Company Report

PNJ reported strong recovery in Q4/2019, wherein net sales and net profit achieved VND 5.321 tn (+30.9% YoY) and VND 384.8 bn (+44.8% YoY). Cumulatively, the company achieved VND 17 tn (+16.7% YoY) of net sales and VND 1.194 tn (+24.4% YoY) of net profit, accomplishing 93% and 101% of its annual targets in respective order. While the crash in Q2 caused by the ERP system brought lower-than-expected sales, a higher-than-expected GPM (20.4% actual vs. 19.0% planned) was the key driver of growth in the bottom line. For 2020, we expect PNJ to open 30 new stores and post a net sales figure of VND 18.512 tn (+8.9% YoY) and net profit of VND 1.303 tn (+9.2% YoY), equivalent to 97% of the company’s annual targets. Major assumptions include a 9.2% YoY growth in retail sales of gold jewelry and 15% growth in sales of gold bars. The shares are now trading at VND 54,900 per share, equivalent to a 2020F P/E of 10.19x – the lowest since 2017. Our new target price arrives at VND 70,000 per share (target P/E of 13.0x), representing an upside of 27.5%. The dividend yield for 2020 is 3.3% at this price. Hence, we upgrade our recommendation for PNJ to BUY from Outperform.

Impacts of Covid-19: By the end of February 2020, credit growth outperformed the sector at +7% YoY compared to the cap for 11.75% YoY, much higher than the zero-growth at many peers, thanks to corporate loans in the staple consumer goods manufacturing sectors and retail mortgage loans. In our base case scenario, we assume that Covid-19 outbreak will be contained by end of 1H 2020. Demand for retail home and auto loans will gradually recovers in 2H 2020. For 2020, we forecast credit and deposit growth at 15.2% YoY and 13.7% YoY respectively, slowing down compared to 2019. Opinion: TPB has been a true pioneer in the rapidly-evolving space of digital banking deployment across Vietnam, and this trend is becoming increasingly more popular amidst Covid-19. TPB has completed cleaning-up its legacy VAMC bonds and is well-prepared for a take-up in retail banking including consumer finance and bancassurance, beside its traditional home and auto loans. 2020F PBT is estimated at VND 4.76 tn, at +23.1% YoY, highlighting the highest ROE of 25.5% across our banking coverage. TPB is trading respectively at a 2020E P/B and P/E of 1.07x and 4.73x respectively, compared to the industry average of 1.00x and 6.64x. Our 1Y target price is VND 25,800 per share, which is equivalent to an upside of 21.1% from the current price. Therefore, we maintain our OUTPERFORM rating for TPB.

Highlights. VIB posted a moderate pretax profit growth expansion of +14.2% in 4Q 2019, attaining VND 1.166 tn. This result appeared to be at odds with the sizzling earnings growth of +69.4% recorded in the first 9 months of the year. Such slower growth was mainly attributable to the fact that VIB recorded a non-recurring income VND 360 bn from its bancassurance contract with Prudential in 4Q 2018. Excluding this one-off item, growth would be +76.4% YoY and VIB would be able to continue its previous stellar growth trajectory. Credit and deposit growth tipped the scales at 34% and 46.8% YoY each, and financial ratios were improved across the board. For full year 2019, VIB recorded pretax profit of VND 4.082 tn (up by +48.8%), with universally robust growth across all income streams. Impact of Covid-19. We expect that the Covid-19 outbreak will sideline demand for home loans and auto loans in 2Q 2020. In our base case where the outbreak could be controlled by June, demand gradually recovers, and really regains its footing in 4Q 2020. Nevertheless, 2020 credit growth is forecast to be 13.2%, lower than our previous assumption of 17%. Opinion. We view VIB as an agile bank which has the largest exposure to retail lending by percentage in Vietnam. Loans to individuals accounted for more than 80% of VIB total loans, and the bank realized an impressive CAGR of +54.8% during 2016-2019. We expect growth to decelerate in 2020. Accordingly, VIB should record VND 4.85 tn in pretax profit, up by +18.8% YoY. The stock is trading at a forward P/B and P/E ratio of 0.84x and 3.6x, which is lower than the industry average of 1.07x and 7.16x. 

