Macquarie Vietnam Strategy 270813

Please refer to the important disclosures and analyst certification on inside back cover of this document, or on our
website www.macquarie.com.au/disclosures.
VIETNAM

Inside
Reality may force some changes 2
Macro update 4
Theme 1: Bank reform still slow, liquidity
holds up 8
Theme 2: FDI may surge, TPP an
opportunity for VN 14
Theme 3: Facing reality
Steady change 17
Appendices Demographics,
FDI & wages 18
FPT Corp. 20
Hoa Phat Group JSC 22
PetroVietnam Drilling and Well Services 24
PetroVietnam Fertilizer & Chemical 27
Vietnam Dairy Products 29

Analyst(s)
Peter Bennett
+65 6601 0847 peter.bennett@macquarie.com
Vina Securities
Cal Le
+848 3821 9316 cal.le@vinasecurities.com

27 August 2013
Macquarie Capital Securities
(Singapore) Pte. Limited
Vietnam Strategy
Reality may force some changes
A combination of stubbornly low and tepid GDP growth rates (4.6% in 2Q13),
and ineffectiveness of 800bps in policy cuts (since Jan-12), is forcing policy
makers in Hanoi to turn to FDI, and portfolio capital to underwrite GDP growth.
With inflation now squarely back in mid-single digits, the next step has to be
starting the process of bank recapitalisation which will mean a fair bit of dilution.
Some of the recent stepped-up activities in bank restructuring are encouraging,
and if ownership liberalisation, improved FDI flows be followed by a pick-up in
the substance and pace of SOE reform, then GDP growth of 6%+ for Vietnam
may well resume from 2015 and beyond.
Theme 1: Bank reform is slow, but liquidity is held up
The magnitude of Vietnams NPL reality was quantified by the 1 year delay in
implementation of Circular 2/2013/TT-NHNN to 1 July 2014. Circular 2 aimed to
tighten risk management and enforce more consistent and uniform standards on
the treatment of debt, collateral, and NPLs. The SBV acknowledged that Circular
2 would have brought to light an additional VND270tn (~USD13bn) in NPLs.
An Asset Management Company (VAMC) to tackle NPLs was established on
July 26th. Given only VND500bn (USD24mn) in paid-in capital and banking
regulations, two things are clear: i) it will initially use base money to buy loans, ii)
it lacks incentives or ability to easily liquidate underlying loan collateral. Thus, we
conclude the VAMCs job is to provide a liquidity buffer to the weakest banks.
Finally, the SBV has just been given authority to direct banks (presumably state-
owned banks) to take primary equity stakes in weaker SBV supervised banks
that fail to meet recapitalisation or follow the SBVs restructuring instructions.
Theme 2: FDI will grow, TPP a serious opportunity for VN
Vietnam continues to benefit from relative wage cost advantages, esp. vis a vis
China. Samsung is now building a new US$3.7bn smart phone and chip plant in
Thai Nguyen province in the north of the country. The Trans Pacific Partnership
(TPP) is stimulating a surge in inbound textile investment. Soft factors such as 8
public holidays per annum vs. 23 in China will also help drive FDI.
Theme 3: Opening up foreign limits 60% from 49%?
Last week, the MoF submitted a proposal to the PMs office to raise foreign limits
to a maximum of 60% for public companys termed non conditional industries.
Restricted industries would remain at 49%, plus a quota of 10% in non-voting
shares. A big question remains; will policy makers increase restrictive bank limits
and allow effective or foreign control of Vietnams commercial banks?
Conclusion
We still believe the market faces strong fundamental headwinds (related to the
weak banking and real estate sectors). Stock picking continues to be key, but
easy choices (i.e. VNM & GAS) are no longer bargains. Significant dilution in the
banking sector is a foregone conclusion, and we would avoid banks as a
consequence. On VNM, while its 30% higher than the PER valuation of the
VN30, its still 29.5% cheaper than regional peers. Stocks we still like a lot
include: FPT, HPG, PVD and DPM. All have: i) single-digit PE ratios, ii) good
growth potential and iii) in DPMs and HPGs case, solid dividend yields that are
twice as high as the broader markets.
Macquarie Research Vietnam Strategy
27 August 2013 2
Reality may force some changes
Many of the themes highlighted in last years note The moment of awful clarity remain valid,
albeit progress is slowly but steadily being made.
1) Further economic stability has been achieved, but at the expense of continued low and
below trend GDP growth.
2) As inflation has fallen dramatically, policy rates have been slashed by 800bps in the last
18 months alone. This has resulted in only a tepid return of credit growth (selective
sectors and at 5.6% for 1H13 - YTD), as banks essentially remain largely unwilling to
lend out new money. Curing the Zombie-like banking system will require liberalisation of
restrictive share ownership rules and squarely facing up to NPL realities.
3) Some big ticket FDI projects have been announced, to tackle much needed economic
value add, and more immediately, some high profile manufacturing led FDI
disbursements are clearly underway.
4) Liberalisation of foreign limits in public companies has now been proposed. But specifics
remain elusive. The PMs office has been asked to sign off on raising the limits to 60% in
non-restricted sectors and 49% in restricted sectors. One big question is what happens
to the current restrictive limits imposed on commercial banks. Recapitalisation cant
efficiently take place without changes here.
Politically, policy makers still seem to be grasping with multiple govt mandated economic
deliverables, but for reasons we will highlight later on, seem unwilling or may well be justly
afraid to make hard sacrifices to achieve them. This is especially true when it comes to large
scale liquidations of real estate (and related NPLs) or focussing on loose monetary policy to
achieve growth at any cost.
The policy goals are broadly defined as follows: Real GDP growth of 6.0% (at a minimum), 7-
8% inflation, an accommodative (but not liberal) credit growth and to a lesser degree a
crawling peg exchange rate policy to help the GDP numbers along. The SBV devalued the
VND by 1.0% in July this year, ostensibly to boost exports, fx reserves and aid GDP growth.
Where we would be putting our money
The VNIndex has returned 26.5% since Sept-12. Of the 105 points it gained, 73.0 of them
came from VNM (+108.6% YoY) and GAS (+69.1% YoY). On the downside, Banks have
been predictably relative laggards along with some conglomerates and real estate stocks. But
in general negative contributions were pretty minor (sub 10pts in aggregate).
Fig 1 VNIndex return chart Fig 2 VinaSecurities key stocks summary

Ticker Rating
FY13E
PER(x)
FY14E
PER(x)
FY15E
PER(x)
FY13E
P/B(x)
FY13
EDiv
Yield
(%)
DPM O 6.8 7.6 9.0 1.6 7.2%
FPT O 8.4 7.3 6.5 1.7 3.2%
HAG N 29.3 16.1 9.6 0.9 0.0%
HPG O 9.9 6.6 5.2 1.6 6.1%
PVD O 7.1 6.3 5.9 1.4 1.5%
VNM O 17.1 14.0 11.5 6.1 2.7%
VNINDEX 11.5 9.9 n.a 1.6 3.1%

Note: O=Outperform; N=Neutral; U=Underperform
Source: Bloomberg, Macquarie Research, Vina Securities, August 2013 Source: Macquarie Research, August 2013; priced as of 22 August 2013

350
370
390
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510
530
550
Ho Chi Minh Stock Exchange (HoSE) (VNINDEX)
Price Close MAV10 MAV50
Source: Bloomberg
-10
30
70
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50
100
150
23-08-12 24-10-12 25-12-12 25-02-13 26-04-13 27-06-13
V
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27 August 2013 3
Like last year, we continue to believe the market and Vietnamese economy face strong
fundamental headwinds almost exclusively related to the weak banking and real estate
sectors. Stock picking continues to be key, but the easy choices (i.e. VNM and GAS) are no
longer the bargains they were. Significant dilution in the banking sector is a foregone
conclusion, its just a matter of time and we would still avoid the sector as a consequence.
On VNM, while its 30% higher than the PER valuation of the VN30, its still 29.5% cheaper
than regional peers Stocks we still like a lot include: FPT, HPG, PVD and DPM. All have: i)
single-digit PE ratios, ii) good growth potential and iii) in DPMs and HPGs case, solid
dividend yields that are twice as high as the broader markets.

27 August 2013 4
Macro update
Is the jar half full or half empty?
In its recently completed 2013 Article IV consultation with Vietnam, the IMFs executive board
broadly concluded:
Vietnam regained macroeconomic stability over the past year, but the economy is
progressing at two speeds. The export sector is performing well - especially foreign-
invested enterprises - but the domestic sector, though improving, has yet to find a solid
footing because of several factors, including low productivity, structure of resource
allocation, impaired bank balance sheets and inefficiency in several state-owned
enterprises (SOEs).
Slow domestic demand, low credit & GDP growth low inflation.
Against the above assessment, Vietnams below trend GDP growth has persisted now for
almost six quarters and semi-official public commentaries suggest that the official 6.0% GDP
growth target for 2013 is almost unreachable. Inflation has been almost unseasonably low,
averaging only 0.1% per month over 2Q13, but looks to come in around 7.2% for the year,
when seasonal factors and core pressures recur later over the second half of this year.
Fig 3 Real GDP Growth (% -YoY) Fig 4 Historical & Inflation outlook

Source: SBV, Macquarie Research, Vina Securities, August 2013 Source: GSO, Macquarie Research, Vina Securities, Aug 2013
The sluggish GDP is despite the fact that in the last 12 months, the SBVs key refinancing
rate has been cut by a further 200bps, over and above the 600bps of cuts in early 2012.
Whilst policy cuts will affect the economy with a lag, we think the loosening effects should
have been felt by now. Credit expansion is only at 5.6% (as of July) and the SBV has a 12%
target for the year. Clearly, something other than interest rates is at play in the system.
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27 August 2013 5
Fig 5 12M Changes key rates and Bond yields Fig 6 VND/USD Fx rate and 3M+ , 6M+ CDS

Source: SBV, Macquarie Research, Vina Securities, August 2013 Source: Bloomberg, Macquarie Research, Vina Securities August 2013
Anecdotally, we also see hints of slower consumer demand, particularity in the consumer
discretionary sectors and non-staple food sectors. As the table below shows, revenues in
these listed consumer stocks is sluggish, while pre-tax profitability has been slowing in
tandem as costs and SG&A expenses rise.
Most notable amongst these is FPT trading/retail, who distributes a wide range of consumer
electronics, including Apple, Nokia, Dell, Toshiba and others. Jewellery retailer PNJ is also
facing demand led issues (even as Gold prices have fallen). YoY, in consumer foodstuff
segments confectionary (KDC), coffee (VCF), and fish sauces and noodles (MSC a
subsidiary of listed MSN), YoY growth is essentially flat in real terms, coming in at low-single-
digit growth levels.
Fig 7 Consumer demand indicators from listed stocks
YoY growth HoH growth
Revenue 1H11 2H11 1H12 2H12 1H13 1H12 2H12 1H13 1H12 2H12 1H13
FPT trading/retail 8,117.6 8,191.4 6,730.1 7,606.8 7,452.8 -17.1% -7.1% 10.7% -17.8% 13.0% -2.0%
PET 4,695.2 5,625.5 5,206.3 4,947.5 5,461.2 10.9% -12.1% 4.9% -7.5% -5.0% 10.4%
KDC 1,512.7 2,734.1 1,549.5 2,736.3 1,705.9 2.4% 0.1% 10.1% -43.3% 76.6% -37.7%
MSC N/A N/A 4,061.9 6,327.5 4,270.1 N/A N/A 5.1% N/A 55.8% -32.5%
MSC excl. VCF N/A N/A 3,239.8 5,090.0 3,426.8 N/A N/A 5.8% N/A 57.1% -32.7%
VCF 721.8 863.7 837.0 1,277.7 843.3 16.0% 47.9% 0.7% -3.1% 52.6% -34.0%
PNJ excl gold export,
gold bar trading
2,234.4 2,122.8 2,208.2 1,899.7 2,116.4 -1.2% -10.5% -4.2% 4.0% -14.0% 11.4%

Pretax profit 1H11 2H11 1H12 2H12 1H13 1H12 2H12 1H13 1H12 2H12 1H13
FPT trading/retail 279.6 241.0 268.1 129.4 209.4 -4.1% -46.3% -21.9% 11.2% -51.7% 61.8%
PET 234.7 172.0 151.3 154.6 154.2 -35.5% -10.1% 1.9% -12.0% 2.1% -0.2%
KDC 51.9 297.3 27.2 462.7 131.3 -47.5% 55.6% 382.1% -90.8% 1598.6% -71.6%
MSC N/A N/A 1,299.7 2,019.9 1,181.7 N/A N/A -9.1% N/A 55.4% -41.5%
MSC excl. VCF N/A N/A 1,186.9 1,919.3 1,124.2 N/A N/A -5.3% N/A 61.7% -41.4%
VCF 135.6 97.8 112.8 213.4 57.5 -16.8% 118.1% -49.0% 15.3% 89.1% -73.1%
PNJ excl gold export 184.5 133.7 160.8 149.3 111.5 -12.8% 11.7% -30.7% 20.3% -7.2% -25.3%
Source: Company Data, VinaSecurities, Macquarie Research August 2013
Official retail sales data tells a similar story, with both the nominal and inflation adjusted
growth data trending downwards in recent months. Overall, the data supports the view that
domestic demand is weak, underpinned by weak credit growth and below trend GDP growth.
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Disc , Refinacing Rate, Interbank & Yield Curve
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VNDUSD Spot VND 3M CDS VND 6M CDS
27 August 2013 6
Fig 8 Retail sales growth (real terms) Fig 9 Nominal retail sales & avg. real growth rates

