VGT_Textile & Garment Highlight_08032018_BSC_Company Update

Valuation
We recommend TRACKING for VGT based on the advantage of being the largest corporation representing the Vietnamese textile and garment industry. At present, VGT is trading at VND14,800/share, corresponding to a P/E of 20.8x - high valuation compared to the average of listed garment enterprises.

Business prospects
• The Vietnamese textile and garment industry is expected to continue to grow positively in 2018 thanks to: (1) improved income per capita (+ 7.7% in 2017) boosting textile spending; (2) Textile export turnover is forecasted to reach 33.5- 34 billion USD (+ 7% YoY) in 2018.
• Operating as a holding, owning many well-known garment companies, VGT is expected to continue its growth momentum in 2018. The corporation's total revenue for 2018 is VND48,500 billion VND (+ 6.5% YoY), equivalent to 2017 and is based on conservative assumptions when taking into consideration the upward trend of raw material price.

Investment risk
• Increasing price of raw material (affected by cotton price, oil price).
• Risk of managing investment capital in member companies.

Catalyst
• Divestment plan at several subsidiaries and associates.
• The Ministry of Industry and Trade plans to divest all state capital (equivalent to 53.49% of share capital) at VGT in 2018.

Business Update
(1) 2017 earnings growth was positive with net sales of VND 17,497 billion (+ 13% YoY), regaining two-digit growth (in comparison with 2016's growth rate of 1.8% YoY) and higher than industry average.
(2) Divestment plan at several subsidiaries and associates. In 2018, VGT is expected divest in some member companies such as Vietnam Cotton JSC (54%). It is worth to note that BVN's shares have doubled since the beginning of this year (from VND 8,000 to VND 16,000 / share), along with improved liquidity.
(3) State capital divestment process. VGT is currently conducting a re-valuation of its business to serve the state capital divestment (from 53.49% to 0%) according Decision No. 1232/2017/QD-TTg.