NT2 is currently traded at FY20 EV/EVBITDA at 4.0x (compared to the regional avg. at 7.7x). At the current market price, NT2 will likely offer an attractive FY20 dividend yield of 15% (with an expected FY20 dividend rate at 23% on par) which is quite attractive vs. regional peers avg. of 6.3%. At the end of 2020-2021 and after dividend & debts paid, net cash per share is expected at VND 780 and VND 1,073; coupled with a 2020-2021 average dividend coverage ratio at 1.1x. We reiterate a BUY recommendation, with a new target price of VND 22,000 that offers a potential upside of 29% versus the closing price as of 18-Mar-2020. We apply 40% discount to regional peers to arrive at 2020 target EV/EBITDA at 4.5x to factor in the company’s small business scale and limited capacity expansion versus regional peers. Along with attractive valuation and a high dividend yield, we see some positive catalysts from a lower gas price in the short-term; being debt-free from 2021 will render a more stable cashflow and solid future dividend payment. 

We lower our SOTP-based 12-month target price from VND192,800 to VND129,560 (previously VND192,800), with a target P/E of 9x for the ICT segment (previously 14x) and a target P/S of 0.3x for the grocery segment (previously 0.53x) applied to our revised 2020E earnings. Nonetheless, we reiterate our BUY rating given the 70% upside potential to our new TP. Key downside risks: possible negative growth in the mobile industry, affecting MWG’s mobile phone segment, and fierce competition in the e-commerce segment.  

We accordingly lower our 12-month TP for GAS to VND64,500 (from VND96,000) based on our lower 2020E EPS and lower target valuation multiples (lower P/E from 17x to 14.5x and lower EV/EBITDA from 10.5x to 9x), in line with regional peers. As the share price has retreated sharply by 26% over the past one week following the oil price movement, we are of the opinion that the deteriorated 2020 earnings outlook from the oil price tumble has been largely priced in. We therefore keep Market Perform rating on GAS.

As of 11 March, Vietnam had 38 confirmed cases of Covid-19 infection. Although it is hard to exactly quantify the impact of the epidemic, we can easily observe that the epidemic along with Decree 100 have eroded beer demand significantly. In particular, on-premise sales have been hit due to the measures to contain the virus. People have increasingly opted to stay clear of public gatherings due to concerns about the virus spreading, and the tourism sector has been hit significantly as a result. In our previous report, we initially estimated a 3% YoY decline in SAB’s sales volume in 2020 as we partially took into account a potential ‘zero-tolerance’ driving law. Combined with the current coronavirus outbreak in Vietnam, we consider the adverse effect to be even more intense due to the global spread of the virus, combined with the expectation of a decline in disposable income later. Given the current situation, we would like to provide 3 scenarios for SAB. Our assumptions are principally based on the timing of when the epidemic is stamped out in Vietnam, and that consumers gradually adapt to the new drink-driving law. At the current price of VND152,000, SAB is trading at a 2020E P/E of 22.3x and 2021 P/E of 20.4x respectively, and a 2020E and 2021E EV/EBITDAs of 12.2x and 11.2x, respectively, on our base case forecasts. Applying a premium target P/E of 27x to our 2020 EPS, thanks to its better fundamentals compared to peers, we derive a new 12-month target price of VND183,800 (from VND214,400). Our TP offers a potential upside of 21%, leading us to upgrade our rating on SAB to OUTPERFORM (from Market Perform). 

