Company Report

Given the current market price, VTP is trading at 2020F and 2021F P/E ratios of 17.7x and 13.1x respectively, which shows that 2020 growth prospects have been reflected quite fully into the current stock price. As the stock price has advanced recently, we change our recommendation to an OUTPERFORM rating, with a new 1Y target price of VND 160,000/share (17% upside) based on a new target PE of 18x (a switch from the old target of 20x due to higher short-term-risk from the pandemic). We still prize this stock when looking at its potential for long-term growth. We believe the pandemic has sped up the consumer transition in behavior toward e-commerce, and this benefits VTP. A downside tail risk from our call comes from the risk that COVID might come back in a 2nd wave, or that a new competitor might increase pricing pressure for VTP. Currently, barrier of entry is high for international companies in this sector, as foreign ownership limit for domestic transportation firm is 49%. Also, it takes very large capital and time in order to establish a nationwide network like that of VTP. 

We revise our 2020 net sales and net income to VND 116.823 tn (+14% YoY) and VND 3.365 tn (-12% YoY). For 2021, we expect net sales and net income to rebound to VND 149.172 tn (+28% YoY) and VND 4.437 tn (+32% YoY. We maintain our view that discretionary consumption in 2H20 will be weaker YoY. Nevertheless, thanks to MWG’s well-managed liquidity position as compared with other retailers, the company will likely be able to acquire more market share in 2020, and be poised to resume strong growth in 2021 (NPAT growth at 32% YoY).

The company set its FY20 targets for sales and NPAT at VND 7 tn (+20% YoY) and VND 469 bn (+25% YoY). In general, we think that it is quite aggressive given the negative impacts from Covid-19 upon the grid construction pipeline, compounded by unfavorable weather for the hydropower segment in the next 3-6 months. Management also shared that 1H20 prelim sales (+1.7% YoY) and NPAT (+6.4% YoY) fulfilled 44% and 54% of their respective targets. Although we are quite concerned about FY20 results given the unexpected nature of the Covid-19 pandemic, we believe that the company might still earn positive growth in FY21, and power through with strong double-digit growth in FY22: (1) In FY21, the grid construction sector might enjoy higher disbursement from the National Power Transmission Co. (EVNNPT) for transmission line projects on the back of Power Development Plan VIII being finalized in FY20. (2) In FY22, we estimate PC1 to achieve sales and NPAT growth at 11.2% YoY and 15.4% YoY, thanks to solid growth from the grid construction sector, coupled with full production coming online from the Lien Lap wind project.  Within our base case, we call for a  MARKET PERFORM recommendation, with a target price of VND 19,800. This offers a potential upside of 9% vs the 04-Jun-2020 closing price. As of the 04-Jun-2020 closing price at VND 18,200, PC1 P/E is traded for FY20/FY21/FY22 at 7.9x/7.6x/6.6x. Given the FY2020-2022 EPS CAGR of 9%, the current price may offer a 3Y PEG at 0.8x.

Amongst joint stock commercial banks, STB was the first to propose a planned contraction of its pretax profit target for 2020. Despite a +11.1% YoY credit growth, the bank targets VND 2.573 tn in pretax profit, down by -20% YoY. As explained by management, the decrease in the bottom line is primarily due to the support provided to corona-impacted clients. Up to May 2020, credit and deposit growth of STB in 2020 reached +4.8% YoY and +4.96% YoY. Total assets grew by +5.23% YoY. The bank has restructured VND 12 tn loans for 2,000 clients. Pretax profit reached VND 1.303 tn, which was already 51% of the annual plan. The overdue debt ratio and NPL ratio were 2.5% and 2% respectively. We maintain our view that the key to the STB investment thesis hinges upon the speed of its legacy debt resolution, which in turn depends on the legal status of its certain large assets (i.e., the wildcard). As no new progress was made, we believe it is still not the right time to purchase STB stock yet. STB is currently trading at TTM P/B and P/E metrics of 0.7x and 7.9x.

