INVESTMENT THESIS
The business results for the first six months of the year are positive. In Q1/2024, GMD recorded net revenue of VND 1,006 billion (+11.5% YoY; 25.1% of full-year target) and profit before tax in Q1/2024 reached VND 708 billion (+129.6% YoY; 42.0% of full-year target). Excluding the extraordinary profit of VND 336 billion from the divestment of Nam Hai port, the profit before tax in Q1/2024 still recorded a growth of 20.7% YoY. The company estimates that the business results for the first half of 2024 will reach 53% of the annual plan, excluding the profit from the divestment of Nam Hai port.
Long-term prospects arise from continuous investment in expanding strategic ports. GMD is implementing a strategy to divest from ports that no longer have growth potential in order to concentrate investment capital on two key large-scale ports, Gemalink and Nam Dinh Vu.
•Nam Dinh Vu port phase 3 is expected to start construction in early Q3/2024 and be completed by the end of 2025, increasing by 350,000-400,000 TEUs/year (equivalent to 50% capacity) in 2026 and reaching 100% design capacity in 2027. If all three phases are completed, the total capacity at this port will increase to 2 million TEUs/year (+66.7% compared to the current capacity).
•Gemalink port phase 2-A is expected to start construction by the end of Q2/2025, increasing capacity by 600,000 TEUs/year to 2.1 million TEUs/year (+40%) when completed. After phase 2A reaches 80-85% capacity, phase 2-B will be implemented to increase total capacity to 3 million TEUs (doubling the current capacity).
The volume of container cargo through ports has recorded continuous growth in the early months of 2024. According to the Vietnam Maritime Administration, in the first four months of 2024, the volume of container cargo through ports reached 9.302 million TEUs (+27% YoY). The demand for import and export of goods is expected to continue growing in 2024 due to the following factors: (1) New free trade agreements (FTAs) coming into effect; (2) Signs of global economic recovery; and (3) The trend of shifting global supply chains.
Prospects:
•Competitive advantage due to the ownership and operation of multiple major seaports at strategic locations, particularly at Cai Mep and Hai Phong.
•Growth potential from the expansion investments in Gemalink Port Phase 2A and Nam Dinh Vu Port Phase 3.
•Container handling charges have room for increase in the future, as Vietnam’s charges remain significantly lower than the regional and global averages.
Risk:
•Significant competitive pressure in the Hai Phong area as deep-water ports Lach Huyen 3 & 4 and Lach Huyen 5 & 6 come into operation next following years.
RECOMMENDATIONS
OUTPERFORM with a 1-year target price of VND 92,600 per share and a price increase potential of 12.9% based on the relative valuation method. Currently, GMD's stock is trading at a trailing 12-month P/E ratio of 9.8x and a P/B ratio of 2.35x.
Investor can see the full Report below:
