EUR 114.00 For Business Accounts Only

SanestDK: Positive growth potential owing to capacity expansion

​“Salanganes nest production has been an attractive industry which is heavily localised where the products as a specialty are nutritious, which means a great growth potential. Thus, equitisation of such companies can be a catalyst for the Vietnamese stock market in 2016.

During 2016-2018, the Company targeted to achieve 1% in average annual growth regarding revenue and 2% for profit after tax. We believe that the plan for 2016-2018 is relatively reckless. After evaluating and analyzing the future prospects of Sanest Dien Khanh, RongViet Research supposes that Company's growth potential is positive in the coming years thanks to the factory expansion. In addition, the transparency in cost structure between parent company and Sanest Dien Khanh is expected to improve after the equitisation.

Under the most optimistic scenario, revenue and profit after tax for 2016 could reach VND 844 bn and VND 59 bn respectively, improved by 15% yoy and 22% yoy. 2016 EPS will be equivalent to VND 2,563/share. Growth in revenue mostly comes from the increase in factory capacity by an addition of 11 million products/year. Furthermore, if Sanest Dien Khanh could efficiently cut costs as we assume, profit growth rate could improve and surpass the revenue growth rate, approximated at 12 – 15%/year.

Using P/E of the businesses in the food and beverage industry along with the potential growth of the firm as well as discounted room, we believe the reasonable price of Sanest Dien Khanh is in the range of 26,000-30,000 VND per share. This price matches with P/E of 10 – 11.7 times.

Based on the initial price of 23,000 VND per share, we recommend a BUY for Sanest Dien Khanh.“