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Hai An Transport & Stevedoring JSC HOSE: HAH ANALYSIS REPORT JULY 23, 2022
Authored by: Adonis Team 1. Thi Truong Vi Tran 2. Huy Hoang Nguyen 3. Van Duc Pham 4. Thi Kim Thuy Vo 5. Nguyen Minh Dat To Business Description
Hai An Transportation and Loading Company Limited (after changing to Hai
An Transportation and Loading Joint Stock Company) was established in
2009 in Hanoi with a charter capital of VND 150 billion. HAH has an
extensive logistic network with 3 main branches: Port Operations,
Transportation and Depot & Logistics. The company has established 9
subsidiaries and associated companies operating in the fields of: port
exploitation, warehouse exploitation, container transport, maritime agents,
logistics services... with annual profits of continuous growth since 2010. The
company currently owns a fleet of quality container ships with a total of 8
container ships with a capacity of 700 to 1,800 TEUs that operate effectively
on inland and inland Asia routes. With constant efforts, the Company's fleet is
currently in the top 100 largest fleets in the world, and is one of the most
prestigious domestic and intra-Asian container carriers, ensuring the weekly
schedule in accordance with the commitment with customers.
To promote the expansion of the market, in March 2022, HAH opened the
intra-Asian container transport route: Hai Phong – Hong Kong – Nansha –
Hai Phong with a schedule of 1 week/trip, operated by Haian Bell with a
capacity of 1,200 TEU. This is the first time Haian Lines' ship has operated
Figure 1: Operational plan in 2022
cargo in a mainland Chinese port. In June 2022, the inland container transport
route of PHONG – QINZHOU (Kham Chau – Guangxi – China) that Hai An
Group has just opened was officially opened. This is the second consecutive
shipping route Hai An Group opened in the last 3 months to transport
containers directly from Hai Phong to China.
After successfully receiving and concluding the charter contract with TS
Lines in late March 2022, in early April 2022 ANBIEN AIRCRAFT was
successfully operated by Hai An Transportation and Loading Joint Stock
Company for the first domestic flight. The container ship Anbien Bay with a
capacity of 25,800 dwt equivalent to a capacity of 1,794 TEU was put into
operation on the North- South route, contributing to less cargo pressure due to
the lack of transport facilities on the North-South route.
Hai An Transportation and Loading Joint Stock Company recorded a net
revenue of goods sales and service provision in Q1 2022 of VND 652 billion,
an impressive 82% growth compared to the same period, a profit after tax of
3 times compared to the same period, reaching VND 263 billion. The growth
of the company's profit after tax is mainly brought about by the fleet. Specifically, 1
the company invested in more HA East and HA West ships in April and May
2021, resulting in more ships in Q1 of this year than in Q1 of the previous year.
The revenue structure of HAH has shifted over the years in the direction of
increasing ship operating revenue, in contrast, port operating revenue has
decreased over the years in the period of 2018 – 2021. Most of HAH's
Figure 2: Revenue structure
revenue (more than 80%) comes from ship operation, only a small part comes
from port operation and other activities. Geographical location:
In terms of port exploitation, and depot, HAH has a container yard area of
150,000 m2 along with a CFS bonded warehouse area of 4,000 m2 and a
depot area of 55,000 m2. The geographical location of the logistics is not
favorable for port exploitation but has the potential for ship exploitation.
HAH has stepped up the lease of human mind transport ship haian east -
Singapore - Bangladesh HAIAN WEST – north-south and ship liquidation service named HAIAN SONG. Corporate Governance
Shareholder structure: HAH is a private enterprise with a proportion of
domestic shareholders accounting for 87.96%, the rest are foreign
shareholders. In which, the major shareholders are Hai Ha Investment And
Transport Joint Stock Company with 11.41%, followed by SAOA D.C
Investment Company with 8.27%, CTBC Vietnam Equity Fund is the next
major shareholder with 5.12% shareholding ratio (updated on July 4, 2022),
the rest are other shareholders holding at a very small rate (Appendix 5).
However, this shareholder structure minimizes the risk of large price
fluctuations from the sudden sale of shares from internal shareholders,
causing loss of confidence for investors.
