COMPANY ANALYSIS REPORT

March 9th, 2011

TICKER: VCF (HSX) VINACAFÉ BIEN HOA JOINT STOCK COMPANY

HOLD
VALUATION
Analyst: Dang Thao Nguyen
Email: nguyen.dt@vdsc.com.vn
Phone No.: +84 8 6299 2006 – Ext 344
Price (3 Mar 2011) (VND)
High price (52 weeks) (VND)
Low price (52 weeks) (VND)
Outstanding shares
Ave trading volume
(30 last trading days)
Market cap (VND bln)
Trailing P/E (x)
P/BV (BV @ 31 Dec 2010) (x)
Price chart in 52 weeks
LONG TERM CONSUMER GOODS – BEVERAGE
VND49,200 Based on forecast and estimate, the analyst assumes that reasonable value of VCF is
around VND49,200 (equivalent to VND1,307 billion), higher 10,5% than reference
price on March 3rd, 2011. In 2011, it is forecasted that a coffee processing sector will
grow strongly and business activities of the company will be still stable. It is expected
that No. 3 Coffee Processing Factory which will run in the third quarter of 2012 can
make a break-through in its business results. According to the analyst’s valuation,
44,500
VCF is suitable for long term investment. Investors can hold it and buy it when
market price is lower 20% - 25% than recommended price.
56,000
Vinacafe is the largest instant coffee producer in Vietnam, accounting for
44,100 about 40% of total market share. With over 30 years of operation in the coffee
market, Vinacafe is the famous brand name and a leader in the instant coffee
26,579,135
product. Demands for this product are forecasted to grow by 10.5% per year
from 2008 - 2013.
4,235
Material inputs are qualified and stable because Vietnam is the largest
1,183 Robusta supplier in the world (accounting for 35% of the world yield).
Business activities are still developing firmly. Growth rate of revenues is
6.1
about 25% annually from 2006 – 2010. In particular, sales and net profits grew by
2.2 28% and 19%, respectively in 2010. However, VFC’s coffee outputs will be able to
decrease because of out of date factories.
Financial capacity is powerful. Idle cash is around VND360 billion, accounting
for about 50% of total assets. The cash will be used to finance a new factory.
The new factory can make the spotlight in VFC’s business results. It has
capacity of 3,200 tons per year, higher 3 times than capacity of existing factories,
with total investment capital of VND560 billion. The new factory which is
expected to run in the third quarter of 2012 will be able to produce 3,200 more
tons of instant coffee and 21,000 more tons of instant coffee with milk annually.

Source: HSX

Financial ratios Unit: VND bln

2009 2010 2010P 2011E

Net sales 1.021 1.302 1.277 1.473
PBT 147 178 147 180
PAT 136 161 136 164
Capital 142 266 - 266
Total assets 492 729 - 836
Equity 442 579 - 700
ROA (%) 27.6 22.1 - 19.7
ROE (%) 30.8 27.9 - 23.5
EPS (VND) 9,594 9,257 - 6,186
BV (VND) 31,170 21,780 - 26,355
Div rate - - 15% 17%
Source: VCF Financial statements, RongViet Securities

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COMPANY ANALYSIS REPORT
March 9th, 2011

Vinacafe Bien Hoa Joint Stock Company Business activities

No 1 Industrial Park, An Binh Ward, Core products and capacity
Bien Hoa City, Đong Nai Province Currently, VCF produces 4 main groups of products such as roasted-ground
Phone: +84 61 383 65 54 coffee, instant coffee, instant coffee with milk, and instant nutritious cereal.
Instant coffee accounts for 85% of total outputs and 77% of total revenues. It is
Fax: +84 61 383 61 08
the product that is placed the first in the same products of competitors.
Website: www.vinacafebienhoa.vn
In addition, in despite of the new product, instant nutritious cereal has a
Income structure in 2010 strong growth rate with about 32% per year,
1% Production and consumption of VFC products grow by 10.5% and 20%
1% annually in terms of coffee and nutritious cereal.
20%
CàRoasted
phê rang xay
coffee Items 2008 2009 2010
Outputs
CàSoluble
phê đenblack
hòacoffee
tan
Coffee (ton) 12,777 14,156 16,700
CàSoluble
phê sữa hòamilk
coffee tan Nutritious (ton) 3,234 3,600 4,500
Bột ngũ cốc
Cereal Consumption
78% Coffee (ton) 12,439 14,727 16,700
Nutritious (ton) 3,241 3,658 4,500
Source: VCF, RongViet Securities

Source: VCF, RongViet Securities Price of products also increases by 7 - 10% per year.
Profit structure in 2010 Materials

