What push for GMD?

GMD is a significant port and logistics company in Vietnam, with its primary focus on port operations. The corporation presently owns numerous important ports, including Nam Dinh Vu, ICD Nam Hai, ICD Phuoc Long, Gemalink, and Dung Quat bulk port.

Decline in Profit

GMD has officially announced its Q2/2024 financial statement, which shows net revenue of VND 1,181 billion, a 29.5% rise from the same period last year. Meanwhile, Q2/2024 financial income was VND 28 billion, a significant drop from the same period last year. The key reason for this is that in Q2/2023, GMD made an unexpected windfall from its equity sales at Nam Hai Dinh Vu Port Joint Stock Company. After subtracting emerging expenses, GMD recorded a pre-tax profit of VND 511 billion, 77% lower than the same time previous year.

Accumulated revenue for the first six months of this year reached VND 2,187 billion, up 21% year-on-year. However, pre-tax profit fell by 51%, down to VND 1,219 billion. For 2024, GMD targets a revenue of VND 4,000 billion, up 4%, with after-tax profit expected to drop 46% to VND 1,686 billion. By the end of the first half of 2024, GMD has achieved 54.6% of its revenue plan and 72% of its full-year profit target.

To boost profitability, GMD's leadership intends to revitalize its business performance by reforming partnerships with global shipping lines and advancing new initiatives to provide the groundwork for long-term growth.

Alliance with Shipping Lines

From 2024 to 2025, the global container shipping market will have four competitors, including three alliances: the Ocean Alliance, consisting of CMA-CGM (France), COSCO (China), and Evergreen (Taiwan); THE Alliance, consisting of ONE (Japan), Yang Ming (Taiwan), and HMM (South Korea); the Gemini Alliance, consisting of Maersk (Denmark) and Hapag-Lloyd (Germany); and one major shipping company, MSC. Among these, Ocean Alliance is the largest, with a total capacity of 6 million TEU. This alliance currently dominates the two most important shipping routes, Asia-Europe and the Trans-Pacific.

Gemalink is Vietnam's largest deep-water port and can accommodate the world's largest ships. The GMD Group and CMA Terminals, a subsidiary of CMA-CGM (France), have invested in the port. In the foreseeable future, CMA-CGM plans to increase the number of ships landing at Gemalink. Additionally, some shipping companies are projected to get new boats in 2024, with the goal of opening new routes or adding port calls to maximize capacity. As a result, Gemalink expects to provide 1-2 new service routes this year.

Because of this cooperation, GMD has consistently introduced new shipping routes, resulting in considerable cargo volumes for the firm. According to BVSC, freight throughput across GMD's whole port system is forecast to improve significantly, by more than 20%, owing to the industry's overall recovery and increased competitiveness at both southern and northern ports.

Expectations from New Projects

Gemalink 2A and Nam Dinh Vu 3 are in the legal implementation phase, with construction set to begin at the end of 2024 and operations starting in 2026, adding 1.5 million TEU capacity to GMD. However, due to severe competition at Hai Phong Port, Nam Dinh Vu 3 will take around 2-3 years to attain above 70% capacity, while Lach Huyen 3 and 4 piers are projected to commence operations in mid-2025 with a capacity of 1.2 million TEU.

Meanwhile, Gemalink 2A may take just over a year to reach over 70% capacity since Gemalink 1 is already operating above capacity, and no new projects in the Cai Mep Thi Vai area are expected to be launched in the next three years. Currently, major projects such as Cai Mep Ha or Can Gio Port have seen no progress, and if approved, they would need at least 3-5 years before becoming operational.

Using a sum-of-the-parts valuation method for GMD, including (1) core business operations profits from joint ventures and associates, (2) the Gemalink project, and (3) the rubber and real estate projects, KB Securities Vietnam recommends buying GMD shares with a target price of VND 93,900 per share, equivalent to a potential price increase of 21.2% compared to the closing price of VND 77,500 per share on September 12, 2024. This recommendation is based on the following assumptions: First, Nam Dinh Vu 12 port systems are expected to reach 99% capacity in 2024 and operate above capacity in 2025. Second, the average port service fee in 2024 and 2025 is expected to increase by 8% and 4%, respectively, compared to the previous year’s average, with a sustained increase of 4-5% per year until 2030.