Company Report

DPM’s 2Q19 net sales reached VND1.931tn, down 28% YoY due to (1) an unexpected shutdown of its plants, (2) adverse weather conditions, and (3) a fall in prices of main agricultural products. Gross margin was squeezed from 17.2% in 2Q18 to 13.6% in 2Q19 due to the (i) low utilization of its urea, NPK, and NH3 plants, and (ii) 9.5% YoY rise in gas input costs, mainly due to a hike in transportation tariffs. At the current price of VND13,300, DPM shares are trading at 2019F and 2020F PERs of 18.0x and 13.5x, respectively.

At the current market price of VND 30,300/share, QNS is trading at 2019P/E and 2020 ratios of 7.7x and 7.4x, which is around a 50% discount compared to overall market valuation. We consider these price levels to be relatively cheap, despite the fact that we agree that the stock should be traded at some discount given its irregular approach to investor relations activities, and because of its large exposure on a commodity business like sugar. Our 1-year target price for QNS arrives at VND 35,400/share (from VND 37,500/share), based on a target P/E of 6x for sugar & biomass, and 10x for soymilk and other consumer businesses (confectionery, beer and beverages). With a 16.8% upside, we continue our Outperform rating for the stock at the moment.

Given the decline in the book-to-bill ratio to just 1.2x, we lower our expectations for 2020F regarding revenue and NPAT by -4%. At the current price of VND 15,450/share, HBC is trading at 2019F PER levels of 5.9x, which is considered fair in our view. HBC is trading at a lower PER than its average ASEAN peers’ PER level of 8.0x, yet possesses characteristics of (1) a higher D/E (1.48x as of 31 Dec 2018), (2) a higher DOR and (3) a 2019-2020F core NPAT CAGR of only 1.5%.

We have updated our earnings forecast for 2019F/2020F after adjusting margin assumptions for the M&C segment and earnings from associated JVs. Accordingly, we forecast PVS to post VND 16.37 tn in net revenue (+11.6% YoY) and VND 1.176 tn in net profit (+114.2% YoY) in 2019, which does not significantly vary from our previous estimates. For 2020, we forecast a net sales and net profit growth of 14.6% YoY and 19.2% YoY respectively. 2019-2023 net earnings CAGR is estimated at 12.3%, thanks to a potential backlog amounting to approx. $2.5 bn USD amounted during the period. At the current market price of VND 23,200/share, PVS is traded at 2019P/E and 2020P/E of 10.9x and 9.3x respectively, which are lower than regional peer P/E equivalents of 13x. We maintain our 1-year target price of VND 27,000/share based on an unchanged target P/E of 13x and P/B of 1x, and reiterate an Outperform rating on the ticker for the time being.

At the current price of VND 18,650/share, HBC is trading at 2019F PER levels of 6.1x, which is considered fair in our view. HBC is trading at lower PER than the average ASEAN peers’ PER level of 8.0x, yet at (1) a higher D/E, (2) a higher DRO and (3) a 2019-2020F core NPAT CAGR of only 3.5%.

On Mar 3^rd 2019, Yeah1 Group announced that Youtube had initiated a termination of its respective Content Hosting Agreements (CHSA) after 31^st March 2019. The withdrawal of the license is related to Yeah1 Group’s digital Youtube AdSense related investees/ subsidiaries, including SpringMe (a Youtube MCN based in Thailand), Yeah1 Network Pte. Ltd., and ScaleLab, LLC (a Youtube MCN based in the US).