Source: GSO, Macquarie Research, Vina Securities, August 2013 Source: GSO, Macquarie Research, Vina Securities, August 2013
Exports growing, foreign reserves, FDI & Portfolio flows are rising
Monthly non-oil exports continue to grow strongly YoY (as of July 2013) as annual growth
was 15.7%, with non-oil and total exports reaching US$10.6bn and US$11.2bn, respectively.
Export growth is strongest in the electronics and footwear categories rising at 41.2% and
26.6%, respectively. These two sectors accounted for US$1.72bn, and along with general
manufacturing (textiles and others) accounted for in excess of 85% of non-oil exports.
Registered FDI data since 2012 also lends credibility to a positive outlook for manufacturing
and FDI. Notably, in the last 18 months, virtually all approved and registered FDI has gone
into manufacturing, with real estate in fact contracting as projects have been abandoned.
Fig 10 Monthly non-oil exports (USDm) Fig 11 Recent trends in Approved FDI (US$m)

Registered Capital
Cumulati
ve to
Dec-12
Dec-12 to
date
Cumltv
Share

Incrementa
l Share
Manufacturing and
Processing 103,524 12,919 52.9% 104.7%
Real Estate 49,724 (1,465) 21.9% -11.9%
Accomodations and food 10,606 92 4.9% 0.7%
Construction 9,917 (37) 4.5% -0.3%
Electricity, Gas, Water,
Production & Distrib. 7,486 15 3.4% 0.1%
Information and
communications 3,938 91 1.8% 0.7%
Arts and Entertainment 3,675 (10) 1.7% -0.1%
Transport and Storage 3,476 43 1.6% 0.3%
Agriculture, forestry,
fisheries 3,344 (40) 1.5% -0.3%
Mining 3,177 20 1.5% 0.2%
Wholesale, retail, repair 2,814 312 1.4% 2.5%
Finance, banking,
insurance 1,322 1 0.6% 0.0%
Health and Social
Assistance 1,219 85 0.6% 0.7%
Water Supply, Waste
Treatment 1,234 51 0.6% 0.4%
Professional Specialties,
Science and Tech.

1,087

74 0.5% 0.6%
Other Services

733

8 0.3% 0.1%
Education and Training

458

191 0.3% 1.5%
Administrative and Support
Services

201

(8) 0.1% -0.1%
Total

207,936 12,342 100% 100%
Source: SBV, Macquarie Research, Vina Securities, August 2013 Source: MPI, VinaSecurities, Macquarie Research August 2013

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T12M Ave real growth (YoY %) Nominal Retail Sales (VND bn)
9,163.8
10,600.0
0
2,000
4,000
6,000
8,000
10,000
12,000
Rubber Fish Coffee Rice Electronics Footwear Coal Others Non-Oil Exports
27 August 2013 7
Summing it up
On balance, Vietnams stubbornly below trend GDP growth (4.9% - 2Q13), for the most part,
remains largely self-inflicted. In part, as Vietnam has allowed the banking systems hangover
from the 2006 2010 credit and real-estate boom to persist. Perhaps because of a lack of
political will or perhaps inexperience in handling its first modern NPL crisis, the country has
been somewhat slow to react. Recent stepped-up activities, however, are encouraging, and in
addition, what appears to be a recent willingness to liberalise barriers to new investment into
the stock market and restricted FDI sectors is a welcome development.
If true, and if ownership liberalisation and improved FDI is followed by a pick-up in the
substance and pace of SOE reform, then GDP growth of 6%+ for Vietnam is likely to resume
from 2015 and beyond.
Fig 12 Summary Macro forecasts
Key Indicators 2008A 2009A 2010A 2011A 2012A 2013E 2014E
Real GDP Growth 6.2% 5.3% 6.8% 5.9% 5.5% 5.4% 5.6%
Inflation (YoY) 19.9% 6.5% 11.8% 18.1% 7.7% 7.2% 6.3%
Inflation (avg) 23.0% 7.0% 9.2% 18.6% 8.6% 8.3% 8.0%
VND/USD rate (Interbank) 17,486 18,500 19,498 21,034 20,843 21,300 21,800
Fx Reserves (USDbn) 23.9 15.2 12.7 13.5 25.4 32.3 38.5
Exports (USDbn) 62.9 56.6 71.6 96.2 114.6 137.7 158.3
Imports (USDbn) 80.4 68.8 84.0 105.8 114.3 142.2 163.9
Import Cover (months) 3.6 2.7 1.8 1.5 2.7 2.7 2.8
Trade Deficit (USDbn) -17.5 -12.2 -12.4 -9.6 0.3 -4.5 -5.6
FDI Commitment (USDbn) 71.7 22.6 18.6 15.6 16.3 17.0 19.0
FDI Disbursed (USDbn) 11.5 10 11.0 11 10.5 11.5 13.0
Credit Expansion 30.0% 37.7% 27.7% 16.0% 7.0% 10.0% 14.0%
Budget Deficit/GDP 4.6% 4.8% 6.2% 5.0% 4.8% 4.5% 4.5%
Public Debt/GDP 42.9% 52.6% 56.6% 57.5% 48.8% 48.9% 50.0%
Source: IMF, GDO, Macquarie Research, Vina Securities, August 2013

27 August 2013 8
Theme 1: Bank reform still slow, liquidity
holds up
NPL problem is further quantified by Circular 2
The magnitude of Vietnams NPL reality was quantified by the 1 year delay in implementation
of Circular 2/2013/TT-NHNN to 1 July 2014. Circular 2 aimed to tighten risk management and
enforce more consistent and uniform standards on the treatment of debt, collateral, and
NPLs. The SBV and SOCB banks have acknowledged that Circular 2 would have brought to
light an additional VND270tn (~US$13bn) in NPLs for the system. This would have meant an
NPL ratio of approximately 16.0% based upon the SBVs latest NPLs estimate.
Against that sanguine back drop, the SBVs latest (February) estimate has NPLs at 6.0%,
down from earlier September and December 2012 estimates of 8.8% and 7.8%, respectively.
One the other hand, independent outsiders have since gradually raised their estimates, with
Fitch Ratings increasing its upper range to as high as 20% as recently as 9 July 2013. Finally,
this week, the SBV stated on its website it had recently completed a review to bad debt in the
banking system (to international standards) but declined to give further comments.

Fig 13 NPL Ratios
Fig 14 Real Estate and landed property as a
percentage of loan collateral

Source: SBV, Macquarie Research, Vina Securities, August 2013
Source: Company Data, Macquarie Research, VinaSecurities August
2013
Reinforcing the NPL issue is that a substantial majority of loans in Vietnam use real-estate,
landed property and immovable assets as collateral. Just for the major listed banks, collateral
exposure ranges from just under 50% to approximately 72% of total collateral. Clearly, any
significant impairment in real estate collateral values would result in further NPLs.
The discrepancies between outsider, SBV, and bank NPL estimates highlight the ongoing
short-comings of the current accounting and reporting standards. As mentioned in prior notes,
we believe banks may be relying on several accounting strategies to mask bad debts in their
loan books, these included: buying corporate bonds issued by bad customers, issuing new
funds to repay older overdue loans i.e. ever greening; lending to customers related parties
to pay off bad debts.
The magnitude of Circular 2s VND270tn bite comes, in part, from its specific address of
some of these accounting strategies. Circular 2 expanded the definition of debt to include
unlisted bonds, credit cards loans, and deposits at other credit institutions. Defining unlisted
bonds as debt limits a banks ability to mask debt by replacing borrower loans with purchased
bonds issued by the same bad borrower. The circular also supplanted an earlier SBV
decision which gave banks the flexibility to maintain and not increase a debts risk grouping
despite being rescheduled more than once.
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
10.0%
J
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2
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3
SBV Estimate Banks (Reported)
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
ACB CTG EIB MBB STB VCB
2011 2012

True system NPLs
remain dangerously
high

Circular 2 would
have added
~US$13bn to the
statistics
27 August 2013 9
Consequently, the delay in Circular 2 affords banks continued flexibility in managing (or
exposing) their real NPL situation until at least mid-2014. But given the delay, the circulars
impact is almost impossible to measure across individual banks. Only a handful of banks
claim either compliance or near limited additional NPL exposure to Circular 2.
By example, Military Bank (MBB VN) tells investors it was fully compliant with Circular 2 in its
FY12A results, while Vietcombank (VCB VN) has stated that its incremental exposure to
Circular 2 was VND6.0tn (US$283mn) of the VND270tn. For the others, we are left to glean
hints from notes in their audit reports and from media reports.
For example, from disclosures and notes from Sacombanks latest annual report, the auditor
highlighted VND9.02tn in real estate refinancing loans (approximately 9.5% of the banks total
customer loan book) that were made in apparent breach of lending rules. While the bank has
classified these loans as Group 1 (Current), Circular 2 introduces several additional criteria
for assessing the risks for such loans.
In particular, debts that violate regulations on credit extension could warrant a Group
3 (Sub-standard) classification, requiring additional specific provisioning of 20% of the
risk weighted asset.
In this case, (Fig 8.0) related parties were extended credit exceeding that allowed by state
regulations. The pledged collateral of VND8,657.0bn also is largely comprised of real estate
which is risk weighted by a factor of 50% for CAR calculation purposes under SBV guidelines.
Fig 15 STBs 2012 Audit report An Emphasis of Matter & Note 8.3 (*)

Source: STB 2012 Audit report, VinaSecurities, Macquarie Research, August 2013
Under Circular 2, for Sacombank, we estimated a Group 3 provision charge (on just this item,
and before any other Circular 2 effects) could have totalled VND960bn, or 96% of STBs 2012
net profits. More importantly, it could have meant a 7.0% hit to the banks Tier 1 capital and
pushed STBs CAR to 8.9% (below the 9.0% requirement) and BVPS down 7% to
VND13,091/sh.
A significant provisioning charge may await Asia Commercial Bank (ACB) surrounding its
exposure to Vinalines, the unprofitable SOE shipbuilder which collapsed after racking up
more VND43tn (USD2.1bn) in debts, more than four times its equity. Of this total,
approximately VND854bn in loans and VND88bn in investments in Vinalines bonds are
owned by the bank. Based upon 2012 financial disclosures, ACB classified these loans to
Vinalines as Group 2 Special mention, which saves the bank from reporting the debts as
NPLs under Vietnam Accounting Standards (VAS) and VAS.
27 August 2013 10
As the Govt works to implement Vinalines restructuring plan with various stakeholders, ACB
will very likely have to book significant provisioning charges, as it begins reclassifying these
loans to NPL status and begins to take on for significant provisioning for the Vinalines bonds.
For just these loans, assuming a Group 5 Bad loan classification with 20% recoveries, we
estimate incremental provision charges of VND683bn. This would have pushed ACBs 2012
NPL ratio from 2.46% to 3.12%, above the SBVs 3% compulsory rate for NPL sales to the
VAMC.
We note ACB has indicated its interest in possibly selling up to half, or VND1.5tn (US$70mn),
of its reported NPLs to the AMC. ACB has one of the highest exposures to real estate in its
collateral portfolio. But it is classified as a Tier 1 bank on the SBVs liquidity-based ranking
framework.
In the background IMF/World Bank Financial Stability Assessment
Program was undertaken and results are pending
In 2011, the government of Vietnam agreed to undertake jointly with the SBV, IMF and the
World Bank, a Financial Stability Assessment Program (FSAP). The FSAPs purpose is to
provide a comprehensive and in-depth analysis of a countrys financial sector, through a
comprehensive analytical framework.
According to the IMF, in developing and emerging market countries, FSAPs are conducted
jointly with the World Bank and include two components: a financial stability assessment,
(undertaken by the IMF), and a financial development assessment, (undertaken by the World
Bank). Each individual countrys FSAP concludes with the preparation of a Financial System
Stability Assessment (FSSA) report. Publication of the report is not mandatory.
For Vietnam the FSSA we understand has been completed and in its recent Article 4
consultations the IMF Board of Directors encouraged Vietnam to implement the steps
recommended in the program To return the banking system to health. The FSSA report has
yet to be made public, but we understand that the Government of Vietnam is considering the
IMFs and World Banks suggestion to publish it.
Revisiting our CAR stress tests for listed banks
We updated our previously published CAR and ABVPS sensitivity analysis with FY12A
results to gauge the circulars potential implementation risk for the six listed banks. Half the
list quickly falls below the 9% regulatory CAR minimum with only a moderate 5% increase in
NPLs. Anecdotally, the above disclosures suggest STB as precariously situated and will
quickly need additional paid-in capital due to even minor adverse charges; VCB could tolerate
incremental provisions of VND18tn (3.1x its incremental NPL exposure) before even having to
go to shareholders. Outside of SOEs MBB even at a lower CAR of 11.1% may well be the
best of the bunch given claims of very prudent and Circular 2 compliant provisioning.
Fig 16 Stress testing listed banks CARs

Source: Company Data, VinaSecurities, Macquarie Research, August 2013
Banks Items Reported +3% NPLs +5% NPLs +7% NPLs +9% NPLs +11% NPLs +13% NPLs
CAR 13.5% 11.1% 9.5% 7.8% 6.0% 4.1% 2.2%
ABVPS 13,463 10,174 7,981 5,788 3,595 1,402 (791)
CAR 14.8% 12.6% 11.0% 9.4% 7.7% 5.9% 4.1%
ABVPS 17,996 14,874 12,793 10,712 8,630 6,549 4,468
CAR 11.1% 9.4% 8.2% 6.9% 5.7% 4.4% 3.0%
ABVPS 13,530 11,295 9,806 8,316 6,827 5,337 3,848
CAR 9.5% 7.7% 6.4% 5.1% 3.7% 2.3% 0.9%
ABVPS 14,076 11,109 9,131 7,153 5,174 3,196 1,218
CAR 16.4% 14.4% 13.0% 11.6% 10.1% 8.6% 7.0%
ABVPS 12,798 10,979 9,766 8,553 7,340 6,128 4,915
CAR 10.3% 7.5% 5.5% 3.4% 1.2% -1.1% -3.4%
ABVPS 12,743 8,928 6,385 3,842 1,299 (1,244) (3,787)
CTG
ACB
VCB
MBB
STB
EIB
27 August 2013 11
Several reports suggest both the business and banking communities pressed the SBV for the
delay in implementing Circular 2, raising concerns over the possibility the Circular could
precipitate a vicious cycle - by increasing NPLs, banks would further tighten credit, causing
more business bankruptcies, and in-turn creating more NPLs.
While any cure should not be worse than the disease, we continue to believe that any viable
long-term solution, that doesnt provide significant amounts of new capital to Banks, may
result in significant short-term costs and disruptions to the risk appetite for the new credit in
the system.

