VNM/VHM contribute up to 55% to Index increase, selling pressure is raising, FRT - A stock each day


- Index slight increased all the day, even though, selling orders seem higher in afternoon.
- VHM/VNM contribute 55% to Index increase. Most other stocks close near the reference price.
- Selling pressure will be higher in next week as 900-920 is strong resistance range.
- Liquidity increased: 9.5% lower than 20-day average, but 16% higher than last trading day.
- Foreigners net buy, focusing on VNM (87 bill) VRE (35 bill)


- WTI and Brent oil price has 9 consecutive days of increase, to 52.24 and 61.18 USD per berrel.
- China's CPI in Dec/2018 increased only 1.9% yoy, the lowest level since Sep/2016. Low inflation will create conditions for China to reduce interest rates to boost GDP growth.
- As the US government continues to close, Fitch will consider lowering US's AAA credit rating.


Business model:
- FRT is a retail company with 2 main product lines: smart phones and laptops & tablets which account for 65% and 9% revenue respectively.
- FRT ranked No.2 in mobile phone distribution in Vietnam with 18% market share, below MWG.
- FRT has a very wide distribution network with 461 stores at the end of 2017 and position products in the high-end segment (~ 44% revenue comes from products with a selling price of over 13 mill)
- In the context that mobile phone distribution industry is mature, FRT is implementing two plans: 1) Opening ~100 new stores per year in locations that FPTShop has not yet explored; and 2) Improve existing sales per store through some projects: improving customer service, opening additional B2B2C channels through a program "F-Friends" - going into the corporate customer base, and promoting e-commerce.
- At the end of 2017, FRT bought Long Chau pharmacy chain to expand retail activities to pharmaceuticals. However, in the short term (2 years), it will not be able to bring profits, even slight losses.

Investment catalysts: NEUTRAL
- Main growth motivation for FRT comes from huge potential of Vietnamese retail industry: high population of 97 mill, golden population structure (proportion of population aged 25-44 is 32.7% - highest in South East Asia), high urbanization ~35%/year, and number of middle class increased sharply. 
- However, mobile phone distribution segment (accounting for biggest portion in FRT’s revenue and profit) is coming to saturation stage with a growth rate of ~ 6% per year. FRT’s project to open more many stores can lead to a sharp increase in costs, but revenue is hard to increase sharply.
- FRT’ plan to expand Long Chau pharmacy chain in 2018-2019 will make FRT to take profit as cost of opening new stores in Vietnam is very high (leasing, labor, electricity and water expenses), revenue in early stages of operation are hard to keep up.
- In addition, FRT’s current valuation ratios with PE 14 times and PB 4.7 times are not really cheap or attractive.

Financial Statement Analysis: OUTPERFORM
Financial position is Outperform due to high cash balance at ~1,150 bill and positive cash flow from operation in the last 2 years. A relatively high inventory balance at ~ 1,770 billion is normal practice for distribution companies with a large number of stores. However, a huge borrowing balance of up to 1,950 bill is also a risk to consider.