Figure 3: Shareholder structure
Board of Management: The Board of Management has 6 members,
including 1 independent member, ensuring the percentage of independent
members in accordance with the State's regulations (Appendix 2). The
governance structure of HAH has a separate Supervisory Board consisting of
3 members supervising the activities of the Board of Management and the
Board of Directors. Hai An has a leadership with extremely long experience
in shipping. Specifically, Mr. Vu Ngoc Son, Chairman of the Board of
Directors of HAH has more than 50 years of experience when working in
Vietnamese shipping companies since 1970. We have faith that an
experienced Board of Directors is fully
able to provide the right development strategies for the company.
Specifically, in 2021, Hai An Transportation and Loading Joint Stock
Company also benefited from the high trend of international fares, many
shipping companies took the opportunity to lease ships to foreign markets. At
the same time, domestic fares were gradually adjusted to suit the general
trend, thanks to the attempt to invest more ships, so from Quarter IV, the
Company leased 02 ships of type 1740 – 1800 TEU to foreign countries.
Therefore, the profit of Quarter IV for the whole year 2021 increased 3 times compared to the plan.
Board of manager: The Board of Directors of the company consists of 7
people (Appendix 3), in addition to their managerial capacity, members have
professional ability in the field of economics, engineering, transportation and
finance due to their time as specialists in the departments. We believe that this
multi-disciplinary understanding can help the Board of Directors make sound,
expeditious, and disciplined decisions. Industry Overview
In the 40s and 50s of the nineteenth century, a series of shipping companies
were born. By the beginning of the twentieth century, industrial raw materials
accounted for two-thirds of the volume of goods transported by sea. Today,
sea transport has become an indispensable international mode of transport,
accounting for 91% of the goods transported. The shipping industry plays an
important role in the global supply chain.
Despite the large impact from the COVID-19 pandemic, the total cargo
volume through the port of Vietnam in 2021 still reached more than 703
Figure 4: Output of goods transported by
million tons, an increase of 2% compared to 2020. In particular, the volume modes of transport
of imports and exports of international transport of Vietnam's seagoing fleet
has reached a rare growth rate of 54% (reaching nearly 5 million tons)
compared to 2020. The main items are transported on the routes: China,
Japan, Korea, Southeast Asia and some European routes...
The supply chain is congested the price of transport fish is high. In the global
Figure 5: Import – Export balance (billion USD)
shipping market, container freight rates began to fall sharply in February due
to weakened demand during the Chinese New Year, followed by the closure
of China's cities under the "No Covid" policy. According to Drewry, the
average container freight rate has fallen 21% since February but is still 5
times higher than the level before Covid. Shanghai reopened on June 1 and
the high season will put additional pressure on already congested supply
chains. Therefore, we think that congestion will continue to persist until 2023
until the backlog is released, whereby freight rates remain high.
Shipbuilding orders have continued to rise in recent months as hauliers
rushed to expand their fleets to address supply constraints. Total new
shipbuilding orders have reached 26% of the existing fleet tonnage, with 872
vessels (6.6 million TEUs). However, the majority of new shipbuilding orders
are expected to be delivered in 2023 and 2024, so there is no pressure on ship
supply in the short term. However, the consolidation of the container shipping
industry over the past decade will help carriers better control freight rates by:
increasing ship demolition activities to offset the very low level of demolition
in 2021-2022; and reducing the number of trains and reducing the speed of
trains to reduce supply. As a result, the controlled capacity can offset part of
the new train traffic and help maintain transport fares higher than before Covid. Competitive position
Open more intra-Asian service lines from the second half of 2022. HAH is
establishing Zim – Hai An Container Transport Joint Venture with Zim
Integrated Shipping Services Ltd. (the 10th largest container carrier in the
world) to provide transportation services on Inner Asia routes and gradually
expand into South Asia, the Middle East, Oceania... At the beginning, the
Consortium plans to operate 2 routes in Vietnam - Southeast Asia (from the
second half of 2022) and Vietnam - China (from the first half of 2023). With
charter capital of $2 million, the Consortium will not invest its own fleet and
will charter from Zim – Hai An. This joint venture will bring two sources of
income for HAH: revenue from chartering and profit shared from operating the fleet.
