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International buyers who search publicity to the Vietnam inventory market usually accomplish that through ETFs or Closed Finish Funds (CEFs) that maintain the bigger and extra liquid corporations. Such corporations are normally distinguished constituents on numerous Vietnam inventory indices such because the VN-Index, FTSE Vietnam Index, MSCI Vietnam Index and so forth.
On this weblog submit I shall focus on one such massive Vietnam inventory, the Hoa Phat Group (HOSE:HPG). I believed is likely to be helpful to usually present a broad overview of the shares you would possibly see pop up in fund supervisor holdings. The aim is to not present purchase or promote suggestions. Nonetheless a fast abstract of key drivers for future efficiency would be the intention, and readers could make their very own thoughts up of whether or not Hoa Phat Group is an efficient inventory to purchase?
WHY HOA PHAT GROUP?
Hoa Phat Group is a transparent success story for shareholders in Vietnam over the past decade. Regardless of that, it trades on a really low P/E ratio. While dividends haven’t been a lot to talk of traditionally, they could ramp up in future years. Traders seeking to achieve publicity to the thematic of Vietnam’s future infrastructure spend, might be tempted to take an in depth have a look at Hoa Phat Group.
AN OVERVIEW OF THE HOA PAT GROUP (HOSE:HPG) BUSINESS
Hoa Phat Group is the main industrial manufacturing group in Vietnam. Over 80% of revenues relate to metal manufacturing, the place they’ve a big market share of above 30%, with goals to get to 40%. Their agricultural enterprise phase can also be experiencing excessive development charges. They’ve usually traded on a single digit PE ratio and are properly positioned for Vietnam’s sturdy give attention to infrastructure growth.
Background of Hoa Phat Group
The primary institution of the Hoa Phat firm title occurred again in 1992. Within the Nineties they went from gear, then furnishings, then established Hoa Phat Metal Pipe Firm. Within the early 2000s they expanded into building, refrigeration and actual property.
2007 was a major 12 months when Hoa Phat Group Joint Inventory Firm restructured as the final word dad or mum firm and listed on the HCMC inventory change.
Very spectacular company story of Vietnam
Generally an image tells the story of success so I shall go away the beneath 10 12 months income / revenue development chart right here.
Supply: Hoa Phat Group 2020 Annual Report
Hoa Phat Group income / revenue combine.
Under is the phase break down if the place income / income are coming from.
Supply: Hoa Phat Group 2020 Annual Report
Hoa Phat Group metal market share development.
Because of Hoa Phat Group’s excellent success within the final decade, they’re now the clear main participant when it comes to Vietnam’s manufacturing building metal.
FACTORS TO DECIDE ON WILL HOA PHAT GROUP SHARES KEEP RISING IN 2022?
Execution of funding in Dung Quat Advanced 2 – This can be a very massive mission for Hoa Phat Group that had already been in planning for a very long time. It has a design capability of 5.6mn tons, together with 4.6mn of scorching rolled coil (HRC). Demand for HRC pertains to materials for manufacturing of many merchandise equivalent to metal pipes, galvanised metal sheets, vehicle spare elements and family home equipment.
This mission may grow to be operational in 2024 and because of this may assist annual revenues soar by 60-70%.
Demand story stays sturdy from Vietnam infrastructure spend / housing rebound – Vietnam has some main plans when it comes to infrastructure over the subsequent few years a minimum of which can be seen drivers to learn Hoa Phat Group. The federal government has made sturdy commitments inside their price range plans on the likes of Airports, highways, rail programs and seaports.
The true property outlook additionally appears comparatively stable as extra certainty comes again into hopefully a submit covid world.
Market share – The chart I confirmed earlier confirmed how Hoa Phat has grown rapidly to be the dominant native participant in metal. Having mentioned that, there’s nonetheless room to win much more market share.
Dividends – That is considerably tied into the primary catalyst of the execution of funding in Dung Quat Advanced 2. The corporate has flagged greater money dividends when this ramps up. Generally I observe that markets get up to re-rating low-cost valuations when the working cashflow and resultant dividends is clearly on show for everybody to see.
VIETNAM STOCK MARKET VALUATIONS – HOA PHAT GROUP PE RATIO, YIELD ETC.
Hoa Phat Group PE Ratio – 4.1 instances
Hoa Phat Group dividend yield – 1.2%
* Supply: TIKR information captured on June 14th 2022
- Observe if you happen to discover this form of information desk helpful, then beneath here’s a hyperlink for a free signal as much as TIKR (no bank card required).
https://app.tikr.com/register?ref=valueinvestliving
They’re a “freemium subscription mannequin”, so there’s tons of free info and the complete entry professional plan you solely must pay for if you happen to later really feel snug you want to take action. Observe that I could obtain a small fee if you happen to be a part of their paid plan, however at no extra value to you.
