PHUOC HOA RUBBER JSC., Unlock Land’s Value

BUY – 26% Potential Upside

My Tran, Associate myttd@tvs.vn

Target price 12-month price target: VND 51,800 Expected 12-month dividend: VND 4,000

Trading Data and Key Metrics Ticker PHR

Sector Natural Rubber

Listed since August, 2009

Price as of Sep 28th, 2017 41,000

52-week range (VND’000) 16.8/43,000

Shares outstanding (mn) 81.3

Free Float (mn) 22.54

15-day average volume 475,936

2016 P/BV (x) 0.9

2016 P/E (x) 11.4

Dividend yield 9.3

Debt to Equity (x) 0.61

Source: Bloomberg, TVS Research

Price Performance Chart

Source: Bloomberg, TVS Research

Company Description Phuoc Hoa Rubber Jsc (PHR – HSX) is the top

nationally planting and exploiting natural rubber

which belongs to Vietnam Rubber Group. The

company was established in 1982, in which, its

main business is involved in exploiting rubber

products and developing industrial parks. The

company currently owns 15,277 ha rubber land,

in which, 8,600 planted land and three factories

with a total capacity of 27,000 tons/year. The

main export markets are Japan, China, Taiwan,

European countries and the US. Besides, PHR’s

key competitiveness lies in its large land bank.

The company also has advantageous location in

Southeast provinces of Vietnam which helps

plant rubber trees as well as develop IP in Binh

Duong province.

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Equity Update| September 29, 2017

Thien Viet Securities JSC (TVS) does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict

of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. Please see more important

disclosures in the last pages.

We issue our BUY rating for Phuoc Hoa Rubber JSC. (HSX-PHR) with a 12-month target price of VND

51,800 (+26% upside before dividend yield) based on the following key points:

1H2017 strong performance. In 1H2017, PHR posted a robust growth thanks to a strong recovery of

natural rubber (NR) price. Particularly, revenue and net profit increased by 58.6% and 105.2% YoY,

reaching at VND 657.7bn and VND 140.4bn, respectively. This strong performance is attributed to a

strong NR price in early-2017. Rubber segment’s gross profit margin also remained high, at 22.6%,

compared with 8.7% in 1H2016.

Our 2017-2018 Investment thesis are the below followings:

(1) Increased NR price and newly-planted trees at Cambodia boosts 2017 earnings. We expect the NR

price go up when seeing the fundamentals improve with: (i) higher demand from automaker

markets, especially China, Japan and EU market; (ii) 10-15% output cut by ANRPC and (iii) short-

term supply deficit. In our model, we project NR price will increase by 30% in 2017, equivalent to

VND 41mn/ton, higher than PHR’s guide of VND 35mn/ton and increase slightly in coming years. In

addition, PHR has also expanded its business in Cambodia with total 9,184 ha, in which 1,500 ha

falls in tapping period (planted in 2008), yielding 0.6-0.7 ton/ha. From 2018-2020, the newly-

exploited land in Cambodia is projected to increase by 1,500-2,000 ha/year and will reach the

highest yield in 2019-2020.

(2) Expected huge non-recurring income adds to bottom line.

Rubber-tree liquidation. We expect PHR would receive a steady income, around VND 140-

150bn/year from rubber tree liquidation. From early-2017 to August 2017, PHR liquidated total

1,040 ha with an average price of VND250-300mn/ha, translating into a revenue of VND 250-

300bn in 2017, of which VND 100bn recorded in 1H2017. We expect the price of rubber tree

liquidation stays at VND300 mn/ha till late-2017, 76% higher than in late-2016, thanks to NR

rubber’s price, natural forest closure and limited IP-used land.

Industrial Park (IP) developer and transfer IP-used land. PHR currently invests in Tan Binh IP

JSC., and Nam Tan Uyen IP JSC., and co-operates with VSIP (Vietnam Singapore Industrial Park).

