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Monday, December 5, 2022

Seaport stocks – shelter for investors during corrections

By Dang Linh

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When investors regain their composure, smart money will be poured into the stocks of companies with positive business prospects in the near future.

Positive business results in Q1

Recent corrections in the stock market have sent the prices of stocks in multiple sectors plunging. Some stocks have even plummeted 40%-50% in only over a month.

Amid the market volatility, if investors want to bottom fish or hold on to stocks, they seek shelter in sectors with good business results and sustainable development. Of which, seaport stocks are common, as seaport companies have reported positive growth in the first quarter of the year and were forecast to maintain strong growth momentum in the remaining quarters.

In the January-April period, Vietnam’s total import-export turnover was more than US$242 billion, up 15.8% year-on-year. In direct proportion to the import-export turnover, the volume of goods passing through seaports grew 19% over the year-ago period to reach 840 million tons.

The growth was thanks to the recovery of goods production and circulation and lower transport costs from the peak in 2021, which fueled export activities in the first months of the year, especially the export of seafood, agricultural and wooden products.

In reality, the benefits of the recovery of supply chains have been reflected in the business results in the first quarter of enterprises in the seaport sector. Typically, Gemadept Corporation (GMD) reported an after-tax profit of nearly VND320 billion (US$13.7 million) in the first three months of the year, nearly double the figure in the same period last year.

In addition, Hai An Transport & Stevedoring JSC (HAH) made nearly VND262 billion in profit, nearly triple the figure recorded in the first quarter of last year. Transimex Corporation (TMS) also saw its profit doubled over the year-ago period, at VND262 billion. Besides the positive business results in the first three months, the sector’s growth potential was assessed to be great in the coming months due to the high demand for container transport on inland waterways to cargo transit points, inland container depots and deep-water ports.

Moreover, with the large-scale deep-water port system, Vietnam is still playing the role of a cargo transport center in the region, thus improving the position of Vietnam’s container vessel fleet in the Southeast Asian market.

Sheltering in strong stocks

With a positive start to the first quarter, some enterprises have revised their business targets for this year. At the annual shareholders’ meeting of Gemadept, the board of directors adjusted the firm’s revenue and pre-tax profit targets to VND3.85 trillion and VND1.2 trillion this year, up VND50 billion and VND100 billion, respectively, over the initial plan. Earlier, the company expected to generate VND3.8 trillion in revenue and VND1 trillion in pre-tax profit, rising 19% and 24%, respectively, versus the figures recorded in 2021.

At Gemadept, the Gemalink Port is expected to receive 1.4 million TEUs of cargo this year, fetching a profit of US$18 million. In addition, the port will help improve Gemadept’s ecosystem and increase the volume of containers and added value services at satellite ports, such as the Phuoc Long Inland Container Depot, the Binh Duong Port and other ports in the north.

As a result, its revenue and profit margin will improve. If it achieves a pre-tax profit target of VND1.2 trillion, 2022 will be the second consecutive year Gemadept obtains a profit growth rate of over 50%.

Meanwhile, the Hai An Port looks to earn a consolidated after-tax profit of VND550 billion this year, increasing 23% over the figure recorded in 2021 and reaching 48% of the full-year target. This year, the Hai An Port has 10 vessels and is planning to build four new vessels in 2023-2024.

According to SSI Securities Corporation, Hai An will maintain high-profit growth in 2022-2023. The parent company’s after-tax profit was forecast to reach VND744 billion in 2022 and VND902 billion in 2023, surging 67% and 21%, respectively.

In addition, Vietnam Container Shipping Joint Stock Corporation (VSC) set a revenue target of VND1.9 trillion and a pre-tax profit target at VND500 billion, rising a slight 4%. VSC plans to contribute more capital to its subsidiary Lao Cai Gold Joint Stock Company (GLC) to acquire the Quang Binh-Dinh Vu Inland Container Depot in Haiphong City. The corporation sought to complete the acquisition and start consolidating the depot’s business results to the corporation’s performance in the third quarter of this year.

After completing the investment plan, VSC will complete the leading marine logistics system in the country. Its strategy to focus on Haiphong will help effectively exploit supporting services from its subsidiaries and strategic partners and enhance the advantages of Haiphong City, thereby improving the firm’s position and capability to win new projects and acquire other enterprises in the city.

Besides the advantages, seaport enterprises have been facing global port congestion. As for Gemadept, the continuous changes in vessels’ schedules have put pressure on ports to build vessels at reasonable costs.

Nevertheless, according to Gemadept, the large-capacity Nam Dinh Vu Port can meet the rising volume of cargo and take full advantage of its wharves to attract more shipping lines.

The Vietnamese stock market has been affected by the potential risks in the real estate and corporate bond markets in the short term. However, when investors regain their composure, smart money flows will be poured into stocks of companies with positive business prospects in the coming periods and seaport stocks were assessed to create a good investment opportunity.

Therefore, some seaport stocks should be kept, including GMD, HAH and VSC.

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