GMD - A Mix of Tailwinds and Headwinds
With the 1st phase of the Nam Dinh Vu port’s operation, GMD is now the second-biggest port operator in Haiphong with around 1.3 mn TEU per annum in handling capacity. As a near-ocean port, Nam Dinh Vu can improve GMD’s competitive position thanks to saving costs and time for shipping lines. We believe this project will also be a long-term growth driver for GMD with total capacity reaching 1.6 mn TEU p.a when the final phase is completed. Meanwhile, Gemalink will not be included in this valuation exercise due to the fact that we aren’t able to determine the restarting time of this project.
Besides, GMD will continue its non-core divestment strategy. The success of the divestment will help the company to recognize some value from these inactive assets which aren’t efficient so far. In the past, GMD’s stock price reacted positively with these kinds of divestments.
GMD is trading at a core trailing PE ratio of 17.6x, which is quite high compared to core earnings growth and industry norms. However, this is the result of the large proportion of inactive assets to total assets of the company. Thus, we base our valuation on a sum-of-the-parts method, which shows a 2019 EV/EBITDA multiple of 8, reasonable to historical valuation. We recommend ACCUMULATING with a price target of VND 30,800 (+16%). We apply a 50% discount on the book value of non-core inactive assets. If the divestment succeeds, the valuation of GMD could rise.
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