Company Report

Given the positive Q3 earnings surprise on cost savings at the parent company level and strong momentum of the newly acquired GTN and MCM, we raise VNM’s NPAT for 2020/2021 to VND 11.47tn/12.20tn, respectively – an increase of 8.7%/6.3% YoY. We believe VNM has navigated the Covid-19 pandemic well, while strengthening its competitive edge for future growth. Meanwhile, we raise our 12-month target price for VNM to VND 128,000/share (from VND112,500-adjusted for 20% stock dividend in September 2020) using the P/E and DCF method. This amounts to a return on investment of 23.1% (4.1% dividend yield), and we reiterate our Outperform rating. 

Better-than-expected recovery in restructured loans. The restructured loan balance declined -34% QoQ to VND 5.1 tn (1.9% of total loans), as MBB clients recovered strongly. Meanwhile, NPLs (before write-off) declined by -3 bps to 1.65%, and Group 2 loans were essentially flattish at 1.47% (vs 1.49% at the end of 2Q 2020), and within acceptable levels. Such a recovery came earlier and was even better than our expectation. This was in conjunction with earnings growth of +10% YoY in 3Q 2020. Upgrade to BUY rating. Given such a recovery, we lowered our credit cost assumptions from 2.6% and 2.8% for 2020 and 2021, respectively, to 2.31% and 2.45%.  As such, we revise our PBT for 2020 and 2021 forecasts to VND 10 tn (+0.15% YoY) and VND 11.7 tn (+17.1% YoY), respectively - a 6.7% and 8% increase from our previous forecast. With a 1 YR price target of VND 24,800 /share (36% upside), we upgrade the shares of MBB to a BUY rating. 

In 2020, DCM finalized its gas input formula with PVN. Accordingly, 90% of gas volume follows the formula 46% x Monthly Fuel Oil price + tariffs, while the remaining 10% of gas volume – 12.7% x Brent Oil price + tariffs. Tariffs are fixed at USD 1.09 USD/mmbtu. With the new floating price mechanism announced in June, the company delivered upbeat results through Q3 due to weaker global oil prices. While net sales rose at a moderate rate of 7.3% YoY to VND 5.3 tn, pretax profit jumped 47% YoY to VND 493 bn. 

We upgrade our rating on BID to OUTPERFORM from Market Perform, and raising our target price to VND 47,100/share (from 43,650/share) – representing 20% upside. Our upgrade reflects both the reality that COVID-19 has not been nearly as severe as initially forecast, and a positive outlook for NIM in the upcoming quarters thanks to a more favourable interest-spread environment. This is best reflected in BID’s 3Q 2020 PBT of VND 2.7 tn (up 16.6% YoY) which was slightly higher than our forecast. In addition, BID’s non-interest income was quite robust given the favorable market environment for foreign exchange and fixed income. As a result, we have increased our pretax profit forecasts by +5.1% and +2.4% for 2020 and 2021, respectively, to VND 9.1 tn (-14.8% YoY) and VND 13.2 tn (+44.4% YoY). 

Reflecting a hydropower recovery from 3Q ’20 onwards, we lift our 2020 and 2021 NPATMI forecasts by 14% and 9%, respectively, under our base case.  As such, we increase our 1Y TP 11% to VND 46,200, which implies a 13% ROI (including 4% dividend yield). Additionally, given upside surprises for our earnings forecast under best case, we see that the 2021 NPATMI growth will potentially register 14.1% YoY if La Nina expands until the end of 2021. We reiterate our Outperform rating on the shares of REE.  

We upgrade our rating on the shares of STK to BUY from Market Perform. Via a stable P/E target of 7.0 applied to 2021F EPS, our target price for STK arrives at 21,400 VND per share (+32% from previous TP), representing an upside of 18.9%.  Our upgrades are predicated on the continued strong recovery since September. This is especially true for recycled yarn and value-added yarn – the two product lines which differentiate STK from most other local yarn producers.

After the resilient 3Q20 results, we raise our 2020-21E net income by 15-37%. Our 2020E net sales and net income now rise to VND112.4tn (+10% YoY) and VND3.872tn (+1% YoY), respectively. For 2021E, we are raising our top line to VND140.8tn (+25% YoY), while we expect strong net income, up by 36% YoY to VND5.3tn, to be driven by: (1) the recovery in discretionary spending; (2) additional market share gained in the ICT segment during the pandemic; and (3) continuous improvement in profitability of the grocery segment. At the current price of VND106,800, MWG trades at 2020-21E PERs of 12.3x and 9.3 x, respectively, which we consider attractive. Using unchanged target multiples (PER of 9x for the ICT segment and P/S of 0.3x for grocery segment), and rolling over our valuation basis to 2021E earnings, we derive our new SOTP-based 12-month target price of VND147,000 (previously VND113,700), which implies 38% upside potential. Hence, we are reiterating our BUY rating on the shares.

