Vietnam Focus – On a recovery pathMarket Update

Vietnam Focus – On a recovery pathMarket
Update- Since our report on Vietnam in Jun 2008 and the significant market correction, latest technical indicators suggest that conditions have bottomed and are on a recovery path.
- The recovery in the Vietnam stock market mirrors the brighter outlook for the country’s economy. As it stands, we highlight Vietnam’s GDP growth of 6.4% for 2010, 88.6m population, and the government’s efforts to attract foreign investments.
- We see significant opportunities in the power sector, given the inadequate power supply infrastructure and the country’s plans to shift its reliance on hydropower to coal. We highlight that JAKS Resources last week signed agreements for a 1,200MW coal-fired IPP to come onstream in 2014-2015.
- The property plays of 2007 such as Gamuda, SP Setia and Berjaya Land are still there, and interestingly,other companies like MRCB are now also scouting for property projects in Vietnam.
- Since 2008, we note that manufacturers like Box-Pak have expanded their operations in Vietnam while furniture manufacturers such as Poh Huat and Latitude Tree are generating almost all their profits from their Vietnam operations. Global economic recovery and favourable operating conditions will likely continue to maintain this growth trend.
- Overall, while the recovery is still at an early stage, we believe the outlook for Malaysian companies in Vietnam is positive. In particular, we highlight Box-Pak (FV = RM2.35), JAKS (FV = RM2.00), and Parkson (FV = RM6.40) where we see significant growth potential.