We briskly state two possible alternatives regarding the path and outcome of the Covid-19 outbreak and its impact upon the economic performance of PNJ. We expect the virus to be contained by the end of Q2/2020 for the base case, and not to be contained within 2020 for the worst case. At a glance, we consequently expect PNJ to grow its net sales/net profit by 8.9%/10.5% YoY in our base case and by 5%/-2.8% in the worst case. It should be noted that in the worst case, we expect retail sales of gold jewelry to decrease by -5% YoY, yet gold bar sales are expected to increase by 30% YoY. This mix is  likely to drive down PNJ profitability and result in a possible -2.8% drop in the bottom line. The PNJ share price has fallen sharply to as low as VND 63,800 per share, equivalent to a forward P/E of 11.92x in the base case and 13.74x in the worst case. We also have noticed a recent decline in the P/E ratio of regional peers. Thus, we reduce our target P/E accordingly to 15 (previously 16.5) in the base case and 13.5 in the worst case, and arrive at target price of VND 80,200 per share (+25.7% base-case) and VND 62,700 per share (-1.7% worst-case). We will update more details in a full report released soon.  

Highlights: Recently BVH posted its 4Q 2019 financial statements with pretax profit of VND 128 bn. For full year 2019, pretax profit attained VND 1.392 tn, which was relatively flat as compared to 2018 despite a -23% YoY drop in financial income. For 2020, we expect that BVH records VND 1.255 tn NPAT-MI, up by +15.3% YoY, with the assumption that the life and non-life insurance premium segments post a respective of 17% YoY and 11% YoY growth. We also expect the technical reserve rate to be further reduced by -5 bps. This is -18% lower than our previous estimate, given the total change in technical rate assumption of -13 bps for 2019 and 2020. The technical rate we use for 2019 is 3.37% (vs. the previous 3.45%) and for 2020 is 3.32% (also previously 3.45%). As for Covid-19, we view this situation as a positive net impact to BVH in the long-term. Opinion: The stock price of life insurance companies in Asia Pacific experienced a plunge of -20% from Jan 2019 to date in the midst of a low interest rate environment. For BVH, the fall was -34.3%. As we expect the interest rate to remain low in 2020, we revise our target P/B to 2.5x and attain a target price for BVH stock of 65,900 VND, which is equivalent to a rating of Outperform. The new target P/B ratio is lower than our previous target of 3.3x (5-year average P/B) as well as the 10 year average P/B of BVH of 2.81x, as we made a further discount for the current perplexing mismatch situation when analyzing the Company’s duration gap. Even in the worst case under our scenario analysis where the technical rate is theoretically adjusted downward 65 bps, the downside for BVH stock is limited from the current price. Meanwhile, we see more upside potential for the stock, as new business premiums are expected to outgrow assumptions of +10% YoY.

In 2019, KBC posted net sales of VND 3.25 trillion, up 29.7% YoY. Such performance was mostly in line with our forecast. Accordingly, 2020 EPS is estimated at VND 2,078 (+14.2% YoY) given higher revenue from Nam Son Hap Linh IP and Phuc Ninh UA, an industrial park and urban area that KBC fully owns. At the current price of VND 14,900/share, KBC is being traded at 2020 P/E and P/B of 7.2x and 0.67x which is relatively lower than average multiples of listed IP developers with a P/E of 9.5x and 1.2x. Our 1Y target price is VND17,400/share deriving from a combination of target P/E of 9x and P/B of 0.7x, representing a 16.8% upside compared with the current price and our rating is Market Perform over the stock. 

Our analysis may be a bit contrarian given the current jitters in global markets. Overall, at the current market price, we discover through our analysis the downside risk is actually not that much, even for our worst case (-9% downside), while the base case and best case upsides are high. In the long-term, after COVID-19 fades away into the distance, ACV is still the main beneficiary of the expanding passenger growth of Vietnam, and thus still makes for a good long-term investment. At the current market price, we think it represents a good opportunity to acquire ACV for long-term investors. Using our base-case estimates and valuation, we upgrade our rating from OUTPERFORM to BUY, with a lower 12-month target price of VND68,600/share (from VND100,500), which offers 29% potential upside. Note that our valuation has not taken into consideration income from landing area prospects.