Particularly, PHR disclosed that the company will transfer 300 ha to VSIP in 2017 and 391 ha in

2018. The revenue from transfer land will be allocated in 2017-2019. For the 300-ha transfer

land profit, PHR will book 50% in 4Q2017 and the remaining in 1Q2018. With plan of transfer

2,037 IP-used land ha during 2017-2020 period, we believe it will unlock the PHR’s intrinsic

value.

NTC’s divestment delivers the one-off profit for PHR. In 3Q2017, PHR and VRG have agreed to

divest PHR-owned NTC. PHR made known that his investment cost ranges around VND 56-59bn.

Based on current NTC’s market price of VND60-70,000/share, we expect that PHR could gain

around VND 250-310bn. This divestment is expected to occur in 2018 after VRG’s IPO, which

will happen in late-2017 and early-2018.

Valuation. We rate BUY for PHR with a 12-month target price of VND 51,800 – a 26% potential upside,

using a blended of DDM, FCFF and P/E methods. We expect 2017F dividend to be VND 4,000, higher

than planned cash dividend payment of VND 1,500 as PHR will enjoy strong cash flow without

significant capital expenditure.

Key investment risks. (1) A downside risk in natural rubber price, (2) Delay in booking non-core

businesses’ profit, and (3) Economy slowdown.

Please visit TVS Research on Bloomberg at <TVSJ> GO

PHUOC HOA RUBBER JSC (PHR-HSX) | Equity Update 2

SUMMARY FINANCIALS Earning Model (VNDbn) 2015A 2016A 2017F 2018F Balance Sheet (VNDbn) 2015A 2016A 2017F 2018F Net sales 1,227 1,178 1,541 1,698 Cash and equivalents 401 293 371 507 Cost of sales 1,058 1,018 1,277 1,390 Financial investment 201 532 532 532 Gross profit 169 161 264 308 Accounts receivable 107 160 170 187 Selling expenses 24 18 26 29 Inventory 148 177 230 250 General administration expenses 67 61 77 87 Prepaid expenses, other CA 33 31 33 34 Other operating income/(expenses) 73 77 51 170 Total current assets 890 1,194 1,335 1,510 EBITDA 124 127 177 212 Depreciation & Amortization 45 49 17 19 Net Property and equipment 2,047 2,204 2,197 2,168 EBIT 79 78 161 192 Net intangibles 0 0 0 0 Net interest income/(expenses) 38 56 16 139 Total investment 212 249 276 306 Net investment income 40 24 27 30 Other long - term assets 77 161 169 177 Others (recurring) 105 101 438 607 Total Assets 3,226 3,808 3,978 4,161 Pretax Profit 261 262 641 968 Income tax 46 33 128 194 Account Payables 301 288 370 403 Tax rate (%) 19% 23% 20% 20% Short-term debt 360 603 579 461 Minorities 3 3 3 4 Net Income 212 225 510 771 Total Current Liabilities 779 1,016 1,075 989 EPS (basic, reported) 2,083 2,219 5,016 7,584 Weighted shares outstanding (mn) 81.3 81.3 81.3 81.3 Long-term debt 254 232 193 153 Other long-term liabilities 74 317 333 349 Common dividends declared 20% 18% 40% 40% Total long-term liabilities 329 549 525 502 DPS (VND) 2,000 1,800 4,000 4,000 Dividend Payout ratio (%) 96% 81% 80% 53% Stockholders' equity 2,135 2,236 2,319 2,610 Common Equity 815 813 813 813 Treasury shares (97) (97) (97) (97) Growth and Margin (%) Capital surplus Sales Growth (%) -23.5% -4.0% 30.8% 10.2% Retained earnings 314 377 434 687 EBITDA Growth (%) N/A 2.8% 39.6% 19.4% Budget sources and other funds 982 1,029 1,054 1,093 EBIT Growth (%) -48.8% -0.6% 199% 1198% Minority interest 58 59 59 59 Net Income Growth (%) -19.4% 3.8% 124.% 50.9% Total liabilities and equity 3,226 3,808 3,978 4,161 EPS Growth (%) -19.8% 3.9% 1261% 51.2% Gross Margin (%) 13.8% 13.4% 17.1% 18.1%

