Company Report

VHC’s core pangasius export business has encountered difficulties over the past two years, caused by both cyclical factors and pandemic-related vulnerable demand. As a result, the company plans to diversify away from its core business and become more of a F&B company, investing heavily in several projects that should generate sustainable cash flow for the future. VHC has invested in three main projects, namely: (i) increasing its ownership in Sa Giang (SGC); (ii) establishing Thanh Ngoc Fruit (TNG Food Ltd); and (iii) constructing an aqua-feed factory. Meanwhile VHC’s Q1 2021 results were rather disappointing. Most notably, net profit has declined -13.5% YoY. We have nevertheless revised our 2021 forecast to reflect: (i) higher SG&A; and (ii) the acquisition of SGC. We expect VHC to post net income and net profit of VND 8.9 tn (+26.3% YoY) and VND 946 bn (+34.2% YoY), respectively, equivalent to a 3.5% increase in net sales and net profit unchanged compared to our previous forecast. Our 1Y target price on the shares of VHC is VND 43,600/share (+20.8% upside), which represents an ROI of 25% and equivalent to an OUTPERFORM rating

In 1Q21, the group posted revenue of VND20tn (+13.3% YoY) and NPATMI of VND187bn (vs. a loss of VND78bn in 1Q20), which are quite in line with our expectations. Growth was driven by various subsidiaries, such as improved profitability at VCM, higher profit sharing at TCB (+78.9% YoY), decent MCH performance, and a recovery at MML. These positive forces, however, were offset by higher interest expenses and losses at the mining business. In order to finance the previous acquisitions of VCM and TCX, MSN aggressively added leverage resulting in VND56tn of net debt by the end of 1Q21 (vs. just VND22tn at end-2019). The de-leveraging progress will likely be a key focus going forward and serve as a key catalyst for the share price. Post-1Q21, however, we increase our 2021E net sales by 3% and lower our NPATMI by 13.1%. Our revised 2021E revenue and NPATMI now amount to VND100tn (+29.6% YoY) and VND3.3tn (+167% YoY), respectively. We do expect subsidiaries that drove 1Q21 financial results will continue to perform in the coming quarters. We lift our SOTP-based 12-month target price for MSN to VND108,000/share (from VND104,000), using average 2021-22E as our valuation basis. Our new TP implies potential upside of 13%. We maintain our Market Perform rating. 

HDB delivered decent 1Q 2021 results, with a TOI and PBT of VND 4.2 tn (+32.3% YoY) and VND 2.1 tn (+67.9% YoY), respectively. Growth was supported by strong credit expansion of 5% YTD, robust fee income growth (+98% YoY), and a gain from trading bonds (+VND 396 bn vs. a loss of – VND 32 bn in 1Q 2020). Credit quality was reasonably contained. Between 2021 and 2022, we expect pretax profit to grow by a respective +23% and +25% YoY to VND 7.2 tn and VND 8.9 tn. Our estimate for 2021 is lower than AGM guidance of VND 7.3 tn (+25% YoY), primarily due to our lower assumption of credit growth (+20% vs. +26% YoY). Rolling forward our valuation to mid-2022, our 1Y target price on the shares of HDB is VND 34,000/share (previously VND 29,500/share), which translates into a 13.3% upside. We reiterate our Outperform rating on the shares of HDB.

DCM recently held its Annual General Meeting, wherein the management sought approval to pay a cash dividend of 8% on par (5% dividend yield). For 2021, the company set a revenue and pretax profit of VND 7.8 tn (+2% YoY) and VND 210 bn (-71% YoY), respectively, and attributable to the rise in oil prices   and the commencement of the NPK plant (expected in 2Q21). Despite the uptrend in the urea sales price and expected improvement in net financial income, we forecast 2021 earnings to decline -12% YoY, due the increase in oil prices and an expected loss from the new NPK plant (commercial operation expected by May 2021, running at 36% expected utilization rate, below break even utilization rate of ~70%). At VND 16,150 per share, DCM trades at 2021 P/E, P/B and EV/EBITDA of 17.1x, 1.4x and 3.1x, respectively. DCM still incurs high non-cash depreciation expenses (VND 1.4 tn vs a pretax profit of VND 627 bn for 2021F), explaining its high PE and low EV/EBITDA. We view DCM as a cash rich company, which likely will enjoy huge earnings growth from 2023 once the urea plant is fully depreciated. 

