CTI-BUY-InitialValuationReport-29.06.2015

INITIAL VALUATION REPORT

Vinh Nguyen

Analyst

Email: [email protected]

Tel: (84) - 86290 8686 - Ext: 7592

Market Price

Target Price

+/-

Dividend Yield

14,300

25,900

+81%

7%

-18%

-7%

0%

+7%

+18%

Sell Reduce Neutral Add Buy

Market Profile

Charted Capital VND Bn 330

Market Cap. (06/26/2015)

VND Bn 468

52-Week High VND/Share 14,400

52-Week Low VND/Share 8,800

Listed shares Mn Shares 33

Outstanding shares Mn Shares 33

% Foreign Ownership % 0,02%

Key Figures 2013 2014 2015

(planned)

Revenues (VND Bn)

289 391 500

EBT (VND Bn) 2.1 16.5 -

NI (VND Bn) 2.3 16.2 40

EPS (VND/share)

995 155 1,212

Dividend (%) - 10% 10%

P/E 66x 11x -

Ownership Structure (%)

Domestic Holders 99,98%

Government 4,67%

IDICO 4,67%

Individual 90,75%

Institutional 4,56%

Foreign Holders 0,02%

GREAT POTENTIAL FROM BOT PROJECTS

As several BOT projects (Provincial Route 16, National Route 1A,

91 A&B) being constructed and getting ready for operation, CTI’s

business performance has been greatly improved since previous

years. Average ROE in the period 2015-2024F is projected to be

29%, much higher than the rate of 4% in the last 3 years. We expect

revenues and net income of CTI in 2015 will be VND 750bn (+91%

YoY) and VND 65bn (+306% YoY), respectively, equivalent to

EPS of VND 1,902/share. Using the FCFF method, CTI’s Target

Price for the next 12 months is VND 25,900/share, 81% higher than

the closing price of 06/26/2015 (VND 14,300/share). Therefore, we

recommend BUY CTI for mid- and long-term investment

Optimistic Q1/2015 financial results: revenues of Q1/2015

was VND 109.8bn increased 40% YoY and net profit

skyrocketed to VND 14.28bn, 22 times higher than the

previous period

Strong cash flow from BOT projects guarantee debt

repayment and investment fund for new projects: CTI is

operating at 2 toll stations including Provincial Route 16 and

National Route 1A–Bien Hoa City Bypass, with estimated

revenues of VND 30-40bn/years and VND 196-300bn/year,

respectively. In 2016, toll rates on National Route 1A will be

increased in average of 50% (according to Circular

37/2014/TT-BTC). CTI will also put National Route 91 (Can

Tho – An Giang section) in operation in next year, and

estimated revenues will be around VND 300bn/year.

Prospect from future BOT projects: apart from 3 current BOT

projects, CTI is planning to invest in 3 new key projects,

including intersection of 319 road and HCMC – Long Thanh

Highway (total investment of VND 755bn), specialized road for

construction materials transportation and National Route 51

(repurchase VND 200bn of the owner equity). To 2030, Dong

Nai will need approximately VND 187.43bn for infrastructure

development. On top of that, the construction of Long Thanh

international airport will be an important boost for CTI.

Closed supply chain for infrastructure investment: CTI is

capable of supplying from construction materials (asphalt,

sewer pipes, fresh concrete and building stone), to

construction services, and toll road services. This will help

CTI save a substantial amount of investment and

construction costs

CUONG THUAN IDICO DEVELOPMENT INVESTMENT CORP. (HSX:CTI)

Industry: Construction 06/29/2015

BUY

-20%

0%

20%

40%

60%

80%

1/2014 5/2014 9/2014 1/2015 5/2015

Historical Price Volatility (1/2014-6/2015)

CTI VNIndex

HSX:CTI

www.fpts.com.vn Bloomberg FPTS <GO> | 2

VALUATION RESULTS

Valuation Using FCFF Method

With a conservative perspective, revenues CAGR in 2015-2024F is

estimated to be around 14%/year with the long-term growth rate of

2%/year. According to the FCFF model, CTI’s target price is VND

25.900/share, 81% higher than the current price. Thus, we

recommend BUY CTI for mid- and long-term investment

Key Figures Unit 2014 2015F 2016F 2017F 2018F 2019F 2020F 2021F 2022F 2023F 2024F

