Company Report

VIB posted envious earnings results for 3Q 2020, with a PBT of VND 1.7 tn (+52.3% YoY) due to strength in TOI (+55.6% YoY) to both provisional expenses (+19.7% YoY) and OPEX (+23% YoY). The overdue loan ratio was showing improvement as compared to the end of June 2020 (3.8% vs. 4.6%) as credit growth recovered. However, the weak provision buffer is a real challenge for VIB. Despite VIB’s positive narrative, loss provisioning pressures is very likely over the near-term. We rate the shares of VIB as Underperform, and reiterate our target price of VND 28,800/share.

We reiterate our MARKET PERFORM rating on the shares of SHB and maintain our 1Y target price of VND 16,950 (+6.6% upside). SHB relies heavily on wholesale lending channels, and as a result is substantially more sensitive to market movements. The downtrend in interest rates should continue to act as a major supportive factor for SHB earnings, as it now has a better ability to more aggressively offset losses associated with problem assets. 

HT1 PBT fell significantly by 33% YoY in 3Q20 to VND 188 bn, due to a decline cement prices amid weak domestic consumption, as well as the absence of higher financial income. As a result, we lower our 2020 PBT estimates for HT1 -14% to VND 814 bn (-12.5% YoY) given sluggish demand and the recent price cut; and assume that 2020 sales volume will drop -9% to 6.65 mn ton with ASP falling -3% YoY.  However, we expect that 2021 PBT will recover 14% to VND 932 bn due to an acceleration in public investment and lower interest expense. We increase our PE and EV/EBITDA target from 8x and 4.5x, respectively, to 9x and 5x given the drop in market interest rates. Accordingly, we revise our target price to VND 16,900 (from VND 16,000 previously). However, as the stock price has increased by 24% since our last Call, we change our rating for the share from BUY to MARKET PERFORM.

By lowering our CGM price assumption, we lower our 2021 pretax earnings forecast 6% which causes us to reduce our 1Y TP to VND 23,000 on the shares of NT2. As a defensive yield play with a FY20 dividend yield of 8.7% - still more attractive than the 6-12 month deposit rate of 5.3% and 10Y government bond yield of 2.6% - we maintain a Market Perform rating on the shares of NT2. 

HPG posted preliminary 3Q20 record high revenue and net profit of VND 24,900 bn and VND 3,785 bn, respectively, achieving remarkable growth YoY rates of 62% and 110%. The net margin improved from 11.6% in 3Q19 to 15.2% in 3Q20, which is also the highest level since 4Q18 given the full utilization of the current furnace. Cumulatively, HPG’s revenue and net profit in 9M20 amounted to VND 65 tn and VND 8,845 bn, respectively, surging by 40% and 56% YoY. At the current price, HPG is trading at attractive 2020E and 2021E PE of 8x and 6.8x respectively. Given the aforementioned longer-term momentum in revenue and net profit, we are raising our 12-month price target to VND39,300/share (previously VND32,400/share before adjustment for 2019 dividend paid in Jul). As such, we also reiterate our BUY rating on the shares of HPG. 

We reiterate our Market perform rating on the shares of PVD, and keep our target price of VND 11,450/share (applying P/B of 0.35x) steady. Management appears to be navigating PVD well through this double set of headwinds of Covid-19 and low oil prices in order to achieve profit in 2020. PVD has an efficient and transparent cost structure and lower gearing than offshore drilling peers. However, the expected low E&P activities due to Covid-19 and low oil price, at least in H1 2021 will be a key risk for now. 

ASG is listed on September 24th at a reference price of VND 30,000/share, which is equivalent to a 2019 P/E of 11x. The 2019 dividend has been set at 15% on par. ASG is a way to gain exposure by proxy to the Vietnamese FDI growth megatrend over the long-term, especially as it relates to the shift in manufacturing considerations, such as smartphone manufacturing, in Vietnam. ASG owns Thai Nguyen off-airport terminal (located next to Hanoi only ~60 km away) and has a very strong relationship with Samsung - accounting for 60% of total revenue. For further growth, ASG plans to expand its business into 2 new business lines: Industrial park development and Distribution centre, with investment starting around 2021-2022. 

Given the protectionist measures expected to be implemented which should positively impact domestic sugar consumption along with the return to profitability for the biomass segment in 2021, we are increasing our share price target on the shares of QNS to VND 43,100 per share – representing 28.7% upside and an ROI of 37.6% when the dividend yield is included.   In addition, our OUTPERFORM rating on the shares is supported by: i) soymilk sales exceed industry average; ii) in 2021, both sugar and biomass segments are anticipated to benefit from a higher sugarcane yield and higher ASP troughing during the COVID-19 pandemic; iii) the completion of an enormous CAPEX plan for sugar/biomass.

We are initiating coverage of HDG starting off with a Market Perform rating, and are establishing a 1Y target price of VND 25,000/per share (upside +1.2%), predicated via SOTP valuation methodology. HDG is entering a new era, as it gradually transforms itself from a real estate developer into a company which emphasizes renewable energy. The Company relies upon an attractive FIT price, coupled with being a beneficiary of current government policy that the Company can leverage upon to develop new power sources. The segment has real potential of generating solid earnings and stable cashflow, a necessary earnings component that is needed to compensate for the cyclical risk characteristics of the real estate business arm of the Company. At the current price of 24,700 VND, HDG is now trading at 2020F and 2021 P/E levels of 4.4x and 3.6x respectively, significantly lower than average p/E 6.5x of peers with similar business activities (DPG, REE, and PC1). For upcoming years, HDG will maintain its dividend policy of 10% for cash dividends, plus 20-30% of stock dividends. 