HOA PHAT GROUP SIZE IN TERMS OF VIETNAM STOCK INDEX AND COMPONENTS
Hoa Phat Group on the time of writing is concerning the ninth largest firm of my searches of Vietnam inventory listing of the biggest corporations. The market cap in USD is circa $6 billion.
IS HOA PHAT GROUP A GOOD UNDERVALUED VIETNAMESE STOCK TO BUY FOR 2022?
The inventory had a fast rise in 2021 significantly over the primary a part of the 12 months. A lot in order that buyers could possibly be forgiven for considering they’ve missed the boat on this. Nonetheless since round November of final 12 months the inventory has had a big decline. The falls have significantly gathered tempo in 2022 amidst very weak world and Vietnam inventory markets.
Regardless of the nice share worth efficiency of 2021, the inventory nonetheless trades cheaply. As I highlighted above within the TIKR analysis information, the inventory is on a trailing P/E of simply 4 instances!
Digging a bit additional with the TIKR information, analysts numbers recommend margins and income may come below stress in contrast with 2021. On analysts forecast numbers for 2022 we’re a speaking a few P/E nevertheless of nonetheless circa 5 instances. After this 12 months’s numbers analysts have sturdy EPS development forecasted for 2023 & 2024.
You would argue it is going to all the time commerce a bit low-cost. It will be labelled as a cyclical kind firm by many market members. Maybe it will be extra susceptible to a worldwide demand shock than most. With inflation the large story throughout the globe in 2022 to date, I can perceive Hoa Phat Group shares underperforming the market. The corporate continues to be in growth mode so maybe rising prices pressures are a fear within the shorter time period.
During the last 12 months or so in world inventory markets buyers appear to be waking as much as the very fact (for a change in comparison with the few years prior!), that issues like excessive certainty of shorter time period earnings and cashflows do matter. Extra importantly, so does the valuation you pay for a inventory.
Regardless of all of the macro dangers round and a few viewing this as a cyclical inventory, I’d assume the present low valuation stands you in good stead of doing properly over the subsequent few years with Hoa Phat Group Inventory.
Their dominant market share, scale, and place to cater for the Vietnam authorities’s sturdy urge for food for infrastructure growth put it a perfect place. Extra capability is rapidly coming on-line, aiding the corporate’s money flows to ramp up over the subsequent couple of years. This paves the best way for Hoa Phat to grow to be a stable excessive dividend paying inventory by 2023/2024.
I spend my time in Vietnam’s south and Ho Chi Minh Metropolis and might definitely relate for the necessity of huge infrastructure tasks equivalent to one other worldwide airport, extra highways and environment friendly rail networks and so forth. This form of want received’t go away anytime quickly.
As an apart, I word that VinaCapital would have been an everyday vendor of this inventory which may must some prolong contributed to holding again the worth development at some phases when the inventory was going up final 12 months. Such promoting although will not be as a result of they don’t just like the inventory. It grew to greater than 20% weight from performing so properly of their VOF fund. It’s due to this fact pure to count on they might do a little bit of trimming for danger administration functions, and to rebalance to weights purchasers could be extra snug with.
OTHER VIETNAM STOCK INDEX COMPONENTS REVIEWS
If you’re concerned with comparable summaries and evaluation on different bigger Vietnam listed shares listed below are another hyperlinks to take a look at.
VIETNAM STOCK INDEX COMPONENTS REVIEW – VINAMILK (HOSE:VNM) – VIETNAM STOCK MARKET (vietnamesestockmarket.com)
VIETNAM STOCK INDEX COMPONENTS REVIEW – VINHOMES (HOSE:VHM) – VIETNAM STOCK MARKET (vietnamesestockmarket.com)
VIETNAM STOCK INDEX COMPONENTS REVIEW – AIRPORTS CORPORATION OF VIETNAM (UPCOM:ACV) – VIETNAM STOCK MARKET (vietnamesestockmarket.com)
VIETNAM STOCK INDEX COMPONENTS REVIEW – SAIGON BEER (HOSE:SAB) – VIETNAM STOCK MARKET (vietnamesestockmarket.com)
And must you need a very fast description of the biggest 10 corporations listed on the Vietnam inventory change, you’ll want to go to the beneath weblog submit I made final 12 months.
VIETNAM LARGEST 10 COMPANIES ON STOCK MARKET
I summarize the biggest Vietnam corporations by market cap:
VIETNAM LARGEST 10 COMPANIES ON STOCK MARKET
Is Vietnam a very good funding?
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