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Analysts predict earnings growth for nation’s shipping, port industries
The latest report by Saigon Securities Inc on port operations said that the sector could enjoy revenues and earnings growth despite weakening foreign trade and domestic transport in 2009.
The report aimed to become a recommended reference for investors’ strategies in the stock market by the end of this year, with a detailed analysis on four typical companies on the stock exchanges.
Viet Nam Ocean Shipping Co.
Similar to its peers in the dry bulk sector, VOSCO ran a loss of VND70 billion (US$4 million) in the first half of this year, which spread equally over two quarters. Total revenue was VND857.59 billion ($48.2 million) in the first half , equal to 42.56 per cent of its 2009 target, and a fall of 36 per cent year-on-year.
In terms of revenue breakdown, transportation decreased 37.46 per cent year-on-year, while 26.82 per cent year-on-year growth in services could not bring much positive impact, as transportation accounted for 95 per cent of the revenue.
There was also no significant change in partners or shipping routes in 2009. Shipping volume was 2.9 million tonnes (equal to 45.52 per cent of the 2009 target and a decrease of 5.7 per cent year-on-year), implying that VOSCO’s shipping volume was stable, but that a freight rate drop was the main driver of VOSCO’s losses in the first half.
Shipping turnover increased while volumes fell slightly as the company had to send its fleet faraway for shipping.
Despite the core business weakening, the company continued improving its fleet. On August 27, it will receive the Lucky Star from Bach Dang shipyard (and another one later this year), and was considering buying a less-than-10-year-old Handymax at about $20 million, selling the Song Hang ship (a 24-year-old, 6,369 DWT) and auctioning the Cabot Orient (a 25-year-old 4,485 DWT).
The company was quite cautious on the outlook of the second half of 2009, as well as that of 2010. At the annual shareholders’ meeting in April, it set after-tax earnings for 2009 at VND78.75 billion ($4.4 million), about a fourth of the record high of VND289 billion ($16.2 million) in 2008. However, at the loss of VND70 billion in the first half, VOSCO expected to break even in the third quarter and to see some gains in the fourth quarter of this year.
It planned to be listed in late 2009 and the beginning of 2010, but it depended on the total earnings of 2009, as it was still possible to suffer losses for the year.
Vinashin Group
The business performance of VNA in July did not show many surprises, and was affected by the freight rate decline of 40 per cent in 2009. Vinashin Co signed charter contracts for some ships of its fleet with a rate of about 25 per cent higher than the break-even level to keep the operation, and also tried to find more partners.
Shipping merchandise structure did not change much, but VNA switched to worldwide routes for better rates (but it needed bigger ships and more stringent marine safety regulations).
In terms of its fleet, VNA bought a 24,000 DWT, a 13-year-old vessel at $12.7 million and planned to sell two old vessels in the second half of 2009.
The company’s outlook for this year was still difficult to ascertain, and it expected to break even with its core business. Gains might only come from vessel sales and liquidation and a part of its investment portfolio (might be MSB stock, which VNA holds 3.1 million units at par value), which would enable VNA to pay the committed dividend of 10 per cent in 2009.
Doan Xa Port Co.
Exports and imports, especially import volumes, seemed to pick up a little since the beginning of the third quarter of 2009, and pre-tax profits for DXP were estimated to stand around VND60 billion ($3.8 million).
The total volume of goods put through was estimated at 4.8 million tonnes. The 2009 earning-per-share ratio of this company would come to around VND11,000/share and price-to-earnings rates at 5x.
The total volume of goods handled was not expected to increase significantly, as the current utilisation rate of Doan Xa port was not likely to increase. The company might continue to increase the proportion of import and export goods in the structure of goods handled (as handling fees for import and export goods were higher than for domestic ones).
However, the company might not restructure completely, as among large domestic clients was Vinalines Shipping, which had 51 per cent ownership in the company. In the long term, the company was considering buying some small size ports in the Hai Phong port area.
Viet Nam Container Shipping
Currently, port operations contribute the highest portion of the company’s revenues and profits (it was estimated that port operations made up around 60-65 per cent of the revenue and 70 per cent of the profit).
However, aside from that, Viet Nam Container Shipping Co continued to expand to road transport, and had invested in CFS expansions and CYs (container yards).
The company recently purchased 10 container trucks in August with a total value of VND4-5 billion ($224,719- $280,898), and liquidated some old trucks.
Besides, in 2009, the company bought a 14-year-old container vessel ACX KOHUTO, capacity 400 TEU (5,946 DWT), for a total cost of $2.8 million. The vessel will be delivered on August 28 and put into operation right after for the company’s Hai Phong–Hong Kong route. As marine transport was still relatively new to the company, the crew and management will be hired from VOSCO.
VSC also planned to purchase another vessel similar to ACX KOHUTO for around $3 million.
Investing in container vessels will help VSC to provide a full door-to-door service. Moreover, to some extent, VSC will have some advantages, as the company has agent and forwarder relationships, thus container goods will be at hand when container vessels come into operations.
However, when diversifying business lines, especially into non-traditional businesses, VSC could encounter management issues.
Based on the first half exceeding the initial year’s targets and positive second-half business prospects, the company has revised its target revenue from VND300 to VND360 billion ($16.9-20.2 million), and pre-tax profits from VND75 to VND115 billion ($4.2-6.5 million).
The earning-per-share ratio for 2009 was estimated at around VND11,000/share, and price-to-earnings rates at around 8x.
The Viet Nam Container Shipping Co’s board of management had passed the plan to issue bonus shares to current shareholders with the ratio of 4:1.
Saigon Securities Inc Research & Investment Advisory Department
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