1. CFA Institute Research Challenge
Hosted by
CFA Society Vietnam
National Economics University
Vinh Hoan Corporation
2. CFA Institute Research Challenge
Hosted by
CFA Society Vietnam
National Economics University
Nguyen Nam Anh 11150209 Advanced Finance 57B
Do Long Khanh 11152225 Advanced Finance 57B
Pham Thi Bao Ngoc 11153227 Advanced Finance 57B
Tran Thi My Linh 11152663 Advanced Finance 57A
Quach Ha Binh 11150545 International Business
57B
3. Market profile
Closing price 92.30 mil
52 – week
high/low
5,229.39 mil
Average
volume (13
weeks)
3,114.00 mil
Shares Out. 6,525.74 bil
Employees 3,150
Branches 1
Industry Farming & Fishing
& Plantations
ROE 21%
Beta 0.81
EPS 6.400
PE 11.4
Ticker – HOSE: VHC Recommendation: HOLD
Closing Price: VND69,000 (13/08/18) Target price: VND74,000
VHC
Executive Summary
Vinh Hoan Corporation is one of the top Vietnamese processors and exporters of Pangasius/basa
fish (Pangasius Hypophthalmus and Pangasius Bocourti).
INVESTMENT SUMMARY
We issue a HOLD recommendation on Vinh Hoan Corporation (VHC) with a one – year target price of
VND74,000 using the Discounted Free Cash Flow to Firm Method and Multiple Valuation Method.
This offers a 4,9% upside from its closing price of VND69,000 on August 13rd 2018. VHC is able to
capitalize on the favorable economic and demographic conditions to further maximize firm value
through its proper core business strategy, strong dominance in the jewelry market and solid
business growth
Raw material self-sufficiency leads to stable revenue growth
In Vietnam’s pangasius industry, Vinh Hoan is among the very few companies able to build
avertically integrated production system with a sustainable development strategy. With 220ha of
farming area added in 2016 to a total of 530ha and 55ha of hatchery, the company’s self-supplied
materials reached 65% as of end 2017, from a low 17% in 2007.
A higher self-sufficiency rate allows VHC to exercise strong quality control and traceability of
fingerlings and raw fish, avoiding most disease contamination. The company is less dependent on
third party suppliers and less affected by fluctuationsin raw materials prices.
A move to higher profitability segment
Frozen pangasius fillets accounted for over 75% of VHC’s revenue mix in 2015-2016, while by-
products accounted for ~15%. VHC indicates 12-16% gross margin for frozen fillet and ~8-10% for
by-products.
The most noteworthy segment is value-added products,which has a high gross margin of 22-25%.
VHC is expanding its product range to include tilapia, barramundiand shrimp to diversify even more
into value-added products. In 2016, value added productscombined with barramundi, tilapia and
shrimp accountedfor 4.4% of VHC’s revenue mix. We estimate this proportion to increase to 4.6% in
2018. VHC aims to increase the proportion to 10%.
Global GAP, ASC and BAP certifications for higher ASP
About half of VHC’s farming area received ASC (Aquaculture Stewardship Council), BAP (Best
Aquaculture Practice) or Global GAP (Global Good Aquaculture Practice) certification or all three
certifications. In details, the company currently has 142ha with ASC certification, 155ha with BAP
certification and 180ha with Global GAP certification.
These certifications provethat VHC meets the strict food safety and quality requirements of difficult
export destinations such as the US or European markets. The company also demonstrates the
sustainability of its production chainas well as safety standardsfor its workers and the environment
through these certifications.
The market leader of the industry & stable earnings growth
In 2017, VHC posted a net profit of VND593.4bn, +4.7% YoY. Moving into 2018, we estimate the
company will deliver a similar growth rate of 4.5%YoY to VND620.0bn along with the recovery of
the sector. From 2019 onwards, we expect the shortage situation to be resolved and VHC to be more
familiar with Farm Bill requirements. Thus we expect the company to deliver a much higher
earnings growth rate of 12.1%,to VND694.9bn in net profit in 2019, equivalent to a 5 year CAGR of
9.6% in 2019. This translates into an EPS of VND6,717 per share in 2018 and VND7,528 per share in
2019, respectively.
Loking at VHC’s ROE and ROA, the company delivered high ratiosin 2017, at22.4% and 12.5%
respectively, while the average industry was negative. The negative ratios forother companies are
VINH HOAN CORPORATION
4. the result of the materials supply crisis in the industry over the last 2 years, the much higher
ratios of VHC once again emphasizes the leading position of the company and shows that VHC is
the bright star of the industry.
Favorable Valuation:
Using both DCF and Relative Valuation methods (including EV/EBITDA, P/E and P/S multiples), we
came up with one-year target price of VND 74,000 (USD 3.62), implying an 5% upside from its closing
price of VND 70,000 (USD 3.09) on 08-Aug-2018.
Investment Risks:
Including market, regulatory, business and operational risks. The biggest risk of this company is the
economic downturn (COGS contribute more than 80% of the Monte Carlo results). Monte Carlo
Simulation (500,000 trials) outcomes confirmed our Hold recommendation.
Business Description
Vinh Hoan Corporation is one of the top Vietnamese processors and exporters of Pangasius/basa
fish (Pangasius Hypophthalmus and Pangasius Bocourti). Established on December 29, 1997 in Dong
Thap Province, Mekong Delta, the company is the top choice of many foreign importers of Pangasius
fillet and other Pangasius products. By strictly conforming to the HACCP, frozen fillets are processed
and packaged in the freshest condition. There are three popular colors of fillets in the current
commerce: white, pink and yellow. This is farmed fish; therefore, the volume is steady and stable for
processing and exporting year-round. With the effective management of HACCP, GMP, ISO
9001:2000, ISO 14001:2004, BRC and IFS, Vinh Hoan has applied an integrated Pangasius fillet
production from farming to processing. Apart from Pangasius fillet, Vinh Hoan supplies a wide range
of other Pangasius products.
Vinh Hoan’s three divisions:
1) Vinh Foods– Providing premium seafood from sustainable aquaculture
2) Vinh Aquaculture – Helping advance sustainable tropical aquaculture with a combination of
research, development, education, and on-site training
3) Vinh Wellness – Providing premium wellness products derived from sustainable aquaculture
Primary categories of products:
1) Pangasius Fish Fillet
2) Value Added Products
3) By-Products
4) Block, Loin and Portion.