Net Sales Bn 392 750 1,125 1,034 1,109 1,194 1,258 1,325 1,339 1,412 1,488

Gross Profit Bn 141 234 422 527 574 625 674 726 724 779 838

Net Profit Bn 16 65 75 108 140 190 270 363 363 361 383

EPS VND 995 1,902 2,176 3,147 4,081 5,523 8,159 11,013 10,989 10,926 11,604

Revenue Growth % 9% 91% 50% -8% 7% 8% 5% 5% 1% 5% 5%

Gross Profit Growth % 129% 65% 81% 25% 9% 9% 8% 8% -0.2% 8% 7%

Net Profit Growth % 600% 303% 14% 45% 30% 35% 42% 35% 0% -1% 6%

Gross Margin % 36% 31% 38% 51% 52% 52% 54% 55% 54% 55% 56%

Net Margin % 4% 9% 7% 10% 13% 16% 21% 27% 27% 26% 26%

ROE % 6% 19% 19% 26% 30% 34% 37% 38% 30% 25% 23%

ROA % 1% 2% 2% 2% 3% 5% 7% 11% 12% 12% 12%

P/E (Current Price) times 14.1 7.4 6.4 4.4 3.4 2.5 1.7 1.3 1.3 1.3 1.2

P/B (Current Price) times 1.3 1.2 1.1 0.9 0.8 0.6 0.5 0.4 0.3 0.2 0.2

DCF Assumptions Value Valuation synthesis Unit Value

2015 WACC 10.8% Forecasted duration year 10

2015 Cost of debt 9.6% Total PV of cash flow Bn 3,276

2015 Cost of equity 20.9% (+) Cash & ST investments Bn 185

Risk free rate* 6.9% (-) Short & Long-term debt Bn 1,667

Market risk premium 5.0% Equity value Bn 1,794

2015 Beta 1.93 Minority interest Bn 1,119

2015-2020 CAGR 14% Investment in subsidiaries Bn 7

Terminal growth rate 2% Total equity value Bn 682

Marginal tax rate 20.0% Outstanding shares Mn 33

* 10-y Government bond yield 2015 Target Price VND/share 23,975

6/2016 Target Price VND/share 25,890

Valuation Results Using FCFF Model

Financial forecast 2015-2024F

Source: FPTS

http://fpts.com.vn/EN/Our-view/FPTS-reports/

HSX:CTI


In

tere

st

rate

(r)

Terminal growth rate (g)

23,975

1.0% 1.5% 2.0% 2.5% 3.0%

7.5% 29,307 30,078 30,893 31,759 32,679

8.5% 26,947 27,677 28,449 29,268 30,137

9.5% 24,476 25,164 25,891 26,660 27,477

10.5% 21,912 22,555 23,234 23,953 24,715

11.5% 19,250 19,846 20,476 21,141 21,846

INVESTMENT RISKS

Risk of Project Timeframe

This is a common risk of BOT projects. As nature of the contract,

the project timeframe is limited to 10-30 years. Therefore, when

this timeframe runs out, the investors must find new projects to

compensate for the expired cash flow.

Risk of Interest Rate Volatility

Most of CTI loans are determined by floating interest rate. In

addition, since infrastructure developers normally use high-

leverage capital structure of 70%/30% or 80%/20%, any changes

in interest rate will greatly affects projects’ profitability and

investment effectiveness. As estimated, if interest rate changes

only 1%, CTI’s net profit could fluctuate from 8% to 15% in the

period 2015-2017.

Risk of New Highways

Traffic flow through CTI’s current tollbooths will be greatly affected

by development of new surrounding highways. For instance,

National Route 1A station may potentially have to share its traffic

flow with HCMC – Long Thanh – Dau Giay Highway. However, new

regulation on controlling truck weight load and lower tariff for

imported vehicles could help to increase traffic flow in general.

Risk of Liquidity

Since insiders hold most of its share (80% – 90%), CTI’s 6-month

average daily trading volume remains at a low level, only at 6,400

shares/session. The liquidity is recently improved with the average

volume in the past 10 sessions is 52,300 shares/session.

Sensitivity Analysis

Source: FPTS


HSX:CTI


BUSINESS ANALYSIS

History and Development

Cuong Thuan is officially operated on 03/05/2000 with initial

charted capital of VND 4.6bn. Its core businesses include

construction services, sewer pipes production, mining and trading

various types of building materials. Since the first day, Cuong

Thuan has been investing in developing a closed supply chain for

infrastructure investment, from supplying construction materials to

construction services.