1% - Because Vietnam is the largest Robusta supplier in the world, coffee

2% bean is always qualified and stable.
21% - RE sugar is either supplied by Bien Hoa sugar company (BHS) or
CàRoasted
phê rang xay
coffee
imported from foreign countries.
CàInstant
phê đen hòa tan
coffee - Cream is imported from Malaysia, Indonesia, and etc.
CàInstant
phê sữa
milkhòa tan
coffee Currently, price of almost of input materials is quite high. It is forecasted that
an uptrend of price will last until the end of second quarter of 2011.
76% Bột ngũ cốc
Cereal
Expenses
Selling, general and administrative expenses are still stable year on year.
Source: VCF, RongViet Securities Expenses for materials accounts for about 80% of cost of goods sold.
Cost structure in 2010 Therefore, increase in input materials will have impact on VFC’s profits.
Market share
13% With over 30 years of operation, VCF has built the well known brand name,
1% nationwide distribution network, (2 branches, 120 outlets over 64 provinces)
5%
and differential products.
VCF’s products are mainly consumed domestically. Its 2 main competitors are
Nestlé (Nestcafé), Trung Nguyen (G7 coffee). Its instant coffee has the leading
81% market share with about 40% of total market share.
Currently, VCF only exports about 5 - 10% of total outputs to some countries
Nguyên
Materialvật liệu Nhân công
Labour Khấu
Dephao Khác
Other such as China, Singapore, Korea, and USA. It is expected that when the new
Source: VCF, RongViet Securities factory goes into operation, VCF will increase exported products to 20 - 30%.
Finance
Profitability
VCF’s gross profit and net profit margin are around 20% and 12% respectively
from 2005 - 2010. Compared to the leading companies in dairy sector (VNM),
confectionery sector (KDC, BBC), sugar sector (LSS, BHS), profitability of coffee
sector is not attractive, equivalent to 0.5 – 0.7 time of these sectors.

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COMPANY ANALYSIS REPORT
March 9th, 2011

Financial structure
VCF has idle cash of over VND360 billion, accounting for about 50% of total
Net sales and Net profit assets. VCF is expected to use the cash for setting up the new factory.
However, the project is delayed until the end of 2010. Therefore, the cash is
Unit: Bln VND
not used efficiently.
1,400 180
160 Because 2 existing factories are fully depreciated, proportion of fixed assets to
1,200
140 total assets is a downtrend, lower 3.5 times than average ratio of the sector.
1,000
120
800 100 Due to large amount of cash, VCF has low debt ratios. Proportion of total debt
600 80 to total assets and borrowed debt are 19.3% and 2.2%, respectively.
60
400
40 Forecast
200 20
- 0 Business result
2007 2008 2009 2010 Revenues
Doanh thu
Net sales LNST
Net profit
In 2011, it is forecasted that instant coffee outputs will grow slowly. Growth of
revenue is mainly based on increase in price, about 7% - 10%.
Source: BCTC VCF, RongViet Securities
According to the analyst’s forecast, when the new factory goes into operation,
imported materials for instant coffee will decrease significantly. Therefore,
Profitability
VCF’s gross profit margin will increase in the next time.
2008 2009 2010 Sector Forecast of outputs and revenues
G.P. margin 20.0% 24.6% 21.0% 32.2% Year 2011 2012 2013 2014 2015
Output (ton)
O.P. margin 11.5% 13.4% 12.6% 23.6% Coffee 17,535 20,250 22,650 25,800 27,900
N.P. margin 12.2% 13.3% 12.4% 22.1% Nutritious cereal 5,400 6,480 7,776 9,331 11,197
Revenue (VND bln)
ROA 26.9% 27.6% 22.1% 24.9%
Coffee 1,158 1,430 1,712 2,087 2,414
ROE 30.8% 30.4% 27.4% 30.6% Nutritious cereal 315 389 481 595 735
Source: VCF, RongViet Securities Total 1,473 1,820 2,193 2,681 3,149
Growth 18% 24% 21% 22% 17%
DuPont Model Expenses
2010 VCF VNM KDC LSS Production expenses will have an uptrend in the future. However, these
expenses will increase by 7% - 10%, equal to crease in price
N.P. margin 12.4% 23.0% 31.9% 22.1%
Proportion of selling and administrative expenses to total revenues are around
A. turnover 1.79 1.47 0.47 0.87
8 - 10% and 2%, respectively.
Asset/Equity 1.24 1.35 1.18 1.33 Income tax
ROA 22.1% 33.7% 15.0% 19.2% Tax rate which VCF is incurred is 15%. However, it is exempted from income
ROE 27.4% 45.4% 17.7% 25.5% tax for 3 year as of 2005 and reduced by 50% of income tax for the 7 next year
Source: RongViet Securities as of 2008.
Based on assumptions above, the analyst forecasts business results from 2011
– 2015 as follows:
Financial structure
Unit: VND bln
2008 2009 2010 Sector
Forecast of business results
Asset Structure
Year 2011 2012 2013 2014 2015
Cash/TA 24,7% 47,8% 49,4% 9,2%
Net sales 1,473 1,820 2,193 2,681 3,149
Receivable/TA 22,9% 19,1% 15,6% 15,5%
PBT 178 190 213 278 331
Inventory/TA 36,4% 21,5% 27,0% 15,2%
PAT 164 176 197 257 307
Fixed A/TA 13,8% 10,2% 7,2% 25,3%
EPS (VNDk/share) 6,186 6,626 7,410 9,680 11,533
Capital Structure
Valuation
T. liability/TA 12,5% 9,1% 19,3% 22,0%
Debt/TA 1,4% 0,0% 2,2% 4,5% The analyst uses FCFF model with WACC of 19% and 14.6% for 2011– 2015
Source: BCTC VCF, RongViet Securities and 2015 afterwards, respectively. Indefinite growth rate is 6.3%.

