Vietnamese Stocks | Investment Opportunities in UPCoM-Listed Stocks

Last week, numerous investors were attracted by brokerage firms, teams, and groups promoting investment opportunities in UPCoM-listed stocks. A large number of floating codes Binh Son Refining and Petrochemical Joint Stock Company’s (BSR) share price reached its highest level in over three years—exceeding VND 23,000 per share—surpassing the winning bid price from its initial public offering (IPO) in early 2018. One month later, the stock price rose nearly 30%, yet many securities firms still recommend buying BSR, assigning it a “Top 3” target price. The driving force behind BSR’s stock appreciation lies in the company’s effective core operations. In Q3 2021, despite nationwide social distancing measures implemented across multiple provinces and cities—and overcoming numerous challenges—BSR maintained stable production and business activities, delivering performance more positive than expectations set by several securities firms. Specifically, BSR achieved revenue of VND 17.675 trillion and after-tax profit of VND 484 billion in Q3. Cumulatively for the first nine months of 2021, revenue totaled VND 66.562 trillion and after-tax profit reached VND 4.066 trillion—compared to a net loss in the same period of 2020. In the market, Brent crude oil prices traded above the USD 80/barrel threshold. With rising oil demand, average prices are expected to remain at elevated levels of approximately USD 75–80/barrel through end-2021 and into 2022—a strong growth support factor for BSR. High crude oil prices will help improve BSR’s profit margins year-on-year and drive up prices for products such as diesel oil (DO) and gasoline. Indeed, BSR’s crude-to-product price spread (crack spread) showed positive movement in Q3 2021. The main factor affecting the company’s operations during this period was extremely low consumer demand—but this is gradually being “resolved” as the economy recovers step-by-step. In addition to refined petroleum and petrochemical products—including oil and petroleum—other products such as liquefied petroleum gas (LPG) and plastic pellets have recently surged sharply, outpacing crude oil price increases. This trend supports higher future profitability for BSR—not to mention the company also benefits from one month’s inventory equaling production volume. Whereas BSR previously “cried out” due to high inventory levels, now—with rising oil prices and a sharp rebound in consumer demand—inventory has become an advantage, as acquisition costs are significantly lower relative to selling prices. BSR’s earnings forecast for Q4 2021 stands at nearly VND 20 trillion, making its stock increasingly attractive to investors. Liquidity stands at approximately 19 million shares per session—comparable to that of many VN30 blue-chip stocks. Gia Lai Hydroelectric Joint Stock Company (GHC), another stock with its own compelling narrative, has been actively purchased by many investors—even amid recent fiery price surges. GHC owns three power generation segments: hydroelectric, solar, and wind—and is preparing a plan to move its stock onto the hose list. In Q4 this year, industrial parks will resume production, and GHC will commission three new wind farms, generating substantial profits for the company. Meanwhile, GHC declared a 35% cash dividend, and its projected earnings per share (EPS) for this year exceed VND 6,000—making its share count notably “concentrated” for business leaders and shareholders alike.

Vietnamese Stocks | Stocks to Watch on September 9: BSR, SGT, BID

Stable plant operation, average efficiency at 105% of design capacity: In the first half of 2021, Binh Son Refining and Petrochemical Joint Stock Company (BSR) benefited from favorable product markets and domestic production capacity, operating machinery at 105% of capacity. Crude oil processing volume and consumption volume reached 3.45 million tons and 3.43 million tons respectively—fulfilling 53% of its annual plan. Strong earnings growth, reaching the highest level since conversion to joint-stock status: Revenue for the first six months totaled VND 489.08 trillion, up 54% year-on-year and achieving 69% of the annual plan. Pre-tax profit reached VND 35.98 trillion and VND 35.27 trillion respectively, compared to a VND 42.52 trillion loss in the same period of 2020. This significant improvement in operational performance was driven primarily by a 45% year-on-year increase in oil prices (Brent crude). The difference between product selling prices and crude oil prices (crack spread) widened during this period—especially for gasoline products (A92, A95), LPG, and polypropylene—while prices for finished products such as diesel oil (DO) and jet fuel (Jet A1) remained relatively low. This resulted in an attractive gross profit of VND 39.14 trillion and a gross margin of 8%, versus -12.2% in the same period of 2020. Financial, sales, and administrative expenses remained largely under control: Both revenue and financial expenses increased, yielding net financial income of VND 1.97 trillion—an increase of 3.8 times. During the period, the company repaid long-term debt totaling VND 11.13 trillion while increasing short-term debt by VND 9.54 trillion. Sales expenses were well controlled, rising only 11% to VND 350 billion; general and administrative (G&A) expenses rose 34% to VND 167 billion. Impact of the Fourth Wave of COVID-19: Currently, renewed outbreaks of COVID-19 have led to isolation and lockdowns across multiple Vietnamese provinces and cities, negatively affecting gasoline market demand. Consequently, the company’s production and business activities have been significantly impacted—factory utilization dropped to 90% capacity in August. We project Q3 output will reach 84–86% of the first-half average, or approximately 1.46 million tons, and second-half output will total about 3.11 million tons. Revenue for the final six months of the year is expected to reach VND 477.1 trillion, with pre-tax profit of VND 18.1 trillion—bringing full-year revenue and pre-tax profit to VND 966.2 trillion and VND 54.1 trillion respectively. EPS is projected at VND 1,640. Issues and Challenges: Progress on the upgrade and expansion project remains sluggish in securing suitable investment funding; the EPC tender package has not yet been finalized, and conditions remain unmet. As environmental and emissions-related product quality standards grow increasingly stringent, this issue may impact the company’s operations. Stock Valuation: Using the FCFF discounted cash flow valuation method—and benchmarking against PE and PB multiples—the fair value of BSR’s stock is estimated at VND 18,200 per share.

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