EBITDA Margin (%) 10.1% 10.8% 11.5% 12.5% EBIT Margin (%) 6.4% 6.6% 10.4% 11.3% Ratios Net Income Margin (%) 17.5% 18.9% 33.1% 45.4% ROE (%) 9.8% 9.7% 22.0% 29.5% ROA (%) 6.4% 6.2% 13.1% 18.9% Cash flow Statements (VNDbn) 2015A 2016A 2017F 2018F ROIC (%) 6.4% 16.1% 5.4% 6.5% Pretax profit 261 260 641 968 Inventory days 62.7 58.4 58.2 63.0 Adjustments for: 61 (114) - - Receivable days 32.0 41.4 39.0 38.3 Depreciation and amortization (9) (9) 17 19 Payable days 89.3 105.5 94.0 101.6 Change in inventories (67) 29 53 20 Asset Turnover (x) 0.4 0.3 0.4 0.4 Change in trade receivables (29) 51 9 17 Debt/equity (x) 35.5% 44.2% 69% 57% Change in trade payables 84 (17) 83 33 Other operating cash flow

Cash flow from operations 244 265 549 787 Net Capital expenditure 44 (139) (94) (211) Valuation (Multiples) Change in Financial investment 253 (368) 27 30 EV / EBITDA (x) 10.5 16.2 N/a N/a Divestures 4 5 0 0 P/E (x) 8 11.4 8.6 5.7 Other investments, net (313) 35 - - Dividend Yield (%) 13% 7% 9.3% 9.3% Cash flow from investing (11) (467) (67) (181) P/B (x) 0.6 0.9 1.5 1.3

Equity issued - - - -

Net borrowings (134) 221 16 (78)

Dividends to shareholders (164) (141) (423) (393)

Cash flow from financing (298) 80 (407) (471)

Net cash flow (64) (122) 75 135

Opening cash 465 415 296 371 Notes: CA = current assets; CL = current liabilities Closing cash 403 296 371 507 Source: TVS model and forecast

Please visit TVS Research on Bloomberg at <TVSJ> GO

PHUOC HOA RUBBER JSC (PHR-HSX) | Equity Update 3

2016 & 1H2017 BUSINESS PERFORMANCE

2016 - Weak core earnings partially compensated by non-core one.

In 2016, PHR recorded a VND 1,178bn (-4.0% YoY) in revenue and VND 220bn (+14.7% YoY) in

net profit, exceeding 11.78% and 60.93% of yearly target plan, respectively. This translates into

an EPS of VND 2,219. Gross profit remained low at 13.4% as NR price hit a 20-year low in 2016.

Revenue and gross profit from core activity contributed 82% and 63%, respectively, to its total

business. However, non-core profits (accounting for c.80% of parent’s profit before tax) from

rubber tree liquidation (VND 143.8bn) and transfer land (VND 106.4bn) for Nam Tan Uyen

Industrial Park JSC., (NTC – UPCoM) and Tan Binh Industrial Park Jsc., made PHR outperform

peers.

1H2017 strong performance attributed to NR price recovery

In 1H2017, PHR posted a robust growth thanks to a strong recovery of NR price. Particularly,

revenue and net profit increased by 58.6% and 105.2% YoY, reaching at VND 657.7bn and VND

140.4bn, respectively. This strong performance is due to a surge in NR price in early-2017.

Regarding rubber segment, average selling price and COGS reached at VND 45mn/ton and VND

35mn/ton, respectively. Rubber revenue accounted for 74% in revenue (VND 489bn, +55% YoY)

and 88% in gross profit (VND 27.5bn, +303% YoY). The core segment’s gross profit margin also

remained high, at 22.6%, compared with 8.7% in 1H2016.

Figure 1: Sales breakdown by segments (1H2017) (VND bn)

Figure 2: Gross profit breakdown by segments (1H2017) (VND bn)

Source: PHR, TVS Source: PHR, TVS

In 7M2017, the company continued to post a record-high profit, reaching at VND 607.34bn

(+53% YoY) in revenue and VND 221.20bn (+201.7% YoY) in before-tax profit (PBT). Sales

volume increased by 5.8% with an average price of VND 42.96mn/ton, up 45.2% YoY.

