GMD - Withstanding Fierce Competition
After many years and lack of capital, the Gemalink deep-water port project has been restarted. As shipping lines tend to use large vessels to transport containers, this strategic project is crucial for GMD in order to secure fast container volume growth in Cai Mep, Vung Tau. GMD will compete directly with market leaders Saigon New Port and Vinalines.
In the short term, however, growth is mostly coming from the northern port cluster. This region is facing fierce competition due to oversupply, especially after the arrival of a new player, HICT deep-water port. Service prices are declining but we believe GMD’s volume growth can compensate for this. Also, we think GMD's ports have several advantages compared to other river ports to withstand the competition from HICT. In addition to owning a good position in the downstream, GMD also has experience in port operation and adds more value to its customers through offering a chain of logistics services (seaports, freight transportation, warehouses and distribution centers). Moreover, most of GMD's customers do not have direct calls at HICT.
Operations of logistics associates are improving. Overall, we expect GMD's core EBT to grow to 24% YoY in 2019. We estimate the fair value of GMD at VND 30,000 per share and reiterate BUY with a total return of 21%.
In terms of risks, investors should pay attention to the annual losses related to rubber plantation in recent years. This item is unpredictable yet a significant factor affecting PBT from 2019 onwards. In 2019, we assume that GMD will record a VND70 Bn loss from the rubber segment (accounting for around 10% of 2019 EBT).
Gemadept Corporation is a Vietnam-based shipping company engaged in the marine freight transportation industry. The Company offers multimodal freight transportation services, including containers and oversize freight, by deep sea, inland water, land and air. The Company is also involved in the operation of marine ports, river ports and airports, as well as the provision of cargo handling services. Other activities include the provision of logistics services, the operation of warehouses and storage yards, liner agency, container agency, freight forwarding, ship building, vessel and transportation equipment leasing. In addition, the Company develops commercial properties and plants rubber trees.
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