Up to 17 points gap between underlying and derivative markets, TNG - A stock each day


- Index traded sideway all the day. The market seems balanced on both selling and buying sides
- Oil&gas stocks attracts cash, on the other hand, banking and securities stocks are mostly sold.
- However, there are 17 points gap between underlying and derivative markets as all derivative markets close at only ~840 points. And, strong resistance level at 900-920 is coming.
- Liquidity reduced: 15% lower than 20-day average, but 30% higher than last trading day.
- Foreigners net buy, focusing on GAS (69 bill) GAS (41 bill)


- Both US and China announce trade talk content with good result
- WTI and Brent oil price increased by 5% to 51.8 and 60.91 USD per berrel due to better US-China trade talks and OPEC volume cut.
- USD/CNY exchange rate reduces sharply to only 6.784 from the peak of 6.97 in Nov/2018. Pressure forVND deperciation against USD will be much reduced.

- Bloomberg: Vietnamese stock market can increase 18% in 2019
- The State Bank bought ~6 bill USD in 2018 and also ~700 mill USD in 9 days 2019 for reserve. Vietnam's USD reserve is now high and safe.
- VEPR: in 2019 Vietnam will have GDP growth ~6.9% and inflation 4.28%

TNG (TNG Investment and Trading) - A STOCK EACH DAY

Business model:
- TNG processes garment products such as Jackets, Cargo shorts
- 94% output is exported, of which 2 main markets are US and EU with 50% and 40% revenue respectively. The remaining 6% is sold domestically with the trademark "TNGFashion" through a distribution system of 26 stores and 14 agents in more than 20 provinces in Vietnam. However, the profit from TNGFashion is still negative in 2017 due to high cost of opening large stores.
- 69% raw materials are imported, and mainly from China (up to ~ 80%).
- Cost structure: raw materials and labor accounts for ~ 45% and 39.5% total cost respectively. TNG currently has ~ 10,000 employees (almost double that of TCM and GMC).
- TNG currently owns 6 factories, in which 3 biggest factories are Viet Duc, Phu Binh, Song Cong are operating at capacity of 100%, 85%, and 50% respectively.

Investment catalysts: NEUTRAL
- Global GDP growth will be lower in 2019 which is concern for both the garment industry and TNG.
- Although CPTPP agreement has been effective since 2019, however, TNG does not get benefit from the agreement as TNG mainly imports materials from China (not a CPTPP member) and the raw materials are requested by the contract orders, so it is impossible to change the source of raw materials.
- TNG's processed products are quite simple and easily to be replaced. Therefore, long-term competitiveness will be limited.
- However, in general, the prospect of Vietnam textile and garment industry continues to be positive in the short and medium term compared to neighboring countries due to low labor costs and garment processing products with high level of detail and complexity.
- In addition, TNG’s valuation ratio is also quite low at 5.1 times.

Financial Statement Analysis: UNDERPERFORMING
Financial situation is Underperforming due to 1) low cash balance ~ 14 bill, 2) receivable balance increasing sharply from 432 billion to 734 billion in 2018, 3) very high borrowing balance at 1,580 bill (equal 59% total assets), and 4) negative cash flow from operation in many recent years (this is a very bad signal for companies with continuous profit growth like TNG). Therefore, TNG is using borrowing and selling products without receiving cash to maintain its operations.