2014: Increase charted capital to VND 329bn

Cổ phần

2010: Listed on HOSE

Cổ phần

2008: Joint IDICO

Cổ phần

2007: Became a joint stock company

2000: The foundation of Cuong Thuan Limited

History Timeline

Source: CTI


HSX:CTI


Core Businesses

Sewer Pipes Production

Sewer pipes have been the main products of CTI since its

establishment. Currently, CTI is using 3 main manufacturing lines

including:

Centrifugation Separation Technology: This is the most

common technology for sewer pipes production. At

present, CTI owns 3 factories and 10 centrifugation

separation production lines with total capacity of 300 pipes

a day (diameter ranging from 300mm to 2,000mm).

JUMBO Technology: This is one of the high-end

technology, capable of producing circular reinforced pipes

with diameter ranging from 300mm to 2,000mm and single

or double rectangle pipes with capacity of 3 to 5 minutes

per pipe

SOUVERAEN Technology: along with investing in

JUMBO technology, CTI simultaneously implement

rotation and pre-pressing technology using SOUVERAEN

machine. It is capable of producing circular pipes with

diameter ranging from 300mm to 1,200 mm and

productivity of 2 minutes per pipe. In addition, this

technology could produce pipes with high consistency and

smooth surface.

Construction Stone

Asphalt

Sewer Pipes

Fresh Concrete

Construction Services Toll Operation

Source: FPTS

Closed Supply Chain for Infrastructure Investment

Source: CTI

Centrifugation Separation Technology

JUMBO Technology

Source: CTI


HSX:CTI


Construction Materials

Presently, CTI is mining at 2 stone quarries of Tan Cang 8 and Doi

Chua 3 with total area over 100 ha, supplying 350 thousand m3 of

construction stone annually. These quarries only started

production in 2013, thus the covering layer of soil is still thick

affecting quality of produced stone. However, in the near future,

these quarries are expected to be an important source of materials

supply for CTI’s projects. Considering Binh Loi quarry with total

area of 40 ha, CTI has recently granted investment license and is

ready to start mining operation.

Quarries Location Reserves

(Mn m3)

Annual

Production

(m3/year)

Remaining

Reserves

(Mn m3)

Timeline

Tan Cang 8 Phuoc Tan - Long Thanh - Đong Nai 11.5 350.000 28.6

2020

Đoi Chua 3 Thien Tân - Vinh Cửu - Đong Nai 17.8 2033

Binh Lợi Vinh Cửu – Đong Nai 10 10 2034

Asphalt Production

With investment in 2 high-tech asphalt concrete production lines

from Korea (DongSung) with capacity of 90 tons/hour and 120

tons/hour, CTI currently supply asphalt to neighbourhood areas of

Dong Nai, Binh Duong, Vung Tau and HCMC. This is also a

strategic product of Cuong Thuan IDICO.

Construction Services

This is one of the core businesses of Cuong Thuan IDICO since the

establishment. With good reputation and established relationship,

CTI was able to enter several major projects in Dong Nai and

nearby regions such as: central interception in Nhon Trach District;

transportation system of Bien Hoa industrial zones 1,2; Amata

industrial zones and National Route 1K – Bien Hoa City.

In the construction process, CTI mainly utilizes the in-house

products of precast drainage pipeline, asphalt, and construction

stone. Thus, they could minimize the investment cost and ensure

a sustainable demand for those products. In addition, the

construction team is also responsible for maintaining BOT projects

helping to cut the costs even further and improve investment

effectiveness.

Asphalt Product

Source: CTI

Source: CTI, FPTS

List of CTI’s Stone Quarries

CTI’s Stone Quarry

Source: CTI

Construction Services

Source: CTI


HSX:CTI


Toll Operation

Presently, CTI is investing and operating at 3 BOT projects of

Provincial Route 16, National Route 1A –Bien Hoa City Bypass,

National Route 91 (A & B).

In 2005, CTI acquired fee collection right of Provincial Route 16

from Construction Joint Stock Company No.5 (586 Company) at

the price of VND 96bn and became the first private firm participating

in toll operation activities in Dong Nai. Today, this project yield VND

2.5–3bn/month and still have 7 years remain of operation.

In 2008, the Government assigned CTI to invest in a BOT projects

of National Route 1A - Bien Hoa City Bypass, with the total

investment capital of VND 1.506bn. This project started to operate

on 6/2014 with expected revenues of VND 16 – 18bn/month and

collecting timeline of 16 years. Currently, CTI controls this projects

via 83% of the ownership structure in Dong Thuan Joint Stock

Company.

