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Public investment stocks face challenges
Despite bright prospects due to increased investment disbursement, public investment stocks are experiencing prolonged stagnation and underperformance compared to the broader market.
A construction site of Đèo Cả in Bình Thuận Province. — Photo hhv.com.vn
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On November 22, shares of Đèo Cả Traffic Infrastructure Investment JSC closed at VNĐ11,000 a share (US$0.43), marking a significant 29.4 per cent drop from the beginning of the year. Similarly, CIENCO4 Group JSC fell by 18.6 per cent to VNĐ7,600 per share while Construction Corporation No. 1 experienced a 13.5 per cent decline to VNĐ14,000 a share.
Head of analysis at Yuanta Việt Nam Securities Company Nguyễn Thế Minh said that various factors are influencing infrastructure investment stocks. Amid the recent general market decline, the public investment group has been perceived as the least efficient in capital utilisation, which has resulted in limited appeal to investors.
He added that public investment firms face challenges due to their significant financial leverage and slow capital disbursement, which leads to high financial costs and a low return on equity.
Typically attracting financial investors who capitalise on market trends, public investment stocks are bought during upswings and sold when price targets are achieved. Conversely, long-term and dividend-seeking investors tend to steer clear of these stocks due to their lower profit potential.
A key issue affecting public investment firms is the slow progress in land clearance and capital disbursement. Delays in land clearance, often due to compensation issues and the risk of cost escalation, pose significant challenges.
Moreover, many projects have been stuck in bureaucratic processes since late 2023. Audit and inspection issues have also impeded project implementation as investors proceed with caution.
Year-end expectations
Currently, stocks in the public investment industry are not expected to decline significantly but rather gain momentum in the final stages of the year, as many large projects are being pushed for disbursement.
"The uptrend may be on the horizon for this group in the near future, as it still holds its own fundamentals. However, investors should choose stocks of companies with strong internal capital sources, minimal financial leverage, higher capital efficiency leading to better profits," said Minh.
Many national infrastructure projects are evolving rapidly. For example, in the eastern North-South Expressway Phase 2 project, key components like Bãi Vọt - Hàm Nghi Expressway and Vũng Áng - Bùng Expressway have disbursement rates of 89 per cent and 87 per cent respectively.
Progress on the Long Thành Airport project is also notable, with 99 per cent of handover and clearance plans completed and construction of the passenger terminal package advancing over 30 per cent, aiming for phase 1 operations by 2026 or potentially by 2025 according to the Prime Minister's optimistic timeline.
Airports Corporation of Việt Nam (ACV) has invested $4.23 billion in component 3 (phase 1) of the Long Thành Airport project, with $2.43 billion from self-owned capital and $1.8 billion from commercial loans. ACV and its contractors are recognised for their continuous construction efforts to expedite project completion.
Vietcombank Securities Company (VCBS) views public investment as a sector to watch in 2025, with many projects nearing completion.
Đèo Cả Pass is expected to see continued growth due to approved fare increases at its toll stations and improved traffic flow from infrastructure projects.
VCBS projects Đèo Cả Pass to achieve significant revenue and profit growth in 2024, with potential for further improvement in construction operations from 2025 to 2027.
Vinaconex holds long-term growth potential, notably due to substantial construction backlog and recent project wins. The Government's commitment to accelerating public investments is set to benefit the company, particularly in projects like the North-South Expressway and Làng Thành Airport, contributing to its revenue growth.
Cienco 4 is also expected to perform well in 2024-2025, driven by improvements in the construction segment and potential growth in the BOT segment as toll prices and traffic volume increase. VCBS has forecast positive revenue and profit growth for Cienco 4 in 2024.
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