The biggest Pangasius exporter in Vietnam:
Vinh Hoan Corporation is a leading company in the pangasius industry in Vietnam and the world,
which has a 15% market share of Vietnam pangasius exports and has maintained its leading position
since 2010. The US, EU and China are the three bigges t exporting market of VHC in 2017. The
propotion of product exported to the US is 58% of the total amount, that of EU is 15% and China is
10%. VHC accounted for 43.5% of the total pangasius from Vietnam which is imported by the US. For
the EU market, VHC has 15.1% of the market share for Vietnam’s pangasius. Apart from that, VHC
also has large market share in other markets such as Canada (38.2%), Japan (29.5%), Hong Kong
(26.5%) and Australia (22.3%).
Effective intergrated production chain:
Vinh Hoan Corporation has an effective production chain including hatchery, feedstock production,
and farming to process frozen Pangasius fillets. The company also demonstrates the sustainability of
its production chain as well as safety standards for its workers and the environment through these
certifications.
5. Corporate Management:
Name Age Since Title
Vi Tam Ngo Nguyen, MBA 39 2003 Chief Executive Officer & Director
Le Khanh Thi Truong 57 1997 Chairman
Kim Dao Thi Nguyen 39 2003 Chief Financial Officer & Director
Duc Phu Vo 42 2012 Director
Hoa Tuyet Truong, MBA 42 - Director & Chief Sales Officer
Kieu Oanh Thi Phan - 2017 Director
Thai Ly Thi Nguyen - - Investor Relations Officer
Trung Duc Huynh 55 2001 Chief Projects Officer
Phuong Tuyet Truong 44 1998 Chief Purchasing Officer
Hue Thanh Ho 36 - Chief Production Officer
COMPANY STRATEGIES
Producing and exporting pangasius are still the two key factors contributing to the revenue and
profit of VHC. In order to maximize its profit and improving the competitive positioning, VHC focuses
on 3 main strategies:
1) Increasing the market share of existing market and expanding to new markets. Concentrating on
improving the markets share on traditional markets such as the US and EU in order to take the
advantage of tax and VHC’s reputation in the US market.
2) Developing value-added products. Vhc decideed to increase the sales of these products in order
to receive more revenue through their large profit margin.
3) Developing direct sale channel to restaurants and supermarkets
Vinh Hoan corporation concentrated not only on improving its ability in producing products in order
to ensure the supply for market but also on improving its self-control for the inputs though investing
in infrastructures and M&A activities.
42.87%
6.50%4.58%4.92%
4.98%
36.15%
Truong Thi Le Khanh
Mitsubishi
Lam Quang Thanh
Red River Holding
Vietnam Investment Fund
Others
6. Industry Overview and Competitive Positioning
INDUSTRY OVERVIEW
Demand driver:
The global market is expects an increase in demand of pangasius. US, EU and China are
presently the largest importer of Vietnam pangasius.
EU
Pangasius’ growth in EU has been thwarted by market barriers erected by industry’s competitors
and erroneous reporting by mass media. Pangasius directly compete with many white fish species,
such as Cod, Saithe, Hake, A-P, Haddock, Redfish, Hoki... Persistent negative claims about Pangasius'
safety and environmental issues in the E.U. markets have damaged the fish’s image and destroyed
the industry’s reputation. From 2013 to 2017, Vietnam Pangasius export to EU has been showing
gradual contraction by a -6.93% CARG.
US
For years, pangasius faced high anti-dumping duties imposed by the U.S government, and a push for
increased inspections. In August 2017, the U.S. Department of Agriculture’s Food Safety and
Inspection Service (FSIS) began inspecting all imported pangasius. Only a few months after the
decision, only two out of 14 Vietnamese pangasius exporters are still shipping pangasius to the U.S.
In 2017, pangasius export value to US slightly decree`sed by 11%. In the long-run, the US is still a
potential market for Vietnam with increasing demand for fisheries products. From 2010 to 2017,
pangasius
China
China on the other hand, has quickly become Vietnam biggest pangasius importer, accounted for
23% of Vietnam’s pangasius net export value in 2017. The demand for pangasius/white fish in china
is surging due to many factors. High population means china market has a great capacity for fisheries
market. With 67% of its population is within the working age, increase in GDP per capital has been
driving the consumption of fisheries. Contaminated water source has raised consumer awareness
about domestic freshwater fish. In this circumstance, importing is the solution to meet the demand
of domestic consumers.
-
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
3,500,000
4,000,000
2014 2015 2016 2017 2018F 2019F 2020F 2021F 2022F
Malaysia Indonesia Bangladesh India Vietnam
67.0%
68.0%
69.0%
70.0%
71.0%
72.0%
-
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
Freshwater fish import from third
countries
Vietnam Pangasius import
Vietnam Pangasius import weight
9%
91%
35%
31%
14%
4%
9%
7%
Cod Alaska Pollock
Hake Nile Perch
Pangaius Others
-20.00%
-10.00%
0.00%
10.00%
20.00%
30.00%
0
50
100
150
200
250
300
Pangasius Tilapia Growth rate
0.00% 5.00% 10.00%
90+
80-84
70-74
60-64
50-54
40-44
30-34
20-24
10-14
0-4
China population structure
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
0
1000
2000
3000
4000
5000
6000
7000
8000
GDP per capita Growth rate
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
0
500
1000
1500
2000
2013 2014 2015 2016 2017
Vietnam pangasius export value to China
China total pangasius import value
Vietnam pangasius import weight
7. Common belief suggest that due to contraction in EU and appealing obstacle in US market has led to
the transition in pangasius exporting market. We have also seen a surge in demand from North
America market including Brazil and Mexico. Meanwhile, Vietnam’s pangasius is success in keeping
on its feet in the ASEAN market.
Macro analysis:
According to the General Statistics Office of Vietnam, economic growth of Vietnam in the second
quarter of 2018 equals to 7.79% (yoy). Despite the lower growth compare to the first quarter, but
this is the highest growth of the second quarter in the 10 nearest years. Besides that, the advantage
of weather and the market price level continue to bring highest level of growth for the aquaculture
of Vietnam in the 8 nearest years.
Following the trend in the first quarter of 2018, the inflation of the second quarter continue to rise.
The total inflation increase from 2.66% in March to 4.67% in June. The average CPI for the first 6
months of 2018 increase by 3.29% compares to that of 2017.
Core inflation which had increased to 1.47% in February stayed stable at 1.37% in 6/2018. This
indicates that the State Bank of Vietnam still control the monetary policy in a careful way.
