Four inherent risks for GMD

In 2Q21, GMD’s net revenue increased by 24% YoY, reaching VND 752 billion.

Gemadept Corporation (HoSE:GMD), set up in 1990 in Ho Chi Minh city, Vietnam, is engaged in the provision of freight shipping services. It operates through the following business areas: Port operations, logistics, forestry, and real estate. The port operations business area includes the exploitation of port systems and investment in the south sea container terminal project. The logistics business area operates distribution centers, transport liners, and multimodal transport; and provides ship management and crew, air cargo, and forwarding services. The forestry business is engaged in the planting, tending, harvesting, and processing of rubber trees and industrial plants in Cambodia. The real estate business area involves the construction and operation of commercial centers, hotels, and office buildings. 

In 2Q21, GMD’s net revenue increased by 24% YoY, reaching VND 752 billion. PAT grew by 39% YoY, reaching VND 178 billion. The higher increase of the bottom line was thanks to the profit from affiliates. The profit from its affiliates increased by 278% YoY. Despite the COVID-19 pandemic, Saigon Cargo Services – GMD’s affiliate (HOSE: SCS) – still had a good performance as it was being the main role in transporting vaccines. Moreover, Gemalink began to have a turnaround in the business performance when operating in full capacity in June 2021. Thanks to Gemalink, the container throughput in GMD’s Southern ports increased by 104% YoY in 6M21. In July, Gemalink had a profit.

PHS raised its forecast of GMD’s revenue and profit compared to its previous report. The revenue in 2021 would be VND 3.1 trillion (19% YoY), increasing by 12% compared to its old forecast. The profit in 2021 would be VND 599 billion (36% YoY), increasing by 11% compared to its old forecast. The increase of new forecast is thanks to the upbeat trade flow through Gemalink port and the increase of the transportation freight.

The catalysts for GMD include (1) Gemalink is a driver for future growth. (2) The company is ambitious to increase its capacity in 2021. With the tailwind from the upbeat trade flow in Hai Phong and Ba Ria Vung Tau ports, GMD also has a plan to expand the capacity in Nam Hai Dinh Vu Port and start the Gemalink phase 2 in 2021. (3) As a top leader in logistics services provider, GMD is a beneficiary of the growing retail industry and infrastructure development in Vietnam.

However, PHS said GMD has faced many risks. First, Gemalink may not operate well, affecting the probability of the project. Second, the pandemic could disrupt the trade activities between countries and provinces. Third, the pandemic could delay the time of phase 2 of Gemalink. Fourth, any unexpected policy changes related to the infrastructure development could cause troubles for GMD’s operation.

By using SoTP like the previous report, PHS still maintains its fair price of VND 54,800 per share. Therefore, it has the HOLD recommendation for this stock.