Company Report

Investment summary: We are upgrading the shares of FPT from Market Perform to BUY, as we roll over our valuation to reflect 2022 estimates. This pushes our 1Y TP for the shares to VND 112,500 (vs. previous TP of VND 93,000) - implying a 23% ROI. Our upgrade of FPT’s shares is supported by strong growth in the Technology segment. We estimate YoY PBT growth of +26.9% in 2022 within the Technology segment, driven by both global and domestic IT services, and exceeding the global IT peer average of +15% (Bloomberg).  Further, despite a forecasted FY22 earnings growth rate of 22% YoY (global IT peers of 15% YoY), FPT (FY22E P/E 17.5x) trades at a 1.7x P/E multiple discount to global IT peers – further supporting our upgrade.  

Given the strength of the recent increase in yellow phosphorus prices and consequent improvement in GPM, we are raising our earnings forecast for DGC by 32% and 49% for 2021 and 2022, respectively, to VND 1,758 bn (+86% YoY) and VND 2,593 bn (+48% YoY). As such, we expect 2H21 net income to increase by 136% YoY, much stronger than 33% YoY in 1H21. We raise target P/E from 12x to 13x thanks to a much higher earnings forecast for both 2021 and 2022. Our price target now increases 62% to VND 177,000 per share (from VND 109,000), and we upgrade the shares of DGC to BUY from OUTPERFORM – representing and ROI of 26% (including 1% dividend yield). The recent rally in yellow phosphorus prices is explained by Yunnan (the key phosphate production region in China) attempting to cut yellow phosphorus production between September – December 2021. For 2022, we expect the prices to continue to rise, as the shortage of semiconductors prompt producers to add capacity - increasing the demand for yellow phosphorus and downstream products. 

We initiate coverage on the shares of TNH with a BUY recommendation, with a 1-year target price of VND 51,800/share. This equates to a total return of 26% from the price as of Sep 1st, 2021. TNH currently possesses the following advantages: (1) a fully-owned favorable location, acquired with low initial investment & run under tight budget control, (2) targeted for capacity expansion and the opening of specialized medical services, (3) the beneficiary of a high growth Vietnamese healthcare market over the next several decades. TNH is one of few listed hospitals in Vietnam, with a good profitable operation and a forward P/E trading at 29% discount compared to regional peers. We expect TNH gross revenue to reach VND 407 bn (+21% YoY) in 2021 and VND 471 bn (+16% YoY) in 2022. For net profit, we expect growth to VND 112 bn (+3% YoY) in 2021 and VND 121 bn (+9% YoY) in 2022. For the next 5 years onwards, we expect TNH gross revenue and net profit CAGR at 22% and 26% respectively. Our forecast has factored in the current pandemic and lockdown impact in relation to the frequency of hospital visits, possible reopening scenario in 2022, and also the company’s upcoming expansion plan.

2Q21 PBT increased strongly by +188% YoY to VND 1.97 tn, thanks to stellar growth of TOI (+87.3% YoY), while CIR decreased & provision expenses also decreased by -41% YoY. 1H 2021 PBT delivered VND 3.12 tn (+220% YoY), fulfilling 95% of the full year plan of VND 3.28 tn.We increase our 2021F PBT forecast by 6% to VND 4.23 tn (+67.8% YoY), while we reduce our 2022F PBT forecast by -9.3% to VND 4.43 tn (+4.6% YoY). Our forecast adjustment is influenced by our downward revision of NIM for both years, given prolonged low lending interest rates. MSB booked about VND 1.6 tn of upfront fee into income in 2Q2021, and we assume that MSB will continue to book VND 400 bn of the bancassurance upfront fee into fee income in 2022F. Provision expenses are revised up +5.8% to VND 1.1 tn (+6.7% YoY) in 2021F. We reduce our 1Y share price target for MSB to VND 29,600 (down from VND 31,400), using an average BVPS of 2021F and 2022F and unchanged P/B ratio of 1.5x. As this implies an upside of 2.4%, we subsequently maintain our Market Perform rating for MSB.

HAH has approved an aggressive expansion plan of their containership fleet between 2021 – 2024, which will increase its fleet capacity 55%. This is a noticeable shift in their strategy, which will emphasize shipping segment expansion to take advantage of increasingly attractive market conditions. Having said that, the success of this plan is a big question for investors. Over the near-term, the 2022-23 outlook is bright, as HAH managed to lock in high rates on time charter contracts. Despite the resurgence of COVID-19 and its huge impact on the Vietnamese economy, HAH has found ways to navigate the storm by sending its fleet to the international market. In light of this, we increase our NPATMI estimates to VND 330 bn (+139% YoY) for 2021 and VND 566 bn (+71% YoY) for 2022, which is 18% and 67% higher than our previous estimates, respectively. We reiterate our BUY rating on the shares of HAH, yet increase our 1Y target price 40% to VND 78,400/share. We base our call on a lower target P/E of 8x to reflect the currently unsustainable level of freight rates.

Given the resurgence of the COVID-19 pandemic in Vietnam during 3Q21, we lower our 2021E and 2022E earnings for GAS by 9% and 10%, respectively. Despite our earnings cuts, we are of the opinion that demand for dry gas will return next year, driven by a strong economic recovery and higher gas-fired electricity mobilization. Thus, we reaffirm our Outperform rating for GAS, with a new 12-month target price of VND101,500/share (previously VND105,000/share) based on an unchanged target P/E of 19x and EV/EBITDA of 11x on our 2022E earnings. Our target price implies 14.6% upside potential.  

