DIG_Company Visit Note - Ministry of Construction registered for a full divestiture - expected completion in 2017

9M2010 business results update: In Q3/2017, consolidated revenue was VND 307 billion (-12.5% yoy) and net profit was posted at VND 45.97 billion (-5.7% yoy). Accumulated 9 months 2017, consolidated net sales reached VND 871.5 billion, up slightly 7.11% YOY, gross profit was VND 150.9 billion (-13.2% yoy), gross profit margin decreased from 21.4% in 9M16 to 17.3% in 9M17. However, after-tax profit came to VND 43.1 billion (+ 11.9% yoy) mainly due to a sharp increase in net financial income of VND 61.6 billion compared to VND 4.7 billion of the same period. BSC noted that financial income increased sharply mainly due to the revaluation of the unfinished production and business expenses to contribute to Phu Quoc Urban Development JSC (An Thoi project). However, we note that in the financial contribution report of the Dai Phuoc project has not been fully recognized, so we have temporarily not estimated this surplus in 2017.

The expectation of a successful divestment of the Ministry of Construction in 2017 will be a driving force which help DIG improving its business results in the coming years.  Ministry of Construction (MOC) has registered to sell all 118.26 million shares, equivalent to ownership of 49.65% stake in DIG.

Investment hightlights: DIG is an enterprise with many lands in the coastal provinces of Vung Tau, Dong Nai, so it will have a 1-1.5 year cycle more than Real estate in big cities like Hanoi and Ho Chi Minh City. In short-term, the profit from the divestment from Dai Phuoc Lotus project will help DIG to record extraordinary profit. In the long run, the Ministry of Construction's divestment will help accelerate the privatization of the business, improving the ability to implement the project.