2020 business targets were approved at the AGM, with a plan in place for revenue to increase 11.5% YoY (VND 145 trillion). Meanwhile, the net income target is geared down by -35.2% YoY (VND 5 trillion). Although its residential arm (VHM: HOSE) expects reasonably resilient growth in its 2020 business results, we believe such cautious guidance on net income reflects: (i) profit decline in the Group’s retail business arm (VRE: HOSE); (ii) higher losses from the hospitality segment which was severely hit by the Covid-19 outbreak globally; and (iii) significant losses from the manufacturing segment as VinFast depreciation costs will be fully reflected this year vs. 6 months 2019 (as VinFast completed its factory and commenced delivery of its first batch of cars since June 2019). Adding to the cost structure, the industrial business is still in the ramping-up stage, prioritizing the capture of market share. Overall, we believe that real estate development will continue to be a key pillar for Vingroup in the next coming periods, while other segments may take time to improve business results and to reach optimal levels, especially after impact of the Covid-19 outbreak. At its current price, VIC operating as a conglomerate is being traded at a TTM P/E of 46.2x, P/B of 4.0x, and EV/EBITDA of 26.9x. 

Assuming FRT will be able to accomplish its 2020 financial targets, FRT is being traded at a 2020 P/E of 12.7x, which is expensive in our view given the expected 2020 earnings drop of -21% YoY caused by negative impact of COVID-19 compounded by losses associated from a rapid pace of Long Chau store openings. Meanwhile, close peer MWG is currently trading at a P/E of around only 10x. We will provide a detailed valuation in our coming report. 

As we still remain cautious regarding credit risk of the consumer finance industry under the current circumstance, we reiterate our Market Perform rating for VPB, with an 1Y target price of VND 25,020/share. The key upside surprise to our call outside our immediate expectations would be an earlier-than-expected containment of Covid-19 (before the end of Q2 – both within Vietnam and at least regionally), and a better recovery rate in relation to restructured loans. The key downside risk to our call would be a prolonged pandemic situation, which would trim down our estimates potentially lower than the aforementioned forecasts.

We revise down our forecast for CTG earnings to VND 9.22 tn, at -21.7% YoY to reflect more comprehensively the impact of Covid-19. For 2021, we expect CTG to achieve VND 13.42 tn of PBT, at +45.5% YoY. 2020E and 2021E ROAE is projected at 9.4% and 12.8% respectively.  At the current price of VND 23,050 per share, the stock is trading at a 2020E and 2021E P/B ratios of 1.06x and 0.98x respectively. Our 1Y target price of CTG is VND 27,200 per share. As the potential upside is +18.0%, we maintain our OUTPERFORM rating on this stock. 

The 2020 AGM has approved the target of sales and pretax earnings of VND 8.3 tn (-2.6% YoY) and VND 765 bn (-50% YoY). 1Q20 reported sales amounted to VND 2.2 tn (30.7% YoY). And the reported NPAT recorded VND 135 bn (-44.3% YoY). If excluding the claim of FX loss in 1Q19, NPAT only descended by -11.8% YoY. With the closing price as of 17-Apr-2020, PPC is trading at a FY20 EV/EBITDA of 5.3x. Given the current price, PPC offers a FY20 dividend yield of 8.4% (based on a FY20 dividend of 20% par) vs. the regional average of 5.9%. At the end of FY20, net cash per share is estimated at VND 3,700/share, still quite affordable for the FY20 dividend payment thanks to being debt-free and possessing a stable cashflow. In the long term, the dividend payment might be lower because of saving up cash for capex in Pha Lai 3. We call for a MARKET PERFORM recommendation for PPC, with a 1Y target price of VND27,600/share, implying an upside of 16% vs. the closing price as of 17-Apr-2020.   