Over the past few years, the container shipping industry has been strongly
consolidated, increasing the level of market concentration with the 10 largest
shipping lines controlling about 85% of the market. By leveraging Zim's
established international network, HAH's fleet can access the Intra-Asian
market as a transshipment vessel for long-distance services operated by Zim
and increase its presence in the international market. We think that the current
shortage of empty ships and containers will create opportunities for Zim –
Hai An Joint Venture to build customer files faster. Financial Analysis
Revenue and NPAT in 2021 grew strongly. In 2020, revenue reached 1,191
billion VND. Although the Covid-19 epidemic is still complicated, the total
stocks of goods through Vietnam's seaports have reached more than 689
million tons. The stocks of container cargo through the port reached more
than 22 million TEUs, an increase of 13% over the same period in 2019. Hai
An port operated 277 ships with a total throughput of more than 346,934
TEUs (reaching more than 110.14% of the plan). Transport stocks in 2020
reached 348,862 TEUs (120.30% of the expectation - domestic transport:
Figure 6: Business results (billion VND)
295,210 TEUs, international transport: 53,652 TEUs.
In 2021, HAH's revenue got VND 1955 billion, up 64.1% over the same
period in 2020, reaching the highest level in 2017 - 2021. The Covid-19
pandemic has disrupted supply chains, causing bottleneck seriously at some
importance ports in the world that cause a decrease in transport capacity and
supply. Accordingly, freight rates along with the demand for chartering
increased to compensate for the affected power. Due to high international
freight rates, many shipping lines have taken advantage of the opportunity to
lease ships to foreign markets while domestic freight rates have also been
Figure 7: Global container freight rate index
from January 2019 to June 2022(in U.S dollars)
gradually adjusted to suit the general trend, so the activities of enterprises Sea – Cre: Statista
transport and Logistics still achieved good results. Operating in the fields of
seaports, shipping and logistics, despite being heavily affected by the Covid-
19 pandemic, the Company still grew in profit during the year thanks to
domestic transportation (market share of nearly 30% and increased year-on-
year). freight rates according to the route) and chartering (4 ships), etc.
Outstanding growth in net revenue: HAH is an enterprise with positive net
revenue growth otherwise many businesses have negative net revenue growth
in 2017-2021. This stems from HAH's strong fleet development, high freight
rates, and foreign cooperation with SM Lines or ZIM, which has helped
Figure 8: Net revenue growth rate
HAH's revenue grow significantly. In 2021, Hai An was successful when it
earned a net revenue of up to 1,955 billion VND, a record revenue since its
inception, especially the ship exploitation segment contributed 82% of total revenue - 78.4 % profit.
Profitability: We evaluate through ROA and ROE.
HAH's ROE has clearly improved in 2021 to 34.01%, in which the main
Figure 9: ROA & ROE of HAH from 2017-2021
reason is that the business has focused on investing in its fleet, expanding its
chartering, transportation and seaports in 2021. In the beginning of 2021, Hai
An has invested 580 billion VND in the fleet. Although the company is
maintaining a fairly safe leverage ratio when it wants to save some financial
costs, but the company is still in a good ROE level along with a lot of growth
potential, which will be potential to become a good growth indicator in the future of Hai An.
HAH's ROA is regularly maintained at the leading level of the industry,
which is predicted that in the coming years HAH's ROA will only increase
slightly. And HAH will continue to expand its fleet greatly to make total
assets increase in the coming years while revenue and profit will not grow
suddenly because freight rates are quite high and difficult to increase further. Figure 10: ROE
In contrast to HAH is VOS, which has low profits and even reported losses in
2020. The main reason is that the industry situation in this period is so
difficult and VOS has been greatly affected. Although this business will
report a profit in 2021, it is only a banking structure operation of VOS. In
fact, this business still operates at a loss.
HAH has indicated the industry wave so well and used capital
effectively so which created more confidence from investors.
Efficiency ratios: To evaluate the ability to optimize all kinds of costs of the
Figure 11: Net profit margin
enterprise expressed through the net profit margin (figure 11). HAH's net
margin is always high due to the reasonable strategy of the management.
With low-cost ship investment, depreciation and interest expenses are always
low, which help to keep net profit margin on the top.