27 August 2013 12
The Tool of Choice Vietnam Asset Management Company
Following the decision to defer the NPL, the SBVs choice to utilize a bad bank vehicle to
handle NPLs was not really controversial. Similar models have been utilised in China and
Japan (both were set up around 2000). Even before its official launch, however, the VAMC
was already working to temper and recalibrate market expectations.
Described as miniscule by the World Bank, the VAMCs VND500bn (US$24mn) initial
capitalization precludes the vehicle from absorbing any appreciable amounts of bad debt
loses. The VAMC did report, however, that foreign investors have expressed interest in
working with the VAMC to provide additional private capital for loan purchases. Private
capital involvement is not unprecedented and would follow other AMC models, including the
Resolution Trust Company in the US and Cinda AMC in China. We view the possibility of
strategic private capital involvement as an encouraging sign for the VAMC and a critical factor
to its overall effectiveness.
The VAMCs most immediate impact will be to provide indirect liquidity support to the system.
The SBV has mandated that banks (over time) with NPLs greater than 3% to sell portions of
their bad debts to the VAMC until NPL ratios fall below the 3% target.
In return, banks receive face-value equivalent amounts of special 5-YR, 0% coupon VAMC
bonds, which can then be pledged as collateral at the SBVs discount window for proceeds
(currently fixed at 5.5%). We expect banks to take this opportunity to off-load their most
problematic NPLs. As such, banks are required to book 20% annual provisions over the life
of their bonds (i.e. 100% provisioned at maturity).
Without explicit decree, the SBV expects banks to use their added liquidity for new prudent
customer lending. The SBV currently maintains a 12% credit growth target for the year; its
July YTD estimate, however, was at only 5.2%. Considering the low credit demand in the
economy, some banks may simply consider buying 5-YR, 8.4% government bonds (the most
liquid) to secure a low risk 290 bps spread. Higher spreads could be earned if the Govt offers
more long dated treasuries in auction.
Due to the lack of tangible bank reforms to date, and the corresponding dilution to controlling
shareholders, some banks may also be tempted to revert to their earlier risky lending
practices or expand into new, even higher-risk ventures in hopes of recouping earlier loan
losses. We plan to watch carefully how banks decide to deploy any new found liquidity.
On paper, the VAMC wields significant authority, including powers to recover and restructure
debts, participate in borrower restructuring, sell loans and auction collateral, request state and
law enforcement resources in support of its actions, and inspect banks. Given the current
legal and regulatory ambiguities surrounding bankruptcy laws and asset seizures, we suspect
it will take some months before the VAMC can effectively organize and begin auctioning
significant asset amounts.
While the VAMC would be the entitled owners of the NPLs, as a practical matter, we
understand that the banks themselves will retain the responsibility for bad debt recoveries.
Considering the VAMCs size and limited institutional experience with asset recovery, auction,
and seizure, we view this arrangement as more than just a convenience for the VAMC.
Within days of its launch, the VAMC announced it was preparing to buy up to VND10tn
(US$474mn) in NPLs from about 10 banks. The list may include ACB, which earlier indicated
its interest in possibly selling up to half, or VND1.5tn (US$70mn), of its reported NPLs. ACB
has one of the highest exposures to real estate in its collateral portfolio. The VAMC expects
to buy VND40tn-70tn in NPLs by the end of 2012.
In addition to the immediate liquidity, we also see the VAMC providing two other benefits: 1) it
gives both banks and the SBV time to develop and implement more substantial restructuring
and reform policies, 2) in contrast to Circular 2, the VAMC provides a softer inducement for
banks to bring forth and disclose underreported NPLs, an issue that continues to hinder the
market.

27 August 2013 13
Recently, a more aggressive SBV
As the SBV works and learns its way through its first modern NPL crisis, its approach could
be best described as slow and incremental. Its call for voluntary restructuring and
consolidation within the system, followed by the delay of Circular 2, appears to mostly be a
somewhat tepid initial approach.
In early August, however, this encouragement became forceful with Decision 48/2013, which
empowers the SBV to either purchase direct stakes in weak banks or order banks it deems
healthy to purchase stakes in weak banks. We do not know which banks the SBV may
designate as purchasing banks. Considering their ownership, we would not be surprised to
see an SOCB or two (as subsidiaries of the SBV) as likely designates. Such actions will
certainly begin to dilute the shareholders of existing weak banks.
For any direct SBV investments, we suspect, again, the source to be a combination of base
money or conversion of liquidity support into equity in the targeted banks. In the case, of
SOCBs, unsecured interbank loans from SOCBs to weak banks could also be converted into
equity. Finally, to support designated purchasing banks with their investments, the SBV could
assist through the discount window or the Ministry of Finance could offer tax incentives.
Depending upon the form and level of SBV assistance, the impact on healthy banks and their
shareholders remains unclear. Questions regarding investment levels, governance and
management oversight, cross-ownership and ownership limitations, exit strategies and
investment time horizons also remain open.
Finally the Prime Minister just approved the enabling Decision 48/2013/QD-TTg on banks
under special supervision. According to decision, when a bank that is under special
supervision, doesn't fulfil requests to increase chartered capital, undergo restructuring or
M&A activities, the State Bank of Vietnam (SBV) will have the right to assign other banks to
buy shares of weaker banks. The decision will take effect on September 20th 2013.
Next shoe to drop raising single shareholder and foreign limits
The SBV has suggested amendments to the Govt for Decree 69 by proposing a special
exemption to the 20% strategic shareholder limit, with the approval of the Prime Ministers
Office, but then only for weak banks (presumably those in bottom quartile of the SBVs
liquidity based ranking). Since then, there has yet to be a significant recapitalisation of a
weak bank under these proposals.
By and large, single shareholder limits in Vietnamese Joint stock banks, still stand at 15% (or
20% with SBV approval). Foreign ownership remains capped at an aggregate 30% and
recent updates to regulations have extended these rules to capture the potential effects of
convertible instruments on a fully diluted basis amongst other administrative measures.
Against that background, Brett Krause the head of the Banking Group of the Vietnam
Business Forum mooted the associations view in June this year that current shareholder
and foreign limits are insufficient to allow for an adequate recapitalisation of Vietnams
banking system, through new investment. The VBF called for a roadmap to majority foreign
ownership to allow rapid rehabilitation of the sector.
The IMFs resident representative for Vietnam noted Its in the interest of the overall financial
system. At the end of the day, some money should be put in, in part because you dont want
to prolong the problem.
The choices facing policymakers are now clear 1) refloat the system with base money (and
risk a return of high inflation), 2) liberalise ownership rules (allowing effective or outright
majority control) and allow significant recapitalisation to take place on market terms and by
definition, accept necessary dilution of founding shareholders or 3) to continue to restrict
ownership at the expense of potentially slower recovery in the sector and likely a continuation
of weak credit appetite by lenders.
27 August 2013 14
Theme 2: FDI may surge, TPP an
opportunity for VN
On the back of several factors, but most importantly; a strong Govt. push to attract higher
value-added manufacturing to Vietnam, along with the ongoing emphasis on inflation control
and macro stability, and finally, what appears to be a strong political push to conclude the
Trans Pacific Partnership Agreement this year, Vietnam looks to be earning some early
dividends.
On top of Samsung Electronics ongoing US$2.0bn investment for its largest mobile phone
plant outside of Korea to date in the Northern Thai Nguyen province. Samsung Electro-
Mechanics Co will now invest US$1.2 billion in a plant to manufacture chips and electronic
components at the same site. Construction is expected to start in October 2013 and begin
operations in August 2014. According to several widely available media reports, inclusive of
this plant, Samsungs total investment in Vietnam will reach at US$5.7bn and be its third
facility in the country.
Fig 17 Vietnam Exports (USDm) Fig 18 Vietnam Imports (USDm)
TPP Countries 2010 2011 2012
Australia 2,704 2,519 3,209
Brunei n.a. n.a. n.a.
Canada 802 969 1,157
Chile 94 138 169
Japan 7,728 10,781 13,065
Malaysia 2,093 2,832 4,500
Mexico 489 590 683
New Zealand 123 151 184
Peru 38 n.a. n.a.
Singapore 2,121 2,286 2,368
United States 14,238 16,928 19,665
Total 30,430 37,194 44,998
China 7,743 11,125 12,388

TPP Countries 2010 2011 2012
Australia 1,444 2,123 1,772
Brunei n.a. n.a. n.a.
Canada 349 342 456
Chile 291 336 370
Japan 9,016 10,400 11,602
Malaysia 3,413 3,920 3,412
Mexico 89 91 112
New Zealand 353 384 385
Peru 69 90 n.a.
Singapore 4,101 6,391 6,691
United States 3,767 4,529 4,827
Total 22,893 28,606 29,627
China 20,204 24,594 28,785
Source: MPI, Macquarie Research, Vina Securities, August 2013 Source: MPI, Macquarie Research, Vina Securities, August 2013
In the recent state visit to Washington DC by Vietnamese President Trung Tan Sang,
Vietnam and the USA reaffirmed their intentions to conclude a comprehensive, high-standard
Trans-Pacific Partnership (TPP) agreement this year. The opportunity the TPP presents to
Vietnam is clear and broadly summed up as follows:
Joining the TPP, and positive, robust implementation of the commitments could
increase bilateral trade between Vietnam and the U.S. to about US$61.3 billion by
2020. And Vietnams apparel exports to the U.S. could increase to US$22 billion by
2020. Already, South Korean, Chinese, Japanese and other companies have
announced over US$1 billion FDI in Vietnam to provide the supporting textiles
industries, yarn-spinning and fabric-weaving, so that Vietnams apparel exports will be
able to benefit from zero import duties in TPP markets.
-Herb Cochran, Executive Director of AmCham Vietnam in HCMC.
One of the key issues in the TPP is the yarn-forward rule, which means yarn and fabric must
be manufactured and assembled in the free-trade partner country in order to enter U.S.
markets tariff-free. Dropping this has been contentious, as more than 160 Members of
Congress have signed a letter to the U.S. trade representative, asking to maintain the yarn-
forward rule, which has reportedly been included in every major U.S. free trade deal for the
last 25 years.
We note that Garment companies in Vietnam heavily rely on fabric imports as the domestic
textile industry cannot supply high-quality fabric. Currently, Vietnam imports raw materials
used in garment manufacturing, including 75 per cent of fabric, 90 per cent of cotton and all
polyester filament and fibre requirements. The demand for fibre was high and local firms had
to import 150,000 tonnes each year, according to a press statement by the Vietnam National
Textile Garment Group.

FDI into
manufacturing is
now significant.

