Equities | Vietnam | Transportation

Gemadept (GMD - HSX)

Flashnote 20 March 2024

Add Nam Hai port divested on 15 Mar-24

Target Price: VND87,500
Up/downside: 13.6%
▪ GMD announced it successfully divested all its 99.98% stake in Nam Hai
Share price (VND) (as of 19 Mar 2024) 77,000 port on 15 Mar-24. The divestment profit is expected to be booked in 1Q24,
Bloomberg code GMD VN
52-week range (VND) 47,612-80,600
although detailed information has not yet been released.
Trading value (5D) (VNDmn) 78,300
Market cap. (VNDbn) 23,206
▪ This said, we expect GMD to post impressive 1Q24 profit growth, on a
Market cap. (USDmn) 939 combination of resilient core earnings growth and resurgent demand, led
Shares outstanding (mn) 301 by Gemalink and one-off profit from the Nam Hai port divestment.
Total FOL share room (mn) 148
Current FOL share room (mn) 1.10 ▪ Gemalink’s (65% owned) vol. growth was very strong at 121% y/y in 2M24
Foreign ownership limit 49.0%
Foreign owned ratio 48.6%
on better demand and contribution of new weekly services since 4Q23. Our
Free float 87.3% current rating is Add with a target price of VND87,500 (14% upside).
Major shareholder SSJ Consulting (9.85%)
Source: Company, HSC Research estimates
Event: Successful divestment of Nam Hai port
Share price performance
GMD (VND) VN30 Index (rebas ed)
GMD announced that it finally signed the contract with an investor to sell all its
85,000
80,000
99.98% stake in Nam Hai port on 15 Mar-24. Detailed information on the sale
75,000
70,000
and profit from this transaction has not yet been released. As per our estimates,
65,000
60,000
the divestment will be booked in 1Q24 with an estimated after-tax profit of
55,000 VND100-200bn for GMD.
50,000
45,000

Nam Hai port – a snapshot

Volume

Mar-23 May -23 Jul-23 Sep-23 Nov -23 Jan-24 Nam Hai has been operating for 15 years since Feb-09. With a capacity of
Source: Company, FactSet 150,000 TEUs/annum, if run at full capacity its sales and profit contribution to
GMD is around VND100bn and VND20bn per annum, respectively. However,
Summary financials and valuation this port recorded loss in FY23 as GMD moved all its vessels from Nam Hai to
Year end: Dec 12-23A 12-24F 12-25F its new port, Nam Dinh Vu phase 2, after it commenced operations.
Net sales (VNDbn) 3,846 4,116 4,801
EBITDA adj. (VNDbn) 1,767 2,157 2,585 Therefore, GMD planned to divest all its stake in Nam Hai port to optimize its
Pre-tax profit (VNDbn) 3,144 1,669 2,012
Net profit adj. (VNDbn) 732 999 1,254
assets. After channel checks, we understand that GMD sold Nam Hai to Vietsun
FCF (VNDbn) (1,156) 1,256 (1,118) Corporation (not listed), a domestic shipping company. We estimate the after-
EPS adj. (VND) 2,418 3,267 4,099 tax profit from this transaction is around VND100-200bn.
DPS (VND) 2,551 2,500 2,000
BVPS (VND)
EBITDA adj. growth (%)
27,975
(4.16)
29,497
22.1
31,775
19.8
Strong 1Q24 on demand recovery and one-off incomes
EPS growth adj. (%) 122 (51.6) 25.5
DPS growth (%) 79.6 (2.00) (20.0) As a reminder, 1Q23 was the bottom of seaport industry as key export markets
EBITDA adj. margin (%) 45.9 52.4 53.8 of Vietnam sharply cut orders on high inventory and weak demand. Therefore,
Pre-tax margin (%) 81.7 40.5 41.9
we expect to see a strong recovery in 1Q24 volumes on the low base last year:
Net margin adj. (%) 57.8 26.4 28.4
Div. payout ratio (%) 34.8 70.4 44.9
Net debt/equity (%) 5.78 0.04 17.8
• Gemalink port (65% owned) handled 232,000 TEUs in 2M24, up 121%
ROAE (%) 28.7 12.4 14.5 y/y. We expect 1Q23 volumes of this port will reach 352,000 TEUs
Return on avg. CE (%) 10.3 9.56 10.1 (+110% y/y). Besides demand recovery, the impressive growth was
EV/sales (x) 6.46 5.96 5.47
EV/EBITDA adj. (x) 14.1 11.4 10.2
supported by market share expansion, as Gemalink (GIL) acquired
P/E adj. (x) 31.8 23.6 18.8 new weekly vessels from other ports since 4Q23.
P/B (x) 2.75 2.61 2.42
Dividend yield (%) 3.31 3.25 2.60 • According to Vietnam Port Association (VPA), GMD’s ports in Hai
Source: Bloomberg, HSC Research estimates Phong handled 179,000 TEUs in 1Q24, up 27% y/y thanks to better
demand.
Company description
GMD is the largest private port operator in Thanks to the strong volume’s growths, we estimate core profit of GMD will
Vietnam, with a nationwide port network and reach VND240bn-VND280bn (up 19%-38% y/y). All in all, once the Nam Hai
integrated logistics systems. divestment is complete and booked in 1Q24, GMD should deliver an impressive
y/y net profit in the range of VND340bn to VND480bn (up 68%-138% y/y).
(Continued on page 2)
Analysts
Che Thi Mai Trang Figure 1: 1Q24 earnings estimates, GMD
Manager, Industrials Research We expect strong earnings growth in 1Q24
trang.ctmai@hsc.com.vn
VNDbn 1Q23 1Q24 Growth y/y
+84 24 3933 4693 Ext. 4848
Core profit 202 240-280 19%-38%
Vo Thi Ngoc Han, CFA Divestment profit 0 100-200 n/m
Director, Head of Industrials Research Total 202 340-480 68%-138%
han.vtn@hsc.com.vn Source: HSC Research
+84 28 3823 3299 Ext. 314