We are upgrading the shares of VHC to OUTPERFORM from Market Perform, reflecting both a rollover to 2021 EPS forecasts and the application of our SoTP methodology. As such, we are raising our 1 year target price on the shares to VND 48,200 – which represents 16.1% upside. Our upgrade is also supported by the continued recovery in the pangasius segment, as well as the continued strength in VHC’s wellness segment – which has grown to 8.5% of the top-line through 9M20 (2019: 6.5% in top-line). Further, we find that VHC has outperformed peer during the 2020 pandemic chaos with quite stable Q3 net sales, as it remains on track to meet plan. 

Earnings beat. Profit through Q3 amounted to VND 6.4 tn, increasing +15% YoY. This translates into a robust Q3 PBT growth of +34% YoY to VND 2.6 tn. This impressive result was led by YTD increases of +10.6% and +8.5%, respectively, in credit and deposit growth. The NIM also expanded 28 bps QoQ to 3.7% and was disciplined with expenses. We are, however, concerned that ACB’s over the LLCR decline from 175% to 113% since 2019. PBT revised upwards by 3.7% and 4.3% for 2020 and 2021 to VND 8.2 tn and VND 9.5 tn. Rationale for such revision include credit growth acceleration of 300 bps to 14.75% (the new credit growth quota granted by the SBV). Further, the NIM was fine-tuned 20 bps to 3.58% due to better-than-expected savings in funding costs YTD. Upgrading to Buy. An exclusive bancassurance deal is currently under negotiation, and we are incorporating upfront fees paid which should boost equity during 2021. We also increase our target P/B multiple from 1.3x to 1.5x, given the drop in market interest rates. Accordingly, the target price for ACB is VND 30,800/share, which is equivalent to a Buy rating.

We are upgrading the shares of DRC from OUTPERFORM to BUY, as we increase our 1-year target price 21% to VND 23,500 per share – representing a 21% return on investment (inclusive of a 7.7% dividend yield). Our upgrades reflect  increases to our 2020 and 2021 net sales estimates to VND 3.2 tn (-17% YoY) and VND 3.5 tn (+8% YoY), respectively, and our pretax profit estimates to VND 268 bn (-14% YoY) and VND 421 bn (+57% YoY). We have grown more positive on the shares of DRC given that depreciation expense is declining more than expected while radial export sales recovered by an impressive 37% QoQ – which are very supportive to future earnings. From a 3Q20 perspective, however, results were in line with SSI Research, as net sales and pretax profit declined -2.5% YoY and -24.9% YoY. Yet, the earnings decline was a bit less when compared to Q2 (-39% YoY).

VRE reported its Q3 results, which included a net revenue of VND 1.8 tn (-20.3% YoY) and a NPATMI of VND 572 bn (-20.3% YoY). The declines were largely attributed to: (1) -11.1% YoY decline in leasing revenue, due to a support package of VND 145 bn offered to selected tenants which were most impacted by Covid-19;  (2) -68.5% YoY decline in sales in inventory due to timing of unit deliveries; and  (3) -25.5% YoY decline in other revenue, as the entertainment business and operation of Condotel Da Nang was heavily impacted by the Covid-19. Our current rating is OUTPERFORM for the shares of VRE. 

Vinhomes JSC posted its results up to 9M 2020, with net sales of VND 49.4 tn (+31.2% YoY) and NPATMI of VND 16.3 tn (+6.6% YoY). The key driver for positive performance came from deliveries of the three megaprojects (Vinhomes Ocean Park, Grand Park and Smart City), Vinhomes Marina (Haiphong) and recognition of the sale of the office complex at Vinhomes Metropolis. As a result, revenue from sale of properties achieved VND 46.8 tn, increasing by 33.8% YoY. We reiterate our BUY rating on the shares of VHM.

The increase in our 2021E pre-tax earnings by 3% coupled with a P/E target re-rating in the technology segment from 13x to 14x causes us to increase our 12-month TP by 12% to VND62,600. The latest FPT deal wins in 3Q20 should add to 4Q20 earnings growth and beyond. We also see attractive earnings growth over 2020-21 relative to its peers. Forward-facing momentum is further fueled by a large net cash balance which can be used to finance M&A deals. Thus, with 22% upside potential to our new TP, we issue our BUY rating on the shares of FPT. 

We are upgrading the shares of PNJ to OUTPERFORM from UNDERPERFORM, as we raise our target price to VND 78,100 per share (up 36% from our previous TP) which represent upside of 13.2%.  We believe that September marked the turnaround for PNJ, with SSSG bouncing back to low-teens growth after falling into negative territory  in August. Although the retail sales growth was achieved mostly because of larger ticket size (which possibly was a result of higher gold price this year); transaction volume has recovered to flat growth during the month, according to the management, showing a good sign of demand recovery. We believe that the demand recovery occurred due to: i) PNJ’s target customer group (middle-income class) being less affected by the pandemic than expected; and (ii) PNJ’s adaptation to new market conditions and new preparedness to capture the demand recovery post-pandemic.