The company held its online AGM on 08-Apr-2020 via Cisco’s Webex platform. The 2020 approved guidance for sales and PBT were VND 32.45 tn (+17.1% YoY) & VND 5.51 tn (+18.1% YoY) respectively. However, the FY20 guidance targets had been set before the black swan outbreak of Covid-19 and it is necessary to have them re-adjusted by the BOD. Within our base case, we estimate VND 29.9 tn for total net sales (+8% YoY) and VND 5.1 tn (+8.7% YoY) for pretax earnings, implying a FY20 EPS growth of 8.2% YoY. Growth from outsourcing, for sales and PBT, is forecasted to ease back to a 14.3% YoY expansion rate in comparison with the previous projection of 25%-28% YoY. The escalated tension due to the pandemic in FPT’s overseas markets casts a shadow upon our expectation over the global IT spending budget in the short term - especially in Japan. In the long term though, we still believe that corporations overall would still spend on IT services and digitalization to improve their operating efficiency. For our base case, FY20 EPS growth is estimated to be 8.2%. According to the closing price as of April 8th, FPT traded at a FY20 P/E of 9.4x in comparison to a regional average of 20x. We reiterate our BUY recommendation, with a new target price of VND 64,000, offering a 37% upside potential. Our new target price was revised downwards by 10% vs. the previous target of VND 71,300 to factor in the impact of Covid-19.

Sales and PBT targets for the year are projected to be VND 8.4 tn (+9.4% YoY) and VND 1.1 tn (-28.7% YoY). PBT of soymilk and sugar are expected to settle at VND 1 tn (-20.6% YoY) and VND 20 bn (-78.5% YoY). Refined sugar (RS) volume is estimated at 80,000 tons, declining by -44% YoY but still slightly higher than the previous management’s estimate of 70,000 tons. Low profit targets are no surprise, as is traditionally the case with QNS conservatively estimating its annual performance. Indeed, we have observed often QNS setting up an extremely low PAT target (2018 target: VND 194 bn and actual: VND 1.24 tn; 2019 target: VND 199 bn and actual: VND 1.292 tn). While this year their profit targets became more pragmatic, they are still quite conservative nonetheless. The cash dividend for 2019 has been raised to 30% on par (the AGM 2019 plan having been 15% at least), of which 15% on par has already been paid and the remaining 15% which will be paid on May 8th, 2020 (record date: April 17th, 2020). The payout ratio for 2019 is equivalent to 68%. No stock dividend is issued this year, which is different from the company’s tradition of a 20-30% stock dividend each year for the last six years. No ESOP plan in 2020.

QNS shares are now trading at the price of VND 23,200 per share, equivalent to a 2020 P/E in our base case of 5.73x. We consider this to be rather attractive in our view, especially given the more clarified outlook for the sugar segment, backed by the Company’s strong financial position with a relatively sizable mountain of cash on hand (net cash of VND 1.2 tn as of the end of 2019). With our target P/E being revised down to 8.0x (formerly 9.0x) in response to a recent fall in market-wide valuation, accompanied with a -15% discount for: (1) being listed on UPCOM, (2) difficulties of the sugar segment in recent years and (3) ESOP history, our target price for QNS shares arrives at VND 27,500 per share, equivalent to an upside of 18.5%. We reiterate our OUTPERFORM rating for the shares. 

We finetune our 2020FY revenue and net profit forecast from VND 28 tn and VND 453 bn to 27.7 tn (-1% YoY) and VND 485 bn (+34% YoY). We assume that sales volume would increase slightly by 2% in FY 2020, whereas the average price dropped by -2.5% compared to a decrease of -6.5% in HRC steel price. HSG shares are currently trading at P/E and EV/EBITDA 2019 levels of 7.5x and 4.5x respectively. We maintain our Outperform rating for the stock, with a 1-year target of VND 9,500/share based on a composite target PE and EV/EBITDA of 7x and 5x respectively. We think the share price in the coming quarter can be supported by the recovery in HSG earnings compared to the low base witnessed in the first quarters.

At the current price of VND 23,300 per share, LTG is being traded at a 2019 PER of 4.2x on total earnings and 5.7x on core earnings. We think that the main business (CPC – making up 53% of net sales and 77% of gross profit in 2018) will face more competition from cheaper generic products imported from China, while the improvement in rice and seed businesses may not be adequate to offset the decline in CPC earnings in the near term. In the longer term, LTG growth will depend on the potential of the rice business, which is quite uncertain at the moment. Nevertheless, LTG is traded at a cheaper valuation compared with industry peers, with a decent dividend yield (6.9%). For valuation, we use a target PER of 6x, lower than the peer average owing to high D/E ratio amid thin net profit margin. As such, we arrive at 1Y target price of VND 25,500, which is equivalent an upside of 9% from the current price and a MARKET PERFORMANCE rating.