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Rebound seen for VN rubber shares
In spite of the declining profits of rubber producers listed on the Vietnamese stock markets following a decline in world rubber prices, future prospects for the rubber industry remain bright.
With global rubber supply increasing beyond demand, profits from Vietnamese rubber exports in the first 10 months of 2014 plunged by 26 per cent year-on-year to US$1.45 billion.
Phuoc Hoa Rubber (PHR), the Vietnamese rubber producer with the largest charter capital, achieved an average selling price of VND42.2 million ($1,900) per tonne, or VND2.6 million ($122.6) short of expectations. Its net profit in the first three quarters of the year likewise dropped by 37 per cent to VND143.5 billion ($6.7 million).
As a result, PHR plans to scale down its revenue target by 10.6 per cent to VND1.36 trillion ($64.1 million) and its profit target by 22.5 per cent to VND207 billion ($9.7 million).
Other companies such as Dong Phu (DPR), Hoa Binh (HRC), Tay Ninh (TRC) and Thong Nhat (TNC) likewise experienced a reduction in profits by more than 30 per cent and had to scale down their targets by half.
However, companies in the rubber industry are still better off than those in other industries. For instance, they managed to pay high dividends ranging from 10 to 30 per cent this year in spite of the difficulties.
According to Nguyen Dinh Thanh, MB Securities Company head of brokerage, the companies' price-to-earning and price-to-book value ratios were lower than the market's average.
"This signals a long-term potential for investment activities as the prices are cheap," Thanh said. He predicted that rubber prices would rebound because international buyers, especially those from China and India, were expected to buy more cars and tyres, and demand might recover following the reduction in the number of rubber plants.
bizhub
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