QNS has released its 4Q 2019 report, in which it claims to have achieved a net sales of VND 1.63 tn (-13.4% YoY) and PAT of VND 472 bn (+4.5% YoY). Cumulatively, 2019 net sales and PAT have reached VND 7.68 tn (-4.4% YoY) and VND 1.28 tn (+3.2% YoY) respectively. While net sales only achieved 93% of our estimate due to a lower-than-expected sugar price, after-tax profit beat our estimate by +1.6% from financial and other miscellaneous income. For 2020, we expect QNS to reach a net sales position of VND 7.46 tn (-2.9% YoY) and PAT of VND 1.23 tn (-4.0% YoY) on the assumptions that soymilk sales growth would continue at a 10% level. However, overall performance is likely to be dragged down by sugar sales, which may experience a sharp contraction of -41% YoY. QNS shares are now trading at the price of VND 25,500 per share, equivalent to 2020F P/E and P/B ratios of 6.4x and 1.07x, still attractive in our view given the high proportion of soymilk that comprise total sales. Therefore, the drop in sugar sales shouldn’t dent company performance results too much. Given the stable soymilk business of QNS, we opt to maintain our target P/E ratio of 9.0x for 2020 together with a discount of -15% on the target price to reflect the market’s disfavor for the share as explained below. When calculated in this way, we arrive at a 1Y target price of VND 30,500 per share (+19.6% upside), equivalent to an OUTPERFORM rating. 

PVD released its 2019 earnings results, in which net revenue, gross profit, and NPATMI recorded VND 4.369 tn (-20.6% YoY), VND 449 bn (+13.1% YoY), and VND 189 bn (-3.9% YoY) respectively. PVD exceeded its revenue target by 14%, and recorded a profit that far exceeds the net-neutral target it set for 2019. For 2020, we estimate PVD net revenue and NPATMI can achieve VND 5.237 tn (+19.9% YoY) and VND 236 bn (+24.7% YoY) respectively. At a price of VND 12,100 per share, PVD is trading at 2020 and 2021 P/E ratio of 21.6x and 16.3x respectively. P/E ratio will have positive improvement thanks to the growth of earnings. Its 2020 P/B ratio is at 0.36x, which is lower than the 3-years historical P/B and regional peer P/B of 0.50x. We set our target 2020 P/B to be 0.45x, thus arriving at the target price of VND 15,000 per share (23.9% upside). We accordingly have a BUY rating for the stock for the time being. 

For 2020, we forecast the bank’s total assets, credit, and customer deposits to grow by 17.2%, 17.3% and 17.7% respectively. In 2020, Vinhomes plans to launch 3 new projects with 1,100 low-rise units in Vinhomes Wonder Park (~133 ha, Hanoi), ~2,000 high-rise units in Vinhomes Galaxy (~11 ha, Hanoi) and ~800 low-rise units in Vinhomes Dream City (Hung Yen) to be offered on an initial basis. It is expected to generate a greater presales value of ~VND 110 trillion (vs. VND 91.1 trillion in 2019). Together with the Grand Park project in HCMC which was launched in June 2019, we estimate demand for mortgages to range from VND 80 tn to VND 120 tn 2020-2021. Techcombank thus possesses ample room for mortgage loan expansion. At the current price of VND 22,500/share, TCB is trading at 2020E P/B and P/E of 1.08x and 7.02x respectively, lower than the sector average of 1.36x and 8.43x respectively. We like the bank’s business model, which has focused on retail products for affluent clients, and possesses core competencies in banking for the housing, FMCG, and auto industries, etc. TCB is also the dominant player in corporate bonds, with more than 80% of bond distribution market shares residing on the HOSE. We maintain the targeted P/B ratio for the stock at 1.3x, which yields the 1Y targeted price of VND 27,100 per share. This is equivalent to an upside of +20.4% from the current price. Therefore, we maintain our OUTPERFORM rating on TCB.