On the morning of July 24, VCG shares of Vietnam Construction and Import-Export Corporation (Vinaconex) suddenly increased by the ceiling price of nearly 7% to VND25,050/share, with over 1.9 million units remaining to buy as of 10:45. VCG had increased slightly in previous sessions.
CTD shares of Coteccons Construction JSC hit the floor at times. HBC shares were not traded on the morning of July 24 due to trading restrictions since May 23. At the end of the morning session, the VN-Index continued to increase by 2.71 points, to 1,188.61 points.
Vinaconex's unexpected breakthrough has many people talking about the possibility of winning the bid for package 5.10 of the Long Thanh Airport project.
According to the announcement, there are 3 contractor consortiums submitting bidding documents for this package, including CHEC-BCEG-Vietnam Contractors Consortium, Hoa Lu Consortium and VIETUR Consortium.
In which, the VIETUR Joint Venture is led by a contractor from Türkiye, members are companies in the Newtecons ecosystem of construction "tycoon" Nguyen Ba Duong (formerly Chairman of Coteccons) and Vinaconex Corporation.
The CHEC-BCEG-Vietnam Contractors consortium is led by a Chinese contractor. The Hoa Lu consortium is led by a Vietnamese contractor, Coteccons, including Hoa Binh Construction (HBC) of Mr. Nguyen Viet Hai.
Information about the winner of the bid worth over VND35,000 billion has not been announced. But this is a factor that makes many people expect some infrastructure stocks listed on the market such as VCG, CTD, HBC...
With a total value of more than VND 35,000 billion, the construction and installation package of Long Thanh Airport passenger terminal equipment is expected to start in August 2023.
At the end of June, Vinaconex won a bid worth over VND1,800 billion for the Ring Road 4 project (with a 3-year implementation period). Vinaconex has put into use 3 large bid packages for the North-South Eastern Expressway project with a total value of over VND8,000 billion.
In addition, this enterprise is implementing a number of large bidding packages in the North-South Expressway construction investment project, phase 2. VCG shares have increased sharply, from 17,500 VND in mid-May to 25,500 VND/share as of now.
In contrast to VCG, Coteccons (CTD) shares fell sharply. This morning, CTD hit the floor at 73,700 VND/share. By 11am, CTD had dropped 4,400 VND to 74,800 VND/share.
In recent sessions, HBC shares of Hoa Binh Construction Group Corporation have increased in price at times and returned to the threshold of VND 10,000/share, in the context of the company receiving bad news. Ho Chi Minh City Stock Exchange (HOSE) has put this stock on warning status, starting from July 13 because the undistributed profit after tax as of December 31, 2022 on the audited consolidated financial statements for 2022 is a negative number.
Recently, many shareholders of Hoa Binh Construction and Coteccons expect that these enterprises will join forces to participate in the bidding package worth 35,000 billion VND (nearly 1.5 billion USD) of Long Thanh airport.
However, Hoa Binh Construction, chaired by Mr. Le Viet Hai, is suspected of not having the financial capacity to participate in this bid. Hoa Binh Construction may still face difficulties after the civil war that has lasted since the end of last year.
Expected capital flow of tens of billions of USD in the second half of the year
Many stocks in the public investment sector or related sectors such as Vinaconex, Coteccons, HHV, C4G, LCG, HPG, TCD, ELC, ITD... are expected to benefit from the large public investment capital expected to be disbursed in the second half of 2023. In addition, there are tens of billions of USD in credit capital from banks.
According to the plan, public investment capital disbursement in 2023 is 711,000 billion VND, meaning about 495,000 billion VND (equivalent to nearly 21 billion USD) will be disbursed in the last 6 months of the year.
Based on the new credit growth limit (14% set by the SBV on July 10), about VND1,081 trillion (US$45 billion) of new credit must be disbursed in the second half of 2023, equivalent to an average of about VND180 trillion per month.
Besides Vinaconex, another enterprise that benefits from public investment activities is Cienco 4 Joint Stock Company (C4G).
Hoa Phat Group (HPG) of Chairman Tran Dinh Long is also expected to make a breakthrough if public investment is quickly disbursed. HPG shares have increased continuously over the past several months, from VND11,000/share in November 2022 to VND28,450/share as of now.
According to experts, steel enterprises are the group that will benefit if infrastructure construction projects are promoted. Among them, Hoa Phat is the enterprise that often benefits the most thanks to its largest steel market share in Vietnam and competitive advantages.
However, infrastructure stocks are expected to not be able to increase profits in the short term. The reason is due to the characteristics of the infrastructure construction industry with thin margins and high receivables. Most of them use high financial leverage and are under pressure of increasing financial costs in a high interest rate environment.
According to SSI Research, the ROE (return on equity) of infrastructure construction companies is often relatively low while the P/E and P/B valuations of construction stocks have entered high territory compared to past valuations, reflecting expectations of future profit growth. However, the amount of tens of billions of USD will help many businesses benefit.
Enterprises that benefit greatly from infrastructure investment projects are often industry leaders, with strong financial potential (asset scale, equity), competitive advantages; experience in participating in key infrastructure construction projects, and high technical content.
For example, VCG, HHV, C4G, LCG... have won bids/been assigned bids to participate in the construction of components of the North-South Expressway or other traffic projects.
Vietnam aims to have more than 3,000 km of highway by 2025 (up from 1,729 km in mid-2023). Assuming that the investment cost for 1 km of highway in Vietnam is about 14 million USD/km (estimated by the Ministry of Transport , not including inflation), the total investment capital for more than 1,200 km of highway will be more than 400,000 billion VND.
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