20151111-Maybank_KERPL-New_player_in_cooking_oil_segment_13页_496kb

Summary of Travel Investment & Seafood Development (DAT VN)

Core Content

Travel Investment & Seafood Development (DAT VN) is a Vietnamese company established in 2008, listed on the Ho Chi Minh Stock Exchange (HOSE) in 2015. It specializes in the processing and production of Pangasius fillets and by-products, including fishmeal, refined fish oil, and cooking oil. DAT's parent company, IDI VN, holds a majority stake and provides critical support in terms of raw material supply and quality control.

Key Information

• Share Price: VND18,300
• Market Cap (USD): $31M
• Average Turnover (USDm): 0.1
• Free Float (%): 12.6
• Issued Shares (m): 38
• Total Capital (VND): VND695.4B
• Major Shareholder: International Dev’t & Invt (79.3%)
• 1H15 Revenue: VND341.6B, representing a 140% YoY increase, driven by the launch of the Ranee fish extracted cooking oil product line.
• Ranee Contribution: VND116B or 34% of total sales in 1H15.
• Plans for Expansion: DAT aims to double its capital to VND762B by year-end 2015, with an additional 38.1M shares issued.
• Future Revenue Growth: Expected to grow at 23% / 34% 3-year CAGR for revenue/net profit.
• Market Position: DAT is the third-largest fishmeal producer in South Vietnam, with the two leaders being VHC (30%) and Honoroad Vietnam Co. (22%).
• Cooking Oil Market: DAT is a new entrant in the cooking oil segment, aiming to capture market share through its premium brand Ranee.
• Consumer Demand: Vietnam's per capita cooking oil consumption is 7-9kg/year, lower than the global average of 14kg/year. Ranee is positioned as a premium product, with a 12% higher ASP than traditional oils.
• Capacity Expansion: DAT has expanded its processing capacity to 300 TPD, with plans to reach 200 TPD for cooking oil by next year.
• Financial Performance:
  • 1H15 Net Profit: VND6.2B, a 69% YoY increase.
  • Gross Margin: Decreased from 8% in 1H14 to 4% in 1H15 due to cost overruns.
  • Core P/E (1H15): 1.9x
  • Net Debt/Equity (1H15): 51.6%

Main Business Segments

Fishmeal and Refined Fish Oil

• Contributes 46% of total revenue in 1H15.
• Used in animal feed and is a key part of DAT's strategy to reduce reliance on imports.
• DAT has a secure supply of raw materials from IDI, giving it a competitive edge.

Cooking Oil (Ranee)

• Launched in Q2 2015, with commercial production starting in July 2013.
• Positioned as a premium product with health benefits like EPA, DHA, and Omega 3, 6, 9.
• Mainly distributed through retail channels.
• Expected to be a key earnings driver for 2015-2017.
• DAT plans to expand its market share and later export the product.

Risks and Challenges

• Dependency on IDI: DAT's operations are heavily reliant on its parent company for raw materials.
• Competition in Cooking Oil Market: The market is dominated by Vocarimex (70% market share) and other established players.
• Cost Overruns: Initial operations of the cooking oil plant led to higher costs and lower gross margins.
• Branding and Distribution Costs: DAT needs to invest in marketing and distribution to gain traction in the B2C retail market.

Management Guidance

• FY15-17 Revenue Targets:
  • 2015: VND1,000B
  • 2016: VND1,200B (+20% YoY)
  • 2017: VND1,520B (+26.7% YoY)
• Ranee Revenue Targets:
  • 2015: VND689B
  • 2016: VND804B (+16.7% YoY)
  • 2017: VND919B (+14.3% YoY)
• Net Margin: Expected to increase from 0.7% in 2015 to 6.1% in 2017.
• ROE: Expected to rise from 6.6% in 2015 to 11.8% in 2017.
• EPS Guidance: VND1,339 for FY15E, while 1H15 EPS was VND168.
• Dividend Yield: Expected to remain at 0% for FY15.

Capital Structure and Financials

• Capital Increase: DAT plans to double its capital by Q4 2015, with a 2:1 share issue for existing shareholders and public offerings.
• Capital Structure:
  • Total Assets (1H15): VND769.3B
  • Shareholders Equity (1H15): VND443.4B
  • Total Liabilities (1H15): VND325.9B
• Debt Management:
  • Net Debt/Equity (1H15): 51.6%
  • Debt/EBITDA (1H15): 11.9x
• Cash Flow:
  • Free Cash Flow (1H15): VND48B
  • Net Cash Flow (1H15): VND14.4B

Industry Overview

• Fishmeal Market: Vietnam relies heavily on imported fishmeal, but the domestic market is growing due to government initiatives.
• Cooking Oil Market: Fish oil is a new product in Vietnam, with limited consumer awareness.
• Market Potential: With the rise in health-conscious consumers, the demand for fish oil is expected to grow.

Key Points

• Strategic Expansion: DAT's entry into the cooking oil segment is a strategic move to diversify and grow its business.
• Product Diversification: DAT processes various by-products, including fishmeal, crude fish oil, fish stomach, and fish maw.
• Future Outlook: DAT's management is optimistic about the growth of the cooking oil segment, which is expected to drive future earnings.

Conclusion

DAT VN is a growing player in the Vietnamese seafood and fishmeal industry, with a focus on expanding its presence in the cooking oil segment. The company's recent 140% YoY revenue growth highlights the potential of this new business line. However, it faces challenges in a competitive market and must manage costs and branding efforts to sustain growth. The planned capital increase and expansion of production capacity indicate a strong growth strategy, but the impact of share dilution on EPS should be monitored.