Outsourcing volume has increased significantly as the company wants to keep inventory for

late-2017 demand. In 7M2017, the company also completed liquidating 1,000 ha of rubber tree

with an average price of VND 250-300mn/ha, translating into a liquidation revenue of VND 250-

300bn in 2017. The company, however, only recorded VND 100bn in 1H2017, implying that the

remaining will be booked in 2H2017.

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Gross profit remained low in

2016 as NR price hit a 20-year

low. Non-core profit, however,

makes PHR outperform peers.

A surge in NR price in early-2017

secured PHR’s 1H2017 strong

performance.

We expect large profit from tree

liquidation booked in 2H2017.

Please visit TVS Research on Bloomberg at <TVSJ> GO

PHUOC HOA RUBBER JSC (PHR-HSX) | Equity Update 4

Figure 3: Global NR price (USD/kg) and PHR’s selling price (VNDmn/ton)

Source: PHR, TVS Research

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Please visit TVS Research on Bloomberg at <TVSJ> GO

PHUOC HOA RUBBER JSC (PHR-HSX) | Equity Update 5

INVESTMENT THESIS

Increased NR price and newly-planted trees at Cambodia boosts earnings.

Core business – Tracking with global rubber prices

Rubber segment takes lion share of PHR’s total earnings, equivalent to 58% profit before tax in

1H2017. We believe that with current expansion plan in Cambodia, PHR could capture ample

profit from the upward trend of NR price. The downside risk of rubber price, however, could

hurt its total earnings due to strong correlated with global NR price. We see high correlation

between PHR’s core profit and NR price (See more in Figure 4).

Figure 4: NR price and PHR’s rubber gross profit

Source: PHR, TVS Research

Although NR price has slowed down recent times, we expect that NR price will go up due to:

Higher demand thanks to the recovery of Chinese auto market. After a recovery in

June, Chinese passenger-car sales have continued to accelerate in July-August, 2017,

5.3% higher than in August, 2016. China is the world’s largest rubber consumer, mostly

for car tires production, constituting c.40% of total world rubber consumption. Thus,

bright outlook in Chinese auto market has been raising hopes for the growth

momentum of NR price after a dip recently. Other auto markets, like EU and Japan,

also delivered a high growth in 8M2017’s sales volume, accelerating 5% and 8.1%,

respectively.

Short-term supply deficit supports NR price bounce back in 3Q2017. The world

rubber consumption of NR reached at 8.54 mn tons, where supply deficits over

500,000 tons in 8M2017. As the result, NR price has recently bounced back after a dip

in June, reaching around JPY220-230/kg in September, 2017.

Alliance power play important role in NR price movement. In August, 2017, Thailand,

Indonesia and Malaysia, which are the key member of ANRPC*, considered to increase

rubber price to support rubber farmers by cutting rubber output from 10% to 15%.

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45% GPM Natural Rubber price

The upward trend of NR price

could lift PHR’s profit.

Supply-demand, alliance

power and weather condition

play important role in NR

price’s movement. And we

expect the price will go up.

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PHUOC HOA RUBBER JSC (PHR-HSX) | Equity Update 6

Weather condition could positively affect short-term NR price’s movement.

September-January is the peak season in rubber harvest times. However, rainfall could

lower rubber yield as well as rubber exploitation volume. This could support for NR

price trend in late-2017.

*ANRPC (Association of Natural Rubber Producing Countries) has 11 members, including

Cambodia, China, India, Indonesia, Malaysia, Papua New Guinea, Philippines, Singapore, Sri

Lanka, Thailand and Vietnam. This group accounted for 90% of global rubber production.

