- 2021-08-03T00:00:00
- Company Research
- We maintain a MARKET PERFORM rating for CTD while trimming our target price by 2% to VND56,300/share as our 17% average downward revision in 2021-2025F NPAT-MI amid slower expected profit recognition in 2021F and lower forecast EBIT margin in 2021-2025F are partially offset by a higher cash balance at end-Q2 2021 and lower capex for forecast period. We expect new contract value to recover, but slow construction progress is partly delaying revenue and profit recognition in 2021. We continue to expect CTD’s backlog to recover from a low base in 2020 amid the ongoing effort of its new management to revive the company. Per management, CTD signed VND14.0tn (USD608.9mn) worth of total new contract value in H1 2021 — the top five projects in terms of value accounted for more than 70% and are located in Hung Yen, Da Nang, Ho Tram and Quang Binh. Management also shared that CTD is confident regarding its 2021 newly signed contract value target of VND21.7tn (USD943mn; triple 2020’s low base). Nevertheless, we believe fierce competition from both existing and new entrants could create pressure on CTD’s ability to gain strong backlog growth. As a result, we continue to assume CTD’s newly-signed contract value in 2021-2025F (VND20tn/USD869.6mn) per year) to be lower than an average of VND27.0tn (USD1.2bn) per year in 2015-2018. CTD’s management is focusing on building long-term sustainable growth. This strategy comprises major changes in five categories: 1) shifting from a niche business model focusing on building works to diversified civil construction (e.g., transportation infrastructure); 2) strengthening corporate governance; 3) shifting from local brand positioning to international brand positioning; 4) shifting from a family business mindset to a teamwork business mindset; and 5) shifting from a B2B business model to B2B2C business model (i.e., creating more value-added services for CTD’s clients). CTD also plans to issue nonconvertible bonds for a total maximum value of VND1.0tn (USD43.5mn) with the aim to prepare funds for diversifying into infrastructure projects, which we have not factored into this update. |