Hai Phong city is the sixth largest city in Vietnam in terms of GDP. The city is traditionally renowned as the logistics center of the northern area. Nearly all import-export cargo in the north are transferred and handled via Hai Phong’s port system. The city is now transforming to become one of the most important industrial areas of Vietnam with a more diversified economy.
In the first nine months of 2018, Hai Phong’s GDP grew by 16.2% yoy, more than double the rate of Vietnam’s economic growth of 6.98%. About 40% of Hai Phong’s GDP was contributed by the industrial and construction sectors which grew 25.5% yoy, hence Hai Phong’s main economic drivers. The services sector, which accounted for about 45% of the Hai Phoneconomy, also achieved an ample growth of 10.3% yoy.
Total disbursed investment capital surged 48% yoy to about $2.8 bn, driven by strong local private investments of $1.7 bn (+81% yoy). However, that seems to be just a beginning of a new growth era in Hai Phong. Many big investment projects were registered and are now in the disbursement process. VinGroup, for instance, is investing in its automobile & motorbike manufacturing complex named Vinfast with a total registered capital of $3.5 bn. The company introduced its models and expects to officially sell motorbikes in late 2018 and automobiles in late 2019. Vingroup also registered to invest in plenty of residential and hospitability real estate projects in Hai Phong. The biggest real estate project in Hai Phong is a hospitality real project of about $3.0 bn, registered by Sungroup. Besides, there are many hundred million dollar real estate projects such as the new five-star Hilton Hotel, Pullman Hotel etc.
Hai Phong’s foreign direct investment (FDI) disbursement was about $0.7 bn, up 33% yoy in 9M/2018. Total FDI registration more than doubled to $1.5bn, compared to the same period last year. Import and export activities were also strong, exports were up 26.6% yoy while imports expanded 19.9% yoy in 9M/2018. Total cargo throughput via ports in Hai Phong reached 78.9 million tons, up 19.1% yoy. Total freight transportation (gauged by ton.km) was up 15.1% yoy.
Amidst all the development above, Hai Phong city is rapidly transforming and providing attractive investment opportunities.
From our current stock covering list, there are some companies which will benefit Hai Phong’s development:
Kinh Bac City (KBC)
One of the largest industrial park (IP) developer in the north of Vietnam, the company has some IPs and one residential zone in Hai Phong. KBC should benefit from strong FDI inflows and rising land prices in Hai Phong city. KBC’s stock closed at VND 12,650/share on 21 November 2018, trading at a 2018F P/E of 5.6x and at a P/B of 0.6x which is very attractive in our view. Compared to our target price, the upside potential from the current market price is 71%.
One of the major port operators in Hai Phong, should be supported by strong import-export activities, the fast growing manufacturing sector and FDI inflows in the area. VSC’s stock closed at VND 40,350/share on 21 November 2018, trading at a 2018F P/E of 7.8x and at an EV/EBITDA of 3.8x. Compared to our target price, the upside potential from the current market price is 133%.
Tien Phong plastics (NTP)
Is the leader in plastic pipes in the north, should benefit from the current rapid development in infrastructure and the real estate sector in Hai Phong. NTP also owns a real estate project, which is located in the busiest area of Hai Phong city, thus it will add more value to the company in the future. NTP’s stock closed at VND 42,300/share on 21 November 2018, trading at a 2018F P/E of 10.6x. Compared to our target price, the upside potential from the current market price is 119%.
Featured image credit: force21.com.vn