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RISING PUBLIC INVESTMENT TO LIFT VARIOUS STOCKS
Public investment is expected to soar in the last months of 2022, giving a big push to various sub-industries.
Based on the regular pattern of public disbursement, which moves slowly in early year but much faster later, KB Securities Vietnam JSC (KBSV) has forecast higher public spending for Q4.
In fact, recent governmental moves have borne out the forecast.
The Ministry of Transport gave the go-ahead to 12 sub-projects in the North-South Expressway Project, second phase, in mid-July. All sub-projects in landing areas of the Long Thành International Airport Project were planned to begin construction in December.
Three decrees were issued and six working groups were dispatched to speed up the process.
The Government's Resolution No 124 promulgated in mid-September stipulates that public disbursement reach around 95 to 100 per cent of the target set by the Prime Minister. Of which, at least 50 per cent of the Socio-Economic Recovery and Development Programme must be delivered in 2022.
KBSV projected public investment to accelerate and reach around 90 to 95 per cent of the target this year, equivalent to roughly VNĐ200 trillion (US$8.4 billion) spent in the last four months.
KBSV said the rising public expenditure is expected to give a major boost to the steel sub-industry as higher construction demand drives steel consumption.
The same goes for the stone sub-industry. Major beneficiaries include Hóa An JSC (HOSE: DHA) and Biên Hòa Building Materials Production and Construction JSC, which own Tân Cang and Thiện Tân quarries.
Cement is the next sub-industry to benefit from higher public spending. However, the boost from the public sector would be of minor effect as it is absorbed by the supply-demand imbalance in the sub-industry.
Specifically, cement producers oversupply about 50 million tonnes annually and the figures are expected to climb to 58 million tonnes by 2023. For investors, it is advisable to monitor HT1 stock (VICEM Ha Tien Cement JSC) and BCC stock (VICEM Bỉm Sơn Cement JSC).
The situation is much better for the plastic pipe sub-industry thanks to the fiscal stimulus and the falling prices of PVC, an input material. Tiền Phong Plastic JSC (HNX: NTP) is expected to be the largest beneficiary as it operates in an economic zone targeted by public investments.
Higher public spending would be equally beneficial to bitumen sub-industry but the benefit is believed to come late as bitumen surfacing only begins in the last phase of the projects.
PLC (Petrolimex Petrochemical JSC) is a stock worth monitoring in the sub-industry since the company holds roughly 30 per cent of the market shares. The company produces around 350,000 tonnes of bitumen annually, outpacing all rivals.
Construction firms, undoubtedly, would find themselves at an advantage amid higher delivery of public money on construction projects. Stocks to monitor include HHV (Deo Ca Traffic Infrastructure Investment JSC), C4G (CIENCO4 Group JSC), and VCG (Vietnam Construction and Import-Export JSC).
Notably, CIENCO4 is one of the largest traffic infrastructure builders in the country, engaging in big projects including Mai Sơn- Highway 45 Expressway, Vĩnh Tuy 2 Bridge, Vĩnh Hảo-Phan Thiết Expressway and Phan Thiết-Dầu Giây Expressway.
The faster implementation of the North-South Expressway Project, second phase, is expected to drive the smart-traffic sub-industry forwards. It is advisable to monitor ITD (Tien Phong Technology JSC) and ELC (Elcom Technology Communications Corp.).
In the bullish electrical construction sub-industry, REE (Refrigeration Electrical Engineering Corp) is worth monitoring as the company is a prime candidate for the Long Thành International Airport Project.
Realty firms and logistics firms located in areas adjacent to the projects are believed to benefit indirectly from the fiscal expansion. However, the extent of the benefits depends on various factors, leaving some room for uncertainty.
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