Positive business results
In the third quarter of 2019, AAA’s business results grew sharply over the same period last year. Specifically, net revenue reached VND 2,364 billion, up 8%, profit before tax reached VND 86 billion, up 49% compared to the same period in 2018.
In the third quarter, all production, trade and industrial zones grew over the same period. Profit before tax increased by 49% in the third quarter, thanks to the phenomenal growth of the manufacturing segment.
Accumulated 9 months, AAA reached VND 7,406 billion revenue and VND 520 billion profit before tax, up by 28% and 174% over the same period. Due to the contribution of the industrial zone segment in three quarters of 2019 and the strong growth of the manufacturing segment, AAA’s profit before tax increased by 2 times compared to the whole of 2018. In particular, core profit contributed about 50% of AAA’s profit before tax, up 35% over the same period in 2018. Compared to the business plan for the whole year 2019, the company now fulfills 74% of the revenue plan and 85% of the profit after tax plan.
This positive result was due to AAA’s shift in market structure and products.
Specifically, the company promotes market development to the US and Japan. Recent meetings such as the meeting with the Governor and Nebraska State Mission, the US and the Governor and the delegation of Kagoshima Province, Japan have shown quite clearly the strategy of AAA’s market expansion.
In addition, the company’s push towards 100% compostable products and increasing factories’ capacity have helped improve margins. AAA’s 100% compostable products now contribute to 10% of export sales.
Bright growth prospects
Plastic industry is expected to grow 6.5% in the period of 2019 – 2024. In Vietnam, the plastic industry is divided into 4 areas, including packaging, household appliances, construction and engineering. In terms of value scale, plastic packaging accounted for the largest proportion with 37%, construction accounted for about 18% of the industry value.
In the field of construction plastic, Binh Minh Plastic JSC (BMP), Tien Phong Plastic JSC (NTP) are the two leading companies listed on HOSE and currently trading at P/E valuation are 10,3 and 10,12 times. The growth capacity of these businesses in the past 5 years was only 2.9% and 2.7%/ year, and the growth potential in the future, according to SBSI, is only about 3% – 4%.
Meanwhile, AAA’s profit has grown at a compound annual growth rate (CAGR) of 21% per year for the past 5 years and is expected to increase by an average of 10% – 15% in the next 5 years.
Assuming BMP and NTP are priced at a reasonable level corresponding to the growth potential, with the high growth rate of AAA, SBSI expects a reasonable price of AAA of 36,100 dong/ share. However, at present, the price of AAA shares is trading around VND 15,350/ share, which is not true compared to its capacity.
Based on the stable operation of factories and the first 9 months’ output, SBSI forecasts that AAA’s production output in 2019 will reach 95,000 tons, equivalent to an increase of 10% compared to the previous year. The policy of moving products to markets outside Europe such as the US and Japan will help AAA maintain maximum output as well as reduce dependence on a market, ensuring a stable growth prospect.
Notably, according to the Plastics Association, Vietnam imports 80% of plastic materials for domestic production. Therefore, the import market of plastic resins is quite wide for businesses to operate.
An Thanh Bicsol JSC, a member company of An Phat Holdings, is currently one of the largest plastic resin importers in the country. With a large market share of plastic resins, combining advantages when having a contract of product consumption, An Thanh’s commercial revenue is expected to reach over VND 3,600 billion/ year and profit after tax is estimated at VND 50 billion/ year.
Quickly catching up with the trend of using self-destructing plastic products, AAA has invested methodically in the past. Currently, 100% compostable products are accounting for 10% of the product structure and are expected to increase sharply in the near future, when An Phat Holdings introduces the compostable material production line (PBAT) in action.
The PBAT project, after being put into operation, will help cut down about 30% of AAA’s production costs compared to the present. In addition, AAA will be proactive in sourcing raw materials, improving inventory turnover and increasing gross profit margin of production.