Apart from that, CTI is also cooperating with Sonadezi (CTI

contributed 60%) to invest in the National Route 91 (A & B) project

connecting An Giang and Can Tho with total investment of VND

2.033bn (Capital structure of 80% debt/20% equity). This project

will carry out construction, renovation and upgrading works for

National Route 91 with the total distance of 28 km. First segment

of this project (91 A) is expected to start collecting fee in Q1/2016,

while 91B is expected to start in 7/2016 with the collecting period

of 16.5 years. Total estimated revenues is approximately to VND

26bn/month.

In 2015, CTI is planning to invest in 3 more BOT projects

including intersection of 319 and HCMC – Long Thanh

Highway (total investment of VND 755bn), Specialized road for

transporting construction materials and National Route 51

(repurchase VND200bn of owner equity). Importantly,

completion of these projects will be critical points for development

of CTI.

Others Investments

Besides infrastructure investment, CTI also involved in resettlement

projects for the residents living in the area of the BOT projects.

Additionally, in the near future, CTI will also take part in social

housing project of Tam Hoa District with the total investment of VND

325bn. Apart from that, the company has also been investing in gas

stations along National Route 1A – Bien Hoa City Bypass, which has

begun to generate revenues since Q1/2015.

National Route 1A –Bien Hoa City Bypass

Source: FPTS

National Route 91

Source: FPTS

National Route 51

Source: FPTS

Intersection of 319 and HCMC–Long Thanh

Highway

Source: FPTS


HSX:CTI


Projects Investment

Fund

CTI’s % of Ownership

Estimated Revenues Depreciation Timeline Toll Rate Increase

Provincial Route 16

96 Bn VND 100% VND 2-3 Bn/month 2005-2016 2021

(7 years)

National Route 1A

1.506 Bn VND 83% 16-18 Bn/month (2015)

24-27 Bn/month (2016-2027) 06/2014-

2027 2027

(13 years) 2016

National Route 91

2.033 Bn VND 60% VND 26 Bn/month 2016-

06/2034 06/2034

(18.5years)

FINANCIAL ANALYSIS

Revenues

In the period 2007 – 2010, CTI’s revenues sharply increased due to

the introduction of new sewer pipes production lines. However, in the

period 2010 – 2012, the frozen real estate markets as well as tighten

fiscal policy has worsen the construction industry condition. In turn, it

led to a dramatic drop in the revenues. In the period 2012-2014, with

supports from stone mining operation, the revenues slowly recovered.

Furthermore, on June 2014, CTI began its toll operation in National

Route 1A contributing to last year recovery.

Profitability

In the period 2007 – 2013, CTI always had a higher gross profit

margin than other construction industry members, averaging at 22%.

The main reason is that the cash flow is being supported with the toll

station on Provincial Route 16 operating since 2005. Moreover, with

the new station on National Route 1A started to collect fee since

middle of 2014, CTI’s gross profit margin increased to 36% at the

end of 2014 and in Q1/2015, this margin peaked at 56%.

CTI’s net profit has fallen dramatically in the period of 2012 – 2013

as revenues declined in the same period. In addition, due to the

hardship of construction industry, gross profit margin has dropped

by 2 – 3%. Furthermore, CTI was under great pressure of increasing

SG&A expenses. The expenses has risen from 11.7% in 2014 to

13.6% in Q1/2015. Moreover, high leverage capital structure also

led to high interest expenses, averaging at 7% of revenues in 2013

– 2014. In 2014, as the BOT project on National Route 1A started to

operate and the project’s interest expenses also began to be

recorded, CTI financial cost spiked to 18.9% and 23.5% in Q1/2015.

However, with the support from strong cash inflow and high gross

profit margin of National Route 1A project (approximately 75 – 80%),

net profit margin was improving and increased to 13.2% in Q1/2015.

Source: Financial Report



Source: CTI, FPTS

CTI’s BOT Projects

0%

10%

20%

30%

40%

50%

60%

0

100

200

300

400

500

Net Revenue and Gross Margin 2007-2014

Revenues Gross Margin

60%26%

10%

3% 1% 0.02%

Gross Profit Breakdown Q1/2015

National Route 1 Station Construcion Services

Provincial Route 16 Station Sewer Pipe Production

Construction Stone Gasoline

0%

10%

20%

30%

0

20

40

60

Net Profit 2007-2014

Net Profit Selling Expense/Revenue

Administrative Expense/Revenue Financial Expense/Revenue

Net Margin


HSX:CTI


Capital Structure

In Q1/2015, CTI’s total assets were VND 2.725bn with debt ratio of

70%. In which, long-term debt occupied for 63% and short-term debt

took up 7% of total asset. Additionally, debt ratio has strongly

increased in 2011–2012 as National Route 1A project was launched.