Financial Potential: The use of reasonable leverage is a problem for
businesses in general and shipping businesses in particular. HAH's financial
Figure 12: Financial leverage of sea transport companies in 2021
leverage is used reasonably. During the gloomy market period, they used low
leverage. When the market went up and freight rates increased, they
borrowed debt to invest in a new fleet, so they can amplify profits and
increase profits and the ROE index (in 2021 it reached 1.65). However, when
compared to the common ground, HAH's leverage is also low, so that
enterprises do not have to bear too much pressure from interest expenses
compared to other enterprises in the same industry, thereby helping
enterprises to Sustained through bad market times.
Figure 13: Financial Leverage Investment summary
We believe that HAH is in the process of accumulating in the shipping
industry and if VNIDEX exceeds the threshold of more than 1,200 points, growth is
very likely. In the short term, we think that HAH will maintain high profit
growth rate thanks to capacity expansion.
The current seaport sector still benefits greatly from the rupture of the supply
chain, as a result of the Russian-Ukrainian war. In addition, in the world
shipping market, container freight rates have fallen sharply since March, but
as of now July, freight rates are still higher than the same period last year.
HAH is a major operating enterprise and profits from shipping activities.
Current fares remain anchored at high prices. Current fares remain anchored
at high prices. So this is a very high advantage for HAH, especially in 2022,
HAH has improved capacity and number of fleets, this will be a huge
advantage for sudden revenue and profit growth in 2022. Valuation
The method we use is DCF and Market-based valuation
Regarding revenue forecast, based on the growth rate of fleet capacity, the
plan to buy and build new ships, along with the forecast of sea freight rates
will increase or decrease in the coming time.
In terms of cost structure, it is worth noting that fuel costs (accounting for 30%)
- this cost depends on world oil prices, depreciation costs - depend on the
growth of fixed assets such as fleet and port. In addition, there are interest
expenses, selling and administrative expenses.
Indices in the balance sheet, the forecast group is based on the plan to buy
new ships, the capital used to buy the ship, and the past turnover indexes to give future projections.
In 2022, the group's forecast scenario is as follows:
- The company continues to invest in a port and depot project in Vung Tau,
Ho Chi Minh City to create a long-term logistics base for the company in the
southern region. Established and supported a joint venture with Zim Lines to
enter the regional Feeder market.
- In the period of 2022-2024, the company has ordered more ships serving
both domestic and international.
Expand production, increase revenue.
- Freight rates will level off or decrease in the coming quarters, oil prices are
also on a downward trend, which will have a small impact on HAH's revenue,
but according to the team's assessment, when looking at the broader picture, this is still acceptable.
- The plan to expand market share to intra-Asia and gradually to larger
regions is a wise move that brings significant revenue and profit to HAH.
=> The number of outstanding shares of HAH is 68.295.817 shares. Through
the analysis of the data and forecast scenarios of the group, we recommend
BUYING for HAH shares and raising the target price of 1 year to 111.002
VND/share, corresponding to a potential price increase of 66,9%. Investment risk Input cost:
Due to transportation and freight forwarding activities, Company's activities
are affected by the fluctuation in fuel prices, which is a big risk for
transporting enterprises in general and HAH particularly. With the intense
geopolitical situation at this time, maintaining high oil prices may stand a
great threat against businesses. However, because of petroleum’s international Figure 14: Risk Matrix
dependence, the Company can only adjust service prices accordingly and in line with the market. Economic growth:
For a company specializing in seaport services, transporting and logistics, the
on-going events of industrial production, domestic and international trade
actually has a great impact on the main production and business results.
Economic growth is still low due to the lack of domestic human resources,
then FDI capital will also decline, affecting the entire economy. However, the
Figure 15: The price of crude oil from the
high rate of vaccination against COVID-19 vaccine and the non-hazardous
beginning of 2022 (USD/barrel)
Omicron strain like Delta will be psychological drugs to help the group of
workers quickly return to work, which may be a sign for the future. the
recovery of the economy and the stronger development of the transportation industry.
Inflation (CPI and Basic Inflation)
As a port and shipping service company, the inflation index affects the
Company's production and business activities through input costs, especially
petroleum and labor prices. The pressure to control inflation in 2022 is
Figure 16: VietNam’s economic growth 2011-
considered to be significant, especially when the energy crisis may put a 2021(%)
heavy burden, the tendency of speculation and hoarding of strategic products
of some big countries would make a comprehensive impact on worldwide and
domestic economy. In addition, the
inflation situation also affects import- export