior Analyst
taquoc@vcbs.com.vn mdtuan@vcbs.com.vn nnphuong@vcbs.com.vn nnnga_ho@vcbs.com.vn
Tran Thi Thu Trang Dam Sy Duc Le Duc Quang Le Thu Ha
tttrang_hcm@vcbs.com.vn dsduc@vcbs.com.vn ldquang@vcbs.com.vn ltha_ho@vcbs.com.vn
Nguyen Thi Thu Hang Nguyen Quang Han Tran Thu Hang Nguyen Huy Hoang
ntthang-hcm@vcbs.com.vn nqhan@vcbs.com.vn tthang@vcbs.com.vn nhhoang@vcbs.com.vn

2017 OUTLOOK REPORT
VIETCOMBANK SECURITIES COMPANY

http://www.vcbs.com.vn
Floor 12th& 17th, Vietcombank Tower, 198 Tran Quang Khai Street, Hoan Kiem District, Hanoi
Ha Noi Headquarter
Tel: (84-4)-39366990 ext: 140/143/144/149/150/151
Ho Chi Minh Branch Floor 1st and 7th, Green Star Building, 70 Pham Ngoc Thach Street, Ward 6, District No. 3, Ho Chi Minh City
Tel: (84-8)-3820 8116

Da Nang Branch
Floor 12th, 135 Nguyen Van Linh Street, Thanh Khe District, Da Nang City
Tel: (84-511)-3888991 ext: 801/802
Phu My Hung Transaction Unit
Floor 3rd, V6 Tower, Plot V, Him Lam Urban Zone, 23 Nguyen Huu Tho Street, Tan Hung Ward, District No.
7, Ho Chi Minh City
Tel: (84-8)-54136573
Giang Vo Transaction Unit Floor 1st, Building C4 Giang Vo, Giang Vo Ward, Ba Dinh District, Hanoi
Tel: (84-4)-37265551
Can Tho Representative Office Floor 1st, Vietcombank Can Tho Building, 7 Hoa Binh Avenue, Ninh Kieu District, Can Tho City
Tel: (84-710)-3750888
An Giang Representative Office Floor 7th, Vietcombank An Giang Tower, 30-32 Hai Ba Trung, My Long Ward, Long Xuyen City, An Giang
Province
Tel: (84-76)-3949843
An Giang Representative Office
1st & 2nd Floor, 79 Hung Dao Vuong, Ward Trung Dung, Bien Hoa City, Dong Nai Province.
Tel: (84-61)-3918815
Vung Tau Representative Office
Floor 1st, 27 Le Loi Street, Vung Tau City, Ba Ria - Vung Tau Province
Tel: (84-64)-3513974/75/76/77/78
Hai Phong Representative Office Floor 2nd, 11 Hoang Dieu Street, Minh Khai Ward, Hong Bang District, Hai Phong City
Tel: (+84-76) 3949 843
Binh Duong Representative Office Floor 3th, 516 Cach Mang Thang Tam Street, Phu Cuong Ward, Thu Dau Mot City, Binh Duong Province.
Tel: (+84-76) 3949 843

Vcbs - Macro Report - 2017 Outlook Report - 2017.01.05

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2017 OUTLOOK

2017 OUTLOOK REPORT

STOCK MARKET .................................................................................................................................................................................... 17

PROSPECTS FOR INDUSTRIES/CORPORATIONS ......................................................................................................................... 27

VCBS Research Department Page | 1

VCBS Research Department Page | 2

GDP growth (qoq) GDP growth by Industry

Sources: CEIC, VCBS

VCBS Research Department Page | 3

Industrial Inventory and IIP (yoy)

Sources: CEIC, HSBC, NIKKEI, VCBS

VCBS Research Department Page | 4

Import - Export Export/GDP

Sources: CEIC, VCBS

Registered Capital Supplemental Capital Implementation Capital

VCBS Research Department Page | 5

Sources: CEIC, VCBS

Retail Sales Credit growth and M2

Services & Tourism

Sources: CEIC, VCBS

VCBS Research Department Page | 6

Inflation under controlled

VCBS Research Department Page | 7

Sources: CEIC, VCBS

VCBS Research Department Page | 8

USD/VND Exchange rate

Reference exchange rate Ceiling exchange rate

Sources: CEIC, VCBS

VCBS Research Department Page | 9

Devaluation of some countries' currencies against USD in 2016

Vietnam Thailand Indonesia Philippines

Malaysia Singapore China

Sources: Bloomberg, VCBS

VCBS Research Department Page | 10

Deposit and Lending rates

Sources: CEIC, VCBS

VCBS Research Department Page | 11

Primary market Secondary market

ST VBSP VDB Outright Repo

VCBS Research Department Page | 12

% Winning rates and CPI

Sources: HNX, VCBS

VCBS Research Department Page | 13

US Inflation and Unemployment US PMI

Manufacturing PMI Services PMI

Sources: Bloomberg, VCBS.

% 6M deposit rate of ECB

Sources: Bloomberg, VCBS.

China's foreign exchange reserves

3,700 6.8 120

3,500 6.6 110

3,300 6.4 100

Sources: Bloomberg, VCBS.

VCBS Research Department Page | 16

VCBS Research Department Page | 17

Volume VN-Index Volume HNX-Index

Volume VN-Index Volume HNX-Index

VCBS Research Department Page | 18

P/E of Vietnam compared to some markets

P/E Vnindex P/E Emerging market P/E Frontier market

Sources: Bloomberg, VCBS

Oil & Gas stocks finished 2016 with outstanding performance

VCBS Research Department Page | 19