Company Visit: VEA – Optimistic on FY19

Target price: N/A

Upside: N/A

Event catalyst:

• Audited FY18 PBT could be c. 8-9% lower than the unaudited preliminary numbers.
• Positive guidance on FY2019.
• Plan to maintain high cash dividend payout.
• Divestment not likely to happen soon.

Audited FY18 PBT could be lower than unaudited preliminary numbers. Management said that audited PBT could be c.8-9% lower than the preliminary results. Specifically, additional required provisions for inventories are likely to reduce audited PBT by 2.7%-3.6%, and another VND 270 bn (4.9% of unaudited PBT) due to a delayed dividend from its Ford Vietnam JV.

Optimistic FY2019 guidance. Management guided for +16% YoY growth in net income in 2019, mainly from a 23% YoY jump in associate income. VEA’s expressed a positive view on the market in 2019, supported by (1) no signs of slowing demand and (2) Decree 116, which hindered car imports from ASEAN markets, has mostly been addressed and should pose less of a hindrance from 2019.

For its core business, the company said it will invest more in its motorbike and auto parts segments (which make up about 20% of core business sales and actually are profitable) while divesting inefficient subsidiaries and JVs to improve consolidated profitability.

VEA plans to maintain high cash dividend payout. The company said it will seek approval to raise its 2018 cash dividend from VND 2,800 per share last year to VND 3,500-3,800/share at its AGM in May. For FY19, the company guided for DPS of VND 5,000 per share, equivalent to a c. 10% yield at its current market price.

Divestment not likely to occur any time soon. VEA said that the government’s divestment plan is not yet clear. The government will eventually hold only 36% of VEAM’s total shares but a divestment will not happen soon due to issues related to VEA’s agreements with its JVs (specifically, Honda and Toyota). The company also said that it is unlikely to list on the Hanoi Stock Exchange in 2019.

Our view: We don’t cover VEA and have no investment view on the stock. However, management’s high projected dividend yield of 10% and positive view on the automobile market make the stock worthy of consideration.

Please access the link for our complete report: VEA — Company Visit

Analyst: Quang Vo, quang.vo@yuanta.com.vn