HAH Initiation report – Buy

Hai An Transport & Stevedoring JSC (HSX: HAH): Expanding the fleet, reaching new market

Founded in 2009, HAH is one of the pioneering port operators along Cam river in Hai Phong. Over the years, the company has gradually developed a comprehensive and integrated business model by offering a range of services: 1) port operations, 2) shipping services, and 3) other services (including inland ports (ICD), container-freight-station (CFS) warehouses, and ship agency services).

The shipping segment is the largest contributor to HAH’s financial performance. As of the end of Q3 2024, assets and revenue from this segment accounted for 82.9% and 80.6% of the company’s total assets and revenue, respectively. Meanwhile, the port operations segment has reached maximum capacity, leaving limited room for further growth. Other business segments (ICD, CFS warehouses, and ship agency services) are currently in the early stages and have not yet made significant contributions to the company’s results.

HAH is pursuing a growth strategy centered on expanding and modernizing its fleet, with a focus on regional shipping routes. For period 2021-2023, the company invested in acquiring and building nine new ships, increasing the fleet size from seven vessels in pre-2021. By the end of August 2024, HAH’s fleet had grown to 15 ships, with a total capacity of 23,000 TEU, representing a 31% market share of the domestic container shipping capacity. In addition, in September 2024, HAH approved an investment plan to acquire a used Panamax vessel with a capacity of 3,500-5,000 TEU to further expand into longer regional routes.

This expansion strategy, coupled with the completion of new vessel deliveries, positions HAH to potentially achieve peak profitability in the 2024-2025 period, supported by favorable container volume and charter rate trends. However, if global trade weakens, leading to a significant decline in container shipping rates and charter prices, HAH could face increased debt pressure, potentially impacting business performance. Despite these risks, the company’s operating cash flow is expected to remain strong enough to cover its financial obligations.

Valuation and Recommendation: Given the current dynamics of the shipping industry, we believe the most challenging period is behind us, with the sector outlook expected to remain positive over the next 6-12 months. We recommend a BUY for HAH shares, with a fair value estimate of 58,200 VND per share based on a discounted cash flow analysis. This target price implies a 34.9% upside potential from the closing price on October 31, 2024, including cash dividends, with a 2024 P/E of 9.8x and a P/B of 1.9x. This valuation does not yet account for the potential dilution risk from the convertible bonds HAH issued at the beginning of 2024 (equivalent to 17.35% dilution).