BSC - Company report CMS ICB 2357 BSC 17 08 2015

We initiated a BUY recommendation in medium for CMS with a target one year price of VND 13,793 dong per share, a 35.22% increase from the closing price on 17/08/2015 based on the FCFF and PE valuation method. CMS Stock is trading with a PE forward of 6.32 x, relatively attractive compared with the Construction sector average PE of 9.09 x.

In our opinion, 2015 is a year of many projects being completed in Vietnam and is also the starting point for major contracts in both Vietnam and foreign markets of CMS. In particular:

Foreign Market - Toward the hydropower projects in Laos and Africa: Construction packages in foreign projects are strategy in the coming year of CMS, particularly hydropower market in Laos and Africa with high demand, high profit margins and transparency in the payment of the foreign investor. In Q1 and Q2 2015, CMS has successfully signed contract of labor supply for two hydropower projects: Sendje - Genuie Equator (contracted plant construction worth USD 5.8 million, dam construction worth USD 15 million and Xayabury - Laos (Phase 2) contract worth USD 5.5 million.

Domestic market - construction contractors and investment towards traffic BOT projects. In 2015, CMS will complete construction package of Ngan Truoi irrigation project (expected output value in 2015 ~ VND 87 billion) and tunneling project at Khe Cham Coal Mine III (output value ~ VND 50 billion). In addition, CMS has combined with S55 offering bids for Da Nhim hydropower expansion construction projects worth USD 600 billion, it is expected to have result in October 2015 and the contractor will start in December 2015.

Besides, CMS and S55 are involved in researching investment in BOT transport projects in Thanh Hoa province (Highway 45) with a total investment of 2,090 billion dong, construction value of about 1,500 billion dong, expected to start construction in quarter 4, 2015 and finish after 2 years of construction.

Forecast earnings: We forecast net sales of CMS in 2015 will reach 435.06 billion dong (+11.35% yoy). With the projects completed in 2015 and the projects signed successfully from early 2015, we project earnings after tax in 2015 will reach 27.77 billion dong (+72.38% yoy), equivalent to 2015 EPS of VND 1,615.