GMD plans to kick off the construction of the next phase at Gemalink and Nam Dinh Vu terminals this year. We estimate that the Gemalink terminal has handled 70-80k TEUs since the official operation on 19 January (~5% designed capacity).
Nam Dinh Vu Terminal in Hai Phong has successfully attracted new services in early 2021. Consequently, we expect GMD terminals in Hai Phong to post solid performance in 2021.
We are reviewing our forecast and valuation for GMD, pending an update on the situation. GMD’s stock price has reached our current TP of VND 35,300.
GMD shows great optimism about the prospect for Gemalink
According to GMD, Gemalink (GML) currently accommodates three shipping services for CMA-CGM and APL, as expected given CMA-CGM’s stake in the port. Going forward, GMD expects GML’s throughput volume to reach 1.2 mn TEU by the end of this year (c80% of the phase 1 capacity) and that this terminal will enjoy double-digit USD-denominated profit on the back of Vietnam’s robust trade flows, committed volume from its shareholders and upcoming new maritime services.
Having said that, we believe that GML’s volume target might be rather high. Since the official initiation to now, GML serves 20 vessel calls from the above-mentioned shipping liners, averaging at around two calls per week. As historical data suggests that each mother vessel call at one terminal in Cai Mep – Thi Vai normally unloads and loads 3-4,000 TEU (total throughput volume at Cai Mep in 2020: 4.4 mn TEUs from 1,470 container vessel calls), we estimate that there should be around 70-80K TEUs stevedored at GML in Q1-2021. Accordingly, GML may need to triple the current number of weekly calls through new services to meet the target.
As the terminal officially started running in late January, we believe that GML has started to record revenue and expenses as well. Due to this, GML may incur losses in Q1 21 given low throughput volume.
Should the operation at GML become more vibrant as the company expects, GML will push for the second phase this year which would add 900K TEU more in the capacity via construction (ie extending main berth, feeder berth) and equipment purchase (ie quay cranes and RTGs). The construction time will be around 1.5 years, which puts phase 2 being operational by 2023. Capital funding for this phase (cUS$220mn) will likely come from debt. However, another structure to fund this project could be debt coupled with a private placement for new global container shipping line(s) since many have an interest in GML. In fact, GMD is in negotiation with global container liners and plans to reduce its ownership in GML to 51% from 65%.
The Cai Mep Ha logistics center project is believed to be the most notable new rival. However, the project, despite the fact that the master plan was approved, has been put on hold for quite a long time and is now looking for new investors/developers. As the development process takes time, we believe that it’s unlikely to have a new terminal in Cai Mep – Thi Vai over the next few years.