20160608_BSC_Vietnam Company Research_EN_CTI_ICB2357

We recommend Strong buy CTI at targeted price of VND 31,800 per stock (upside 22%). CTI are now traded at P/E FW and P/B of 10.31 and 1.63x, respectively.  BOT toll collections provide stable, low risk revenue stream. Toll collections of new BOT projects and mining expansion of quarries in South East aeres bring long – term prospect for CTI.

2016 performance forecast. Net revenue is forecasted at VND 1,329 billion (+60%), expected after-tax profit is VND 114 billion (+68% yoy), equivalent to 2016 diluted EPS of VND 2,521 per share.

BOT toll collections provide stable, low risk revenue stream. Until 2016, CTI collected toll on three main routes which have high vehicle traffic including national route 1A, national route 91 and provincial road 16. 2016 toll collections are anticipated at VND 563 billion. The characteristics of BOT toll collections are stable cash flow; high and guaranteed internal rate of return (IRR) of 12%-14%; financed by bank loans with long repayment period.

Expected rapid increase in BOT toll collections. (1) there will be more 2-3 toll routes namely, intersection No. 319 connecting Long Thanh-Dau Giay highway, specialized road for construction materials transportation, and national route No.51, which is in negotiation of acquiring 49% toll collection right. If success, CTI will operate 6 routes with 9 toll stations, which bring annual revenue of over VND 1,000 billion, much higher than 3 listed companies, namely, HTI, HUT and CII. (2) Toll for national route 1A will increase by the average of 70% since 1st January, 2016 and toll collections are adjusted every three years.

Potential mining of quarries. CTI owns three quarries including Tan Cang 8, Doi Chua 3 and Binh Loi which have the largest remaining reserve (up to 38 million m3), longest remaining mining period (until 2034) in South East areas. While, licenses of many quarries in the same area will be expired in the next 2 years. High demand of stone comes from large projects as Long Thanh International Airport and road expansion projects in Dong Nai and South East Area.