The second raising interest rate of Fed in the second quarter of 2018 is one of the most important
factor stimulate the appreciation of USD and the depreciation of many local currencies. This event
has a quite huge effect on the exchange rate VND/USD in the second quarter of 2018. According to
that, central parity rate and spot rate at commercial banks are all increase slightly. In the upcoming
months, the exchange rate still face the raising pressure when the financial market is worrying about
the war trade between the US and China.
INDUSTRY ANALYSIS
Pangasius is Vietnam’s largest fishery product for export by volume and the second largest by value.
In 2017, Vietnam exported $1,777 million of pangasius to more than 160 countries, accounting for
21.4% of Vietnam’s total fishery exports.
Data from the VASEP suggests that Vietnam’s pangasius exports recorded a 10yr CAGR of 6.1% from
a low USD980.0mn in 2007. However, the industry’s turnover has been turbulent as shown in the
graph below with a strong YoY growth of 48.4% and 30.1% recorded in 2008 and 2011, respectively.
Excluding that, the industry turnover remains almost flat, especially over the last 6 years.
This is primarily underpinned by import barriers from the US and EU–two of the largest markets for
Vietnamese products-with anti-dumping taxes, food safety controls, quarantines, and more recently,
the Farm Bill rules implemented by the US.
Demand from the EU has been declining since 2015 given beliefs about the negative environmental
impact of Vietnamese pangasius from production waste. Export volume to the EU also declined
sharply in 2017given negative news coverage about Vietnamese pangasius by Cuatro TV (Spain),
concerning unhygienic cages and non-industrialized feed, which drove Carrefour – the largest retail
group in the EU – to stop importing pangasius from Vietnam as some schools in Spain have refused
15%
23%
18%6%
6%
8%
27%
11%
19%
23%4%
4%
8%
27%
EU US China Brazil
Mexico ASEAN Others
20162017
1,427
1,856
1,744 1,720 1,777
1,565
1,715 1,777
2010 2011 2012 2013 2014 2015 2016 2017
Vietnam pangasius export value
Vietnam pangasius export value
46%
22%
7%
8%
11%
Shrimp Pangasius
Tuna Squid & Octopus
8. to buy it.
Export markets: China became the biggest importer of Vietnam’s pangasius
In 2017, China surpassed the US to be the biggest importer of Vietnam catfish with import
turnover of $420 million, up by 37 percent over the year before. In addition, the ASEAN
market also witnessed an increase of 6% in 2017 and 57% in Q1/2018. According to VASEP, ASEAN
will soon surpasses the EU to become the third largest importer of Vietnamese pangasius (after
China and the US).
The 10 leading importing markets of Vietnam pangasius from 2012 - 2018
No 2012 2013 2014 2015 2016 2017 3M/2018
1 EU EU EU U.S U.S China China
2 U.S U.S U.S EU China U.S U.S
3 ASEAN ASEAN ASEAN China EU EU ASEAN
4 Mexico Brazil Brazil ASEAN ASEAN ASEAN EU
5 Brazil Mexico Mexico Mexico Mexico Brazil Mexico
6 China China China Brazil Brazil Mexico Brazil
7 Russia Colombia Colombia
Saudi
Arabia
Colombia Colombia Colombia
8
Saudi
Arabia
Saudi
Arabia
Saudi
Arabia
Colombia
Saudi
Arabia
Saudi
Arabia
Saudi
Arabia
9 Colombia Australia Egypt Canada Canada Canada UK
10 Australia Russia Australia Egypt Australia Australia Australia
Pangasius in China is considered a high-quality-but-cheap protein, so the shift to the Chinese market
is an appropriate strategy for Vietnamese pangasius companies. In the face of declining demand
from the EU due to false media campaigns and tougher tariff and technical barriers in the US, China
will be a good alternative. However, profit margins in the Chinese market are lower as China imports
mainly whole not processed fish.
COMPETITIVE POSITIONING
The biggest Pangasius exporter in Vietnam.
Vinh Hoan Corporation is a leading company in the pangasius industry in Vietnam and the world,
which has a 15% market share of Vietnam pangasius exports and has maintained its leading position
since 2010.
Intergrated & certified production chain.
Vinh Hoan Corporation possess an integrated production chain from hatchery, feedstock production,
and farming to process frozen Pangasius fillets. About half of VHC’s farming area received ASC
(Aquaculture Stewardship Council), BAP (Best Aquaculture Practice) or Global GAP (Global Good
Aquaculture Practice) certification or all three certifications. Specifically, the company currently has
142ha with ASC certification, 155ha with BAP certification and 180ha with Global GAP certification.
These certifications prove that VHC meets the strict food safetyand quality requirements of difficult
export destinations such as the US or European markets. The company also demonstrates the
sustainability of its production chainas well as safety standardsfor its workers and the environment
through these certifications.
0
1
2
3
4
5
Intensity of
Rivalry
Threat of
Substitutio
n
Bargaining
Power of
Suppliers
Bargaining
Power of
Customers
Threat of
New
Entrants
Porter's Five Forces Analysis
9. According to management, those certifications also allow VHC to have a higher ASP,with a10-15%
premium versus average market prices
Increased self-supply ability
The company has a high raw material self-sufficiency rate of 65% , with 32 farms with a total area of
530 ha and 55ha of hatchery and 6 processing plants with a total capacity of 850 tonnes of raw
material per day. The self-sufficiency rate allows VHC to exercise strong quality control and
traceability of fingerlings and raw fish, avoiding most disease contamination. Also, the company is
less dependent on third party suppliers and less affected by fluctuationsin raw materials prices.
Traditional market focus
Although the Vietnamese pangasius industry has shifted focus from the US and EU to China, China
remains Vinh Hoan’s 3rd market. Given the lack of raw materials in the last two years, Vinh Hoan
chooses to focus on traditional markets such as the US and EU rather than expanding into a new
market (China). This is considered a good move for the company as average export prices tend to be
lower for the Chinese market, while VHC aims is to expand the proportion of its value-added
products. Additionally, as the standards the US and EU are the highest in the market, meeting the
requirements in these areas will allow VHC to be able to enter additional new export destinations.
A move to higher profitability segment.
At the moment, VHC is expanding its product range to include tilapia, barramundiand shrimp to
diversify even more into value-added products. In 2016, value added products combined with
barramundi, tilapia and shrimp accounted for 4.4% of VHC’s revenue mix. This proportion is
estimated to increase in 2018.
Another remarkable segment is VHC’s gelatin and collagen segment. Although this segment currently
accounts for less than 1% of VHC’s revenue mix, this segment has very good potential with high
profitability,as it is derived from by-products. According to ABCS, Gelatin products could be sold for
as high as 10USD/kg and collagen at 20USD/kg while traditional by-product prices are only
~15,000VND/kg (~0.7USD/kg). According to management, this segment has the highest gross
margin, up to 25-30%.