TPP is generating
significant FDI
Interest in Textiles
and garments
27 August 2013 15
As we have noted last year, the trade deficit with China is a significant source of opportunity
cost to Vietnam. In 2012, Vietnam ran a US$16.4bn trade deficit with China and in the first
half of this year, it reportedly stood at US$11.4bn.
There has been press commentary that yarn-forward and trans-shipment provisions will
result in a slower rate of textile FDI in Vietnam relative to if the rule was included. However,
we believe that the countrys proximity to China along with TPP benefits will drive a growing
trend of intermediate manufacturing investment in Vietnam, a necessary step if Vietnam
hopes to increase productivity, and become less dependent on wage advantages over time.
Chinas Texhong textile group may have already seen this likely outcome, it has already
invested $200 million in a plant in Dong Nai Province, and in April 2012 the company said it
would invest $300 million to build a new yarn factory in Quang Ninh. When fully complete,
Texhong will be able to produce110,000 tonnes of yarn in Vietnam. As noted in its 1H13
interim reports:
At present, the first phase of the northern Vietnam project of about 170,000 spindles
and 30 sets of open-end spinning machines was successfully put into full production in
July 2013 at high efficiency. Our newly expanded capacity in other places including
Vietnam and China of about 600,000 spindles in aggregate is expected to be put into
full operation on a gradual basis in the third quarter of 2013.
For the expansion plan in 2014, it is expected that production facilities equivalent to
about 520,000 spindles will be built and are expected to be completed in the second
half of 2014. The total investment will be about RMB1.35 billion. This will include the
second phase of our northern Vietnam project with about 230,000 spindles.
Fig 19 Selected Big Ticket FDI projects
Project - 2013 Province Industry Investor Country
New Capital
(USD mn)
Total Capital
(USD mn)
PTT Nhon Hoi Refinery Binh Dinh Refining (Feasibility Study) Thailand 28,700 28,700
Formosa Plastics Group Ha Tinh Steel / PetroChemiclas Taiwan 17,100 27,000
Nghi Son Oil Refinery Thanh Hoa Refining Japan, Kuwait 2,800 6,740
Long Son Petrochemical
Complex
Ba Ria Petrochemicals Thailand, Qatar 4,500 4,500
Samsung Electronics Co., Ltd Thai Nguyen Electronics Korea, Singapore 2,000 3,200
Samsung Electronics Co., Ltd Bac Ninh Electronics Korea 1,000 2,500
Bus Industrial Center Co., Ltd Binh Dinh Manufacturing & Processing Russia 1,000 1,000
VSIP Dung Quat Quang Ngai Industrial Parks Singapore 338 338
VSIP Binh Hoa Binh Duong Industrial Parks Singapore 200 200
Project - 2012 Province Industry Investor Country
New Capital
(USD mn)
Total Capital
(USD mn)
Samsung Electronics Co., Ltd Bac Ninh Electronics Korea 830 1,500
Tokyu Binh Duong Garden City Binh Duong Real Estate / Industrial parks Japan 1,200 1,200
Wintek Vietnam Co., Ltd. Bac Giang Electronics Taiwan 870 1,120
Shimizu Group Hanoi Real Estate / Industrial parks Japan 1,000 1,000
Bridgestone Tire Vietnam Hai Phong Manufacturing and Processing Japan 575 575
LIXIL Vietnam Dong Nai Manufacturing and Processing Japan 441 441
Oshima Shipbuilding Khanh Hoa Transport and Storage Japan 180 180
Source: MPI, Macquarie Research, Vina Securities, August 2013

27 August 2013 16
There has been some movement in big ticket FDI Projects over the last year. As noted, these
intermediate industries are necessary precursors for Vietnam to improve productivity.
The Japanese and Kuwaiti joint venture behind the Nghi Son Oil Refinery complex in Thanh
Hoa Province took a major step forward in late July when the project officially received its
land-use rights and construction certificates. The US$9.0bn project, 75% foreign-owned, is
scheduled to begin construction in the Nghi Son Economic Zone in September and is
expected to boost the countrys refinery capacity by more than 200,000 barrels/day, or 10
million tonnes/yr, once completed in 2016.
This would more than double the countrys current estimated 6.5 million tones/yr refining
capacity and allow Vietnam to meet upwards of 70% of its domestic petrol fuel needs, up
significantly from its current 30% level.
Following closely behind Nghi Son, another mammoth project, the US$4bn Long Son
Petrochemical complex, also received its official land transfer papers in mid-August, allowing
construction to begin in early 2014. The Long Son complex will produce polymer materials
and plastics for domestic consumption.
27 August 2013 17
Theme 3: Facing reality Steady change
Raising foreign ownership limits
The Ministry of Finance, following a review by the State Securities Commission submitted a
plan on liberalisation of foreign limits to the Prime Ministers office for approval. Details remain
sketchy, but the plan would raise limits to 60% from 49% for what was termed non
conditional industries. Restricted industries limits would remain at 49%, with an additional
quota of 10% in non-voting shares. No disclosures on which industries will be restricted were
mentioned, but we expect Energy, Telecom, Utilities and Resources to lead the list. But an
open question remains; will policy makers allow foreign control of Commercial Bank (i.e. will
foreign limits in banks go from 30% currently to 49% or perhaps 60%)?
An increase in foreign limits from 49% to 60% and the creation of a 10% non-voting tranche in
restricted sectors would open up another US$4.5 in foreign quota over and above the existing
available room of US$2.1bn. This would also be only for stocks listed in the VN30 Index. A
sizable increase in quota would also make up significant room in the small cap stocks or
stocks with low free floats that are not captured by the VN30.
The two industry groups that would see the largest increase in foreign availability (in absolute
terms) would be Commercial Banks followed Food Products. The later is largely driven by
increased room in MSN and VNM, whilst the former from the six listed banks.
Fig 20 Estimating the invest-ability effects of higher foreign limits
GICS Industry Group (USD mn) Mkt Cap Avail. Quota Assumed New Limit Non Voting Shares Increased Quota
Energy Equipment & Services $602.7 $72.1 49% 10% $132.4
Chemicals $758.2 $158.2 60% 0% $241.7
Metals & Mining $842.3 $72.1 49% 10% $156.3
Transportation Infrastructure $242.1 $43.8 60% 0% $70.4
Construction & Engineering $157.2 $51.7 60% 0% $69.0
Consumer Discretionary $366.8 $0.0 60% 0% $40.4
Auto Components $273.3 $85.1 60% 0% $115.1
Food Products $9,325.8 $547.3 60% 0% $1,573.2
Commercial Banks $8,366.2 $419.8 60% 0% $2,929.7
Real Estate Management & Devel $2,761.0 $247.9 60% 0% $551.6
Insurance $1,374.2 $341.3 60% 0% $492.5
Capital Markets $476.6 $29.3 60% 0% $81.7
Diversified Financial Services $873.3 $29.3 60% 0% $125.3
Electronic Equip., Instruments $614.3 $0.0 60% 0% $67.6
Electric Utilities $136.9 $28.4 49% 10% $42.1
Gas Utilities $62.6 $0.0 49% 10% $6.3
Total $27,233.5 $2,126.3 $6,695.3
Additional Quota $4,568.8
Source: Macquarie Research, Vina Securities, August 2013
Next steps, executing on SOE reforms
The governments SOE reform plan has been progressing slowly and haphazardly. Officially,
SOEs will be required to divest non-core assets, streamline operations, and improve internal
controls and financial reporting lines. About 1,200 SOEs are planned to be restructured.
However, the reform strategy for the 20112015 periods focuses on retaining full ownership
of approximately half of the SOEs that operate in public service areas or are of strategic
value, some of which have significant monopoly power (i.e. EVN). The balance of the SOEs
are to be equitized, restructured, sold, or ultimately be liquidated.
Implementation on SOE reform so far has been haphazard, a few large SOEs (PetroVietnam,
VinaChem) have put broadly defined plans on paper, but very few sizable transactions in
restructuring have been executed.
One of the problems with SOEs is the contingent liabilities they reportedly possess. There
has been comments that public/debt to GDP is closer to 100% once SOE loans are added
into the equation. In what sounds like a familiar reason for delaying circular 2. Too aggressive
reform could lead to uncomfortable liquidations of collateral and further NPL visibility. As
such, as the VAMC begins to deal with the bad debt in the system, it may well herald or open
the door to acceleration in SOE reform.

Long-awaited
changes to FII limits
have been
proposed.

Incremental room if
US$4.6bn could be
created.
27 August 2013 18
Appendices Demographics, FDI & wages
Fig 21 Vietnam Population Pyramid (2015E)

Fig 22 Vietnam Population Pyramid (2030E)

Source: World Bank, Macquarie Research, Vina Securities, Aug 2013


Fig 23 Vietnam Working age Population (1960-2050E)

Fig 24 Vietnam Dependency Ratio (1960-2050E)



Fig 25 Cumulative FDI (US$m)
Registered Capital Jun-09 Jan-11 Jun-11 Dec-11 Jun-12 Sep-12 Dec-12 Mar-13 Jul-13
Manufacturing and Processing 87,401 95,155 98,480 93,053 97,922 100,791 103,524 111,470 116,443
Real Estate 33,929 48,004 48,198 47,002 49,358 49,732 49,724 47,920 48,259
Accomodations and food 10,938 11,383 11,748 11,830 10,539 10,540 10,606 10,606 10,698
Construction 9,118 11,596 11,739 12,500 10,385 10,245 9,917 10,063 9,880
Electricity, Gas, Water,
Production & Distrib.
2,107 4,870 5,136 7,398 7,404 7,408 7,486 7,489 7,501
Information and
communications
4,644 4,789 4,829 5,697 5,721 6,115 3,938 3,952 4,030
Arts and Entertainment 3,662 3,461 3,621 3,636 3,699 3,680 3,675 3,629 3,665
Transport and Storage 2,125 3,180 3,218 3,262 3,446 3,463 3,476 3,496 3,519
Agriculture, forestry, fisheries 2,960 3,094 3,161 3,218 3,284 3,290 3,344 3,262 3,304
Mining 3,078 2,940 2,975 2,975 3,020 3,020 3,177 3,182 3,197
Wholesale, retail, repair 1,006 1,609 1,814 2,067 2,321 2,530 2,814 2,984 3,126
Finance, banking, insurance 1,182 1,321 1,322 1,322 1,322 1,322 1,322 1,322 1,322
Health and Social Assistance 952 988 1,037 1,015 1,166 1,166 1,219 1,302 1,305
Water Supply, Waste
Treatment
48 64 387 710 2,410 2,402 1,234 1,239 1,285
Professional Specialties,
Science and Tech.
508 717 786 983 1,004 1,060 1,087 1,113 1,161
Other Services 600 646 644 716 713 728 733 740 741
Education and Training 244 380 345 355 429 433 458 463 648
Admin and Support Services 177 183 183 188 189 192 201 201 194
Total 164,680 194,380 199,625 197,927 204,332 208,115 207,936 214,434 220,278
Source: World Bank, Macquarie Research, Vina Securities, August 2013

6.0% 4.0% 2.0% 0.0% 2.0% 4.0% 6.0%
0-4
5-9
15-19
20-24
25-29
30-34
35-39
40-44
45-49
50-54
55-59
60-64
65-69
70-74
Male (%) Female (%)
6.0% 4.0% 2.0% 0.0% 2.0% 4.0% 6.0%
0-4
5-9
15-19
20-24
25-29
30-34
35-39
40-44
45-49
50-54
55-59
60-64
65-69
70-74
Male (%) Female (%)
27 August 2013 19

Fig 26 Share of FDI buy 5 largest industries

Fig 27 Wage differentials Vietnam vs. China (Avg
textile worker salary US$ month)

Source: Macquarie Research, Vina Securities, August 2013

Fig 28 Coastal vs. in-country population density
Source: Columbia University, Macquarie Research, Vina Securities, August 2013

0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
%

o
f

C
u
m
u
l
a
t
i
v
e

R
e
g
i
s
t
e
r
e
d

C
a
p
i
t
a
l
Manufacturing and Processing
Real Estate
Accomodations and food
Construction
Electricity, Gas, Water, Air Conditioning Production &Distrib.
0
100
200
300
400
500
600
2008 2009 2010 2011 2012
Indonesia Cambodia
Vietnam China
Philippines


27 August 2013 20
VIETNAM

FPT VN Outperform
Price (at 06:52, 23 Aug 2013 GMT) VND45,400

Valuation VND 49,100
- PER
12-month target VND 49,100
Upside/Downside % +8.1
12-month TSR % +12.1
Volatility Index Low
GICS sector
Technology Hardware & Equipment
Market cap VNDbn 12,490
Market cap US$m 592
Free float % 70
30-day avg turnover US$m 0.0
Number shares on issue m 275.1

Investment fundamentals
Year end 31 Dec 2012A 2013E 2014E 2015E
Revenue bn 24,594 26,342 29,278 32,668
EBIT bn 2,232 2,279 2,592 2,964
EBIT growth % -12.9 2.1 13.7 14.3
Reported profit bn 1,540 1,546 1,759 1,976
EPS rep VND 5,665 5,648 6,392 7,184
EPS rep growth % 12.8 -0.3 13.2 12.4
PER rep x 8.0 8.0 7.1 6.3
Total DPS VND 3,635 1,508 1,500 2,501
Total div yield % 8.0 3.3 3.3 5.5
ROA % 15.3 15.3 15.5 15.6
ROE % 25.4 22.3 22.0 21.2
EV/EBITDA x 4.9 4.7 4.1 3.5
Net debt/equity % 11.8 2.9 -5.6 -12.5
P/BV x 2.0 1.7 1.4 1.3

FPT VN rel Vietnam Ho Chi Minh
performance, & rec history

Note: Recommendation timeline - if not a continuous line, then there was no
Macquarie coverage at the time or there was an embargo period.
Source: FactSet, Macquarie Research, August 2013
(all figures in VND unless noted)

Analyst(s)
Jeff Su
+886 2 2734 7512 jeff.su@macquarie.com
Vina Securities
Gigi Nguyen
+848 3821 9316 giao.nguyen@vinasecurities.com

