Earnings picture is clouded

Property stocks still remain stellar choices for forward thinking investors

Vietnam Construction No 2 (VC2) said it earned a VND10.4 billion pre-tax profit in the second quarter, down from VND11.9 billion in the first quarter. VC2’s first half pre-tax profit was VND22.3 billion, meeting only 48.6 per cent of its 2010 plan of VND46 billion.

Saigon General Service Company’s (SVC) first half pre-tax profit was VND40.6 billion, completing 41 per cent of this year’s plan, while Vinasun Corporation (VNS) earned VND52 billion pre-tax profit, fulfilling only 30 per cent of the yearly plan.

However, these few corporate earnings are not representative of the whole market’s earnings. Nguyen Viet Hung, chief analyst with SME Securities, said second quarter results might not be positive as it was normally a “bottom” period for corporate earnings. The domestic macro economic fundamentals remained strong, but credit growth was low as lending rates remained high.

Hung said the global economy was not supportive to exports, Vietnam’s key contributor to its gross domestic growth (GDP). A director with Viet Dragon Securities (VDS) added that as economy was improving, corporate earnings would also be better, but the announced results might not be good as expected.

“Firms might not report their true second quarter earnings but wait to release them late in the fiscal year,” said the VDS director. “Only firms with positive earnings will quickly announce, while others try to postpone as long as possible,” said Nguyen Quang Thuan, StoxPlus financial media company’s CEO.

Hung, however, said that the property sector might report better-than-expected earnings results with firms having huge land funds, especially property developers in Hanoi as the land prices soared sharply in May and June.

“We favour Kinh Bac City Development Corporation (KBC), Song Da Urban and Industrial Zone Investment and Development (SJS), Vincom (VIC), Tu Liem Housing and Urban Development (NTL),” said Hung, adding that food and drinks, construction and construction materials, excluding steel, also reported second quarter’s positive earnings.

Ho Chi Minh City Securities Corporation (HSC) analysts added that they saw some early number fragments from Tay Ninh Rubber (TRC) with first half’s sales having risen 48 per cent to VND186 billion with net profit coming at VND87 billion.

“We think this performance is impressive as first half is the low season. We recommend TRC as a buy and forecast it can exceed its target by 20 per cent or so in 2010,” said HSC analysts.

A recent BIDV Securities (BSC) report found that listed firms were to release better-than-expected earnings in the second quarter and investors would look to invest in stocks with good earning results.
“Sectors of sea transport services, property, and seafood will be among choices,” said Tong Minh Tuan, BSC deputy chief analyst.

By Nguyen Hung