Stanley Brothers Securities Incorporation (SBSI) has just released an updated report on An Phat Holdings and its member companies. In which, giving a positive assessment on the growth prospect of An Phat Bioplastics JSC (Ticker symbol: AAA) with an expectation of profit after tax this year will reach 2.2 times higher over the same period last year.
Although the Covid-19 pandemic has severely affected the global economy, affecting the production and business activities of many enterprises, AAA has proven to maintain a stable production output that has not been affected by Covid-19.
In 2021, SBSI forecasts that AAA’s revenue will reach VND 8,895 billion (~$378 million), equivalent to an increase of 19.7%; AAA’s after-tax profit reached VND 621 billion (~$26 million), 2.2 times higher than that of 2020. In which, the profit is expected to come from three segments: industrial real estate, packaging and compostable products.
Specifically, the industrial real estate segment is expected to rebound thanks to the remaining area revenue of An Phat Complex IP and the new project An Phat 1 IP will start commercial operation in the third quarter of this year. In addition, the production of plastic packaging continues to increase thanks to the optimization of equipment productivity and the contribution from jumbo bags of An Vinh Packaging JSC.
Bright prospect with industrial real estate
Vietnam’s industrial real estate market, especially in the North, is picking up speed as the trend of shifting production out of China and FTAs set eyes on Vietnam.
In Hai Duong, with a favorable geographical location, Hai Duong’s industrial real estate market witnessed a positive growth in both land rental (up 5-20%) and occupancy rate (reaching 79% for land, 97% for factory). In detail, industrial land rental price in Hai Duong fluctuates between 60 – 90 USD per square meter per remaining term; The factory rental price ranges from US$ 3-5 per square meter per month, which is the lowest in the Northern provinces and luring investors.
Furthermore, among 21 industrial parks approved for planning in Hai Duong province, currently only 11 industrial zones have been put into operation (total area of 1,560 hectares), the vacant land fund available for lease in Hai Duong in the period 2021-2022 is running out.
The production value chain in Hai Duong province has been increasingly improved as the province has attracted many large-scale hi-tech enterprises, leading to increase demand for industrial land, in the context of a limited land fund from now until 2022, this will be an advantage for An Phat 1 IP when it comes into operation this year.
An Phat 1 Industrial Park covers an area of 180 hectares with a commercial area of 130 hectares. It is estimated that An Phat 1 Industrial Park will contribute about VND 2,560 billion (~$ 109 million) and VND 795 billion (~$ 33 million) to AAA’s revenue and profit respectively in the next 5 years.
Increase profit margin with packaging segment
SBSI Securities Incorporation believes that AAA benefits from increasing the proportion of compostable packaging and maximizing industrial packaging production capacity, which leads to an increase in profit margin. Since 2018, AAA has launched a compostable product line in the domestic market and has continuously increased capacity up to now. The compostable packaging production currently utilises AAA’s existing packaging production lines, which can be flexibly converted without additional new investment costs.
Besides, AAA continues to invest in factory No. 8 with a capacity of 9,600 tons per year to produce compostable bags to enhance competitiveness and meet the rapidly increasing global demand for compostable packaging.
With great market potential, especially in Europe and America, AAA can take advantage of production advantages from raw materials to finished products to reduce costs and compete with major manufacturers in the world.
Self-production of raw materials will help AAA save 30-40% of raw material costs compared to the current import, which helps AAA to offer competitive prices, ensuring output for products, and increases the profit margin of the company at the same time.
With the acquisition of An Vinh Packaging, starting mid-2020, AAA has recorded revenue from trading jumbo packaging used in industrial transport. An Vinh factory has a design capacity of 12,000 tons per year and is operating at 60-70% capacity. An Vinh is expected to contribute revenue of VND 5-600 billion (~$ 212-255 million) per year on average and profit margin is higher than the profit margin of traditional thin monolayer film when running at full capacity.
Increase capital with the plan to issue 75 million shares
AAA has a plan to issue 75 million shares to help mobilize the necessary capital to develop business operations in 2021. On February 5, 2021, AAA’s General Shareholders Meeting approved the plan to issue 75 million shares with public auction via Hochiminh City Stock Exchange (HOSE) and an unlimited number of investors. The starting price of the auction is VND 14,000 per share, the total amount of mobilized capital is expected to be VND 1,050 billion (~$ 44 million).
It is expected that the auction will be conducted in May 2021, the raised capital will be used to structure debt and develop business. This is positive information for the financial situation as well as the business prospects of AAA.
AAA’s business activities are divided into three main segments, including manufacturing plastic packaging, trading plastic additives and resins, and industrial real estate. All three segments have positive prospects in 2021.
SBSI Securities Incorporation recommends investors to buy AAA with a target price of VND 24,000 per share (diluted after additional issuance).
