Company Report

We are initiating coverage on the shares of SZC with a BUY recommendation and are establishing a target price of VND 38,300/share – which represents 19.7% upside. SZC has a large amount of available land for lease which benefit from an increase of FDI’s production shifting to Vietnam. At the same time, SZC’s low compensation cost enables it to maintain high profit margins. In addition, SZC features strong cash flows from its toll collection business.  Revenue and NPAT are forecast at VND 730 bn (+ 58% YoY) and VND 292 bn (+48% YoY) in 2021, respectively.

Underlining the big change in the CTR business model with the new Telecom infrastructure segment, we see long term earnings growth of over 20% per annum through 2025. Following with capex to fuel new business expansion, the Company should be able to maintain its average interest coverage ratio at 5.3x between 2021-2025. As a result, we initiate coverage on the shares of CTR with a OUTPERFORM rating and a base case 1Y TP of VND 81,400 – implying +13% upside vs. the 04-Jan-2021 closing price.   

For 2020, we forecast the growth of total assets, customer deposits, and credit to reach 18.8%, 12.2%, and 26.8% YoY, respectively. NIM is forecast to improve to 3.29% from 2.47% last year, while NPL is expected to be decline to 1.95% from 2.04% in 2019. PBT is projected at VND 2.4 tn in 2020 (+86.3% YoY), translating to a ROAA and ROAE of 1.12% and 11.75%, respectively. In 2021, we forecast PBT to expand 30.5% YoY to VND 3.13 tn. EPS is expected to surge from VND 971 in 2019 to VND 1,634 in 2020 (+68.3% YoY) and to VND 2,123 in 2021 (+30% YoY). BVPS is VND 16,588 (+20% YoY) in 2020 and VND 18,598 (+12.1% YoY) in 2021. We estimate the fair value of MSB at VND 20,500 per share, equivalent to the targeted 2021F P/B metrics of 1.1x. This is equivalent to our OUTPERFORM recommendation, with an upside potential of 18.5%.

As the share price of AAA increased 21.4% since our last report (August 27th, 2020), we are lowering our rating on the shares from Outperform to Market Perform. AAA did post encouraging results for 3Q20, complete with net profit growth of 16.7% YoY due to the trading and industrial park segments. However, the result fell short of our original expectation given the delay in the industrial park segment, as Covid-19 made it difficult for prospective customers to make production base decisions. As a result, we lower our net profit forecast for 2020 from VND 450 bn to VND 322 bn (-35.8% YoY). That being said, we fully expect that net profit will recover to VND 449 bn (+39.5% YoY) in 2021, given the likelihood of full-year revenue generation within the industrial park segment. We also see growth in the jumbo bag business line, from An Vinh Industrial Packaging. AAA is trading at 2020 and 2021 P/E of 11.2x and 8.1x, respectively. Our 1-year target price for the stock is VND 14,600/share (upside: +3.5%) based on the SoTP method.

We arrive at target price on the shares of MCM of VND 77,500/share, based on 2021 EPS and a target P/E of 15x. We apply a discounted P/E for MCM compared to dairy peer, due to: (1) much more limited scale; and (2) the anticipated limited trading liquidity in the shares. This implies an impressive return on investment of 168% (including dividend yield of 8.3% for 2020). We initiate coverage on the shares of MCM with a BUY recommendation.  

We forecast 2021 EPS at VND 1,454 (+107% YoY) given higher revenue attributed to Nam Son Hap Linh IP and Phuc Ninh UA, an industrial park and urban development owned by KBC. At VND 16,150/share, KBC trades at 2021 P/E and P/B of 11x and 0.7x which is relatively lower than average multiples of listed IP developers with a P/E of 14.7x and P/B of 1.6x. We rate the shares of KBC as OUTPERFORM, given our 1Y target price of VND 18,700/share which is derived from a combination of a target P/E of 14x and P/B of 0.8x, and represents 15.8% upside. 

