Company Quarterly Earnings Update – VSC VN – 2019 Q4

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

2019 results: highlights
  • VSC’s 2019 net revenue increased by 5.8% yoy to VND 1,793bn. Port operations, whose revenue was up by about 4% yoy thanks to higher port service prices, contributed roughly 72% to the company’s total sales.
  • VSC’s gross margin fell to 24.4% compared to 29.3% in 2018 due to increased sales contribution from transferred volume as vessel schedules were unfavorable for the company. But the transferred volume generated lower gross margins. In addition, sales contribution from the very profitable services for refrigerator containers declined. However, the situation notably improved towards year-end, and the gross margin rose considerably in Q4/2019 (26.5%). All in all, net profit after minority interest fell by 22.1% yoy to VND 234bn.
  • The unexpected deceleration of growth to 1.6% in 2019 was unusual and doesn’t reflect the bright long-term potential of cargo volume in the North of Vietnam (CAGR of 11% from 2010-2018). The cargo volume growth should move in line with Vietnam’s imports and exports. We think that in the longer run, import/export growth will surpass Vietnam’s GDP growth.
  • The outbreak of Covid-19 virus will probably have a short-term impact on the port sector in Hai Phong. We expect the throughput via ports in this area to slow in H1/2020, but to recover meaningfully thereafter, mitigating the negative impact in the first half of this year. Therefore, we expect total container volume via ports in Hai Phong to grow by 5% in 2020, and even by about 8% p.a. in subsequent years.
  • As for VSC, we expect no volume growth due to capacity limits. We assume that net profit will rise by 21.4% yoy in 2020 thanks to the recovery of the gross margin as VSC will be able to reduce transferred volume, and to minimize related costs of such activities. In 2021, net profit should increase by another 6.8% yoy, mainly thanks to higher financial income because of the strong cash position.

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