High debt ratio will potentially dampen CTI’s profitability. However,

this affect will be compensated partly by the strong and stable cash

inflow generated by upcoming BOT projects.

DuPont Analysis

CTI’s ROE peaked in 2009, 27%, the time of Vietnam’s stock market

boom. However, ROE slowly dropped in the following years as net

profit margin and asset turnover depreciated. As mentioned above,

the main reason of this hardship is because of the frozen real estate

market which has been holding back revenues recovery and

creating a pressure on operating expenses (SG&A and Interest

Expenses). However, since 2014, ROE has showed signs of

recovery.

Cash Flow Analysis

In the period of 2010 – 2014, CTI’s cash flow from operating was

considerably weak. In 2014, there were VND 139bn cash outflow

from operating. This is because CTI has been purchasing land for

the gas stations project on National Route 1A (VND 175bn of

advance payment). However, due to several legal complications,

CTI was unable to record the amount as its assets and cash outflow

from investment activities. In addition, cash outflow from investment

activities was also at the high level as CTI has been investing in new

BOT projects of National Route 1A and 91. Moreover, the use of

debt financing to compensate for CFO and CFI outflow has

increased cash flow from financing activities sharply in 2014.

0%

20%

40%

60%

80%

0

500

1,000

1,500

2,000

2,500

Capital Strucure

Short-term Debt Long-term Debt Debt Ratio

(800)

(400)

-

400

800

1,200

2010 2011 2012 2013 2014

Cashflow Analysis

CFO CFI CFF Net Cash Change


Source: FPTS


0

2

4

6

8

0%

10%

20%

30%

2008 2009 2010 2011 2012 2013 2014

DuPont Analysis

Net Income ROE

Asset Turnovers Financial Leverage


HSX:CTI


FINANCIAL PROJECTIONS FOR THE PERIOD OF 2015-2024

Strong and Stable Cash Flow From Toll Operation Activities

In the period of 2015-2024F, toll operation will be the main revenue

source for CTI, especially in National Route 1A and 91 stations

BOT project on Route 1A – Bien Hoa City Bypass is one of the most

critical projects in Dong Nai. The purpose of this project is to reduce

traffic flow going through Bien Hoa on National Route 1A. Additional,

this project also help minimizing travel time through Bien Hoa area.

Thus, traffic flow is expected to be stable with the increase of 5.9% per

year (based on the increasing rate of goods movement in Southern

area according to “Master plan for development of Vietnam’s sea

ports”). Presently, this toll booth yields VND16 – 18bn/month. According

to Circular 37/2014/TT-BTC, toll rates in this highway will be increased

by 50%. Thus, along with traffic flow grow of 5.9%, 2016 revenues of

this project are expected to raise by 59%. Therefore, projected

revenues in 2016 – 2024 will be VND 24 – 27bn/month equivalent to

VND 296–330bn/year. However, the project timeframe and

depreciation period will be reduced from 23 years to 13 years.

BOT project of National Route 91 – between Can Tho and An

Giang – is one of the most important highways in the Southwest

area. This highway connects Vietnam, Cambodia and others

provinces in the Southwest. Thus, traffic flow in this highway is

expected to be as high as in National Route 1A – Bien Hoa City

bypass and also predicted to grow by 5.9%/year (based on the

increasing rate of goods movement in Southern area according to

“Master plan for development of Vietnam’s sea ports”). This highway

is being constructed urgently. Despite having some legal issues in

clearing the land, according to CTI, since the population is not dense

in that area, land clearance could be implemented swiftly. This

project is expected to operate in 2016 with estimated revenues of

VND 240 – 300bn/year with the timeline of 18.5 years

Fee-collecting timeline for Provincial Route 16 has 7 years remain

expected to end in 2021 and currently yields VND 30 – 40bn/year

Other BOT projects such as intersection of 319 road and HCMC – Long

Thanh Highway (total investment of VND 755bn), specialized road for

construction materials transportation and National Route 51 were still in

preparation phrase. Thus, they were not included in this projection.