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COMPANY ANALYSIS REPORT
March 9th, 2011

Forecasted cash flows 2011 2012 2013 2014 2015

Financial ratios of outstanding companies Profit after tax 164 176 197 257 307
Mkt Cap Trailing P/BV + Depreciation 15.8 28.6 34.2 36.1 37.5
Ticker
(VND Bln) P/E 31/12/10 - Tax reduction from borrowings (0.2) (3.4) (3.2) (3.0) (2.9)
VNM 30,535 8.4 3.8 - Profit/ loss from financial activities (0.2) 45.0 36.2 24.1 22.0
KDC 5,002 8.2 1.5 Cash flow before changes in NWC 180 246 264 314 363
LSS 1,336 3.3 0.6 Changes in net working capital (166) (85) (94) (177) (128)
SBT 1,681 6.4 1.0 Changes in investments (130) (251) (112) (39) (27)
SCD 231 9.1 1.5 FCFF (116) (90) 58 98 208
BBC 257 63 0.5
VCF’s P/E and P/B are around 7.0x and 1.8x, respectively.
Average 7.6 2.6
Valuation model Price Weight Average
Source: RongViet Securities
P/E
Robusta prices in 5 years 43,305 30% 12,991
P/B
47,438 25% 11,860
FCFF
54,136 45% 24,361
Average price 100% 49,212

OVERVIEW OF COFFEE INDUSTRY

Vietnam is placed the second in terms of area and export of coffee.

Vietnam’s output of coffee accounts for 15% of total of coffee outputs in the
world.
Area of coffee trees is around 500,000 hectare with a popular kind of Robusta.
Vietnam is the largest producer of Robusta in the world.
Source: Indexmundi
Currently, because weather in Vietnam changes constantly, it is forecasted
Arabica prices in 5 years
that coffee outputs will decrease by about 10-20% in 2011, compared to the
previous harvest.

Segment of instant coffee grows strongly in the near future. Instant coffee
is more and more favourite because of its convenience. According to Gerson
Lehrman Group’s research, total revenues of instant coffee get around USD21
billion in 2009, equivalent to 40% of total coffee consumption in the world
In Vietnam, demands for coffee are about 60,000 ton per year, in which instant
coffee accounts for 19,000 ton. According to some researches, needs of instant
coffee increase by 10.5% annually from 2008 – 2013.

Source: Indexmundi
Financial Ratios of Outstanding Enterprise
2010 Revenues EPS 2010
Ticker Mkt Cap Revenues 4 Qs BV Trailing
(8/3/11) (bln) %plan PAT(bln) %plan (VND) 31/12/10 PE P/BV ROA ROE
VNM 32,830 15,753 109% 3,615 136% 10,260 22,600 8.4 3.8 34% 45%
KDC 4,762 1,910 102% 609 96% 6,060 34,254 8.2 1.5 15% 18%
SBT 1,737 792 85% 262 101% 1,857 12,082 6.4 1.0 14% 15%
LSS 1,348 1,352 118% 299 160% 10,108 59,922 3.3 0.6 19% 25%
BBC 240 788 106% 42 97% 2,650 34,677 6.0 0.5 5% 8%
SCD 218 366 99% 26 87% 3,007 17,956 9.1 1.5 13% 17%
Source: Stox, RongViet Securities

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COMPANY ANALYSIS REPORT
March 9th, 2011

APPENDIX

2008 2009 2010 2011E

Income Statement (VND bln)