In Vietnam Rubber Group, PHR ranked the top 5 in the planted rubber land with a total 15,277

ha in Vietnam and 8,632 ha in tapping period. Each year, the company taps around 16,000-

18,000 tons of rubber and outsource 11,000-14,000 tons of rubber from Rubber Farmers in

Southeast region. Thanks to its advantageous location in Southeast region, the company could

flexibly collect from the farmer to utilize its operating capacity of 27,000 tons/year. Moreover,

the company has also expanded its business in Cambodia with total 9,184 ha, in which 1,500 ha

falls in tapping period (planted in 2008), with an average yield of 0.6-0.7 ton/ha. From 2018-

2020, the newly-exploited land in Cambodia is projected to increase by 1,500-2,000 ha/year

and will reach the highest yield in 2019-2020, thus offset the decreasing land in Binh Duong

province due to industrial park expansion (See more in figure 6).

Figure 5: Vietnam Rubber Group’s subsidiaries (2016)

PHR DPR TRC Dau Tieng Dong Nai Phu Rieng Loc Ninh VRG

Key Indicators Binh Duong Binh Phuoc Tay Ninh Binh Duong Dong Nai Binh Phuoc Binh Phuoc

Revenue (VNDbn) 1,178 854 402 982 1,297 1,369 730 20,720

PBT (VNDbn) 260 189 77 375 315 116 3,227

Total area (ha) 24,461 16,583 13,600 - 34,234 18,850 15,859 300,000

Parent 15,277 10,083 6,000 - 34,234 18,850 10,800 -

Cambodia* 9,184 6,500 7,600 - - - 5,059 -

Tapping area (ha) 16,294 13,228 4,718 16,035 18,351 11,504 10,250 253,300

Parent 8,632 7,135 4,718 16,035 18,351 11,504 7,000 -

Cambodia* 7,662 6,093 - - - - 3,250 -

In-house volume (tons) 16,400 14,476 9,050 26,212 24,316 26,000 - -

Outsourcing volume (tons) 14,000 2,610 711 12,930 5,936 9,000 - -

Consumption volume (tons) 30,874 17,232 10,639 39,143 30,252 35,541 12,238 -

Source: PHR, TVS Research

Figure 6: Cambodia’s exploiting plan

Planting year Area (ha) 2016 2017 2018 2019 2020

Expected exploited volume (tons)

2009 503.45 503.45

2010 2,023.96 1,000 1,024

2011 2,544.40 1,000 1,544.4

2012 2,278.00 1,000 1,278

2013 239.39 239.39

2014 75.08

Sum 7,664.28 503.45 1,000.00 2,023.96 2,544.40 1,517.39

Source: PHR, TVS Research

The increase in Cambodia’s

newly-exploited land offsets

the decreasing land in Binh

Duong province.

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PHUOC HOA RUBBER JSC (PHR-HSX) | Equity Update 7

Ample income from non-core businesses

More Steady Revenue Coming From rubber tree liquidation

Along with a strong performance in rubber segment, rubber tree liquidation has proven as an

attractive segments. PHR owns an old-tree profile, with average age of 16-24 year old

compared with younger tree structure like DPR and TRC. Thus, the company would receive a

steady income, around VND 140-150bn/year from rubber tree liquidation. According to VRG,

rubber wood contributed c.32% of total export value of USD 4.85bn (+16.4% H-o-H).

Figure 7: Revenue from liquidating rubber tree

Source: PHR, TVS Research

From early-2017 to August 2017, PHR liquidated total 1,040 ha and expects to liquidate more

500 ha in 4Q2017. Thanks to a rising rubber price, natural forest closure and FDI attractions,

rubber wood tree’s price has experienced a rapid growth this year. In September, rubber wood

liquidation is traded at VND 300mn/ha, 76% higher than in late-2016. We expect that rubber

wood liquidation price could continue their upward trend in the rest 2017

Extraordinary profit thanks to transferring land to IP developers

Owning the favorable geographic location, PHR has more advantages as an IP developer apart

from NR exploiter. PHR currently invests in Tan Binh IP JSC., and Nam Tan Uyen IP JSC., and co-

operates with VSIP (Vietnam Singapore Industrial Park), which are three well-known IP

developers.

