Horizon Securities: Company Visit Note
Horizon Securities: Company Visit Note
Horizon Securities: Company Visit Note
Exchange: Sector:
HRS
Equity Research
Horizon Securities
Research team Tu Tran Senior Analyst [email protected]
Company highlights
In 1Q2010, MPC generated revenues of VND663bln (US$34.7mln), an increase of 46% y-o-y and net income of VND38bln (US$1.99mln), a decrease of 22.7% y-o-y. In March 2010, MPC became the first shrimp exporter in Vietnam to receive the GLOBAL GAP certification, which is a globalize quality and environmental standard for aquatic products. The certificate enables the company to surpass one of many hurdles in exporting to the highly-regulated European market. Rising capacity is a key catalyst: Management highlighted that MPCs annual capacity has increased to 24,000 tons per year from 09 capacity of 19,500 tons/ha. In addition, another new processing plant, Minh Phu Hau Giang with capacity of 20,000 tons per year coming into stream in 2Q10 will be an additional growth driver in terms of processing volume for the company. Feeding area expansion, a platform for future growth: We believe that enlarging feeding area provides MPC with a competitive edge over other domestic counterparts. The company aims to broaden feeding area to 860 ha at the end of 2010 from its current 250ha, equivalent to an increase in its own raw materials supply from 25% at present to approximately 60%-80%. New manufacturing factory underpins future sales growth: MPC has increased chartered capital from VND150bln (US$7.8mln) to VND300bln (US$15.7mln) for its subsidiaries, Minh Phu Hau Giang (MPC has 90% ownership) to complete a 19,500-ton capacity processing plant. Valuation: MPC is currently trading at a 2010 P/E of 8.9x, which represents a 12.7% premium to local peers and 2009 P/B of 1.9x, which is a 26.7% premium. Share price performance: the stock is down by 9.4% YTD but has outperformed the VN-Index by 3.6% last month
Stock profile/statistics
Bloomberg Ticker Sector Price (VND) VND/USD Share Outstanding Par (VND) Market Capitalization (VND mln) Foreign room/ limit (%) 52 week High/ Low (VND) Stock performance (%) Absolute (%) Relative Vs VNIndex (%)
% Ownership Structure as of March 31, 2010 Company founders Strategic investors in which: foreigners Others 26% 42% 9% 33%
thousand shares
1,200
60,000 Volume
1,000
Price
50,000
800
40,000
600
30,000
400
20,000
200
10,000
VND
ou
2009 Review
In 2009, MPC generated VND3,094bln (US$162mln) of revenues, an increase of 7.6% y-o-y, and net income of VND239bln (US$12.5mln) driven by a VND156bln (US$8.2mln) reversal of stock provision from 2008 losses. MPC is currently the leading shrimp exporter in Vietnam with a 10% market share. The United States is the companys largest export market, representing 45% of total revenues in 2009; South Korea (13.4%), Japan (12.4%), Canada (12.2%), and EU (11.1%) were other leading markets. FY2009 EXPORT REVENUES BREAKDOWN
Canada 12% EU 11% Others 6%
Japan 12%
Korea 13%
US 46%
MPC exported 16,096 tons of shrimp in 2009, 45% of which were tiger prawns and the remaining 55% were white leg shrimps. Although margins are higher for tiger prawns, management expects to have a higher product concentration from white leg shrimps due to a shortage of tiger prawns from local farmers and wholesalers.
1Q-2010 UPDATE
In 1Q2010, MPC generated revenues of VND663bln (US$34.7mln), an increase of 46% y-o-y and net income of VND38bln (US$1.99mln), a decrease of 22.7% y-o-y. The surge in revenues and decline in net income was due to the expiration of tax benefits in 2010 when the company had to pay a 25% tax-rate as opposed to a marginal 0% rate in 2009. In March 2010, MPC became the first shrimp exporter in Vietnam to receive the GLOBAL GAP certification, which is a globalize quality and environmental standard for aquatic products. The certificate enables the company to surpass one of many hurdles in exporting to the highly-regulated European market. 2
Horizon Securities
VND bil.
193
6.03% 19.50
2010s OUTLOOK
MPC plans to increase sales by 28% Y-o-Y in FY10, mainly from rising processing volume while price is expected to decrease marginally. We believe that MPC can reach its target because the price of tiger prawn in the U.S. has surged by more than 40% YTD in the wake of Gulf of Mexico oil spill. Low inventories along with a shortage of supply are likely to squeeze prices further in coming months. New manufacturing factory underpins future sales growth: MPC has increased chartered capital from VND150bln (US$7.8mln) to VND300bln (US$15.7mln) for its subsidiaries, Minh Phu Hau Giang (MPC has 90% ownership) to complete a 19,500ton capacity processing plant. The factory is expected to begin operating in Q2 2011, aggregating the annual capacity to 43,500 tons, an increase of 81%. FARMING AREA EXPANSION PLAN
Total framing area Feeding area Additional area expansion in which at Kien Giang at Ca Mau ha ton ha ha ha Current 250 2,699 2010 860 6,884 610 100 510 2011 1,172 14,398 312 162 150 2012 1,422 21,899 250 250 2013 1,672 25,749 250 250 2014 1,672 28,090
Developing feeding land area establishes the platform for subsequent years: in order to secure its raw material input, management plans to expand its fish farm aggressively from 860ha at the end of 2010 to over 1,600ha in 2013. The new fish farm zone is expected to supply 100% of the required raw materials for the company. This helps the company minimize uncertainties with regards to quality and quantity of raw materials. Expansion through co-operation towards a fully integrated manufacturing process: MPC plans on partnering with leading domestic firms to produce packaging and with a Singaporean firm to develop a container port in Hau Giang province. In 2010, the management plans on raising chartered capital by VND200bln to VND900bln (US$47.1mln) to finance the Minh Phu Hau Giang processing plant. MPC is also considering a VND600bln (US$31.4mln) convertible bond if it requires more capital. The company has a debt to equity ratio of 1.0x as of March 31, 2010.
Horizon Securities
Valuation
MPC stock is currently trading at a 2010 P/E of 8.9x, which represents a 12.7% premium to local peers and 2009 P/B of 1.9x, which is a 26.7% premium. Given its strong growth potential in the overseas markets, but pricey valuation, we recommend taking a cautious approach on the stock. QUICK VALUATION
Market cap Name Minh Phu Seafood JSC Nam Viet Corp Hung Vuong Corp Cuulong Fish JSC An Giang Fisheries. Vinh Hoan Corp Local peers US$/share $1.57 $1.11 $1.63 $2.08 $1.93 $2.13 TSO (mln) 70.0 65.6 66.0 11.0 12.9 35.3 (US$mln) 110 73 107 23 25 75 PE 2010 8.9x 13.9x 4.5x 5.8x 7.2x 7.3x 7.9x PB 1.9x 0.9x 1.2x 2.3x 0.7x 1.9x 1.5x ROA 10.8% -5.8% 2.2% 8.2% 1.2% 12.7% 4.9% ROE 21.1% -8.7% 9.2% 28.3% 2.3% 28.2% 13.4%
Horizon Securities
A Member of Horizon Capital Company 194 Nguyen Cong Tru Street, 5th Floor District 1, Ho Chi Minh City Vietnam Tel: +848 3914 7027 Fax: +848 3914 7020 Email: [email protected]
Horizon Securities
Horizon Securities