Investing in construction industry stocks: opportunity and challenge

The Covid-19 pandemic has reduced stock prices strongly. However, sort out stocks and sectors to invest, anticipating a recovery cycle is not a simple task.

The stock market rides out the storm

Due to the impact of the Covid-19 pandemic, world’s economic growth has witnessed an obvious decline. International organizations such as IMF and WB have lowered their forecasts for many economies such as the US, EU and Japan. Vietnam’s GDP growth in the first quarter of 2020 reached only 3.82%, much lower than the figure of 6.79% in the same period last year.

In addition, oil price has reduced strongly in the past, especially on April 20, the "black gold" price has fallen to the region below 0 USD/barrel - an unimaginable price in the history of oil prices that has caused a double effect and made the global stock market has become chaos. Before that, Vietnam stock market had lost more than 300 points when it dropped from the 990 points to 650 points, however, in April, Vietnam stock market has maintained the green color even though there are bad effects from the objective factors.

Contrary to the deary of the Vietnam economy, Vietnam stock market has experienced exciting movements during this period when the market fell to an attractive price range for domestic and foreign investors.

According to Vietnam Securities Depository’s statistics (VSD), in March 2020, the number of new accounts opened by domestic investors surged more than 32,000 accounts with the expectation of successful bottom fishing. Statistics show that, although the Vietnamese economy has been severely affected by the Covid-19 pandemic, Vietnam stock market has reached attractive point for domestic and international investors in the recent period.

Therefore, along with the fact that the stock market has dropped deeply to a low level and created a bottom around 650 points at the end of March and it is tending to recover to the area of 800 - 850 points in the coming period - The market’s P/E is about 11x while many construction stocks, banking, oil and gas stocks have dropped to attractive prices. The worst period of the market has passed, the market is in the process of recovery and its growth is expected in the coming time when the pandemic is well-controlled by Vietnam. This is the right time for valuing traders as well as swing trading.

Stocks attract cash flows

According to the analysis of securities companies: construction, banking, petroleum will still be attractive stocks in the watch list of investors due to these stocks have dropped deeply below the listed value of the business.

Construction stocks such as FCN (FECON), CTD (Coteccons) ... or oil and gas stocks such as PVGas, PVD, PVS have also fallen to particularly attractive prices and in fact they have rebounded strongly after they hit the bottom.

According to that, CTD has decreased from 160,000 VND/share to 44,000 - 50,000 VND/share, FCN has dropped to 9,000 VND/share, PVD has dropped from 18,000 VND/share to 8,000 VND/share... This is an opportunity for valuing investors.

One of the infrastructure construction industry stocks which is currently very interested by investors is FCN of FECON Joint Stock Company. According to Petrovietnam Securities Incorporated (PSI), FCN has solid basis for a breakthrough in the coming period.

In the Covid-19 pandemic, FECON's business activities still received many optimistic signals, with a newly-signed contract value of nearly VND 1,000 billion. FECON has participated in as an infrastructure contractor with 03 projects: Vinh Tan port project which is belonging to Hoa Phat Group in Dong Nai, the industrial park project - Phuoc Dong Harbor Bridge, Long An and the infrastructure project Dai Phuoc Lotus, Dong Nai which is expected to earn over VND 400 billion in revenue; promoting disbursement of public investment, especially in the field of infrastructure investment in order to promote economic development in the context of the Covid-19 pandemic will create a huge source of work for infrastructure construction businesses such as FECON.

In the field of industrial construction, FECON has won two wind power projects, namely Cau Dat Wind Farm in Da Lat and Thai Hoa Binh Thuan Wind Farm with an estimated revenue of two projects over VND 100 billion and they are negotiating in the final round with 3 more projects.

A lot of information reveals that FECON is seriously considering industrial construction, especially wind farm projects as one of the strategic businesses from 2020 through 2023. Currently, FECON is the only enterprise that has the right to use the invention "The method of constructing the foundation of near-shore wind farm" under the technology copyright of CTE Group (France) on the territory of Vietnam, including construction solutions, production processes and installation of W-shaped wind turbine foundation at nea-rshore wind farm projects requiring design technology and very high execution experience. This technology is estimated to save 30% to 50% of the cost compared to foreign methods being used in Vietnam.

FECON's representative said that by the end of 2020, the total expected revenue from wind power projects will bring about over VND 1,000 billion to FECON.