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 Flashnote - Gemadept (GMD) 20 March 2024

The capital receival from the divestment will help GMD to finance its Nam Dinh
Vu phase 3 project. GMD plans to kick off the project in 1H24 with a capex of
VND2,500bn. Once completed in 1H24, Nam Dinh Vu port will have a total
capacity of 2mn TEUs, up 67% from the current level.

Maintaining Add rating, estimates and target price

As a reminder, we haven’t incorporated this transaction in our earnings model.
Therefore, we see an upside risk to our current FY24 earnings forecasts as this
divestment would benefit GMD as it will help the company to create one-off
incomes and reduce the debt ratio at the Nam Dinh Vu phase 3 project.
Given the lack of detailed information of the divestment, for the time being, we
keep unchanged our estimates, Add rating and target price of VND87,500 (14%
upside).
We expect GMD’s FY24 net profit and core profit of VND1.1tn, which will be
down 51% y/y in terms of net profit due to the dropping out of Nam Hai Dinh
Vu divestment profit (VND1.4tn) in FY23. However, the core profit will grow
37% y/y thanks to the turnaround of Gemalink. Our model implies a core profit
CAGR in the FY24-26 period of 27%.

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 Flashnote - Gemadept (GMD) 20 March 2024

Financial statements and key data

Income statements (VNDbn) 12-22A 12-23A 12-24F 12-25F 12-26F Cash flow statements (VNDbn) 12-22A 12-23A 12-24F 12-25F 12-26F
Sales 3,898 3,846 4,116 4,801 5,275 EBIT 1,051 1,100 1,187 1,403 1,526
Gross profit 1,718 1,776 1,895 2,228 2,433 Depreciation & amortisation (393) (395) (396) (486) (516)
SG&A (667) (660) (707) (825) (906) Net interest (142) 1,772 (92.5) (86.4) (106)
Other income (30.6) (69.0) (57.6) (67.1) (73.8) Tax paid (147) (625) (241) (290) (312)
Other expenses 30.3 53.1 56.9 66.3 72.9 Changes in working capital 1,077 (836) (505) (903) (738)
EBIT 1,051 1,100 1,187 1,403 1,526 Others (432) (2,268) 4.45 9.27 6.40
Net interest (142) 1,772 (92.5) (86.4) (106) Cash flow from operations 2,299 (88.2) 1,602 1,348 1,823
Associates/affiliates 399 272 574 696 933 Capex (1,366) (1,068) (346) (2,466) (77.9)
Other non-operational - - - - - Acquisitions & investments 88.0 (803) 0 0 0
Exceptional items - - - - - Disposals 4.40 2,447 0 0 0
Pre-tax profit 1,308 3,144 1,669 2,012 2,353 Others 38.5 437 0 0 0
Taxation (147) (642) (241) (290) (312) Cash flow from investing (1,235) 1,013 (346) (2,466) (77.9)
Minority interests (167) (280) (342) (359) (388) Dividends (428) (780) (765) (612) (612)
Exceptional items after tax - - - - - Issue of shares 0 45.2 0 0 0
Net profit 994 2,222 1,086 1,363 1,653 Change in debt 132 (45.3) 923 509 (427)
Other financing cash flow (41.4) (35.4) 0 0 0
Net profit adj'd 914 732 999 1,254 1,521 Cash flow from financing (338) (816) 158 (103) (1,039)
EBITDA adj. 1,843 1,767 2,157 2,585 2,975
Cash, beginning of period 637 1,364 1,474 2,888 1,667
EPS (VND) 3,298 7,335 3,551 4,455 5,403 Change in cash 727 109 1,414 (1,221) 706
EPS adj. (VND) 3,034 2,418 3,267 4,099 4,971 Exchange rate effects 0.06 0.49 0 0 0
DPS (VND) 1,421 2,551 2,500 2,000 2,000 Cash, end of period 1,364 1,474 2,888 1,667 2,373
Basic shares, average (mn) 301 303 306 306 306
Basic shares, period end (mn) 301 306 306 306 306 Free cash flow 934 (1,156) 1,256 (1,118) 1,745
Fully diluted shares, period end (mn) 301 306 306 306 306

