Investment themes 2017

Long Tran

Head of research

M +84 906 959 034

E Longtt@bsc.com.vn

P +84 4 39352722 (118)

S rongbeo

BSC

Content List

• Economy & Stock market 03

• Economy 04

• Stock market 05

• Investment themes 07

• Overall 08

• Five course menu 09

Economy and stock market Challenging 30 years since “Doi Moi”

3

Key takeaway macro points

• Global growth is weak while raw material price recovers

• What happens if TPP fails Or is delayed ?

• Vietnam falls short of GDP target in 2016 (6.7%), 2017 target 6.7% again

• New PM wants to support growth and push privatization, indicating that he is more Pro-business. Party leader’s anti corruption campaign.

• Pros: strong FDI, stable interest rate, liquidity, positive export, foreign reserve of USD 40 billion

• Cons: SOEs restructuring, Banking system, CPI and fiscal deficit,

Money will be where the growth is found

Source: BSC, Blackrock

Emerging economies

• China Slowdown

• BRIC slow down

• Commodities price recovery

Developed economies

• FED hike

• Election year and anti TPP

•Brexit & EU

Geopolitical risks

• Conflict and violence

(Russia, East Sea, IS)

• Cyber Security

Vietnam

• USD/VND

• Fiscal Policies

• FTA & investment (TPP)

BSC’s relevant reports: Brexit before & after, Lanina, Oil, commodity

Key takeaway Stock market points

• Vietnam looks a lot like a turnaround stock with new leaders, restructuring plan and receiving huge foreign investment (start slow but improve fast)

• Valuation multiples is higher than 5 years average but still attractive compare to Asian peers. 4Q P/E is high (16.2) and need a correction.

• Top Blue chips look expensive with half of their P/Es ranging from 22 to 40 times.

• In medium term, Stock market will have new kids on the block as IPO, divestment and listing procedures are pushed; market cap and liquidity will hence increase

• What if Vnindex can grow at the same rate as Asean stock indexes from 2009 to 2012 ?

752.03 621.88

699.31

880.58

400

500

600

700

800

900

1000

1100

1200

01/15 07/15 01/16 07/16 01/17 07/17 01/18 07/18

Bear Bull Average

Fearless forecast 2016 -2018 • Vnindex is the biggest loser comparing

to other Asean stock markets. Vnindex broke 8 year high of 680 points.

• Since 2009, Asean stock market sur passed 2007’s top by a huge percentage.

• Indonesian index has increased the most, while Singapore performed the least.

• What if Vnindex can recover at the same rate as Asean indexes 2009 - 2012

• Let your imagination go wild:

• Vnindex 699 at the end of 2016

• Vnindex 752 to 880 at the end of 2017

Source: BSC

Investment themes Alpha Seeking

8

Key Investment themes for 2017

Drinks

Starter

Main course

Side dishes

Dessert

Five Course menu

Starters: Seasonal stocks

10

Related stocks:

Hydropower (VSH,

SJD), Natural

rubber (TRC, DPR),

sugar (BHS)…

The weather is

changing as the

chance of Lanina

increases

Revenue and

profit bottom out

together with

stock price

Valuation looks

attractive again

BSC’s relevant reports: Lanina, Oil, commodity, rubber

Main Course: New Stocks

11

Related stocks:

Sabeco, BHN, ACV,

VEAM, Petrolimex,

Vietnam Airline,

Vinatex…

30% of top 10,

40% of top 15,

60% of top 20

will be replaced

by new stocks

New industries

will bring new

growth to the

very old VN

index

These stocks

can bring

Vietnam closer

to Emerging

market

New kids on the block • If the IPO and listing process are

pushed hard enough, we will have USD 15 billion market cap increase .

