Seaport stocks fail to entice investors

Outstanding business results in 2022 were factors for investors to expect great hopes in seaport stocks in 2023. However, recent statistics show that seaport enterprises are facing turbulent times as demand has fallen all round.

Decline in exports

According to the Vietnam Maritime Administration, the import-export value continued to record positive growth in 2022 at more than US$730 bln, up by 9.1 percent. In this, the export and import value had reached US$371.8 bln and US$360.6 bln, respectively. Along with the growth in import and export value, the port clearance volume also had recorded a positive figure with 733 million tons, of which domestic goods had reached 342.79 tons, up by 12 percent. While the volume of container cargo through the seaport in 2022 is estimated at 25.09 million TEU, up by 5 percent.

From the above results, analysts saw a pretty bright forecast for the seaport industry in 2023. The analysis report on the seaport industry of VNDirect Securities (VNDS) says that the industry picture may be brighter in the near future. First of all, it can be seen that in 2022, despite the global monetary tightening policy, Foreign Direct Investment (FDI) disbursement to Vietnam would still grow with the majority of projects targeting the industrial and manufacturing sectors.

The Regional Comprehensive Economic Partnership (RCEP), which came into effect in early 2022, had spurred a number of manufacturing industries in Vietnam to achieve strong growth in the first half of 2022. As a result, these trade agreements will have a positive impact on Vietnam’s import and export activities in the coming years when global consumption recovers, which will then benefit Vietnam’s seaport industry. Hence, VNDS expects Vietnam’s container volume to grow at a CAGR of 8.6 percent in the period 2022 until 2030.

However, in January 2023, the import-export value recorded a decrease of up to 25 percent compared to the same period in 2022, with US$46.5 bln. This is the strongest decrease since 2018. According to statistics, key export items recorded negative growth with electronics down by 11.5 percent; phones down by 18.6 percent; machinery and equipment down by 25.2 percent; textiles down by 30.7 percent; and footwear down by 17.7 percent. This shows that there is likely to be a decline in import-export activities in the first quarter of this year.

Global economic growth in 2023 is forecast to continue to face difficulties, as central banks around the world maintain an increase in operating interest rates to bring inflation back to the target level. Tight monetary policy in the context that growth has not fully recovered from the Covid-19 pandemic and the impact of the war in Ukraine, is likely to lead to a recession in 2023. Vietnam’s main export market is expected to be at a low level, such as the US, EU, and Japan.

Dip in profit

According to the Mirae Asset Vietnam Securities Company (MAS), the above unfavorable factors had caused the world shipping price index to be at an average level in the period 2011 until 2020. In 2023, companies with main revenue coming from shipping services will face greater competition, as profit margins will dip significantly than in previous years. Low growth combined with rising inflation is likely to reduce consumer demand in major export markets and affect import-export output and goods clearance. At the moment, MAS forecasts that the import-export value and customs clearance volume will be difficult to maintain in terms of growth like in previous years and will likely fall flat in 2023.

The year 2022 can be considered the most profitable year for the Hai An Transport and Unloading Joint Stock Company (HAH) since it listed shares on HoSE. In early 2020, HAH only traded above the VND5,000 mark, but by the middle of 2022, the market price of this stock surpassed the VND90,000 mark. The rising HAH wave comes from the very favorable business conditions in the period of 2021 and 2022. In 2022, HAH recorded net revenue of VND3,205 bln, and a profit after tax of VND1,051 bln, nearly two times higher than in 2021. Owing to this result, HAH entered the top bracket of listed companies with the highest EPS on the stock market with VND11,117 per share. The remaining listed seaport enterprises also recorded similar results in 2022.

However, the less positive data in January shows that the ability to maintain growth momentum like in 2022 is extremely difficult or even impossible for listed port companies. The leading enterprise is the Gemadept Joint Stock Company (GMD), which also faces difficulties, so it took the initiative to withdraw 85 percent of its shares from the Nam Hai-Dinh Vu Port Joint Stock Company of GMD in Hai Phong. This is one of GMD main ports in the North with an output of nearly 600,000 TEU per year and is currently operating at 100 percent capacity.

The Vietnam Container Shipping Joint Stock Corporation (VSC ) plans to acquire the Nam Hai-Dinh Vu Port Joint Stock Company of GMD. If the deal is successful, VSC will become the largest port company in Hai Phong in 2023 with a total capacity of about 2.6 million TEU, accounting for 30 percent of the market share in this region. VSC is quite cautious with the business plan and has set a target of pre-tax profit of VND260 bln, down by 45.5 percent. According to the VSC Board of Directors, the financial targets for 2023 are affected by interest on bank loans for the investment program to transfer enterprises in the seaport sector, with an investment loss in subsidiaries estimated at VND240 bln.

Saigon Investment