27 August 2013
Macquarie Capital Securities Limited,
Taiwan Branch
FPT Corp.
Vietnams infocomm leader
The company
FPT is a proxy on Vietnams fast-growing Info-Communications (ICT) market.
It has a leading market share in sales in each segment in which it operates:
software outsourcing (1st), systems integration (1st), IT products distribution
(1st) and broadband telecommunication services (3rd).
Founded by 13 partners in 1988, FPT Corporation (FPT) became a public
company in Mar-02 and listed on the Ho Chi Minh stock exchange (HoSE) in
Dec-06. Over the last 25 years, the group has established its reputation in
Vietnams information and communication technology (ICT) sector with
market-leading positions in software outsourcing (1st), systems integration
(1st), IT and mobile product distribution (1st) and broadband service (3rd).
The group employs nearly 15,000 staff and operates under five main
divisions: FPT IS, FPT Software, FPT Telecom, FPT Trading and FPT Edu.
Recent results & key drivers
Pre-tax profit for the first seven months of FY13 totaled VND1.4tn (+5.7%
YoY), or 57.6% of our FY13 estimate. This was underpinned by FPT Telecom
(+8.5% YoY), which contributed 42.3% to blended profit, and the software
outsourcing division (+60% YoY). IT and mobile distribution remain a drag on
the bottom line, with segment pre-tax profit down 29.8% YoY.
We believe that Vietnams core ICT market (which includes broadband,
software outsourcing and systems integration) will continue to grow, driven by
1) Competitive advantages in software outsourcing on lower wages and
comparable skills, 2) broadband penetration rising off a low base and the
introduction of value-added services such as IP TV and 3) improved
performance in the systems integration division as e-Govt and other banking
tenders grow.
FPT is in exclusive negotiations to acquire the states 50.2% stake in FPT
Telecom. We expect any transaction to be largely funded by stock issuance
and to be concluded late this year. On our estimates, VND592.3bn719.8bn
in FPT Tel profits will accrue to the State Capital Investment Corporation
(SCIC) in the next two years.
Earnings and target price revision
No change.
Price catalyst
12-month price target: VND49,100 based on a PER methodology.
Catalyst: Strong growth in software business, recovery in the IS segment and
ongoing negotiations to consolidate FPT Telecom.
Action and recommendation
We maintain our OP rating and value the stock at VND49,100, for a 12.1%
TSR. We note that FPT trades at a significant discount to peers, but given our
forecast for EPS growth of 13.2% for FY14 and a full foreign limit, we believe
a valuation re-rating will likely come with full consolidation of FPT Tel and
more visibility on consolidated EPS growth. Our target price reflects the
simple average of FY13E and FY14E fair values for FPT based on a target
PER of 8.7x.
27 August 2013 21

FPT Corp. (FPT VN, Outperform, Target Price: VND49,100)
Interim Results 2H/12A 1H/13E 2H/13E 1H/14E Profit & Loss 2012A 2013E 2014E 2015E

Revenue bn 13,353.0 12,267.2 14,075.2 15,208.1 Revenue bn 24,594.3 26,342.4 29,278.4 32,668.2
Gross Profit bn 2,674.6 2,763.6 2,980.3 3,440.2 Gross Profit bn 5,091.8 5,743.9 6,622.9 7,762.2
Cost of Goods Sold bn 10,678.4 9,503.6 11,094.9 11,768.0 Cost of Goods Sold bn 19,502.5 20,598.5 22,655.5 24,906.0
EBITDA bn 1,276.8 1,437.9 1,356.6 1,686.9 EBITDA bn 2,631.3 2,794.5 3,247.6 3,770.6
Depreciation bn 205.3 205.3 310.1 340.7 Depreciation bn 399.7 515.4 655.9 807.1
Amortisation of Goodwill bn 0.0 0.0 0.0 0.0 Amortisation of Goodwill bn 0.0 0.0 0.0 0.0
Other Amortisation bn 0.0 0.0 0.0 0.0 Other Amortisation bn 0.0 0.0 0.0 0.0
EBIT bn 1,071.6 1,232.6 1,046.5 1,346.2 EBIT bn 2,231.6 2,279.1 2,591.7 2,963.5
Net Interest Income bn 42.7 3.7 125.6 134.9 Net Interest Income bn 86.4 129.3 259.7 370.6
Associates bn 3.3 8.0 24.6 17.0 Associates bn 32.7 32.7 32.7 32.7
Exceptionals bn 33.0 40.9 -0.0 0.0 Exceptionals bn 55.7 40.9 0.0 0.0
Forex Gains / Losses bn 15.4 -32.5 3.9 -18.0 Forex Gains / Losses bn 34.1 -28.6 -34.6 -38.0
Other Pre-Tax Income bn 35.5 23.9 -0.0 0.0 Other Pre-Tax Income bn -33.9 23.9 0.0 0.0
Pre-Tax Profit bn 1,201.5 1,276.7 1,200.5 1,480.1 Pre-Tax Profit bn 2,406.6 2,477.2 2,849.5 3,328.7
Tax Expense bn -205.9 -217.7 -215.7 -259.0 Tax Expense bn -421.1 -433.4 -498.6 -632.5
Net Profit bn 995.6 1,059.0 984.8 1,221.1 Net Profit bn 1,985.5 2,043.8 2,350.9 2,696.2
Minority Interests bn -208.2 -255.9 -241.8 -307.6 Minority Interests bn -445.2 -497.7 -592.3 -719.8

Reported Earnings bn 787.4 803.1 743.0 913.5 Reported Earnings bn 1,540.3 1,546.1 1,758.6 1,976.4
Adjusted Earnings bn 754.4 762.2 743.0 913.5 Adjusted Earnings bn 1,484.6 1,505.3 1,758.6 1,976.4

EPS (rep) ho 2,896 2,934 2,714 3,320 EPS (rep) ho 5,665 5,648 6,392 7,184

PE (rep) x 6.2 8.0 7.1 6.3

EBITDA Margin % 9.6 11.7 9.6 11.1 Total DPS ho 3,635 1,508 1,500 2,501
EBIT Margin % 8.0 10.0 7.4 8.9 Total Div Yield % 10.3 3.3 3.3 5.5
Earnings Split % 50.8 50.6 49.4 51.9 Weighted Average Shares m 272 274 275 275
Revenue Growth % -0.4 9.1 5.4 24.0 Period End Shares m 272 274 275 275
EBIT Growth % -14.8 6.3 -2.3 9.2

Profit and Loss Ratios 2012A 2013E 2014E 2015E Cashflow Analysis 2012A 2013E 2014E 2015E

Revenue Growth % -3.1 7.1 11.1 11.6 EBITDA bn 2,631.3 2,794.5 3,247.6 3,770.6
EBITDA Growth % -10.4 6.2 16.2 16.1 Tax Paid bn -421.1 -433.4 -498.6 -632.5
EBIT Growth % -12.9 2.1 13.7 14.3 Chgs in Working Cap bn 201.4 -731.3 -1,168.2 -1,313.2
Gross Profit Margin % 20.7 21.8 22.6 23.8 Net Interest Paid bn 0.0 0.0 0.0 0.0
EBITDA Margin % 10.7 10.6 11.1 11.5 Other bn 260.5 98.3 1,003.2 1,195.6
EBIT Margin % 9.1 8.7 8.9 9.1 Operating Cashflow bn 2,672.1 1,728.1 2,584.0 3,020.6
Net Profit Margin % 8.1 7.8 8.0 8.3 Acquisitions bn 0.0 0.0 0.0 0.0
Payout Ratio % 66.6 27.4 23.5 34.8 Capex bn -716.5 -1,017.6 -1,283.8 -1,300.0
EV/EBITDA x 3.9 4.7 4.1 3.5 Asset Sales bn 0.0 0.0 0.0 0.0
EV/EBIT x 4.6 5.7 5.1 4.4 Other bn 201.3 23.9 0.0 0.0
Investing Cashflow bn -515.2 -993.7 -1,283.8 -1,300.0
Balance Sheet Ratios Dividend (Ordinary) bn -988.4 -412.8 -412.8 -688.0
ROE % 25.4 22.3 22.0 21.2 Equity Raised bn 652.9 13.5 0.0 0.0
ROA % 15.3 15.3 15.5 15.6 Debt Movements bn -1,718.6 -331.8 -7.2 -7.2
ROIC % 22.5 23.7 23.8 23.8 Other bn -686.3 243.2 -34.6 -38.0
Net Debt/Equity % 11.8 2.9 -5.6 -12.5 Financing Cashflow bn -2,740.4 -487.9 -454.6 -733.2
Interest Cover x nmf nmf nmf nmf
Price/Book x 1.5 1.7 1.4 1.3 Net Chg in Cash/Debt bn -583.5 246.5 845.6 987.4
Book Value per Share 22,735.1 26,769.4 31,529.3 36,211.8
Free Cashflow bn 1,955.7 710.5 1,300.1 1,720.6

Balance Sheet 2012A 2013E 2014E 2015E

Cash bn 2,318.9 2,565.4 3,410.9 4,398.3
Receivables bn 3,208.6 3,436.7 3,819.7 4,261.9
Inventories bn 2,699.5 3,135.7 3,449.9 3,793.6
Investments bn 1,147.9 1,147.9 1,147.9 1,147.9
Fixed Assets bn 2,348.6 2,903.3 3,583.7 4,129.1
Intangibles bn 485.5 433.0 380.5 328.0
Other Assets bn 2,000.3 1,906.2 2,038.2 2,185.4
Total Assets bn 14,209.2 15,528.1 17,830.7 20,244.3
Payables bn 3,097.3 2,838.0 3,090.7 3,369.4
Short Term Debt bn 2,859.7 2,807.2 2,807.2 2,807.2
Long Term Debt bn 293.6 14.3 7.2 0.0
Provisions bn 297.3 532.9 592.3 660.8
Other Liabilities bn 567.0 597.0 656.6 721.8
Total Liabilities bn 7,114.9 6,789.3 7,153.8 7,559.2
Shareholders' Funds bn 6,181.8 7,328.6 8,674.5 9,962.8
Minority Interests bn 912.5 1,410.2 2,002.4 2,722.3
Other bn 0.0 0.0 0.0 0.0
Total S/H Equity bn 7,094.3 8,738.8 10,676.9 12,685.1
Total Liab & S/H Funds bn 14,209.2 15,528.1 17,830.7 20,244.3

All figures in VND unless noted.
Source: Company data, Macquarie Research, August 2013


27 August 2013 22
VIETNAM

HPG VN Outperform

- PER
Volatility Index High
GICS sector Materials
Market cap US$m 639
Free float % 56

Year end 31 Dec 2012A 2013E 2014E 2015E
Revenue bn 16,827 18,663 22,023 25,993
EBIT bn 1,624 1,948 2,928 3,585
EBIT growth % -27.9 19.9 50.3 22.5
Reported profit bn 994 1,500 2,110 2,636
EPS rep VND 2,157 3,580 5,036 6,290
EPS rep growth % -27.8 66.0 40.7 24.9
PER rep x 14.9 9.0 6.4 5.1
Total DPS VND 791 2,000 2,000 2,000
Total div yield % 2.5 6.2 6.2 6.2
ROA % 8.9 9.5 13.2 16.3
ROE % 12.7 16.6 22.5 24.1
EV/EBITDA x 8.3 7.0 4.9 4.2
Net debt/equity % 58.4 87.9 54.1 16.9
P/BV x 1.7 1.5 1.3 1.1

HPG VN rel Vietnam Ho Chi Minh


Analyst(s)
Gary Pinge
+852 3922 3557 gary.pinge@macquarie.com
Vina Securities
Duong Dinh
+848 3821 9316 duong.dinh@vinasecurities.com

27 August 2013
Macquarie Capital Securities Limited
Hoa Phat Group JSC
Vietnams most profitable steel
company
The company
HPG is the second- biggest player (14.3% market share) in Vietnams steel
industry, with long steel capacity of 650,000 TPA. HPG secured its
competitive market position by leveraging an integrated production chain,
which includes: 1) six iron ore mines with total reserves of 50.0mn tonnes, 2)
an internal coke production factory with capacity of 700,000 TPA and 3) an
ongoing project to double its steel production capacity.
HPGs market share has steadily risen, to 14.3% in May-13 from 12.0% in
Dec-10, despite a gloomy construction and real estate market. HPG has
opportunistically grabbed market share away from weaker competitors.
For 1H13, HPG achieved VND8,410.4bn in revenue (-3.9% YoY) and
VND1,012.6bn in net profit (+86.7% YoY), which accounted for 45.0% and
67.5% (from asset disposals) of our FY13E revenue and profit forecasts,
respectively.
HPGs phase II steel capacity project (500,000 TPA) will complete the groups
blast furnace production chain, doubling capacity to 1.15mn TPA, and lower
production costs (- 8.1%) given internal coke & iron ore supply. The phase II
plant is expected to come on-stream in late-3Q13.
We estimate that the operation of this Basic Oxygen Furnace (phase II) will
help HPG achieve sales volume of 703,000 tonnes (+15.0% YoY) in FY13E
and 829,900 tonnes (+18.0% YoY) in FY14E.
We thus forecast core EPS growth (construction steel) will be 14.9% in
FY13E, rising to 45.1% in FY14E. This growth reflects higher sales volumes,
lower production and input costs (-8.1%) and a substantial drop in interest
expense (given an 800bp in rate cuts since Jan-12 ).
HPGs legacy property project (Mandarin Gardens) has now sold 600 of 1,000
units. The company is slowly selling down its unsold inventory. We estimate
revenue of VND5,885.9bn and net profit of VND745.4bn over the FY1315E
period.
No change.
Price catalyst
Catalyst: Volume growth in 2H13, following the phase II commercialisation.
HPG shares are now trading on a FY13E P/E of 8.5x (a 40.6% discount to
Peers). EPS is back on a growth path, with a CAGR of 29.1% in FY1214E.
ROE is also back to 20.0%, and HPG has promised a dividend yield of 6.5%.
We note that our valuation is based on the companys core steel business
earnings and excludes its real estate interests.
27 August 2013 23

Hoa Phat Group JSC (HPG VN, Outperform, Target Price: VND34,000)