Tan Binh IP JSC.,: total area of 352 ha and commercial land is 244 ha with current

occupancy rate of 60% and current land rental of USD 54-55/sqm. The company plans

to expand further 1,000 ha in 2018.

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Liquidating rubber tree adds

more steady revenue around

VND 140-150bn per year.

VND140-150 bn/year

The company planned to

transfer 2,037 ha for IP

developers during 2017-2020

period. We expect PHR can

recognize extra-profit from

transferring land to VSIP

during 2017-2018.

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PHUOC HOA RUBBER JSC (PHR-HSX) | Equity Update 8

Nam Tan Uyen IP JSC.,: total area of 620 ha and commercial land is 429 ha with current

occupancy rate of 90-100% and current land rental of USD50-60/sqm. NTC plans to

expand further 346 ha (commercial land of 256ha) in Q42017.

VSIP: PHR disclosed that the company will transfer 300 ha to VSIP in 2017 and 391 ha

in 2018. The revenue from transfer land will be allocated in 2017-2019. For the 300-

ha transfer land profit, PHR will book 50% in 4Q2017 and the remaining in 1Q2018.

Figure 8: PHR’s planned transfer land

Company Type of Investment %Ownership Acreage (ha) Land transfer price (VND mn/ha)

Time

Tan Binh IP JSC., Subsidiary 80% 1,000 N/a 2016-2020

Nam Tan Uyen IP JSC., Investment associates 32.85% 346 925* 2017-2020

VSIP Co-operation 691 1,000 2017-2018

Source: PHR, TVS Research, *current price

NTC’s divestment delivers the one-off profit for PHR

In 3Q2017, PHR and VRG have agreed to divest the PHR’s stake in NTC. The company made

known that their investment cost ranges around VND 56-59 bn. Based on current NTC’s market

price of VND60-70,000/share, we expect that PHR could gain around VND 250-310bn. This

divestment is expected to occur in 2018 after VRG’s IPO, which will happen in late-2017 and

early-2018.

Favorable geographic location

PHR is one of the largest NR exploiter in Vietnam Rubber Group. The company has the

advantageous location in Southeast provinces of Vietnam where the weather condition is

favorable for planting and tapping NR trees. The company locates in the central of Binh Duong

Province where is well-known for FDI investors. The province remains attractive to foreign

investors, following by Ho Chi Minh City, ranked the 2nd place with total FDI investment of USD

29bn in 8M2017. Therefore, the favorable natural location gives PHR advantages to position

itself as an Industrial park developer, besides its traditional business.

Favorable geographic location

gives PHR advantages to

position itself as an industrial

park developer and rubber

exploiter.

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PHUOC HOA RUBBER JSC (PHR-HSX) | Equity Update 9

Figure 9: PHR’s location

Source: Google Map, TVS Research

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PHUOC HOA RUBBER JSC (PHR-HSX) | Equity Update 10

OUTLOOK and VALUATION

2017 and 2018 Outlook

In 2017, we expect that PHR sell around 29,450 tons, of which 15,450 tons is outsourced, with

an average yield of 1.9 tons/ha. Cambodia’s exploitation volume will be at 900 tons with a lower

yield of 0.6 tons/ha. The average rubber price is expected to be VND 41mn/ton, up 30% YoY. In

2017, we project that PHR’s revenue and profit after tax will reach VND 1,541bn (+30.8% YoY)

and VND 510bn (+126.1% YoY), respectively. This translates into an EPS of VND 5,016. With

strong performance, we expect the company could rise its cash dividend payment to 35-40% in

2017 instead of 15% as per management’s guide.

For 2018 forecast, we expect that rubber price could increase slightly due to its fundamental

support. However, rubber volume from in-house exploitation and consumption could be lower

due to liquidation and transfer land activities, reaching at 14,500 tons and 27,500 tons,

respectively. PHR’s net revenue and NPAT is projected to increase by 10.2% and 51.2% YoY,

equivalent to EPS of VND 7,584. 2018 P/E forward will be 5.41x, lower than the average P/E of

8.6x in domestic natural rubber sector.

