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PHP – Reach the big sea – Initiation

Company Note 22/04/2021    222


  • Owning the largest market share in Hai Phong – Vietnam’s second largest port cluster, PHP is well-positioned to ride on the buoyant ocean trade.
  • The deep-water port development fuels long-term growth while the plan of Hoang Dieu port relocation is near-term catalyst.
  • We initiate coverage on PHP with an ADD rating and TP of VND24,200.

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Initiate coverage with ADD rating and target price of VND24,200
PHP is traded at 11.9 TTM P/E, which is 31.2% discount to its peer average. Our TP is based on sum-of-the-parts method to evaluate PHP’s core business and PHP’s plan of Hoang Dieu port relocation.

Well-positioned to ride on the buoyant ocean trade
Haiphong International Gateway (HIGP) is located in Dinh Vu – Cat Hai economic zone, one of the five key coastal economic zone of Vietnam. In order to cement the leading position in Hai Phong port cluster, PHP is going to invest in two wharves in HIGP from 3Q21F. The construction is set to begin in 3Q21F and expected to be completed by 2025. We expect PHP’s deep-water port to contribute 33.3% to PHP’s total container volume since 2027F onward.

Hoang Dieu port relocation plan is near-term catalyst
According to the relocation project which submitted to Prime Minister in 2018, Hoang Dieu port will be transformed into residential and commercial area. We expect the plan will be approved within 2021 following the current construction progress of Nguyen Trai bridge. Currently, this land bank was paid at a minimal annual land-using right fee thus we believe its market value should be much higher than its book value which will create one-off gain for PHP.

Positive growth prospects in the coming years
During the FY21-27F period, we expect PHP’s NP to grow at 9.5% CAGR in which (1) in FY21-22F, we expect PHP’s NP to grow 7.6%/10.2% yoy thanks to rising demand in Hai Phong port cluster and the estimated 5% yoy fee increase in FY22F based on the Seaport Services Fee Proposal expected to be approved in 2021, (2) in FY23-27F, we forecast PHP’s net profit to grow at 9.8% CAGR thanks to the launching of PHP’s deep-water port.

Downside risks and re-rating catalysts
Downside risks: (1) uncertainties emerging from pandemic or global trade, (2) longer-than-expected deep-water port completion. Potential re-rating catalyst: (1) higher-than-expected cargo volume and services price of PHP’s ports, and (2) Hoang Dieu port relocation proposal is approved.

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