Price advantage
Vinh Hoan is exempt from anti-dumping tax duty imposed by the US government, and enjoys a zero
anti-dumping tax rate in POR 13. Therefore, in the medium term, other Vietnamese competitors,
such as Hung Vuong, Thuan An and Nam Viet which must pay high tax rates, cannot compete with
Vinh Hoan in the US and this seafood company can continue to increase its market share in this
world highest margin market.
Valuation
We value VHC based on DCF and P/E methods and derive a target price of VND73,500/sh, equivalent
to an upside potential of 5%.
1. DCF Valuation
A discounted cash flow analysis was used to estimate the intrinsic value VHC’s share price due to the
predictability of cash flows in relation to growth and profitability. The primary model is forecasted
five years.
The base case for this model was formulated using guidance from historical performance, industry
outlook, and company revenue, earnings growth and change in exchange rate . The DCF is most
sensitive to the WACC because of the change in capital structure as the result of company’s need for
the working capital. CAPM was used to estimate Cost of Equity, while interest rate or a 5-year
government bond was used to calculate Cost of Debt. The target capital structure of 60% equity and
40% debt is utilized from 2018-2022. The team prefer FCFF for VHC as (1) the company leverage is
decreasing over time; (2) the fundamentals of the company are taken into consideration. This
method consists of a two- stage growth rates and the second phase of year to year forcecast up to
2022 with moderate growth rates and the second phase of a constant growth of 3%. Based on our
10. Variable Value
Risk free rate 4.53%
Adjusted Beta 0.8
Equity Risk
Premium
Cost of equity 12.47%
Pre-tax Cost of
Debt
9%
Marginal Tax rate 20%
After tax Cost of
Debt
7.2%
Capital Structure 40% Debt, 60%
Equity
WACC 11.08%
Statistics: Forecast values
Trials 500,000
Base Case 80,912.84
Mean 85,294.02
Median 84,075.91
Mode ---
Standard Deviation 20,297.40
Variance 411,984,398.04
Skewness 0.4175
Kurtosis 3.57
Coeff. of Variability 0.2380
Minimum 7,547.94
Maximum 246,902.23
Range Width 239,354.29
Mean Std. Error 28.70
analysis, the estimated price is VND 73,206.
Our model is sensitive mostly to the following factors:
Revenue
In the last 5 years, fish products’ export accounts for 90 – 95% of VHC’s revenues each year. The
Company’s biggest importers are the U.S (58.84%), EU (13%) and China (9.95%), respectively. VHC’s
target is to bring the proportion of value added products up to 10% of total revenue in 2022, as the
segment is highly profitable with a 22-25% gross margin. However, due to barriers faced in
exporting produts to U.S, EU and Latin America nations, expanding to their 3rd market (China) will be
VHC’s plan in the following years. Assume that the market size is constant, production export growth
rate will be equal to population growth rate.
Weighted average cost of capital (WACC)
To calculate Beta, linear regressions of VHC’s stock price were run against the VNindex for two year
with daily observation. CAPM was used to estimate Cost of Equity, while a risk free rate plus a 5
years bond was used to calculate Cost of Debt . The target capital structure of 60% equity and 40%
debt is utilized from 2018-2022.
Terminal Growth rate (3%)
The projected terminal value of VHC is roughly VND10,853 trillion by estimating substantial growth
rate of 3%. The growth of 3% was derived from the forecast Asia Pacific airlines and Vietnam GDP
growth rate for 2035, 4.5% and 5.3% respectively, as long-term growth would not exceed per capita
income growth
Change in Exchange rate (VND/USD)
As an exporting company, VHC’s revenue is affected by the exchange rate fluctuation. Fed's
continual interest rate raising recently indicates the likely growth in the U.S economy, and it is
expected to continue to grow without interfering with monetary policy in the near future. Thus, our
group predicts that another FED interest rate hike in the upcoming time will likely to take place,
increasing U.S dollar value. As 50% of VHC’s revenue comes from exported products to U.S, this will
contribute significantly to the company’s revenue.
Operating expense
Vinh Hoan’s divestment of Van Duc Tien Giang, and its efforts to improve plants and hatchery area at
Thanh Binh Dong Thap indicates ability to self-supply and reduce COGS to increase profit margin. In
particular, by the end of 2017, Vinh Hoan’s COGS accounted for over 75% of net profit, while that of
previous years attributed for over 90% of the company’s profit. It is expected that in the coming
years, Vinh Hoan will continue to invest in plant construction as well as implement plans to invest in
subsidiaries to improve the business model, reducing operating costs.
2. Monte Carlo Simulation
A Monte Carlo Simulation was utilized in analyzing the potential outcomes of VHC’s growth
prospects. This methodology simulates a range of possible outcomes for the multiple variables
determining the intrinsic value of VHC’s stock price. Key factors for this model include VHC’s %
COGS, % SG&A, growth rate in VND/USD, increase in US market’s price, increase in China market’s
price, increase in EU market’s price, percentage of aquaculture to revenue, growth rate of USA
market, WACC, cost of equity and sustainable growth rate (g). These inputs are vital to the DCF given
its sensitivity to each input, primarily the cap rate. 500,000 simulations were run which accounted
for each possibility of a feasible change in important company specific, industry macroeconomic
factors.
-
2,000,000
4,000,000
6,000,000
8,000,000
10,000,000
12,000,000
14,000,000
2012
2013
2014
2015
2016
2017
2018F
2019F
2020F
2021F
2022F
Revenue project to 2022
11. These inputs (Appendix ) lead to a Price Target of VND 75,000, and a 90% confidence level in our.
3. P/E (Relative multiples valuation)
The table above shows that most of VHC’ratios are above the regional peer average. The company’s
gross margin is 24.1% higher than the peer average, while its net margin is twice the average. In
terms of ROE and ROA, VHC has a much higher profitability ratios at 34.1% and 71.2% ,higher than
its peers’ averages.
If we take a closer look at the country level suggests that VHC’s size is equivalent to the average of
India in terms of revenue and net profit. VHC’s ROE & ROA and the averages in India and the
Philippines are also in the same range. In term of margins, VHC’s margins are comparable to
Thailand’s. The recent anti-dumping tax POR 12 in 2017 used Indonesia as the surrogate country.
