VSC - Maintaining Impressive Utilization Rate
2019 outlook: Lower growth momentum
We expect that the volume growth will slow down as the VIP Green Port is reaching its maximum capacity, while the Green Port has limited potential growth due to a location that does not provide much advantages. We estimate total container throughput in 2018 and 2019 will be 1,048K TEU (+31%) and 1,056K TEU (+1% YoY).
On the other hand, we expect the new circular that regulates higher range of international container handling tariffs to apply in Hai Phong next year. This will be an upside potential for VSC.
Valuation and recommendation:
In our view, VSC is one of the good operators in the seaport sector because of its strong customer relationship, management capability, healthy balance sheet (strong operating cash flow, stable dividends, decreasing debts in VIP Green port). Above all, it’s trading at cheap valuations, current PE is 7.3x and PB of 1.3x. On the downside, constraint in capacity may affect the prospects of the company.
We estimate 2018 and 2019 PATMI to be VND 294 bn (+24% YoY) and VND 315 bn (+7% YoY), respectively. This translates to a 2018 and 2019 EPS of VND 5,870 and VND 6,280, respectively. We assume VSC will transfer 5% of its stake in VIP Green Port to Evergreen in 2019.
Applying a target PE multiple of 7.5x, we arrive at a target price of VND 47,000. We expect a 2019 cash dividend of VND 2,000, which means the total return would be 17%. We recommend ACCUMULATING the stock.
Vietnam Container Shipping Joint Stock Co. Vietnam Container Shipping Joint Stock Corporation, formerly Vietnam Container Shipping Joint Stock Company, is a Vietnam-based provider of marine port services. It is involved in the operations of ports, container terminals and warehouses, as well as the provision of cargo handling services and container services. The Company also offers freight forwarding services, vessel chartering services, marine brokerage services, inland logistics services and customs clearance services. Other activities include multimodal freight transportation, container manufacturing and the merchandise of petroleum and industrial supplies. As of December 31, 2012, it was a subsidiary of Vietnam Container Shipping Corporation, and it had six wholly owned subsidiaries, one joint ventures and two affiliates. Effective July 18, 2013, the Company has changed its name to Vietnam Container Shipping Joint Stock Corporation from Vietnam Container Shipping Joint Stock Company.
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