GMD – Strong in all facets – Update

• GMD reported 1Q22 net profit (NP) of VND274bn (+86.1% yoy), in line at 27.2% of our full-year forecast.
• We expect NP to increase at CAGR of 23.0% in FY22-26F thanks to new investment plans to ride on Vietnam’s vibrant seaport & seafreight market.
• Upgrade to Add with higher TP of VND64,400 (+22.2%) following higher net profit growth over FY22-26F.

Strong 1Q22 results
1Q22 GMD’s revenue increased 28.0% yoy, of which port services revenue rose 26.3% yoy on the back of a 24% yoy growth in container volume throughput and a 1.9% yoy increase in average handling fee. Logistics revenue increased 37.2% yoy mainly thanks to the contribution of depot services with GMD’s warehouse area increasing 21.2% yoy and inland container shipping which benefited from skyrocketed container shipping rates. Gemalink’s container volume has reached 300,000 TEUs and recorded net profit of VND38.5bn in 1Q22, bringing associates’ profit up 408.8% yoy. Consequently, 1Q22 NP rose 86.1% yoy to VND274bn, in-line at 27.2% of our full-year forecast.
Capital raising plan to finance for capacity expansion
GMD plans to issue shares to outstanding shareholders with exercise rate 3:1 and offering price VND20.000/cp. If successful, GMD will raise its capital by VND2,009bn to finance for Nam Dinh Vu phase 2 (VND800bn) and Gemalink phase 2 (VND1000bn). GMD is in negotiation process to divest its 24% stake of Gemalink. GMD aims VND1,200bn for FY22F pre-tax profit (+48.9% yoy) in best scenario, however, we expect FY22F pre-tax profit may increase 55.7% yoy to VND1,255bn mainly thanks to the contribution of Gemalink (VND275bn).
Maintain FY22-23F EPS forecast and raise FY22-26F NP CAGR by 2.7%
We almost maintain FY22-23F EPS on mixed factors. Moreover, we expect a better long-term prospect for GMD thanks to the investment plans to capture Vietnam’s vibrant seaport and seafreight market, thus we increase revenue CAGR in FY22-26F from 4.3% to 9.9%, which help net profit CAGR in FY22-26F raise from 20.3% to 23.0%.
Upgrade to Add with higher TP of VND64,400
We upgrade our rating to Add on GMD with a higher SOTP-based TP of VND64,400 as (1) we roll forward our valuation to FY22F, and (2) we raise NP CAGR in FY22-26F from 20.3% to 23.0%. Upside risks to our forecasts include (1) higher-than-expected container volume and handling fee at GMD’s ports and (2) assets divestments at higher-than-expected prices. Downside risks are (1) uncertainty from the pandemic or geopolitical concerns hindering the growth of global trade and (2) slower-than-expected construction of Gemalink phase 2
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