To sum up, in the period of 2015-2024F, toll operation income is

expected to increase by 5.9% based on the increasing rate of goods

movement in Southern area according to “Master plan for

development of Vietnam’s sea ports”. Additionally, traffic flow will

also be supported by the new regulation controlling total load of

transporting vehicles. In long-term, with conservative estimations,

the terminal growth rate is predicted to return to 2%.

Source: FPTS

Assumptions

0

200

400

600

800

Gross Profit Breakdown 2014-2024F

National Route 91 National Route 1

Provincial Route16 Gasoilne

Asphalt & Construction Services Construction Stone

Sewer Pipes

Source: FPTS

30%

35%

40%

45%

50%

55%

60%

0

400

800

1,200

1,600

Projected Net Revenues 2014-2024F

Total Revenues Gross Margin

Source: FPTS

2015-2024 2024-

National Route 1A VND 24-27 Bn/month 5.9% 2%

Projects Estimated RevenuesGrowth rate

National Route 91 VND 26 Bn/month 5.9%

Provincial Route 16 VND 2-3 Bn/month 5.9%


HSX:CTI


Other Sources of Income

Apart from toll operation activities, CTI was also involved in producing

construction materials and construction services. Revenue growth

rate from such activities is projected based on the growth rate of

Vietnam’s infrastructure construction sectors from BMI report.

Furthermore, the existing quarries production is much lowered than

the design capacity (approximately 3 million m3/year). Thus, we

expect that CTI will expand their mining activities to reach the

maximum capacity in the next 5 years.

Moreover, CTI is currently implementing two resettlement projects

including Binh Minh (VND 166bn) and Phuoc Tan (VND 303bn).

These two projects will be completed and transferred back to the

government in 2015 and 2016. Thus, there will be a sudden increase

in revenues but gross profit will remain unchanged, as these projects

are non-profit. However, CTI will has a cash inflow to cover partly

investment fund for the BOT projects.

High Gross Profit Margin, Maintaining at over 50% in 2017-

2020

As CTI recorded revenue and COSG of the resettlement projects,

gross profit margin will drop to only 31% and 38% in 2015 and 2016

respectively. Without them, the margin will be at 57% and 54%.

Both BOT projects of National Route 1A and 91 is using straight line

depreciation method, thus, gross profit margin of these two projects

will be extremely high, expected to be around 63%.

Regarding construction activities, CTI mainly operates in

infrastructure segment and utilizes the in-house materials. Thus, the

gross profit margin are respectively higher than other construction

firms, averaging at 22.5%.

Expenses

SG&A expenses is projected to remain at the same level as in 2014,

13.7%.

Interest expenses are expected to spike in 2015 and 2016 as new

BOT projects of National Route 1A and 91 (A & B) start operation.

However, in the long run, strong cash flow from toll operation

activities will guarantee CTI’s ability to repay debt. Thus, interest

expenses are expected to decrease gradually in the following years.

11.7%

8.5%

2.0%

5.1% 4.5%

11.7%

16.8%

13.0% 13.7%

HTI CII CTI

SG&A/Revenues

Selling Expenses/Revenues

Administrative Expenses/Revenues

SG&A Expenses/Revenues

Source: FPTS

Source: FPTS

0%

5%

10%

15%

20%

25%

30%

0

500

1,000

1,500

2,000

2,500

3,000

3,500

Total Debt & Interest Expense

Total Debt Interest Expenses/Revenues


HSX:CTI


Taxes

CTI enjoys special preferential tax rate for current BOT projects, with

tax exemption in the first 2 years of operation and 10% for the next

4 years.

Asset Structure

As the nature of BOT contracts requiring a large amount of debt

financing, the industry members will normally have high debt ratios

(higher than 50%). However, due to the strong and stable cash

inflow from toll operation, debt ratio will be reduced gradually in the

upcoming period. Based on cash flow projection and the ability to

repay debt, CTI’s debt ratio could fall to 5% in 2023. Moreover, asset

turnover will also be improved in the following years, averaging at

0.33 in the period of 2015-2024.