We believe this is the most comparable country in terms of Vietnam’s pangasius industry. As the
result, we set our target PE and PB ratios for VHC based on Indonesia. Given the size of VHC as
compared to the average in Indonesia in terms of market cap and revenue, we set a discount of 16%
on Indonesia average PE, PB and derive a target PE and PB of 11.0x and 1.9x, respectively. Looking at
VHC’s 2018 EPS and BVPS of VND6,717 and VND36,372, we derive a fair value of VND73,892/ share
and VND70,271/share, respectively.
4. Sensitivity analysis
From our own perspectives, WACC and exchange rates are factors that have greatest impacts on
valuation process. Thus, we decided to conduct the sensitivity analysis based on these two variables.
Under our current assumption, the price of VHC’s share is VND73,690.
According to above statistics, we set a SELL recommendation as WACC increased to 12%. With the
higher WACC, it is prudent to invest in debt securities to enjoy a fixed but safe interest rate rather
than investing in equity securities that are at a higher level of risk. With the trade--war going on and
the unpredictability of international financial markets in general, many investors are more cautious
in making decisions.
The exchange rate also plays an important role in our valuation model. As the exchange rate is likely
to increase in the near term, our recommendation remains BUY.
A football field graph is a graph showing the valuation of a company based on different
methodologies.
I have the share prices based on different parameters like P/E, P/BV, EV/EBIDTA for different years
and for DCF using different discount rates. Basing on our calculation, the value is approximate VND
75000.
0
20000
40000
60000
80000
100000
120000
Football filed
12. 0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
-
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
7,000,000
8,000,000
9,000,000
2013 2014 2015 2016 2017
Consolidated net revenue Growth rate CAGR
FINANCIAL ANALYSIS
Our group’s financial analysis is based on historical data from 2013 – 2017. We decided to choose
2013 as the base time as this was the foundation year for VHC’s in-depth products strategy for value-
added products, collagen and gellatin’s investment.
Seafood processing and export remains the main growth driver of the company
From 2013 to 2017, VHC's consolidated net sales growth fluctuated. The reason for this came from
these group of product: rice, value-added, collagen and gellatin. Rice is no longer included in the
strategy of VHC; aquafeed, collagen and gellatin are also excluded from the potential product list of
VHC. Nevertheless, VHC’s main business - seafood processing and export still showed steady growth
with a 4y CAGR of 14.98%. Additionally, the proportion of revenue and profit from this sector over
the years kept at a very high level, always accounting for more than 90%. It can be showed that
seafood processing and export remains the main growth driver for VHC in the next years.
Significantly improved margins came from controlling input prices through raw material self-
sufficiency.
Since 2013, VHC's gross profit margin has been significantly improved, thanks to the expansion of its
farming area to fingerlings self-sufficiency. From 2014 – 2016, bad weather was the cause of severe
shortage of both fingerlings and raw pangasius, causing signficantly declining profits for Vietnamese
seafood processing and exporting companies; however, Vinh Hoan was among the very few
companies maintaining its materials supply and profit margins, its revenune and profit witnessed a
stable growth with 5y CAGR of 23.49%.
Aquatic food, collagen and gellatin are potential segments.
Value-added products, collagen and gellatin experienced revenue growth but unstable profit in the
first phase. However, they are still potential products with high profit margin. For aquatic products
and collagen & gellatin, the gross profit margin is 22-25% and 30%, respectively. The margin is
expected to contribute significantly to VHC's profit in the coming years. According to VHC, these
items are expected to contribite to 10% of the company’s products by 2020.
The capital structure tends to be stable with the reduction of loan ratio and the increase of
equity ratio.
In recent years, there were a few divestment that impacted on Vinh Hoan considerably. The
withdrawal of 75% stake in Octogone Holding Pte. Ltd and the divestments of Van Duc Tien Giang
helped stabilize capital structure and reduce the interest burden on the company.
We expect SG & A expenses to fall to 5% and remain stabe in the coming years. In addition, with the
expansion of farming areas and self-supply, VHC can reduce COGS, increase their gross profit margin
to 16% - 17%, in which these are the two main drivers of VHC's net profit growth. Moreover, the
increased production capacity (from 65-70% to 85-90% in the future) will help VHC achieve greater
efficiency by scale, improving the company’s asset turnover ratio. Lastly, from 2017 onwards, our
group expects VHC will not suffer any losses from financial activities after the most recent
divestment in subsidiaries. Therefore, despite the downward trend in leverage, there will be a
significant increase in ROE by improving gross margins and net profit, along with the optimization of
performance over total assets.
0%
20%
40%
60%
80%
100%
2013 2014 2015 2016 2017
Revenue Breakdown in 2013 - 2017
Seafood and fat powder Processed seafood Rice Collagen and Gellatin
-20%
0%
20%
40%
60%
80%
100%
2013 2014 2015 2016 2017
Net Profit Structure
Seafood and fat powder Processed seafood Rice Collagen and Gellatin
13. (source: VASEP)
(source: VASEP)
(source: VASEP)
(source: company filings)
(source: company filings, team estimates)
INVESTMENT RISK
Prob
5 IPR
4 PR
3 SBR
2 TWR
1
0 1 2 3 4 5 Impact
Volatile input price risk (High probability – huge impact)
The price of raw material inputs is still high due to supply shortage, leading to higher input costs for
VHC. In the short term, fingerlings and materials’ prices remain at this level. Although VHC owns
65% of self-sufficiency, over 30% of Pangasius inputs need to be purchased from small business
households outside. Therefore, VHC’s business performance is still affected.
Protection Risk (Medium probability – small impact)
A great number of nations are imposing stricter regulations to protect domestic firms from imported
products. For example, with the unprecedentedly high antidumping duties (USD 2.39-7.74/kg)
imposed in the 13th administrative review of the US Department of Commerce, at the present, only
few companies with low duties are still able to export to this market, including Vinh Hoan
Corporation which enjoys zero anti-dumping tax rate. However, with the trend of trade protection
coming from many countries around the world, it is not likely that the company's export activities
will enjoy lower tax rates in the future.
Selling and Branding Risk (High probability – small impact)
With the divestment of almost all of its trading companies: 85% in Vinh Hoan (USA) Inc and 75% in
Octogone Holding Pte. Ltd. This somewhat poses difficulty and pressure on VHC’s product
distribution and import partnerships, which can be seen in the significant increase of Receivables
category to 86% from 2014 – 2017 (from VND713,965mn to VND1,329,417 mn)
Trade war risk (Low probability – medium impact)
Trade war between the US and China has the potential to become a global trade war. This can
influent the economies of many countries and areas when the US impose tax on Chinese goods and
receive the same action from EU and China. Morgan Stanley predicted that global trade war can
decrease the global GDP by 0.81% and the main impact – about 80% - will come from the lagging of
domestic and global supply chain. For a corporation depending heavily on exporting, especially for 3
huge markets like the US, EU and China, VHC may face huge negative impact if global trade war
happend.