EBITDA bn 957.9 1,182.9 1,445.8 1,701.5 EBITDA bn 2,220.5 2,628.8 3,781.2 4,446.4
Depreciation bn 293.3 306.5 374.6 384.1 Depreciation bn 596.2 681.1 853.6 861.1
EBIT bn 664.6 876.5 1,071.2 1,317.4 EBIT bn 1,624.2 1,947.7 2,927.6 3,585.3
Net Interest Income bn -189.9 -121.2 -148.2 -147.4 Net Interest Income bn -457.8 -269.4 -327.6 -243.1
Associates bn -0.2 -0.3 -0.3 -0.3 Associates bn -0.5 -0.6 -0.6 -0.6
Exceptionals bn 24.5 47.7 58.2 0.0 Exceptionals bn 14.9 105.9 0.0 0.0
Forex Gains / Losses bn 41.5 -26.4 -32.2 -30.7 Forex Gains / Losses bn -5.3 -58.6 -68.1 -78.0
Other Pre-Tax Income bn 42.7 0.0 0.0 0.0 Other Pre-Tax Income bn 42.7 0.0 0.0 0.0
Pre-Tax Profit bn 583.1 776.3 948.8 1,139.1 Pre-Tax Profit bn 1,218.2 1,725.0 2,531.3 3,263.6
Tax Expense bn -76.2 -93.2 -113.9 -170.9 Tax Expense bn -187.7 -207.2 -379.7 -554.8
Net Profit bn 506.9 683.0 834.8 968.2 Net Profit bn 1,030.6 1,517.9 2,151.6 2,708.8
Minority Interests bn -53.0 -8.0 -9.8 -18.6 Minority Interests bn -36.5 -17.9 -41.4 -72.8

Reported Earnings bn 453.9 675.0 825.0 949.6 Reported Earnings bn 994.1 1,500.0 2,110.2 2,636.0
Adjusted Earnings bn 429.5 627.3 766.8 949.6 Adjusted Earnings bn 979.1 1,394.1 2,110.2 2,636.0

EPS (rep) VND 1,083 1,611 1,969 2,266 EPS (rep) VND 2,157 3,580 5,036 6,290

PE (rep) x 9.7 9.0 6.4 5.1

EBITDA Margin % 11.7 14.1 14.1 17.2 Total DPS ho 791.4 2,000 2,000 2,000
Revenue Growth % -4.7 -2.7 25.3 18.0 Period End Shares m 419 419 419 419
EBIT Growth % -10.7 -8.7 61.2 50.3


Revenue Growth % -5.7 10.9 18.0 18.0 EBITDA bn 2,220.5 2,628.8 3,781.2 4,446.4
EBITDA Growth % -20.6 18.4 43.8 17.6 Tax Paid bn -187.7 -207.2 -379.7 -554.8
EBIT Growth % -27.9 19.9 50.3 22.5 Chgs in Working Cap bn -1,311.8 -1,498.2 -246.8 446.1
EBITDA Margin % 13.2 14.1 17.2 17.1 Other bn 1,548.4 -911.2 266.4 302.7
EBIT Margin % 9.7 10.4 13.3 13.8 Operating Cashflow bn 2,269.4 12.2 3,421.1 4,640.3
Payout Ratio % 37.4 60.1 39.7 31.8 Capex bn -1,828.1 -2,238.3 -100.0 -100.0
EV/EBIT x 8.5 9.5 6.3 5.2 Other bn 168.4 -0.6 -0.6 -0.6
Investing Cashflow bn -1,659.7 -2,238.9 -100.6 -100.6
Balance Sheet Ratios Dividend (Ordinary) bn -361.8 -838.1 -838.1 -838.1
ROE % 12.7 16.6 22.5 24.1 Equity Raised bn 0.0 0.0 0.0 0.0
ROA % 8.9 9.5 13.2 16.3 Debt Movements bn -118.9 2,848.2 -1,476.7 -2,651.4
ROIC % 10.3 12.6 14.3 18.3 Other bn 101.1 -58.6 -68.1 -78.0
Net Debt/Equity % 58.4 87.9 54.1 16.9 Financing Cashflow bn -379.6 1,951.6 -2,383.0 -3,567.5
Interest Cover x 3.5 7.2 8.9 14.7
Price/Book x 1.1 1.5 1.3 1.1 Net Chg in Cash/Debt bn 230.2 -275.1 937.5 972.2
Free Cashflow bn 441.3 -2,226.1 3,321.1 4,540.3


Cash bn 1,294.5 1,019.4 1,956.9 2,929.2
Receivables bn 1,150.5 1,191.4 1,384.2 1,566.5
Inventories bn 3,884.2 5,543.9 6,395.1 7,430.0
Investments bn 240.4 240.4 240.4 240.4
Fixed Assets bn 6,840.9 8,420.7 7,689.7 6,951.2
Intangibles bn 1,084.8 1,062.2 1,039.7 1,017.1
Other Assets bn 4,520.5 4,691.9 3,597.7 1,661.5
Total Assets bn 19,015.7 22,169.9 22,303.6 21,795.8
Payables bn 1,520.6 1,674.9 1,912.9 2,253.0
Short Term Debt bn 4,850.2 5,633.4 5,106.5 2,540.7
Long Term Debt bn 1,455.7 3,520.8 2,571.0 2,485.4
Provisions bn 209.9 209.9 209.9 209.9
Other Liabilities bn 2,401.7 1,873.5 1,932.5 1,865.3
Minority Interests bn 492.4 510.3 551.6 624.4
Other bn 294.5 294.5 294.5 294.5



27 August 2013 24
VIETNAM

PVD VN Outperform

Valuation VND 69,100.00
- EV/EBITDA
12-month target VND 69,100.00
Volatility Index Medium
GICS sector Energy
Market cap US$m 588
Free float % 50

Year end 31 Dec 2012A 2013E 2014E 2015E
Revenue m 572.8 650.6 656.6 723.2
EBIT m 90.9 112.5 119.8 140.2
EBIT growth % 26.7 23.8 6.5 17.0
Reported profit m 62.6 84.9 88.2 97.8
EPS rep 29.9 37.1 35.5 39.4
EPS rep growth % 18.3 24.2 -4.3 10.9
PER rep x 9.4 7.5 7.9 7.1
Total DPS 0.4 0.4 0.4 0.4
Total div yield % 0.1 0.1 0.1 0.1
ROA % 10.1 11.9 11.5 12.3
ROE % 19.1 20.3 17.1 15.9
EV/EBITDA x 5.3 5.1 4.8 4.2
Net debt/equity % 78.2 36.0 35.6 11.1
P/BV x 1.7 1.5 1.3 1.0

PVD VN rel Vietnam Ho Chi Minh

(all figures in USD unless noted)

Analyst(s)
James Hubbard, CFA
+852 3922 1226 james.hubbard@macquarie.com
Vina Securities
Duong Dinh

27 August 2013
PetroVietnam Drilling and
Well Services
Placement finished successfully
Event
We reiterate our OP rating for PVD, increase our TP by 19.9% to VND69,100
(+17.1% upside). This is due to the decline in net debt given USD68.5mn in
private placements proceeds, a delay in raising loans for a high-spec jack-up
and increased FY13E profits of USD2.9mn.
Placement finished: PVD was able to sell a total 38.0mn shares at an avg.
price of VND38,262/sh (19.6% higher than our trailing BVPS assumption).
PVD has indicated they will now not invest in a new build highspec jack-up
(to be completed in late 2013) with Falcon Energy. Instead, PetroVietnam
Drilling Overseas (PVDO) a joint venture between PVD (55% stake), Falcon
(10% stake) and Joy Pride Keppel (35% stake) has ordered an USD210mn,
400 ft WD jack-up from Keppel FELS (scheduled for delivery in 1Q15).
1H13A results: USD313.4mn in Rev (+30.9% YoY) and USD41.5mn in NP
(+41.2% YoY). These account for 50.1% and 50.1% of our previous FY13Es
forecasts respectively. Finally, another leased-in rig was secured, Key
Gibraltar (1+1 year contract), for PVEP. PVD now has 6 leased-in rigs.
Impact
With approximately USD68.5mn proceeds from the placement, PVDs net
gearing ratio should drop to 36.7% by FY13E from the 82.1% at FY12A.
We are lowering our FY14E NP estimates to USD88.2mn vs. USD92.8mn
given the decision not to invest in the new build rig. We now estimate 3.9% in
FY14E NP growth, but a 4.3% contraction in EPS growth given dilution.
We like the participation of Keppel in PVDO as this will ensure timely delivery.
The 400ft WD rig will help PVD achieve double digit EPS growth again of
10.9% and 22.4% for FY15/16E on our estimates.
We raise our FY13E revenue forecast to US$650.6mn from US$624.5mn and
our net profit by 3.5% to US$84.9mn from US$82.0mn respectively, on the
back of strong margin. Our TP jumps by 19.9% to VND69,100.
Price catalyst
12-month price target: VND69,100.00 based on an EV/EBITDA methodology.
Catalyst: Progress of the high-spec jack-up project, and a rising dayrate trend.
Regional jack-up dayrates look to remain robust averaging over
USD160,000/day. At 6.3x our FY14E EBITDA forecast of US$153.1mn, PVD
trades at a 32.5% discount to its peer group, and at a prospective FY14E PER
of 7.8x EPS and PB of 1.2x BVPS respectively.
27 August 2013 25
Valuation
We revise up our target price by 19.9% from VND57,600 to VND69,100/sh. Our estimated equity
value has increased to USD747.9mn (+46.5% vs previous forecast) and USD830.3mn (+2.2% vs.
previous forecast) respectively for FY13E & 14E. These are due to the decline in net debt (with the
placements proceeds and delay in raising new debt for high-spec jack-up project) as well as more
EBITDA expected for FY13E. The increase in EBITDA is mainly due to higher gross margin and one
more leased rig, Key Gibraltar with 1+1 year contract for PVEP.
PVD finally and successfully closed its long running private placement, receiving proceeds of
USD68.5mn. In particular, 20.1mn shares were sold at VND31,758 to PetroVietnam (with a three
year lock-up), 17.8mn shares (with a one year lock-up) were sold at average of VND45,605 to PYN
fund management Ltd, PENM Partners Private Equity New Market II & VOF Vietnam Investment
Property Holding Ltd. The proceeds have helped PVD to lower the net debt to equity to 36.7% at
FY13E from 82.1% as of FY12E.
As of the end of FY13E, we estimate PVDs target price of VND69,100, implying upside of 17.1%.
Going forward to FY14E, our fair value rises further to VND73,389 (+24.4% upside).
Fig 1 Valuation
Year Ended FY13E FY14E FY15E
Reported EBITDA 163.3 172.1 197.0
Less Minority EBITDA from TAD rig (19.2) (19.0) (34.1)
PVD's Proportionate EBITDA 144.1 153.1 163.0

Net debt 175.6 204.4 110.4
Less Minority Net Debt in TAD (15.7) (70.2) (55.4)
PVD's proportionate Net Debt 159.9 134.2 55.0

Target EV @ 6.3x 907.8 964.5 1,026.7
Less proportionate net debt (159.9) (134.2) (55.0)
Equity Value 747.9 830.3 971.7
Outstanding shares after issuance 247.6 247.6 247.6
Equity Value/Sh (US$) 3.02 3.35 3.92

VND/US$ Fx rate 21,453 21,882 22,976
Equity Value/Sh (VND) 64,810 73,389 90,179
Target price (VND/sh) 69,100
Upside 17.1% 24.4% 52.8%
Share price 59,000 59,000 59,000
Source: Company data, Macquarie Research, Vina Securities March 2013

27 August 2013 26

PetroVietnam Drilling and Well Services (PVD VN, Outperform, Target Price: VND69,100.00)

Revenue m 313 337 309 348 Revenue m 573 651 657 723
Gross Profit m 102 104 101 114 Gross Profit m 178 206 215 245
Cost of Goods Sold m 211 233 207 234 Cost of Goods Sold m 395 445 441 479
EBITDA m 83 80 81 91 EBITDA m 140 163 172 197
Depreciation m 25 26 25 28 Depreciation m 49 51 52 57
Amortisation of Goodwill m 0 0 0 0 Amortisation of Goodwill m 0 0 0 0
Other Amortisation m 0 0 0 0 Other Amortisation m 0 0 0 0
EBIT m 58 54 56 63 EBIT m 91 112 120 140
Net Interest Income m -5 -8 -4 -5 Net Interest Income m -13 -13 -9 -12
Associates m 1 6 3 4 Associates m 3 7 7 8
Exceptionals m -3 3 0 0 Exceptionals m 0 1 0 0
Forex Gains / Losses m 0 0 0 0 Forex Gains / Losses m 0 0 0 0
Other Pre-Tax Income m 0 0 0 0 Other Pre-Tax Income m 0 0 0 0
Pre-Tax Profit m 51 56 55 62 Pre-Tax Profit m 81 107 117 136
Tax Expense m -6 -7 -10 -11 Tax Expense m -12 -13 -21 -24
Net Profit m 45 49 45 51 Net Profit m 69 93 97 112
Minority Interests m -3 -5 -4 -5 Minority Interests m -6 -8 -9 -14

Reported Earnings m 42 43 41 47 Reported Earnings m 63 85 88 98
Adjusted Earnings m 45 40 41 47 Adjusted Earnings m 63 84 88 98

EPS (rep) 0.20 0.17 0.17 0.19 EPS (rep) 0.30 0.37 0.35 0.39
EPS (adj) 0.02 0.02 0.02 0.02 EPS (adj) 0.03 0.04 0.04 0.04
EPS Growth yoy (adj) % 44.8 5.7 -21.4 17.1 EPS Growth (adj) % 18.3 24.9 -4.8 10.9
PE (rep) x 6.0 7.4 7.5 6.8
PE (adj) x 60.3 73.2 75.2 67.8

