Company Quarterly Earnings Update – VSC VN – 2019 Q1

Summary of the Q1/2019 results of Vietnam Container Ship. (VSC VN) 

Q1/2019 results: highlights
  • VSC’s net revenue increased by 15.5% yoy to VND 423bn in Q1/2019, thanks to the solid performance of port operations, while other businesses also did well. Revenue of port operations expanded by 12% yoy thanks to a 10% yoy increase of total throughput via VSC’s two ports, which reached about 240,000 TEUs.
  • The company’s gross profit went down by 8.3% yoy due to its lower gross margin. A cargo congestion at VSC’s two ports and unfavorable shipping schedules increased operating costs for the company, thereby negatively affecting the gross margin. In addition, VSC booked an extraordinary expense of VND 13.6bn for commissions to clients. As a result, net profit declined by 36.8% in Q1/2019.
  • By the end Q1/2019, VSC had a total of VND 305bn in cash & cash equivalent, accounting for 12% of total assets. The financial leverage remained low at a D/A ratio of 0.09x and a D/E ratio of 0.12x.
  • Hai Phong city is the main gateway for international trade in the North of Vietnam. During the last five years, total cargo volume via ports in Hai Phong has grown by a CAGR of 14.5%. But there was no volume growth in the first quarter of 2019. However, we think that the long-term growth potential is very promising thanks to the strong inflows of Foreign-Direct-Investment (FDI) companies into Vietnam. The VIP Green Port is likely to continue to achieve high capacity utilization in the future, while the Green Port might become less attractive. Therefore, VSC will gradually replace the port operation business at the Green Port in favor of an expansion of the logistics area.
  • The unfavorable financial result in Q1/2019 has some implications on our earlier projections. We expect net profit to grow slightly by 1.0% yoy in 2019 and by 6.8% yoy in 2020.

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