VND -
VND 1,000
VND 2,000
VND -
VND 20,000
VND 40,000
2014 2015 2016 2017 2018
Price of input materials
While meat pangasius Pangasius seed
VND -
VND 10,000.00
VND 20,000.00
VND 30,000.00
VND 40,000.00
1 2 3 4 5 6 7 8 9 10 11 12
White meat pangasius price monthly
2015 2016 2017
VND -
VND 2,000.00
VND 4,000.00
1 2 3 4 5 6 7 8 9 10 11 12
Pangasius seed price
2015 2016 2017
0.00%
5.00%
10.00%
15.00%
20.00%
-
2,000,000
4,000,000
6,000,000
8,000,000
10,000,000
2013 2014 2015 2016 2017
Receivables
Consolidated net revenue
Receivables/Consolidated net revenue Ratio
0.00%
20.00%
40.00%
60.00%
0
500
1000
1500
2000
Revenue by market
Industry VHC VHC market shares
14. PART A: FINANCIAL STATEMENT
APPENDIX A1: REVENUE BREAKDOWN (IN VND MILLIONS)
15. 2012A 2013A 2014A 2015A 2016A 2017A 2018F 2019F 2020F 2021F 2022F
I. NET
REVENUE 4,227,93
2
5,095,01
2
6,292,44
8
6,493,39
0
7,303,54
6
8,151,49
7
8,257,86
9
9,110,01
3
10,104,0
11
11,229,3
00
12,800,4
26
II. COST OF
GOODS SOLD (3,680,31
8)
(4,491,391
)
(5,469,173
)
(5,690,815
)
(6,236,783
)
(6,979,607
)
(7,019,189
)
(7,743,511
)
(8,588,409
)
(9,544,905
)
(10,880,36
2)
III. GROSS
PROFIT 547,614 603,621 823,275 802,575 1,066,76
3
1,171,89
0
1,238,68
0
1,366,50
2
1,515,60
2
1,684,39
5
1,920,06
4
IV. SG&A
EXPENSES (304,616) (383,810) (406,786) (370,119) (381,056) (410,702) (412,893) (455,501) (505,201) (561,465) (640,021)
V. R&D
EXPENSES - - - -
VI. OTHER
REVENUE - - - -
VII. OTHER
EXPENSES - - - -
VIII.
OPERATING
INCOME
242,998 219,811 416,489 432,456 685,707 761,188 825,787 911,001 1,010,40
1
1,122,93
0
1,280,04
3
IX. FINANCIAL
INCOME 86,205 93,375 238,197 165,549 86,281 58,395 58,395 58,395 58,395 58,395 58,395
1. INTEREST
INCOME 43,038 68,596 17,768 44,089 27,976 20,637
2.
INVESTMENT
INCOME
- - - - - -
- EQUITY
INCOME FROM
ASSOCIATES
- -
- DIVIDEND
INCOME - -
3. OTHER
INCOME 43,167 24,779 220,429 121,460 58,305 37,758 - - - - -
- GAINS ON
SALE OF
INVESTMENTS
- - 182,753 (701) (457) -
- FOREIGN
EXCHANGE
GAINS
34,224 13,834 29,255 115,082 42,080 26,069
- OTHER
INCOME 8,943 10,945 8,421 7,079 16,682 11,689
X. EXPENSE
FROM
FINANCIAL
ACTIVITIES
(66,971) (90,567) (64,704) (209,337
)
(92,420) (88,525) (88,525) (88,525) (88,525) (88,525) (88,525)
16. APPENDIX A2: BABLANCE SHEET (IN VND MILLIONS)
2012A 2013A 2014A 2015A 2016A 2017A 2018F 2019F 2020F 2021F 2022F
A. CURRENT
ASSETS 2,281,97
3
1,660,
675
3,118,82
6
2,847,04
4
2,748,38
8
3,004,11
1
3,233,83
4
4,150,41
3
4,029,63
5
5,033,195 6,019,443
1. INTEREST
EXPENSE (60,030) (77,557) (38,438) (36,841) (68,145) (71,441) (74,459) (77,393) (70,519) (46,358) (40,072)
2. REALIZED
FX LOSS (6,941) (13,007) (21,529) (160,561) (30,868) (9,704)
3. REVERSED
ALLOWANCE
FOR REDUCED
SECURITIES
- - - (6,904) 6,903 (184)
4. OTHERS
(0) (3) (4,737) (5,031) (310) (7,196)
XI. OTHER
INCOME 10,226 14,624 5,441 4,261 12,417 11,521
XII. OTHER
EXPENSE (2,821) (9,698) (8,362) (6,259) (19,552) (19,799)
XIII. EBIT
329,667 305,102 625,499 423,511 740,578 794,221 870,116 958,265 1,050,79
0
1,139,15
8
1,289,98
5
DEPRECIATION
&
AMORTIZATIO
N EXPENSE
(7,334) (9,024) (191) (150) (14,253) (14,746) (222,404) (232,412) (242,871) (253,800) (265,221)
XIV. EBITDA
337,001 314,126 625,690 423,661 754,831 808,967 1,092,52
0
1,190,67
7
1,293,66
1
1,392,95
8
1,555,20
6
XV. EBT
269,637 227,545 587,061 386,670 672,433 722,780 795,657 880,871 980,271 1,092,80
0
1,249,91
3
XVI.
CORPORATE
INCOME TAX
(36,922) (41,638) (124,376) (59,566) (108,816) (109,556) (159,131.3
8)
(176,174.2
6)
(196,054.2
1)
(218,560.0
0)
(249,982.5
3)
XVII.
DEFERRED
CORPORATE
INCOME TAX
29 (9,871) 227 (6,269) 1,821 (8,650)
XVIII. NET
INCOME 232,744 176,036 462,912 320,835 565,438 604,574 636,526 704,697 784,217 874,240 999,930
XIX.