Revenues 863 1.021 1.302 1.473

Operating profit 80 136 148 162
Profit before tax 114 147 178 178
Profit after tax 105 136 161 164
EBIT 114 147 180 181
EBITDA 120 155 191 194
Balance Sheet (VND bln)

Cash 24,1 16,9 27,8 9,3

Current assets 8,7 7,0 6,1 6,7
Fixed assets 35,5 30,9 32,9 108,4
Total assets 391 492 729 836
Debt 5,3 - 16,2 58,9
Total debt 48,7 44,6 140,9 126,1
Owners’ equity 327 442 579 700
Growth rate (%)

Revenues 39 18 28 13
Profit before tax 5 29 21 0
Profit after tax -3 29 19 2
Total assets 3 26 48 15
Owners’ equity 0 31 31 21
Profitability (%)

Gross profit margin 20 25 21 21

Profit before tax margin 13 14 14 12
Net profit margin 12 13 12 11
ROA 27 28 22 20
ROE 31 34 31 25
Activity Ratios

Total asset turnover 2,2 2,1 1,8 1,8

Equity turnover 2,5 2,3 2,2 2,1
Receivables turnover 9,7 10,8 11,4 10,0
Inventory turnover 4,9 7,3 5,2 4,3
Payables turnover 20,2 26,7 10,2 29,4
Liquidity ratios

Current ratio 8,9 15,3 5,8 4,4

Quick ratio 5,1 11,7 4,1 1,7
Cash ratio 2,5 8,2 3,1 0,1
Solvency ratio (%)

Total debt/Owners’ equity 14% 10% 24% 18%

LT debt/Total assets 1% 0% 2% 7%
Total debt/Total assets 12% 9% 19% 15%

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COMPANY ANALYSIS REPORT
March 9th, 2011

Recommendation
- Recommend ‘BUY’: when reasonable price is 25% - 30% higher than market price.
- Recommend ‘SELL’: when reasonable price is lower that market price.
- Recommend ‘HOLD’: investor can either keep or sell PET when profits reach an expected level.
Introduction
Viet Dragon Securities Corporation (Viet Dragon) is one of the leading securities companies in Vietnam’s stock market
that provide a wide range of services including Brokerage, Financial and Investment Advisory, Underwriting,
Depository.
Viet Dragon was founded in December 2006 by the leading financial and commercial institutions such as Vietnam
Export and Import Commercial Joint Stock Bank (Eximbank), Saigon Trading Group (Satra), and Vietnam’s famous
financiers. In August 2010, It raised chartered capital to VND349.8 billion from initial capital of VND100 billion and
become the company that has strong financial capacity in Vietnam’s securities market.
Currently, Viet Dragon provides a lot of services and products to all investors such as individuals, institutions, funds
domestically and overseas.
After three years of operation, Viet Dragon has built a prestige brand name in the Vietnam’s securities market. It was
awarded “Vietnam Leading Stock Brand” for 3 consecutive years (2008, 2009, and 2010). Its stock is officially listed on
HNX under VDS ticker on May 25th, 2010.
Research and Investment Advisory Department: Provide clients with marco and securities market researches,
Investment strategic reports, industrial and company reports, and monthly, weekly, daily reports.
RongViet Securities’s network
Head quarter
1st , 2nd , 3rd , 4th Floor, VietDragon building, 141Nguyen Du, District 1, HCM city
Tel: (84.8) 6299 2006
Fax: (84.8) 6291 7986
Website: www.vdsc.com.vn

Saigon branch Hanoi branch Nha Trang branch

147-149 Vo Van Tan – District 3, HCM 74 Ba Trieu –Hoan Kiem District, Hanoi 50Bis Yersin - Nha Trang
City
Danang branch Can Tho
48 Tran Phu –Đa Nang 8 Phan Đinh Phung –Can Tho

Disclaimer
The report is prepared for the purpose of providing information, not given suggestion or invitation to buy or sell any specific securities. Opinions,
estimate and projection expressed in this report reflects the current views of VDCS at the date of publication only; It does not regard differences in
investment objectives, needs, strategies, and financial situations of each specific investor. Besides, investors should note that there may be some
interest conflicts influencing the subjectivity of the report. The investors should view this report as reference source only and make investment
decisions by themselves; Moreover, investors have to take all responsibilities related to decisions made. RongViet Securities shall not be responsible
for any loss wholly or partially of the investors or any others considered as loss towards using information in the report partially or wholly.
The information herein is believed by RongViet Securities to be collected from reliable sources. With the exception of information about RongViet
Securities. RongViet Securities does not assure the perfection or accuracy of such information. Opinions and estimate of RongViet Securities valid until
the date of publication and be subject to change without notice. 2010 RongViet Securities’s copyright.

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