EBITDA Margin % 26.6 23.7 26.2 26.2 Total DPS 0.00 0.00 0.00 0.00
Revenue Growth % 30.7 1.3 -1.5 3.2 Period End Shares m 210 249 249 249
EBIT Growth % 33.1 15.1 -3.2 17.0


Revenue Growth % 27.4 13.6 0.9 10.1 EBITDA m 140 163 172 197
EBITDA Growth % 31.6 16.7 5.4 14.5 Tax Paid m -12 -13 -21 -24
EBIT Growth % 26.7 23.8 6.5 17.0 Chgs in Working Cap m 71 15 -1 -34
Gross Profit Margin % 31.1 31.7 32.8 33.8 Net Interest Paid m 0 0 0 0
EBITDA Margin % 24.4 25.1 26.2 27.2 Other m -70 -52 -20 40
EBIT Margin % 15.9 17.3 18.2 19.4 Operating Cashflow m 129 113 130 179
Net Profit Margin % 12.0 14.4 14.7 15.5 Acquisitions m 0 0 0 0
Payout Ratio % 13.9 10.9 11.5 10.4 Capex m -40 -40 -156 -51
EV/EBITDA x 3.9 5.0 4.7 4.1 Asset Sales m 0 0 0 0
EV/EBIT x 5.9 7.1 6.6 5.7 Other m -3 -31 7 8
Investing Cashflow m -42 -71 -149 -43
Balance Sheet Ratios Dividend (Ordinary) m -9 -10 -10 -10
ROE % 19.1 20.3 17.1 15.9 Equity Raised m 0 68 0 0
ROA % 10.1 11.9 11.5 12.3 Debt Movements m -52 -78 66 -81
ROIC % 11.8 15.7 14.9 14.9 Other m -6 0 0 0
Net Debt/Equity % 78.2 36.0 35.6 11.1 Financing Cashflow m -68 -20 56 -91
Interest Cover x 6.9 8.5 12.8 11.9
Price/Book x 1.1 1.4 1.2 1.0 Net Chg in Cash/Debt m 19 22 37 45
Book Value per Share 1.7 1.9 2.2 2.7
Free Cashflow m 90 73 -26 128


Cash m 51 73 110 155
Receivables m 144 147 148 163
Inventories m 38 42 42 45
Investments m 2 2 2 2
Fixed Assets m 633 660 763 757
Intangibles m 7 7 7 7
Other Assets m 42 42 42 42
Total Assets m 916 972 1,114 1,172
Payables m 107 109 108 117
Short Term Debt m 93 66 81 81
Long Term Debt m 234 182 234 153
Provisions m 14 14 14 14
Other Liabilities m 116 113 104 99
Total Liabilities m 563 484 540 464
Shareholders' Funds m 299 442 520 608
Minority Interests m 1 10 18 33
Other m 52 37 35 67
Total S/H Equity m 353 488 574 707
Total Liab & S/H Funds m 916 972 1,114 1,172

All figures in USD unless noted.


27 August 2013 27
VIETNAM

DPM VN Outperform

Valuation VND 48,000.00
- DCF
12-month target VND 48,000.00
Volatility Index Low/Medium
GICS sector Materials
Market cap US$m 733
Free float % 39

Year end 31 Dec 2012A 2013E 2014E 2015E
Revenue bn 13,322 10,612 10,583 10,568
EBIT bn 3,013 2,220 2,011 1,828
EBIT growth % -0.9 -26.3 -9.4 -9.1
EPS rep VND 7,924 6,144 5,530 4,671
EPS rep growth % -3.3 -22.5 -10.0 -15.5
PER rep x 5.2 6.7 7.5 8.8
Total DPS VND 4,500 3,000 3,000 1,500
Total div yield % 8.5 7.3 7.3 3.6
ROA % 30.3 20.5 17.5 15.1
ROE % 34.9 25.0 20.9 16.7
EV/EBITDA x 3.2 4.2 4.6 5.1
Net debt/equity % -61.0 -59.4 -62.8 -64.8
P/BV x 1.7 1.6 1.5 1.5

DPM VN rel Vietnam Ho Chi Minh


Analyst(s)
James Hubbard, CFA
+852 3922 1226 james.hubbard@macquarie.com
Vina Securities
Duong Dinh

27 August 2013
PetroVietnam Fertilizer &
Chemical
An agricultural cash cow
The company
PetroVietnam Fertilizer and Chemical Corp is the largest fertilizer producer
and distributor in Vietnam. The companys key product is prilled urea (gas
feedstock), marketed domestically gand regionally under the Phu My Urea
brand. The company, 60% owned by PetroVietnam Oil & Gas Group, has
several distribution and associate companies located throughout the country.
DPMs stock price has fallen sharply since March and although there is no
change to our fundamental view, with almost 24% upside to our target price,
we upgrade the stock from Neutral to Outperform.
1H13A results: Revenues fell 14.4% YoY to VND6.1tn with net profit falling
17.4% YoY to VND1.6tn. Gross margins, improved to 35.8% from 34.8%.
These results represent 59.7% and 69.7% of our FY13 forecasts. Part of the
revenue decline came from falling avg. urea prices as well as the absence of
revenues from Ca Mau urea, in which DPM no longer distributes. Net profits
were down, due to a 17.1% YoY increase in selling expenses and a 26.1%
decrease in interest income from lower rates.
Increased global urea production capacity and abundant natural gas
inventories continue to place downward pressure on urea global prices.
DPMs ASP for urea fell to about US$410/tonne in 1H13A.
Domestic supply: DPMs sister company (PVFCM) Ca Mau relied heavily
upon DPMs distribution network and will now need time to develop its own.
Vinachems Ninh Binh Nitrogenous Fertilizer Plant has experienced various
setbacks and inconsistent production since its launch in March 2012.
Longer-run, DPM still plans to invest in a JV for a USD900mn Ammonia plant
and is planning a USD63mn investment in a NPK facility for FY14. It will also
look to participate in the PVCFC (Ca Mau) equitization next year.
DPMs FY12A final dividend of VND2,000/sh brought dividend payments to
VND4,500/sh, (a T12M yield of 10.68%). With a growing cash position and no
major CAPEX projects underway this year, we believe DPM can easily raise
its payout ratio above our forecast 50% (equiv. to VND3,000/sh).
No change.
Price catalyst
12-month price target: VND48,000.00 based on a DCF methodology.
Catalyst: Higher DPS, treasury management, urea prices and competition
DPM trades at 6.7x FY13E EPS, with a prospective dividend yield of
VND4,348/sh and 7.3% (with upside potential). DPM is in a net cash position
and in the mid term is expected to invest FCF for expansion or acquisition.
27 August 2013 28

PetroVietnam Fertilizer & Chemical (DPM VN, Outperform, Target Price: VND48,000.00)

Revenue m 6,232,830 5,147,021 5,465,393 5,132,863 Revenue m 13,321,853 10,612,414 10,583,223 10,568,135
Gross Profit m 1,966,346 1,671,906 1,775,323 1,567,118 Gross Profit m 4,537,322 3,447,229 3,231,172 3,047,174
Cost of Goods Sold m 4,266,484 3,475,114 3,690,070 3,565,745 Cost of Goods Sold m 8,784,531 7,165,184 7,352,051 7,520,961
EBITDA m 1,200,442 1,181,654 1,254,746 1,080,253 EBITDA m 3,226,234 2,436,401 2,227,326 2,044,759
Depreciation m 105,933 104,887 111,375 104,887 Depreciation m 212,835 216,262 216,262 216,262
Amortisation of Goodwill m 0 0 0 0 Amortisation of Goodwill m 0 0 0 0
Other Amortisation m 0 0 0 0 Other Amortisation m 0 0 0 0
EBIT m 1,094,509 1,076,767 1,143,372 975,366 EBIT m 3,013,399 2,220,139 2,011,064 1,828,497
Net Interest Income m 258,296 224,021 237,878 199,514 Net Interest Income m 565,032 461,899 411,368 349,754
Associates m -41,741 -23,133 -24,563 -23,133 Associates m -47,696 -47,696 -47,696 -47,696
Exceptionals m -1,897 0 0 0 Exceptionals m 0 0 0 0
Forex Gains / Losses m -3,837 0 0 0 Forex Gains / Losses m -4,966 0 0 0
Other Pre-Tax Income m 339 0 0 0 Other Pre-Tax Income m 1,279 0 0 0
Pre-Tax Profit m 1,305,669 1,277,656 1,356,686 1,151,747 Pre-Tax Profit m 3,527,048 2,634,342 2,374,736 2,130,555
Tax Expense m -221,751 -127,766 -135,669 -115,175 Tax Expense m -474,402 -263,434 -237,474 -319,583
Net Profit m 1,083,918 1,149,890 1,221,018 1,036,572 Net Profit m 3,052,646 2,370,908 2,137,263 1,810,972
Minority Interests m -21,617 -17,460 -18,540 -17,460 Minority Interests m -50,796 -36,000 -36,000 -36,000

Reported Earnings m 1,062,301 1,132,430 1,202,478 1,019,112 Reported Earnings m 3,001,850 2,334,908 2,101,263 1,774,972
Adjusted Earnings m 1,064,198 1,132,430 1,202,478 1,019,112 Adjusted Earnings m 3,001,850 2,334,908 2,101,263 1,774,972

EPS (rep) ho 2,804 2,980 3,164 2,682 EPS (rep) ho 7,924 6,144 5,530 4,671
EPS (adj) ho 2,809 2,980 3,164 2,682 EPS (adj) ho 7,924 6,144 5,530 4,671
EPS Growth yoy (adj) % -35.8 -41.7 12.6 -10.0 EPS Growth (adj) % -3.1 -22.5 -10.0 -15.5
PE (rep) x 5.2 6.7 7.5 8.8
PE (adj) x 5.2 6.7 7.5 8.8

Revenue Growth % 32.9 -27.4 -12.3 -0.3 Period End Shares m 379 380 380 380
EBIT Growth % -31.8 -43.9 4.5 -9.4


Revenue Growth % 44.4 -20.3 -0.3 -0.1 EBITDA m 3,226,234 2,436,401 2,227,326 2,044,759
EBITDA Growth % -0.1 -24.5 -8.6 -8.2 Tax Paid m -474,402 -263,434 -237,474 -319,583
EBIT Growth % -0.9 -26.3 -9.4 -9.1 Chgs in Working Cap m 315,763 -496,228 -10,600 -7,668
Gross Profit Margin % 34.1 32.5 30.5 28.8 Net Interest Paid m 0 0 0 0
EBITDA Margin % 24.2 23.0 21.0 19.3 Other m 211,922 175,686 159,217 136,757
EBIT Margin % 22.6 20.9 19.0 17.3 Operating Cashflow m 3,279,517 1,852,425 2,138,469 1,854,265
Net Profit Margin % 22.9 22.3 20.2 17.1 Acquisitions m 0 0 0 0
Payout Ratio % 44.3 48.8 54.3 32.1 Capex m -714,542 -200,000 -200,000 -200,000
EV/EBITDA x 3.2 4.2 4.6 5.1 Asset Sales m 0 0 0 0
EV/EBIT x 3.4 4.6 5.1 5.7 Other m 849,103 0 0 0
Investing Cashflow m 134,561 -200,000 -200,000 -200,000
Balance Sheet Ratios Dividend (Ordinary) m -1,330,000 -1,140,000 -1,140,000 -570,000
ROE % 34.9 25.0 20.9 16.7 Equity Raised m 0 0 0 0
ROA % 30.3 20.5 17.5 15.1 Debt Movements m 28,380 7,762 0 0
ROIC % 59.9 55.9 45.1 39.2 Other m -553,500 -219,976 0 -570,000
Net Debt/Equity % -61.0 -59.4 -62.8 -64.8 Financing Cashflow m -1,855,120 -1,352,214 -1,140,000 -1,140,000
Price/Book x 1.7 1.6 1.5 1.5 Net Chg in Cash/Debt m 1,558,958 300,211 798,469 514,265
Free Cashflow m 2,564,975 1,652,425 1,938,469 1,654,265


Cash m 5,629,403 5,929,614 6,728,083 7,242,348
Receivables m 46,193 110,394 110,091 109,934
Inventories m 1,171,462 1,427,139 1,448,804 1,466,674
Investments m 62,077 62,077 62,077 62,077
Fixed Assets m 1,896,165 1,928,165 1,960,165 1,992,165
Intangibles m 770,898 722,636 674,374 626,112
Other Assets m 1,004,337 936,465 888,552 840,743
Total Assets m 10,580,535 11,116,490 11,872,146 12,340,054
Payables m 398,388 317,363 316,490 316,038
Short Term Debt m 27,737 50,000 50,000 50,000
Long Term Debt m 8,477 0 0 0
Provisions m 124,031 124,031 124,031 124,031
Other Liabilities m 851,974 730,449 741,867 752,251
Total Liabilities m 1,410,607 1,221,843 1,232,387 1,242,320
Shareholders' Funds m 5,775,353 6,266,581 6,765,566 7,010,044
Minority Interests m 205,561 205,561 241,561 277,561
Other m 3,189,014 3,422,505 3,632,631 3,810,128
Total S/H Equity m 9,169,928 9,894,647 10,639,758 11,097,733
Total Liab & S/H Funds m 10,580,535 11,116,490 11,872,146 12,340,054