MINORITY
INTEREST
(22,293) (17,652) 23,761 (1,726) (1,299) (132)
XX. NI TO
SHAREHOLDER
S OF THE
PARENT
COMPANY
210,451 158,384 486,673 319,109 564,139 604,442 636,526 704,697 784,217 874,240 999,930
21. ANNUAL SALES GROWTH (YOY) 20.5% 23.5% 3.2% 12.5% 11.6% 1.3% 10.3% 10.9% 11.1% 14.0%
CAGR (COMPOUND ANNUAL GROWTH
RATE)
20.5% 22.0% 15.4% 14.6% 14.0% 11.8% 11.6% 11.5% 11.5% 11.7%
ACTIVITY MANAGEMENT
1. ON A YEAR-END BASIS
ACCOUNTS RECEIVABLE TURNOVER 12.2 8.8 5.5 6.3 6.1 6.3 6.3 6.3 6.3 6.3
DAYS OF ACCOUNTS RECEIVABLE 29.9 41.4 66.8 57.5 59.5 57.9 57.9 57.9 57.9 57.9
BAD DEBT/ACCOUNTS RECEIVABLE -2.0% -1.2% -0.2% -0.3% -0.2% 0.0% 0.0% 0.0% 0.0% 0.0%
.
INVENTORY TURNOVER 4.1 3.8 4.4 5.1 5.8 5.5 5.5 5.5 5.5 5.5
DAYS OF INVENTORY 89.2 97.1 83.4 71.0 62.9 65.9 65.9 65.9 65.9 65.9
ACCOUNTS PAYABLE TURNOVER 53.4 22.3 28.6 22.6 29.9 26.3 26.3 26.3 26.3 26.3
DAYS OF ACCOUNTS PAYABLE 6.8 16.4 12.8 16.1 12.2 13.9 13.9 13.9 13.9 13.9
CCC (CASH CONVERSION CYCLE) 112 122 137 112 110 110 110 110 110 110
2. ON AN AVERAGE BASIS
ACCOUNTS RECEIVABLE TURNOVER 11.8 11.1 6.8 6.2 6.6 6.3 6.6 6.6 6.6 6.7
DAYS OF ACCOUNTS RECEIVABLE 31.0 32.8 53.4 58.4 55.5 58.3 55.2 55.0 55.0 54.3
BAD DEBT/ACCOUNTS RECEIVABLE -2.0% -1.5% -0.2% -0.3% -0.3% 0.0% 0.0% 0.0% 0.0% 0.0%
INVENTORY TURNOVER 4.1 4.1 4.0 4.6 5.4 5.6 5.8 5.8 5.8 5.9
DAYS OF INVENTORY 89.4 88.9 92.1 78.7 67.3 65.4 62.8 62.6 62.6 61.8
ACCOUNTS PAYABLE TURNOVER 43.4 33.2 25.6 26.3 27.4 28.1 27.6 27.6 27.7 28.0
DAYS OF ACCOUNTS PAYABLE 8.4 11.0 14.3 13.9 13.3 13.0 13.2 13.2 13.2 13.0
CCC (CASH CONVERSION CYCLE) 112 111 131 123 110 111 105 104 104 103
LIQUIDITY AND SOLVENCY
LIQUIDITY
CURRENT RATIO 1.8 1.2 1.6 1.8 1.8 2.5 2.1 2.8 3.3 3.7
QUICK RATIO 0.5 0.6 0.8 1.0 1.0 1.5 1.3 1.7 2.2 2.5
CASH RATIO 0.1 0.4 0.2 0.2 0.3 0.5 0.6 0.6 1.0 1.2
SOLVENCY
FINANCIAL LEVERAGE (EQUITY
MULTIPLIER)
2.0 2.1 2.2 2.0 1.8 1.6 1.5 1.5 1.3 1.3
DEBT TO EQUITY 0.7 0.8 1.0 0.7 0.5 0.4 0.3 0.3 0.2 0.1
LIABILITIES/ASSETS 0.4 0.4 0.6 0.5 0.4 0.3 0.3 0.3 0.2 0.2
INTEREST COVERAGE 3.9 16.3 11.5 10.9 11.1 11.7 12.4 14.9 24.6 32.2
APPENDIX A5: RATIO ANALYSIS
After a conducting a thorough analysis on VHC’s investment risks, we apply Monte Carlo Simulation to estimate the
potential outcomes of VHC’s intrinsic value. We analyzed 11variables that are considered to have significant effect on
FCFF: Growth rate in VND/USD, Increase in US market’s price, Increase in China market’s price, Increase in EU
market’s price, Aquaculture/revenue, Growth rate of US market, %COGS, %SG&A, Ke, WACC, g.
Factor Contribution The factor effects Parameters
Growth rate in VND/USD Triangular Total revenue Likeliest: 1%
Maximum: 3%
Minimum: -1%
Increase in US market’s
price
Normal Total revenue x: 2%
s: 1%
22. Increase in China
market’s price
Normal Total revenue x: 4%
s: 2%
Increase in EU market’s
price
Normal Total revenue x: 1%
s: 1%
Aquaculture/revenue Triangular Total revenue Likeliest: 90%
Maximum: 92%
Minimum: 87%
Growth rate of US
market
Unit Total revenue Min: 2%
Max: 5%
%COGS Normal Net income x: 85%
s: 2%
%SG&A Normal Net income x: 5%
s: 1%
Ke Normal Cost of capital x: 12%
s: 1%
WACC Normal Cost of capital x: 11%
s: 0.05%
g Unit Terminal value Min: 1%
Max: 5%
Source: Team estimates (x: expected value, σ: standard deviation)
Wesimulated500,000outcomesandarrivedatanaverageintrinsicvalueof VND74,000 with the standard error is 28.70
Source: Team estimates
Statistics: Forecast values
Trials 500,000
Base Case 80,912.84
Mean 85,294.02
Median 84,075.91
Mode ---
Standard Deviation 20,297.40
Variance 411,984,398.04
Skewness 0.4175
Kurtosis 3.57
Coeff. of Variability 0.2380
Minimum 7,547.94
Maximum 246,902.23
Range Width 239,354.29
Mean Std. Error 28.70
23. APPENDIX B1: Corporate Management
Name Age Since Title
Vi Tam Ngo Nguyen, MBA 39 2003 Chief Executive Officer & Director
Le Khanh Thi Truong 57 1997 Chairman
Kim Dao Thi Nguyen 39 2003 Chief Financial Officer & Director
Duc Phu Vo 42 2012 Director
Hoa Tuyet Truong, MBA 42 - Director & Chief Sales Officer
Kieu Oanh Thi Phan - 2017 Director
Thai Ly Thi Nguyen - - Investor Relations Officer
Trung Duc Huynh 55 2001 Chief Projects Officer
Phuong Tuyet Truong 44 1998 Chief Purchasing Officer
Hue Thanh Ho 36 - Chief Production Officer
APPENDIX C1: EU freshwater fish import – live weight volume (Tons)
(Source: AIPCE – Eurostat)
APPENDIX C2: EU whitefish import segment by species 2015 – 2016
67.0%
67.5%
68.0%
68.5%
69.0%
69.5%
70.0%
70.5%
71.0%
71.5%
72.0%
-
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
2013 2014 2015 2016 2017
Freshwater fish import from third countries Vietnam Pangasius import
Vietnam Pangasius import weight
24. (Source: Trademap)
APPENDIX C3: Vietnam’s pangasius export value to China
(Source: Team estimation)
APPENDIX C4: China’s GPD per capital
0.00
0.50
1.00
1.50
2.00
2.50
2013 2014 2015 2016 2017
AVERAGE EXPORT PRICE TO EU (EUR/KG) 2013-2017
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
0
200
400
600
800
1000
1200
1400
1600
1800
2000
2013 2014 2015 2016 2017
Vietnam pangasius export value to China China total pangasius import value
Vietnam pangasius import weight
25. (Source: Worldbank)
PART D: PORTER’S FIVE FORCES MODEL
1. Intensity of Rivalry: Medium
VHC is now the number 1 in the pangasius market in Vietnam and the biggest Vietnamese aquacultural product
exporter with the total export value equal to USD 270 million in 2017, accounted for 15.2% of total pangasius
market share. VHC’s export value is now doubled that of the second Vietnamese pangasius exporter, Hung Vuong
Group (HVG) – with USD 121 million in 2017. However, the self-control in inputs of VHC is limited at 65% when
compare with other competitors in the market.