• 03 New members in top 10

• 06 New members in top 20

• 12 New members in top 30

• What it mean for the market:

• ETF and index tracking funds will be busy with rebalancing portfolios

• Index will be strongly affected (big cap with small floating shares)

• You should hurry up If you haven’t had a few new names in your portfolio,

Source: Bloomberg, BSC

No

Market Cap (bil USD)

Percentage

accumulate

d Ticker

1 9,255 14,6% 14,6% VNM

2 6,209 9,8% 24,5% VCB

3 6,122 9,7% 34,1% GAS

4 5,151 8,1% 42,3% VIC

5 2,941 4,7% 46,9% CTG

6 2,661 4,2% 51,1% BID

7 2,378 3,8% 54,9% MSN

8 2,248 3,6% 58,5% BVH

9 1,629 2,6% 61,0% HPG

10 1,090 1,7% 62,8% MBB

11 0,963 1,5% 64,3% FPT

12 0,898 1,4% 65,7% MWG

13 0,863 1,4% 67,1% ROS

14 0,779 1,2% 68,3% STB

15 0,570 0,9% 69,2% EIB

No Company

Market

Cap

1 Sabeco 3,00

2 ACV 2,25

3 BSR 1,58

4 Novaland 1,40

5 Vietnamairlines 1,12

6 Petrolimex 1,02

7 Viet Jet 1,00

8 Habeco 1,00

9 VEAM 0,85

10 PV Power 0,64

11 PV Oil 0,50

12 Vissan 0,29

13 Vinatex 0,25

14 Vinafor 0,16

15 Hancorp 0,06

Side dish: Divestment

13

Related stocks:

Sabeco, Habeco,

VNM, VNR, BMI,

NTP, BMP, VCG,

FPT

1100 companies

will go IPO until

2020, leaves

SOEs less than

200 companies

After being

privatized, most

Vietnam SOEs

had significant

improvement

SOEs IPO link

to listed stocks

which can

push the

market size

Privatization & divestment to be pushed

• Privatization process will be pushed due to fiscal budget after 9 month of slow IPO (only 40).

• Divestment in Sabeco, Habeco, FPT, FPT telecom, VNR, BMI, BMP, NTP, HGM, SGC, VIID in 2016 - 2017

• The number of state owned companies to go IPO and divest is around 1100 (2016 to 2020)

• Market cap will increase vastly thanks to new stocks

• Hidden gems are expected (Blue chips & mid cap), so be prepared.

Source: BSC

109

180

0

100

200

300

400

500

600

700

800

900

Number of IPO in Vietnam

Drinks: Local oriented

15

Related stocks:

Travel services (VNA,

ACV); Jewelry (PNJ);

Mobile (MWG); Car

(SVC); beverage

(SBC); tobacco…

Growing young

population in

Vietnam (69% in

15 to 64 years

old)

Middle class is

growing faster in

VN than

anywhere else in

ASEAN , doubling

to 33 M (2020)

Young people

Save less, spend

more, use bank

services and be

more

independence

Why invest in local oriented sectors ?

Source: Bloomberg, BSC Research

As of 30 Sep 2016

Vietnam GDP almost tripled before crisis • Fuelled by growing incomes and a young and active consumer base, retail spending reached US$108bn by 2016.

• Automobiles market: USD 5.9 billion

• Jewelry market: USD 6.2 billion

• Dairy market: USD 6 billion

• Aviation market: USD 6 billion

• Beer market: USD 3 billion

• Pharmaceutical market: USD 3 billion

• Mobiphone market: USD 3 billion

• Tobacco market of USD 1 billion

Dessert: Out of favor

17

Related stocks:

Taxi (VNS), fertilizer

(LAS), JPY/USD

(PPC, REE), textile

(VGG)…

Most investors

don’t want to talk

about these

stocks anymore

Fundamental

factors

improvement is

noticed

These stocks’

price start

bottoming

Thank You

Long Tran Head of research

Please feel free to contact me at

E Longtt@bsc.com.vn

P +84 4 39352722 (118)

M +84 906 959 034

S rongbeo

BSC