69%

79% 77% 77%73%

66%

55%

38%

15%

5% 5%

0.0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

0

1,000

2,000

3,000

4,000

5,000

2014 2015F 2016F 2017F 2018F 2019F 2020F 2021F 2022F 2023F 2024F

Projected Capital Structure

Total Assets Liability Asset Turnover Debt Ratio

0.16

0.310.27

67.2%

55.9% 69.2%

HTI CII CTI

Industry Members' Debt Ratio & Asset Turnover

Asset Turnover Debt Ratio

Source: FPTS


HSX:CTI


Appendix 1: Financial Results and Projections

Source: CTI, FPTS


HSX:CTI


Appendix 2: The Program for Dong Nai Urban Development in Period of 2015-2030

I. Current Situation

Dong Nai’s current infrastructure system includes numbers of National Routes (1, 20, 51, 56, 1K, and 1

(old)) with total length of 244.22km, and there are 20 provincial routes with total length of 269.1km which

are all connected with National Route systems. In which, paved roads occupy for 64.4% (237.7km),

gravel roads take another 35.5% and there are 71 bridges. Recently, the critical project of HCMC – Long

Thanh – Dai Giay Highway has been put into operation.

There are 274 internal roads with total length of 1,317km with 39.6% paved road, 0.4% concrete road,

37.2% gravel roads, 0.6% flagstone road and 22.1% dirt road.

In general, the transportation systems is unable to keep up with the demand for economic and social

development in Dong Nai. Transportation system density is low, approximately 0.6km/km2, and paved

and concrete road density is even lower, only at 0.16km/km2, accounting for 26.7% of total transportation

length and was unevenly distributed.

II. Outlook

From now to 2030, Dong Nai will need VND 187.43trillion for infrastructure development.

Roads

Presently, Dong Nai Transportation sector has been implementing several important projects to upgrade

National Route 56, 1; constructing a new Bien Hoa city bypass; investing to upgrade provincial roads:

761, 764, 766, 769 to became III and IV Tier road; paving 100% of provincial roads; upgrading several

bridges along with Vinh Cuu bridge.

Highways

Hồ Chí Minh – Long Thành - Dầu Giây Highway

Dầu Giây-Đà Lạt Highway is being studied, located on the East of Highway 20

Biên Hoà - Vũng Tàu Highway located on the East of National Route 51 with the width of about

150m.

Ring Road 4: Crossing Binh Duong – Thu Bien bridge – Northwest of Bien Hoa – Trang Bom in

National Route 1A – Binh Son – Northeast end of Long Thanh international airport - West of Cau

Moi lake 5 – road to Thi Vai port

South Inter-regional Highway: go from the South of HCMC – Binh Khanh Bridge – Nhon Trach

– National Route 51 – Bien Hoa Highway – Vung Tau – Ring Road 4.

National Routes

National Routes 1A will be upgraded to 4-lane. Since National Route 51 Bien Hoa - Vung Tau

has the dense population along the road, it will be adjusted to be friendlier to vehicles with width

35 – 45m. Upgrading Provincial Route 10 to become a National Route linking HCMC – Long

Thanh – Dau Giay Highway and 6-lane National Route 1A at Xuan Loc.

National Route 1K is expanded by 55m as the development of Bien Hoa city.

Ring Road 3: First section from the South Inter-regional Highway – National Route 9 Bridge –

HCMC border. Second section from Tan Van – Bien Hoa beltway – Binh Duong border.


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Airports Infrastructure

Long Thanh International Airport is expected to be constructed with supports from Japanese,

scaling at 5.000 ha, located at Long Thanh and Dong Nai areas including several communes of

Long Phuoc, Bau Can, Long An, Binh Son, Suoi Trau, Cam Duong. This airport is 43 km away from

Tan Son Nhat International Airport and 40 km from HCMC center and 24 km from Bien Hoa city.

Long Thanh airport could handle 80 – 100 million passenger/year, 5 million tons of goods/year

and large airplanes such as A380 – 800, A380F. The total investment is around USD6.6bn. In that,

the first phrase costs USD2.1bn

25C road is the main road from Nhon Trach City to Long Thanh airport. This project will upgrade

provincial road 769 and replace the plan of several provincial routes in Long Thanh Airport border

by ring road 4.