Main competitors in the related field are: HVG, ANV, IDI and some potential competitors from Indonesia, Thailand
or Philippines, Jamaica and Puerto Rico.
The intensity from rivalry, especially those from top 5, is not really serious in the US and EU markets which have
strict regulations about the product’s quality and safety. However, with the strategy of market diversification, VHC
may face huge competition in markets such as China, Africa or South America. In general, because of the different in
product field, the most dangerous threat for VHC comes from other processors and exporters in the same field from
countries namely China.
Among the competitors in Vietnam, IDI and ANV have greater forecast about revenue and profit growth than VHC.
VHC’s goal about these targets is smaller, but it is understandable because Vinh Hoan is a bluechip which has
reached a certain scale of production. That is why maintaining a growth level at 20-25% per year is quite hard for
VHC.
2. Threat of substitution: Low
The majority of VHC’s profit came from exporting pangasius, and it also face some competition due to substitutions
such as tilapia from China or Alaska pollock. Every year, China export 1.5 million tonnes tilapia to the global market
while that of Vietnam is just about 1.2 million tonnes. However, with the reputation and position of VHC’s
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
0
1000
2000
3000
4000
5000
6000
7000
8000
2009 2010 2011 2012 2013 2014 2015 2016 2017
GDP per capita
Growth rate
26. pengasius products at major markets like US, EU,… its sales are ensured.
3. Bargaining Power of Suppliers: High
The self-control in inputs of VHC is limited at 60% so it faces high difficulty in control the level of price due to
bargaining power of suppliers. Vinh Hoan is now focusing on improving its input control, and plan to raise it to 70-
75% in the upcoming year through investing in infrastructure. However, with the current situation, and the scarce
of inputs, VHC still has a long way to go if it wants to reduce this pressure from suppliers.
4. Bargaining Power of Buyers: High
The US, EU, Japan, China,.. are major markets and accounted for a huge amount of export value of VHC. The fact that
3 difficult market US, EU and Japan have high share in VHC’s export value leads to the high threat from bargaining
power of buyers to Vinh Hoan. Especially, US has its farm bill which includes many strict regulation about
aquacultural product’s quality and safety makes it more difficult for VHC to increase its market share and expand
more.
5. Threat of New Entrants: Low
The aquaculture industry has high barrier to entry because of its characteristics such as: the majority of processors
in this field enter exporting and consider it as the main source of revenue. That is why the news in this field will not
receive the trust from foreign customers. Beside that, the cost of exit is high resulting from high cost for equipment,
location and human resources. If a company want to change its field, these specialized equipment can not be used
for any other industries. Therefore, the company will lose a huge amount of money due to that reason.
PART D: SWOT ANALYSIS
1. STRENGHTH
• Anti-dumping duty advantage and reputation in the U.S. market; have the largest market share and
leading position among the industry; and strong growth;
• Reputation in product quality, quality control system, sustainable aquaculture under international
standards and integrated business model, especially in EU market;
0
1
2
3
4
5
Intensity of Rivalry
Threat of
Substitution
Bargaining Power of
Suppliers
Bargaining Power of
Customers
Threat of New
Entrants
Porter's Five Forces Analysis
27. • Integrated farming, processing nished products and by-products systems that allow us to take the
initiative in raw material sourcing and optimize protability in di-erent segments;
• Successful, loyal and experienced sales team with a multi-cultural and linguistic background;
• Have the knowledge and relationships to penetrate international markets; facilitate improvement and
innovation; and deploy new business development plans;
• Strong fnancial situation with no interest burden.
1. WEAKNESSES
• Lack of market diversifcation in di-erent segments; lack readiness to deeply penetrate large market
segments dominated by lower quality products, thus hard to compete on price (markets such as
Mexico and Brazil);
• Lack of strong brand;
• No excessive production capacity to meet rising demand for immediate sales;
• Lack of experience in new businesses and distribution channels;
• Lack of human resources to meet development and expansion requirements of the company,
especially with new projects.
2. OPPORTUNITIES
• The company has a lot of potential to develop consumer markets, particularly in the value added
category and retail channel;
• The aquaculture industry is gaining global recognition as an essential force to replace consumption of
seafood from wild-caught sheries with limited longterm supply. This scenario will clearly cause long
term growth in demand for our core products, as well as the by-products we produce as demand for
raw material imputs into aquaculture sector will also continue to grow;
• The seafood sector is gradually being restructured which will facilicate the growth of companies those
who keep progressing with proper business strategy;
• Consumers increasingly show their higher awareness of food safety, product traceability and
sustainability;
• Pangasius remains competitive in price in comparison with other white sh; pangasius can’t be easily
replaced by any other alternatives.
3. THREATS
• The increasingly high production costs;
• Direct labor forces are taken away by other industries;
• Climate and environmental issues;
• Trade and technical barriers in importing countries;
• The image and quality of pangasius on the global maket is negatively a-ected by the rivals’ media
campaigns