27 August 2013 29
VIETNAM

VNM VN Outperform
Price (at 13:00, 23 Aug 2013 GMT)VND136,000

- PER
Volatility Index Low/Medium
GICS sector Food, Beverage
& Tobacco
Market cap US$m 5,360
Free float % 85

Year end 31 Dec 2012A 2013E 2014E 2015E
Revenue bn 26,562 32,779 40,316 49,059
EBIT bn 6,206 7,765 9,445 11,335
EBIT growth % 43.8 25.1 21.6 20.0
EPS rep VND 4,296 8,194 9,972 12,223
EPS rep growth % 55.6 90.7 21.7 22.6
PER rep x 31.7 16.6 13.6 11.1
Total DPS VND 1,926 3,801 4,002 4,446
Total div yield % 1.4 2.8 2.9 3.3
ROA % 35.2 35.4 34.6 33.2
ROE % 39.6 39.0 38.4 37.2
EV/EBITDA x 16.6 13.2 10.8 9.0
Net debt/equity % -8.1 -14.2 -27.7 -42.7
P/BV x 7.3 5.9 4.7 3.7

VNM VN rel Vietnam Ho Chi Minh


Analyst(s)
Gary Pinge
+852 3922 3557 gary.pinge@macquarie.com
Vina Securities
Gigi Nguyen
+848 3821 9316 giao.nguyen@vinasecurities.com

27 August 2013
Vietnam Dairy Products
More milk for the masses
Event
We upgrade VNM to Outperform from Neutral and raise our target price by
11.8% to VND170,000/sh. We see a TSR of 27.9%, inclusive of a 2.9% div
yield.
VNMs shares have fallen by 9.9% off their recent high of VND151,000 and
now trade at 13.6x and 4.7x our FY14E EPS and BVPS estimates,
respectively.
VNM ended 1H13 with net revenue of VND14,746.9bn (+14.4% YoY), EBIT of
VND3,833.5bn and NP of VND3,373.6bn (+21.5% YoY), which represents
45%, 49.4% and 49.4% of our full-year forecasts, respectively.
Impact
We think that VNMs fundamental growth story remains intact. Why?
1) Organic Growth: Dairy consumption in Vietnam stands at only 16kg per
capita (incl. butter), much lower than that of China and Thailand, which
consume nearly 23kg and 35kg per capita, respectively.
2) Sustainable gross margins: VNM typically holds close to three months of
raw material in inventory. This gives the company significant visibility on input
prices, allowing ex-factory pricing to be adjusted ahead of COGS pressure.
Management seeks to maintain gross margin in the 30%+ range.
3) Insulated from recent controversies: VNM was unaffected by the 2008
China melamine scandal and did not receive any of the contaminated whey
protein concentrate behind Fonterras (a VNM supplier) recent global recall.
All in, we believe that VNM gives the investor sustainable earnings growth
above 20%, strong FCFF of VND4.3tn in FY13E and a net cash position. The
company also produces one of the highest ROEs of any listed Vietnamese
firm. FY12s ROAE came in at 41.6% and we believe future ROEs will remain
over 35.0%, on our estimates.
Currently trading at 13.6x FY14E EPS and 4.7x FY14E BVPS, the stocks
approximate 30% PER premium relative to the VNINDEX does not look
unreasonable to us given the companys higher profitability. In addition, we
note that VNM is currently trading at a significant 29.5% discount to its
regional dairy peers.
We raise our target price by 11.8% as we roll our valuation forward to FY14E.
No changes to our estimates.
Price catalyst
Catalyst: Higher sales volumes and high GMs may drive an earnings surprise.
We upgrade VNM to Outperform on strong fundamentals as we roll our
valuation forward to FY14E. In our view, the recent price correction offers
investors a good buying opportunity.
27 August 2013 30

Vietnam Dairy Products (VNM VN, Outperform, Target Price: VND170,000)

EBITDA bn 3,558.0 4,168.6 4,299.4 5,136.3 EBITDA bn 6,737.3 8,468.0 10,400.3 12,427.3
Depreciation bn 282.4 335.0 367.8 471.7 Depreciation bn 531.5 702.9 955.2 1,092.5
EBIT bn 3,275.5 3,833.5 3,931.6 4,664.6 EBIT bn 6,205.8 7,765.1 9,445.1 11,334.7
Net Interest Income bn 114.9 191.9 46.5 278.4 Net Interest Income bn 281.7 238.4 563.6 1,085.5
Associates bn -0.8 12.3 0.0 0.0 Associates bn 12.5 12.3 0.0 0.0
Exceptionals bn 154.3 73.2 0.0 0.0 Exceptionals bn 287.3 73.2 0.0 0.0
Forex Gains / Losses bn 11.2 36.8 0.0 0.0 Forex Gains / Losses bn 41.8 36.8 0.0 0.0
Other Pre-Tax Income bn 4.9 -32.8 39.2 0.0 Other Pre-Tax Income bn 100.5 6.5 6.5 6.5
Pre-Tax Profit bn 3,559.9 4,114.9 4,017.3 4,942.9 Pre-Tax Profit bn 6,929.7 8,132.3 10,015.2 12,426.7
Tax Expense bn -516.6 -740.9 -560.3 -840.8 Tax Expense bn -1,110.2 -1,301.2 -1,702.6 -2,236.8
Net Profit bn 3,043.3 3,374.1 3,457.0 4,102.1 Net Profit bn 5,819.5 6,831.1 8,312.6 10,189.9
Minority Interests bn 0.0 0.0 0.0 0.0 Minority Interests bn 0.0 0.0 0.0 0.0

Reported Earnings bn 3,043.3 3,374.1 3,457.0 4,102.1 Reported Earnings bn 5,819.5 6,831.1 8,312.6 10,189.9
Adjusted Earnings bn 2,889.1 3,300.8 3,457.0 4,102.1 Adjusted Earnings bn 5,532.1 6,757.9 8,312.6 10,189.9

EPS (rep) VND 3,651 4,047 4,147 4,921 EPS (rep) VND 4,296 8,194 9,972 12,223

PE (rep) x 20.5 16.6 13.6 11.1

Earnings Split % 52.2 48.8 51.2 49.3 Weighted Average Shares m 1,355 834 834 834
Revenue Growth % 17.2 14.4 31.9 35.0 Period End Shares m 834 834 834 834
EBIT Growth % 58.2 30.8 20.0 21.7


Revenue Growth % 22.8 23.4 23.0 21.7 EBITDA bn 6,737.3 8,468.0 10,400.3 12,427.3
EBITDA Growth % 41.7 25.7 22.8 19.5 Tax Paid bn -1,110.2 -1,301.2 -1,702.6 -2,236.8
EBIT Growth % 43.8 25.1 21.6 20.0 Chgs in Working Cap bn -1,572.5 -2,365.2 -2,733.0 -3,194.4
EBITDA Margin % 25.4 25.8 25.8 25.3 Other bn 1,862.3 2,047.2 2,756.3 3,653.4
EBIT Margin % 23.4 23.7 23.4 23.1 Operating Cashflow bn 5,916.8 6,848.9 8,720.9 10,649.5
Payout Ratio % 39.5 46.9 40.1 36.4 Capex bn -3,134.0 -2,267.1 -1,439.6 -560.6
EV/EBIT x 11.6 14.4 11.9 9.9 Other bn -2,462.0 18.7 6.5 6.5
Investing Cashflow bn -5,596.0 -2,248.4 -1,433.2 -554.1
Balance Sheet Ratios Dividend (Ordinary) bn -2,223.0 -3,168.3 -3,335.8 -3,705.9
ROE % 39.6 39.0 38.4 37.2 Equity Raised bn 2,782.6 -0.0 0.0 0.0
ROA % 35.2 35.4 34.6 33.2 Debt Movements bn 0.0 0.0 0.0 0.0
ROIC % 55.9 45.8 47.7 53.2 Other bn -2,784.9 36.8 0.0 0.0
Net Debt/Equity % -8.1 -14.2 -27.7 -42.7 Financing Cashflow bn -2,225.3 -3,131.5 -3,335.8 -3,705.9
Price/Book x 4.7 5.9 4.7 3.7 Net Chg in Cash/Debt bn -1,904.4 1,469.0 3,951.9 6,389.5
Free Cashflow bn 2,782.8 4,581.7 7,281.3 10,089.0


Cash bn 1,252.1 2,721.0 6,673.0 13,062.5
Receivables bn 1,269.8 1,644.3 2,017.3 2,449.3
Inventories bn 3,472.8 4,409.6 5,447.6 6,663.8
Investments bn 3,975.8 3,975.8 3,975.8 3,975.8
Fixed Assets bn 7,788.7 9,319.7 9,770.0 9,203.4
Intangibles bn 267.3 300.6 334.7 369.3
Other Assets bn 1,671.3 1,856.4 2,081.3 2,342.4
Total Assets bn 19,697.8 24,227.4 30,299.6 38,066.6
Payables bn 2,247.7 2,761.4 3,411.4 4,173.1
Short Term Debt bn 0.0 0.0 0.0 0.0
Long Term Debt bn 0.0 0.0 0.0 0.0
Provisions bn 334.0 334.0 334.0 334.0
Other Liabilities bn 1,623.2 1,976.2 2,421.5 2,942.9
Minority Interests bn 0.0 0.0 0.0 0.0
Other bn 677.7 677.7 677.7 677.7


27 August 2013 31
Important disclosures:
Recommendation definitions
Macquarie - Australia/New Zealand
Outperform return >3% in excess of benchmark return
Neutral return within 3% of benchmark return
Underperform return >3% below benchmark return

Benchmark return is determined by long term nominal
GDP growth plus 12 month forward market dividend
yield
Macquarie Asia/Europe
Outperform expected return >+10%
Neutral expected return from -10% to +10%
Underperform expected return <-10%
Macquarie First South - South Africa
Outperform expected return >+10%
Neutral expected return from -10% to +10%
Underperform expected return <-10%
Macquarie - Canada
Outperform return >5% in excess of benchmark return
Neutral return within 5% of benchmark return
Underperform return >5% below benchmark return
Macquarie - USA
Outperform (Buy) return >5% in excess of Russell
3000 index return
Neutral (Hold) return within 5% of Russell 3000 index
return
Underperform (Sell) return >5% below Russell 3000
index return

Volatility index definition*
This is calculated from the volatility of historical
price movements.

Very highhighest risk Stock should be
expected to move up or down 60100% in a year
investors should be aware this stock is highly
speculative.

High stock should be expected to move up or
down at least 4060% in a year investors should
be aware this stock could be speculative.

Medium stock should be expected to move up
or down at least 3040% in a year.

Lowmedium stock should be expected to
move up or down at least 2530% in a year.

Low stock should be expected to move up or
down at least 1525% in a year.
* Applicable to Asia/Australian/NZ/Canada stocks
only
Recommendations 12 months
Note: Quant recommendations may differ from
Fundamental Analyst recommendations
Financial definitions
All "Adjusted" data items have had the following
adjustments made:
Added back: goodwill amortisation, provision for
catastrophe reserves, IFRS derivatives & hedging,
IFRS impairments & IFRS interest expense
Excluded: non recurring items, asset revals, property
revals, appraisal value uplift, preference dividends &
minority interests

EPS = adjusted net profit / efpowa*
ROA = adjusted ebit / average total assets
ROA Banks/Insurance = adjusted net profit /average
total assets
ROE = adjusted net profit / average shareholders funds
Gross cashflow = adjusted net profit + depreciation
*equivalent fully paid ordinary weighted average
number of shares

All Reported numbers for Australian/NZ listed stocks
are modelled under IFRS (International Financial
Reporting Standards).

Recommendation proportions For quarter ending 30 June 2013
AU/NZ Asia RSA USA CA EUR
Outperform 49.80% 57.68% 48.05% 41.13% 61.75% 47.10% (for US coverage by MCUSA, 8.12% of stocks followed are investment banking clients)
Neutral 39.85% 24.45% 42.86% 54.70% 34.42% 30.89% (for US coverage by MCUSA, 6.60% of stocks followed are investment banking clients)
Underperform 10.35% 17.87% 9.09% 4.17% 3.83% 22.01% (for US coverage by MCUSA, 0.00% of stocks followed are investment banking clients)

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Eric Roles (New York) (1 212) 231 2559
Paul Colaco (New York) (1 212) 231 2496

Regional Heads of Sales contd
Sheila Schroeder (San Francisco) (1 415) 762 5001
Erica Wang (Taiwan) (8862) 2734 7586
Angus Kent (Thailand) (662) 694 7601
J ulien Roux (UK/Europe) (44) 20 3037 4867
Sean Alexander (Generalist) (852) 3922 2101
Regional Head of Distribution
J ustin Crawford (Asia) (852) 3922 2065
Sales Trading
Adam Zaki (Asia) (852) 3922 2002
Phil Sellaroli (J apan) (813) 3512 7837
Kenneth Cheung (Singapore) (65) 6601 0288

Sales Trading contd
Mike Keen (UK/Europe) (44) 20 3037 4905
Chris Reale (New York) (1 212) 231 2555
Marc Rosa (New York) (1 212) 231 2555
Stanley Dunda (Indonesia) (6221) 515 1555
Suhaida Samsudin (Malaysia) (603) 2059 8888
Michael Santos (Philippines) (632) 857 0813
Isaac Huang (Taiwan) (8862) 2734 7582
Dominic Shore (Thailand) (662) 694 7707

Macquarie Vietnam Strategy 270813

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Macquarie Vietnam Strategy 270813

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Please refer to the important disclosures and analyst certification on inside back cover of this document, or on our

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