The 2021 AGM held on Apr 27 approved the annual plan, featuring 20% PBT growth and a 38% increase in charter capital. The Bank also released its 1Q 2021 earnings, which exceeded consensus with total operating income (TOI) of VND 9.1 tn (+45% YoY) and pretax profit of VND 4.6 tn (+109% YoY and 79% QoQ). Solid performance was fueled by all income streams, and reasonably controlled asset quality. The customer base continued to expand by 1 mn (+17% YTD) during 1Q 2021. We forecast MBB to achieve VND 13.6 tn in pretax profit (+28% YoY, completing 106% of the AGM plan) for 2021. For 2022, PBT is expected to reach VND 16.4 tn (+20% YoY). We also roll forward our valuation to June 2022, and our 1Y target price for the shares of MBB is VND 36,000/share (+20% upside). We reiterate our BUY rating on the shares of MBB.

DPM recently held an Annual General Meeting on 26 April 2021, whereby management sought approval to pay a 2020 cash dividend of 14% on par (higher than historical level of 10-12%), anchored on strong 2020 pretax profit growth of 82% YoY. For 2021, management set very conservative revenue and pretax profit growth targets of up 6% YoY and down 48% YoY, respectively. Nevertheless, we forecast revenue and pretax profit to increase by 19% YoY and 4% YoY (+6% and -7% compared with previous revenue and pretax profit estimates as we revise up our assumptions for urea selling prices and related gas input costs). At VND19,000 per share, DPM trades at a 2021E P/E, P/B, and EV/EBITDA of 11.6x, 0.9x and 2.3x, respectively. We derive a new target price of VND19,700 per share (from VND18,400 per share). With 4% upside to our target price (and a 6.5% 2021E dividend yield), we maintain our Market Perform rating on the shares of DPM.  

After attending Sabeco’s AGM, we are downgrading our rating on SAB from OUTPERFORM to Market Perform due to several challenges that we see on the horizon, which include: (i) rising raw material prices; (ii) a potential COVID-19 resurgence; and (iii) higher SG&A spend in order to claw back lost market share. We are also lowering our 12-month target price for SAB to VND195,900/share (+15.4% upside potential) from VND214,000 - representing a total return of 17% (including a 2% dividend yield for 2021E). That said, off of the low 1H20 base, we do expect a strong recovery in 1H21E, and for all of 2021E we expect SAB to report net sales and net profit of VND34.1tn (+21.8% YoY) and VND5.7tn (+15% YoY), respectively. 

We attended the VNM 2021 AGM held on 26 April. The company set out a conservative 2021 plan, with net sales growth targeted at just 4.1% YoY (not including ASP hikes) and NPAT being flat YoY. We are downgrading our rating on the shares of VNM from Outperform to Market Perform, and lowering our 12-month target price to VND109,000/share (from VND121,000), based on P/E and DCF methodologies – as we trim our 2021E sales and NPAT by 1% and 1.3%, respectively, on the back of the weaker-than-expected 1Q21 results (net sales and NPAT decreases of 6.4% YoY and 6.5% YoY). Our new TP implies upside potential of 13.5%. Strong raw material input increases are also key contributing factors leading to their discouraging plan. Management did explain that the weak demand was the result of complications from the COVID-19 pandemic situation. Given that we expect very low earnings growth in 2021 with a modest growth outlook in the coming years, VNM is now lagging the growth expected at other listed companies. 

We attended PVS’AM held on 20th April. Based on 1Q 2021 prelim results and management discussion on PVS’ outlook, we maintain our forecast for the company as mentioned in our last report, with 2021 revenue and PBT estimated at VND 16 tn (-19.1% YoY) and VND 1 tn (-2.2% YoY), respectively. Our assumptions are predicated on a Brent oil price of USD 60/bbl (+37% YoY). YTD average Brent oil prices have hovered around USD 61.30/bbl. Thus, as our 2021F PBT estimate remains flat YoY, our 1Y TP remains VND 24,500/share and we reiterate our OP rating on the shares based on our stable oil price assumption of USD 60/bbl beyond 2021F. Please note that the 2020 dividend is expected at 10% of par, translating to a 4.8% dividend yield.

After attending the STB AGM on the 23rd of April, we have decided to upgrade our rating on the shares of STB to Outperform, along with our 1Y target price of VND 26,949/share (previously VND 24,300) - representing 20% potential upside. We came away from the meeting quite positive on STB’s pace of legacy asset debt settlement. The Chairman is confident that STB will clear all debt-challenged assets in 2022, which is three years ahead of the STB restructuring plan, and a year ahead of what the Chairman had initially anticipated at last year’s AGM. Meanwhile, the core business remains stable, with limited stress on asset quality (NPLs at 1.7%; restructured loans under Cir 01 amounting to 0.2%) and decent 2021E bottom line growth (+20% YoY). The worst looks to be behind STB, and the settlement of its underwater legacy assets has been moving in the right direction.