We value PHR using a blended of FCFF, PE and DDM methods. Our 12-month target price is

VND 51,800/share.

Figure 10: Valuation summary

Method Price (VND) Weight (%)

DDM 45,298 30%

FCFF 40,242 30%

PE 65,225 40%

Target price (VND) 51,766 100%

Source: TVS Research

For DDM model, we expect PHR can pay dividend of VND 4,000 per share until 2021 as we are

bullish on the business cash flow without significant capital expenditure.

Figure 11: DDM-based method

VND unless otherwise stated 2017 2018 2019 2020 2021

Cash Dividend 4,000 4,000 4,000 4,000 4,000

Cost of Equity (%) 10.33%

Present Value of Cash Dividend 3,897 3,532 3,201 2,902 2,630

Cumulative Present Value of DDM 16,162

Growth rate (%) 1.2%

Terminal Value (VND) 44,312

Discount Factor 0.66

PV of Terminal Value 29,136

Implied Price per Share 45,298

Source: TVS Research

Our blended model arrives fair

value of VND 51,800 per share,

26% potential upside before

dividend yield.

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PHUOC HOA RUBBER JSC (PHR-HSX) | Equity Update 11

Figure 12: FCFF-based method

VNDbn unless otherwise stated 2017 2018 2019 2020 2021

FCFF 437 436 361 365 438

WACC (%) 7.92%

Present Value of FCFF 428 396 304 284 317

Cumulative Present Value of FCFF 1,729

Terminal Value 3,289

Discount Factor 0.72

Present Value of Terminal Value 2,378

Total FCFF 4,107

Less: Total Debt

835

Implied Equity Value 3,272

Number of shares (mn)

81

Price per Share (VND)

40,242

Source: TVS Research

Figure 13: Peer comparison

No. Ticker Company ROE P/E

1 DPR Dong Phu Rubber JSC., 11.63% 9.3

2 TRC Tay Ninh Rubber JSC., 5.08% 7

Average P/E 8.6

Source: TVS Research

Downside risks to our model are:

(1) Commodity price risk. Decline in natural rubber price could undermine PHR’s future

earnings.

(2) Delay in transferred-land’s profit recognition. Currently PHR do not disclose the non-core

business recognition practices that raises our concerns about quarterly earnings volatility.

(3) Economy slowdown. Domestic GDP growth slows could lead to a decline in FDI flows,

which negatively affected industrial park and wood segments.

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PHUOC HOA RUBBER JSC (PHR-HSX) | Equity Update 12

ANALYST CERTIFICATION

I, My Tran, hereby certify that all of the views expressed in this report accurately reflect my personal views about the subject company or companies or its or their securities. I also certify that no part of my compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in this report.

RATING and VIEWS Buy (B), Neutral (N), Sell (S) – Analysts recommend stocks as Buys or Sell based on his own views. Being assigned a Buy or Sell is determined by as total stock’s return (TSR) potential that represents the price differentials between the current share price and the price target expected during the time horizon plus expected dividend yield. Any stock not assigned as Buy or Sell is deemed Neutral.

TVS Investment Research: Equity Rating Definitions 12-month rating Definition Buy Total Stock’s Return Potential > 15% Neutral Total Stock’s Return Potential between (-15%) and 15% Sell Total Stock’s Return Potential < (-15%) Short-term rating Definition Buy Stock price expected to rise within three-month because of a specific catalyst or event Sell Stock price expected to fall within three-month because of a specific catalyst or event Not-rated The investment rating and target price, if any, suspended as there is not a sufficient fundamental

basis for determining an investment rating or target.

DISCLAIMER Copyright©2017 Thien Viet Securities JSC (TVS). ALL RIGHT RESERVED. This research report is prepared for the use of TVS clients and may not be redistributed, retransmitted or disclosed as a whole or partially in any form or manner without the prior written consent of TVS. The information herein is obtained from various sources and TVS does not guarantee its accuracy. Neither the information nor any opinions expressed in this publication constitutes a buy or sell recommendation on any securities or investment. TVS therefore does not take any responsibilities for any investor’s decisions.

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