Despite HT1’s encouraging 2Q21 business result, we are cutting our rating on the shares from Market Perform to Underperform with 1-year target price of VND 17,600/share, as the recent advance in share price seems to over-react to the potential impact of infrastructure investment on future bottom-line performance.  Further, we do anticipate that sales volume to significantly decline by over -40% YoY in 3Q21 due to the strict social distancing measures in southern Vietnam, which pushes us to lower our 2021 revenue and PBT forecast to VND 7.6 tn (-4.4% YoY) and VND 728 bn (-5.1% YoY), respectively.  However, as HT1 earnings are likely to post solid growth of 21% YoY in 2022 on the back of sales volume growth of 11% and falling interest expense, we suggest a re-enty post 3Q21 results when the shares have a more attractive price. 

MWG achieved upbeat results for 2Q21, with net sales and net income increasing by 20% YoY and 36% YoY, respectively. Notably, the grocery segment managed to break even in terms of EBITDA. Meanwhile, the resurgence of COVID-19 may leave MWG behind its full-year target of achieving 21% YoY growth in net income. In July, net income dropped by 29% YoY as the government placed restrictions on home delivery for ICT products, whereas the closure of wet markets and wholesale markets allowed BHX stores to post a record high revenue, helping the company to cushion the earnings decline. We hence revise down our 2021E net sales and net income by 10% and 13%, respectively, assuming the retail chains will reopen fully from November 2021. Market consolidation will accelerate amid the resurgence of the pandemic, enabling MWG to post strong earnings growth in 2022. We introduce our 2022 estimates, with net sales and net income respectively increasing by 19% and 33% YoY. We apply a higher target P/S for the grocery segment (from 0.3x to 0.5x as the company already reached EBITDA breakeven in 2Q21) and a higher target P/E for the ICT segment (from 10x to 11x thanks to market-share gains). By rolling over into 2022 financials and assigning higher multiples, we derive a new SOTP-based 12-month target price of VND130,000 per share (from VND110,000, adjusted for stock split). With upside potential of 19% from the current share price, we downgrade our rating to OUTPERFORM rating (from BUY). Downside risk to our call would be a longer-than-expected duration of the COVID-19 pandemic.

We rate a rate a strong BUY for TRA shares with the target price of VND 101,000/share – representing 29% upside from the current price on August 20th. Key investment catalysts for TRA are: 1) recent progress in the development of new herbal medicines & health supplements, while benefits from stricter quality control in Vietnam’s health supplement market, (2) lower SG&A expenses on sales with improvements in revenue of new R&D products and more efficient sales strategy, (3) higher utilization on synthetic drug factory with product transfer from Daewoong Pharma in H2 2021. Also, the company’s sales from trading & cosigned goods are expected to grow significantly with new signed distribution agreements with JW, CKD & other supplement brands. We expect TRA total sales to reach VND 2.19 tn (+15% YoY) in 2021 and VND 2.54 (+16% YoY) in 2022. Net income is expected to reach VND 275 bn (+26%) in 2021 & VND 353 bn (+29%) in 2022. As earnings growth has now begun to return from 2021 after going flat during 2015 - 2020, with lesser competition and higher diversification in products, we believe that 29% upside in the shares of TRA is achievable – especially given where industry peers are trading.

At the current price of 108,100 VND, VHM is trading at 2021 P/E and P/B forward metrics of 12.4x and 3.7x respectively. We maintain our 1-year Target price at VND 130,000 (upside 20%). For this year, with the solid backlog from sold projects such as Vinhomes Grand Park, Ocean Park, Smart City…, we expect the revenue and NPAT to achieve VND 94 tn (+31 YoY) and VND 33.4 tn (+20 YoY) respectively.  As the fundamental operations of VHM has no significant change, the share price fluctuation might be temporary in nature.

We reiterate our OUTPERFORM rating on the shares of VPB with 1Y target price of VND 70,700/share. Even though FeCredit is going through a hard time with aggressive writing off and low profitability in 2021, gradual recover should be expected in 2022. Besides, we do see better than expected income generating capacity at  the parent bank in 2022, fueled by the upcoming capital infusion. Net profit from the FeCredit divestiture and proceeds of the planned private placement support the bank’s ambitious long-term expansion. On a consolidated basis, PBT for 2021 and 2022 are projected at VND 16.8 tn (+29% YoY) and VND 21.4 tn (+27% YoY). 

We call for MARKET PERFORM rating on the shares of BVH in 2H 2021 even though we keep our 1Y TP unchanged at VND 71,000/share. We consider the company as a gateway to the under-penetrated life insurance market in Vietnam. BVH trades at a discount to its historical average due to the current low interest rate environment, which we consider an opportunity for long-term investors. According to our estimates, 2H 2021 earnings growth might be negative at -33% YoY before bouncing back by +27% YoY in 2022. Hence, we believe investors could consider accumulating BVH in 2H 2021 at price weakness. Downside risk: Larger-than-expected decline in interest rates and VN government bond yields, and a qualified audit opinion for FY 2020 and 1H 2021. Upside surprise: A stronger-than-expected uptick in VN government bond yields.