Potential “tremendous” in renewable energy stocks

At last week’s talk show about selecting stock portfolios hosted by VIR in Hanoi, Nguyen The Minh, director of the Analysis Division at Yuanta Vietnam, said that inflation risks will have an impact on cash flow, which is no longer as cheap and plentiful as it was two years ago. Consequently, investors will seek out defensive equities such as renewable energy.

“The renewable energy sector has faced numerous challenges over the past two years due to the outbreak of the pandemic, climate change, and legal framework,” Minh said. “However, the sector is recovering strongly in 2022 thanks to its track record of strong dividend yield and stable cash flow.”

Vietnam is also taking action to realise its COP26 commitments to achieve net-zero emissions by 2050, which will benefit renewable energy firms.

Quan Duc Hoang, chairman of both Green Fund and A+ Fund, noted the tremendous potential of Vietnam’s renewable energy sector. Vietnam plans to increase its renewable energy generation to 130KW by 2030 and 300KW by 2050. The sector posts an annual growth rate of 12-15 per cent, which is more than double the GDP growth rate of 6 -7 per cent.

Hoang added that renewable energy only accounted for 6 per cent of the electricity market in 2017. This ratio rose to 10 per cent in 2020 and is projected to reach 21 per cent in 2030. It means renewable energy in the market will almost double. Thus, his funds are interested in the field as well as listed renewable energy groups.

“Our fund focuses on growing stronger businesses to get it to the next exchange, rather than just investing in equities on the exchange,” Hoang said. “With so much momentum, I believe the renewable energy business has a lot of potential. Young people should invest in the renewable energy industry or directly in a fund. Because our Green Fund is a member fund, the minimum commitment for individuals is fairly high, but we will work to make products more accessible to individual investors.”

Among the eight listed renewable energy stocks, Bamboo Capital (HSX: BCG) is receiving great attention from investors. However, Hoang raised the issue that BCG’s debt-to-equity is the highest. He wondered about the impact of the real estate industry on BCG amidst the inflationary market. Meanwhile, their revenues in renewable energy are not high compared with that of their investment banking business.

Minh added that BCG joined the renewable energy market in the 2019-2020 period and has performed well since. It is now one of five leading renewable energy companies in Vietnam with a view to entering the top three in Southeast Asia.

BCG’s major source of revenue in earlier years was mostly consulting contracts, operating as a securities firm. In 2019, it ventured into many other industries, particularly energy. Its major sources of revenue will come from real estate and renewable energy, while cash flow will become more consistent in the coming years because it has increased its capitalisation and expanded into more stable business segments.