Balance sheets (VNDbn) 12-22A 12-23A 12-24F 12-25F 12-26F Financial ratios and other 12-22A 12-23A 12-24F 12-25F 12-26F
Cash 1,364 1,474 2,888 1,667 2,373 Operating ratios
Short-term investments 82.2 356 383 444 486 Gross margin (%) 44.1 46.2 46.0 46.4 46.1
Accounts receivable 868 1,212 1,298 1,517 1,668 EBITDA adj. margin (%) 47.3 45.9 52.4 53.8 56.4
Inventory 82.5 68.2 73.0 85.1 93.5 Net profit margin (%) 25.5 57.8 26.4 28.4 31.3
Other current assets 222 290 311 363 398 Effective tax rate (%) 11.2 20.4 14.4 14.4 13.3
Total current assets 2,619 3,401 4,953 4,076 5,019 Sales growth (%) 21.6 (1.34) 7.02 16.7 9.86
EBITDA adj. growth (%) 47.0 (4.16) 22.1 19.8 15.1
PP&E 2,956 3,894 3,788 5,701 5,185 Net profit adj. growth (%) 62.4 (19.9) 36.5 25.5 21.3
Intangible assets 262 258 250 242 233 EPS growth (%) 62.4 122 (51.6) 25.5 21.3
Investment properties 0 0 0 0 0 EPS adj. growth (%) 62.4 (20.3) 35.1 25.5 21.3
Long-term investments 2,830 1,799 1,809 1,826 1,843 DPS growth (%) 0.45 79.6 (2.00) (20.0) 0.00
Associates/JVs 3,026 3,083 3,083 3,083 3,083 Dividend payout ratio (%) 43.1 34.8 70.4 44.9 37.0
Other long-term assets 1,339 1,107 1,565 1,818 2,005
Total long-term assets 10,412 10,141 10,495 12,670 12,349 Efficiency ratios
Return on avg. equity (%) 15.0 28.7 12.4 14.5 16.2
Total assets 13,031 13,542 15,448 16,746 17,368 Return on avg. CE (%) 11.5 10.3 9.56 10.1 10.3
Asset turnover (x) 0.33 0.29 0.28 0.30 0.31
Short-term debt 543 446 477 556 611 Operating cash/EBIT (x) 2.19 (0.08) 1.35 0.96 1.19
Accounts payable 838 508 700 480 316 Inventory days 13.8 12.0 12.0 12.1 12.0
Other current liabilities 1,737 901 965 1,125 1,236 Accounts receivable days 145 214 213 215 214
Total current liabilities 3,211 1,936 2,228 2,263 2,275 Accounts payable days 140 89.6 115 68.1 40.6

Long-term debt 1,486 1,518 2,410 2,839 2,357 Leverage ratios

Deferred tax 0 0 0 0 0 Net debt*/equity (%) 9.62 5.78 0.04 17.8 5.63
Other long-term liabilities 386 381 408 476 523 Debt/capital (%) 15.6 14.5 18.7 20.3 17.1
Long-term liabilities 1,872 1,899 2,817 3,315 2,880 Interest coverage (x) 7.42 N/a 12.8 16.2 14.4
Debt/EBITDA (x) 1.41 1.32 1.83 1.80 1.46
Total liabilities 5,083 3,836 5,046 5,578 5,155 Current ratio (x) 0.82 1.76 2.22 1.80 2.21

Shareholders' funds 6,926 8,558 9,023 9,720 10,693 Valuation

Minority interests 1,022 1,149 1,379 1,448 1,520 EV/sales (x) 6.36 6.46 5.96 5.47 4.77
Total equity 7,948 9,707 10,402 11,168 12,213 EV/EBITDA adj. (x) 13.5 14.1 11.4 10.2 8.46
P/E (x) 23.3 10.5 21.7 17.3 14.3
Total liabilities and equity 13,031 13,542 15,448 16,746 17,368 P/E adj. (x) 25.4 31.8 23.6 18.8 15.5
P/B (x) 3.35 2.75 2.61 2.42 2.20
BVPS (VND) 22,981 27,975 29,497 31,775 34,956 Dividend yield (%) 1.84 3.31 3.25 2.60 2.60
Net debt/(cash)* 665 490 (1.59) 1,729 595
Note: *Excluding short-term investments.
Source: Company, HSC Research estimates

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 Flashnote - Gemadept (GMD) 20 March 2024

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