List of Priority Projects in Dong Nai Area

Projects Timeline

2016-2020 after 2020

1 Long Thành International Airport x x

2 Planned Highways in Dong Nai area x x

3 Biên Hòa - Vũng Tàu Railway x x

4 Port Systems On Đồng Nai, Nhà Bè, Lòng Tàu, Thị Vải River x

5 National Route 1A – Biên Hòa City Bypass x

6 Hóa An Bridge x

7 Upgrading Bùi Văn Hòa Road x

8 Hiệp Hòa Bridge, Biên Hòa City x

9 Vườn Mít - Sông Cái Central Route x x

10 Vườn Mít Intersection x x

11 National route 1 - Trần Quốc Toản Riverside Road x

12 An Hảo Bridge x

13 Ruộng Tre - Thọ An Provincial Route x

14 Nhơn Trạch Inter-port route x

15 The bridge connecting District 9 and Nhon Trach area x

16 Parallel road of National Route 56 x

17 Upgrading and Expanding Provincial Routes x x

18 Upgrading and Expanding Inter-district Routes x x

19 Anti-Traffic Congestion project in Tân Hòa District, Biên Hòa City x x

Source: Circular 734/QĐ-TTg


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Appendix 3: Vietnam Infrastructure Development Outlook

According to a survey, 40% of road infrastructure in Vietnam transportation system has low and very low quality.

Thus, the amount of estimated investment capital is needed for upgrading the transportation network will reach USD

$48-60 bn until 2020, equivalent to an amount of 202,000 billion VND per year. In addition, the Government also

planned to build 26 airports (10 international airport 16 domestic airports) until 2020. Moreover, the most prominent

project is Long Thanh International Airport (Dong Nai) with a total investment of approximately USD $10 bn.

On the other hand, Vietnam is facing a serious problem of power shortage. Therefore, in the Master Plan 7, the

government also planned to develop another 75,000 MW of electricity generating capacity, double the current

capacity. Total investment for this plan in the period 2011-2020 are estimated at USD $48.8 bn, equivalent to VND

125,000 bn/year.

Besides, the constant improvement of PPP’s legal framework will open up opportunity for attracting investment from

private sector in infrastructure construction.

(Refer to Vietnam Construction Industry Report)

0

500

1,000

1,500

2,000

2,500

3,000

3,500

-10%

-5%

0%

5%

10%

15%

2012 2013 2014F 2015F 2016F 2017F 2018F 2019F 2020F 2021F 2022F 2023FT

ho

usa

nd

Bn

VN

D

Industry Growth Rate and Total Investment Forecasts

Total Investment Construction Industry Residential and Non-Residential Infrastructure

Source: BMI


http://fpts.com.vn/FileStore2/File/2015/05/13/FPTS_baocaonganhxaydung_052015.pdf

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INTERPRETATION OF RECOMMENDATION

This recommendation based on the difference between targeted value and market value of each stocks in order to

provide appropriate information for investors in 12-month investment period from recommend day.

The expected at 18% is estimated based on 12-month government bond rate in addition to market risk premium in

Vietnam.

Recommendation Explanation

12 months period

Buy If targeted price is higher than market price by 18%

Add If targeted price is higher than market price by 7%-18%

Neutral If targeted price compared to market price is within -7%-7%

Reduce If targeted price is lower than market price by -7% to -18%

Sell If targeted price is lower than market price by -18%

Disclaimer

All of information and analysis on this repost made by FPTS based on information sources that the company provides to us reliable resources, available and legal. Except for information about FPTS, we are not guarantee about the correctness or completeness of this information. Investors who are using this report need to note that all of comments on this report only the subjective opinions of FPTS. The investors have to take their own responsibility about their decision when using this report.

FPTS may base on all information in this report or others to make decision for us, but not have any claim on legal of

given information.

At making this analysis report time, FPTS and analyst do not hold any CTI stock.

This report may not be copied, reproduced, published or redistributed by any person for any purpose without

the written permission of an authorized representative of FPTS. Please cite sources when quoting. The

information related to other stocks or other information related this stock can be viewed at

https://ezsearch.fpts.com.vn or will be provided upon official request.

© 2010 FPT Securities

FPT Securities joint-stock company

Head office

Floor 2 – Tower 71 Nguyen Chi Thanh,

Dong Da district, Hanoi, Vietnam

Phone: (84.4) 3 773 7070 / 271 7171

Fax: (84.4) 3 773 9058


Ho Chi Minh city branch

136-138, Floor 3 – Timesquare Building,

Le Thi Hong Gam Str., District 1, HCMC,

Vietnam

Phone: (84.8) 6 290 8686

Fax: (84.8) 6 291 0607


Da Nang branch

100 Quang Trung, Hai Chau district,

Da Nang city, Vietnam

Phone: (84.511) 3553 666

Fax: (84.511) 3553 888


https://ezsearch.fpts.com.vn/

CTI-BUY-InitialValuationReport-29.06.2015

Documents

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