We lower our 1-yr target price for MSN to VND 60,500 (from VND 64,900) - which represents 9% upside potential - after accounting for the recent acquisition of a 12.6% stake in The CrownX (TCX). Nevertheless, we retain our Market Perform stance on the shares, as we believe that the likely significant earnings decline for 2020-2021 associated with the VCM consolidation is mostly priced in. The likely decent performance of the consumer and banking segments would be a plus, while we expect a recovery from H2 2020 in the feed business of MML. On the negative side, MSN faces significant challenges: a) its consumer retail business has yet to reach break-even EBITDA; b) the impact of low commodity prices on its mining business; and c) increased leverage which will act as a drag on the 2020-2021 earnings. 

DMX supermini will be able to command a higher profit margin given: 1) sales of more high-margin products (kitchenware and home appliances); 2) lower rental and staff costs; and 3) the levering of existing well-entrenched distribution hubs.   Assuming a monthly revenue per store of VND 1.1 bn, and that the company will have 1,000 stores by 2021 year end, these stores will generate VND 13,200 bn per year. As such, we estimate that MWG will be able to raise market share by ~10%. We shall closely watch the store opening speed and the monthly revenue per store of DMX supermini. Earnings are under review.

We are upgrading the shares of VCB from Underperform to MARKET PERFORM, as the share price has declined by approximately -8% over the past three months (-1.2% decline in HOSE over that period). Supportive of our call, VCB’s 2H2020 and 2021 TOI outlook has become even more compelling given its renewed focus on mortgage lending and bancassurance, and impressive credit growth – exceeding that of peer - given the impact of Covid-19. VCB is also planning on issuing 6.5% additional shares. Although this share issuance will be modestly EPS dilutive, we estimate it will be BVPS accretive by 10.9% (expected issuance price VND 70,000 per share while pre-money BVPS around VND 25,275 per share) which is important as the shares trade more on a BV basis than EPS. That said, we lower our 12-month target price to VND 89,200 (from VND 89,900) due to lower forecast for 2020F and 2021F earnings as a result of higher Covid-driven newly formed NPL and restructured loans. 

BVH posted a surprising VND 617 bn in pretax profit in 2Q 2020, up by +98.6% YoY. Such stellar results were driven by trading gains via its government bond portfolio when market yields were low, leading to a surge of +86.8% YoY in financial income to VND 2.6 tn. As the Company’s duration gap was already large, we did not expect the company to sell part of its bonds during the period. Meanwhile, underwriting profit swung the other way, facing significant pressure (-67% YoY) during this persistently low interest environment. While Q2 was positive for BVH, the market environment likely will remain to be challenging, particularly as Vietnamese government bond yields are likely to remain at a low level. As such, we believe BVH earnings results will remain heavily dependent on tactical trading opportunities. Factoring in this headwind, our revised NPAT-MI estimates for 2020 and 2021 are VND 1.177 tn (-0.9% YoY) and VND 1.317 tn (+11.8% YoY), respectively, down -2% and -12% vs. previous estimates. Given our revised estimates, our target price was adjusted downward accordingly to VND 60,000 (-4% decline from our previous report), representing an upside of 15.8%. Hence, we downgrade BVH to an Outperform rating. 

We are initiating coverage on the shares of BCM with a SELL rating with a target price of VND 40,600 per share, representing a 13.6% downside. BCM is one of the five largest industrial park developers in Vietnam with an ecosystem that includes industrial park services and residential areas. Its real estate inventory had a value of VND 22.895 tn (53% of total assets), with VND 2.85 tn (12.4% of total assets) located in Binh Duong New City - representing a substantial opportunity for BCM. Upon the completion of the metro (subway) between Binh Duong and HCMC, we anticipate that the demand for real estate in Binh Duong will intensify - and BCM is well positioned to benefit from this demand shift. We estimate that land transfer revenue in Binh Duong New City in the 2021-2023 period to be around VND 1.5 trillion each year, growing to approximately 16.2% of BCM’s current revenue. Further, new industrial parks should enable BCM to lease 120-150 ha/year with an average rate of $80-90 USD/sqm/term. This is equivalent to annual revenue of between VND 2.5 – 3.0 tn between 2021-2025. While excited about BCM’s long-term prospects, BCM is increasing its charter capital via a 5:1 rights issuance (4Q20) and and a private placement of up to 758 mn shares (37.9% of outstanding) (2021) which should cause EPS dilution of 36.5% - hampering upside for the shares.  Other risks to our call include low liquidity concerns of real estate projects in Binh Duong New City, temporarily weakened demand for industrial park rental from new clients as affected by Covid-19, slow legal procedures in new industrial park such as Cay Truong and Lai Hung and debt payment pressure. These factors are expected to negatively affect the company's earnings in 2H2020 and might prolong through 2021.

During 2Q20, net sales and pretax profit fell -28% YoY and -39% YoY, respectively, as both domestic and export sales volume underperformed. However, July exhibited early signs of recovery in exports, while the 50% reduction in registration fees for locally assembled vehicles appears to have increased domestic tire sales. Nevertheless, we still anticipate that 2020 performance will be weak YoY, as net sales and pretax profit are expected to decline -17% each. For 2021, we expect net sales to increase +4.5% YoY as transportation recovers slowly post COVID-19, and pretax profit to jump +49% YoY as depreciation expenses associated with the Radial I factory substantially declines. Given the strong EPS growth of 49% YoY in 2021, the shares of DRC now trade at 2021 PE and EV/EBITDA of 7.1x and 3.5x, respectively, which is well below the 2018-2019 averages of 16x and 6.2x. While we recently lowered our 2020/2021 EPS and EBITDA forecasts by -7%/-8% and -4%/-6%, respectively, which translates into a lower one year price target of VND 19,400 per share (down -7%), we call for an OUTPERFORM rating given the near 14% ROI – inclusive of the 8.8% dividend yield.