CII’s point of view about factors affecting its current share price

November 25, 2017

Dear valuable shareholders,

As the fiscal year of 2017 has almost reached its end, the VN Index has recorded a 40.4% increase from 664.97 (as of 3 January 2017) to 933.7 (as of 23 November 2017); meanwhile, CII’s share price has only recorded a modest gain of 14.4% from 28,150 VND/share to 32,200 VND/share for the same period. Such stagnant gain of CII’s share was due not only to objective factors such that most of the market capital was drawn toward bigger-cap companies and some newly listed stocks but also to some inherent factors.

We reckon  those factors may include the following:

1) Right issuance of VND 1,230 billion:

Although additional capital would unlock new opportunities for the companies, such capital increase has put immense pressure on existing shareholders as they need additional funding for the upcoming right issuance. Therefore, there will be a tendency to liquidate parts of the existing investment and use the proceeds to subscribe to the upcoming right issuance.

2) Lack of confidence in CII’s business plan for 2018:

We have already provided the guidance of business planand profit estimate for 2018. However, the provided information may have been not sufficient to secure confidence of shareholders and investors.

3) Selling pressure from foreign investors:

Recently, Ayala Corp has declared that they have sold around 17.57 million shares and explained that they had to do so before the Philippine starts applying new IFRS accounting treatment next year. However, Ayala Corp has also affirmed that they “will definitely increase investment in Vietnam, especially in the Water and Electricity segments, wish to maintain a good relationship with CII, and continue their participation as a member in CII’s Board of Director”. Meanwhile, Goldman Sachs has also declared their selling of 7.87 million CII’s shares.

Such immense combined selling pressure (of 25.44 million shares) from these two investors was definitely a major challenge to the market absorption capability in the short term, especially amid the market trend to favor big-cap stocks over mid-cap stocks.


Acknowleding all of the above, CII has been working on solutions and would like to report to the shareholders, as follows:

 1) Exploring alternative capital sources:

CII is currently negotiating with a number of major financial institutions regarding possibility of CII issuing straight bonds of roughly VND 2,500 billion. Although it is still in the negotiation phase, we believe that there is a high possibility of success. In case of successful issuance, CII will have sufficient capital to invest in new projects, and may thus cancel the new share issuance plan, which is subject to approval by the BOD and shareholders.

 2) Reaffirming the 2018 business plan:

CII hereby reaffirms its ability to complete or even exceed its 2018 business plan, based on the following key factors:

  • CII Bridge & Investment Joint Stock Company (CII B&R): toll collection activities are being carried out as planned. Total toll revenue of existing projects is expected to grow by about 11% p.a.
  • CII Infrastructure Construction Joint Stock Company (CII E&C): Beside bridge and road construction, the company has also developed its civil division to execute CII’s residential In addition, the mining and trading construction materials businesses are performing very well. Accordingly, it is expected that CII E&C will complete or even exceed its 2018 profit plan.
  • Regarding the cooperation with Hongkong Land: The Thu Thiem Selection Council has approved the project’s concept design. Currently, the company is in the process of submiting the 1/500 master plan for approval. Hongkong Land and CII are expected to officially sign the definitive contracts by late 2017 or early This deal is expected to contribute significantly to CII’s 2018 bottom line.
  • Regarding the Thu Thiem Lakeview projects: the rate of purchasing /subscribing for the Lakeview projects has exceeded CII’s initial expectation. The total sale amount and subscribed amount has reached VND 1,000 billion. These projects are apparently in high demand, indicated by the long list of potential buyers. Normally, potential buyers will be fully subscribing for these projects within 30 days upon the approval of 1/500 master plan of the projects.
  • Regarding the 152 Dien Bien Phu project: the construction of this project has started since November 2017. The sales progress has also been much faster than CII’s expectation, in particular:
    • Apartments: CII has reached an agreement with another party to wholesale the apartment blocks.
    • Offices: Recently, CII has received an exclusive offer for the whole office blocks. However, we have not yet agreed to the offer because we have higher expectation on the leasing price upon the project’s completion.

Therefore, considering (i) no capital call, (ii) the expected 2018 bottom line, and (iii) the closing price of VND 32,200/share (on 23 November 2017), the 2018 EPS will be about VND 4,873 and forward P/E will be 6.6x, which is quite attractive.

3) Organizing roadshows:

Acknowledging the importance of mobilizing foreign capital, especially amid the enlarging foreign investment into Vietnam, we are planning to organize our own roadshows in HongKong and Singapore by early 2018 as a chance to directly discuss with interested investors regarding (i) CII’s future development as well as (ii) opportunities to invest in CII.

Considering the foregoing and believing “what will be, will be”, we trust that CII’s share price will eventually return to its deserved value. Therefore, CII hopes shareholders and investors will understand and accompany us through this difficult time.

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