We upgrade our rating on the shares of PVD to Outperform, reflecting an increase in our 1Y target price to VND 15,400/share (from VND 11,450/share) - suggesting 18.5% upside in the shares. We are also raising our 2020 and 2021 NPATMI forecasts by 88% and 47% to VND 136bn and VND 178 bn, respectively, reflecting higher JV earnings and better bad debt collection. PVD should also benefit from a brighter global oil price outlook in 2021, given the increasing optimism that a COVID-19 vaccine will be widely available beginning Q1 next year. Our base case suggests that OPEC+ will extend its supply curb of 7.7 mn bbls per day for another quarter from its meeting on Thursday, December 3rd. Such a production curb will support Brent crude towards USD 50/bbl in 2021E (up from previous assumption of USD 47/bbl). PVD has navigated well through this double headwind of Covid-19 and low oil prices and is set to achieve solid profitability in 2020. PVD has an efficient and transparent cost structure and lower gearing than that of offshore drilling peer should be supportive to valuation. 

BCM’s Q3 revenue grew 11.6% YoY mainly driven by the bulk residential land sales to sub-developer.  Although revenue from industrial parks declined -27% YoY due to the absence of new investors, the segment’s GPM improved to 54.3% due to an increase in leasing prices. In 9M2020, Industrial park revenue reached VND 1.216 tn (-27% YoY) while residential revenue reached VND 2.7 tn (+165% YoY). In 2021, we expect that BCM’s business performance is set to improve, as demand for industrial park (IP) land post-Covid is set to increase. In particular, we estimate that BCM will let 136 ha (+ 35% YoY) of IP land due to Expanded Bau Bang IP and Cay Truong IP. Further, we also anticipate that interest expense will decline -29% YoY after the paydown of VND 3.1 tn in debt from the proceeds rights issue in 2021. Net income attributable to shareholders in 2021 is expected to grow 44.7% YoY to VND 2.3 tn. As BCM stock price declined 10.5% from our last report dated September 9, we are upgrading the rating on the shares of BCM from SELL to Market Perform, and reiterating our target price of VND 40,700 on the shares (-3.2% downside).  

Since the outlook for global airlines has been markedly brighter with the introduction of various types of vaccines from the US, UK, Russia, and China (among others), these four countries boast a relatively high efficacy rate. We now see a better chance for VJC to recover from this trough in 2021-2022. However, the inflection point associated with wider vaccine application to achieve herd immunity suggests that there is still a long road ahead before we see full recovery. In the meantime, we expect global border restrictions to remain in place throwing a wet blanket on the notion that travel might rebound quickly. According to IATA, international flights are only expected to recover in 2023F. 

We are holding the line on our 2020 and 2021 forecasts as discussed in our previous report.  Please note that our forecast do not take into account the bad debt provision linked to Ca Mau in Q4 nor the one-off gain from PVM divestment.  We reiterate our Market Perform rating on the shares of POW, with a 1Y TP of VND 11,300 which represents 12% upside.  Risk to our call. We’re keeping our eyes peeled regarding potential downside risk associated with the Luang Prabang hydropower plant. Although POW’s stake has now been finalized (previously reported at 38%), additional details have not as of yet been disclosed. The project has been in the works since 2007 but has been delayed in the pipeline until now which gives us concerns over the possibility of ballooning capex, or the project’s overall profitability.

We reiterate our OUTPERFORM rating on the shares of QNS, as our TP is slightly recalibrated at 41,800 VND/share (-3% from previous TP, +19.8% upside). We have lowered our 2021F EPS target, as we trimmed numbers for the soymilk segment. The soymilk segment was more negatively impacted by local lockdowns while the sugar segment improved. The soymilk segment continues to be impacted by the storms and flooding in Q4 (late October-early November), resulting in soymilk sales declining between 7%-8% YoY in October. For 2021, we expect that the sugar and biomass segments to drive +27% YoY bottom-line growth at QNS. 

We downgrade our rating on the shares of TCM to SELL from Neutral, as our recently revised target price of 29,200 VND per share represents a -17.7% downside. We raised our earnings forecast for TCM for both 2020 and 2021 by +30%/+21%, respectively, on the back of increasing personal protective equipment (PPE – fabric masks and protective clothes) and domestic fabric sales in 2021, and maintain our target P/E 7.0x for TCM shares. While believing that ongoing mounting Covid-19 infections in the US may continue boosting the PPE sales, we are skeptical that such a growth momentum achieved during 2020 is sustainable through 2021.