Company Report

Our 1-year target price for the stock is VND 69,000 per share based on the SOTP method, equivalent to an OUTPERFORM rating. The Company boasting a high net cash position (~24% of current market capitalization) and certain exposure to the promising industrial park business could be a safe choice amid the current rising interest rate environment.

Short term view: we expect 3Q22 earnings to decline single digit owing to the lack of one-off land compensation income. This together with heavy market sell-off will weigh down on PHR share price. Nevertheless, we think PHR share price may bounce back in 4Q22 along with the recognition of one-off land compensation income, enabling the company to post 73% YoY net income growth in 4Q22, in our estimate.

AST posted a positive turnaround PBT of VND 16.6 bn in 2Q22, the first time after eight consecutive quarters of losses, which marks an important turning point for AST. The earnings recovery path will be largely dependent on the international market, especially for the main markets of both inbound and outbound Vietnamese tourism such as East Asian countries, therefore we do not expect strong earnings recovery over the short term of 3-6 months. However, we believe that recovery is well ongoing now, supported by improving passenger volume, optimized business operations post-Covid, and the expanded points of sales (115 stores vs 92 stores in 2019).

We maintain an OUTPERFORM rating for AST with a 1Y-TP of VND 69,000/share (based on 2023F P/E of 20x), implying 22.5% upside and reflecting our positive view on the Company’s strong turnaround in 2023 along with the general recovery of the aviation industry. We note that the primary risk is that international recovery might be slower than expectations in the scenario if China were to prolong its zero-COVID policy, and if global travel demand were to deteriorate more rapidly due to economic recession.

Investment summary

We recently attended HCM’s 2022 AGM, and the 2022 capital raise was front and center. Such a focus was the result of the reluctance and restriction preventing one large shareholder, the state-owned HCMC financial investment company or HFIC. Indeed, HCM has lagged on the capital buffer front since last year, and its previous position has been somewhat whittled down. HCM went from a Top 5 brokerage company in total equity at 2019 to ranking ninth at June 2022.

The shares have rebounded over 64% since bottoming in late June. As of Aug 22, 2022, HCM is trading at VND 27,700 per share, with a 2022 forward P/E of 10.5x and P/B of 1.5x, which is in line with its historical valuation. All catalysts, in our view, are now priced mostly into the shares. In the long-term, the complicated relationship between HFIC and HCM’s BOD might restrict HCM in expanding its business activities. 

We reiterate our Outperform rating on the shares of HDB, with a 1Y TP of VND 32,300/share (vs. VND 31,100/share) - representing potential upside of 28% as we increase our 2022 PBT estimate 4%. HDB posted better-than-expected PBT results in 2Q22 of VND 2.8 tn, up +32.6% YoY. 1H22 pretax profit was VND 5.3 tn, achieving 54% of our current estimate. Growth was driven by vigorous performance in both NII (+31% YoY) and income from fee-based services (+54% YoY). Meanwhile, there was harmonization between balance sheet growth (+14.8% YTD credit growth) and quality. Group 2, NPLs, and restructured loans all declined (to 3.61%, 1.33% and 0.05% respectively), while NPL provision  aggregated 93%.

Recently, HDB has sought shareholder approval to support a weak bank. While details have not yet been made public, we are fairly positive on this plan despite the initial capital contribution of VND 9 tn. Observing recent proposals related to these weak banks, it appears that large enough incentives are needed in each case. With respect to HDB, we are of the view that the net rewards will be backloaded unlike was the case with VCB and MBB.

BID delivered a solid set of results in 2Q 2022, with PBT exceeding our expectations and achieving VND 6.6 tn (+41% YoY). Strong credit expansion, a robust NIM recovery, and a lower provisioning more than offset the decline in fee income and writebacks, allowing BID to enjoy robust growth for the period.

We are bullish on BID’s short- and medium-term outlook, as we expect the bank to post over 80% YoY PBT growth in 2H 2022, and a solid +24% PBT growth for 2023. However, we are concerned that long-term growth could be constrained by BID’s limited capitalization.

We maintain our Market Perform rating for the shares of BID, although we increase our 1Y TP to VND 44,180/share (from VND 41,200/share). The target price change reflects the increase in our 2022 and 2023 earnings by 2.8% and 8.5%, respectively, and valuation rollover impact to mid-2023.

BID performed well during 1Q22, as operational efficiency and profitability indicators exhibited improvement, with well-managed credit. For full-year 2022, we expect that the bank would garner +52% YoY growth in pre-tax profit, fueled primarily by a lighter provisioning burden (-19% YoY). ROE would rise to 16% (from 9-13% over the past three years). However, long-term growth potential for BID is still limited by capital (CAR of around 9% only), while fee-based services lack a critical growth driver. Although the bank is reviewing its strategy/ownership structure regarding its life insurance arm BIDV MetLife, we do not expect it to be finalized soon (at least not within 2022). With an adjusted 12-month TP of VND41,200 (from VND42,300), we maintain our MARKET PERFORM rating on the shares of BID.

We recently attended the MWG AGM, wherein the management guided for 2022 earnings to increase by 30% YoY. As a result, we increase our SOTP-based 12-month target price to VND196,000 (from VND174,000) – for upside potential of 31.4%. While the revenue recovery for its grocery chain (BHX) is slow, 2022 earnings growth should be supported by: (1) a recovery of DMX/TGDD off of a low base in 2021; and (2) improvement to BHX’s bottom line due to cost optimization measures. Our 2022 revenue and net income estimates are now VND138.8tn (+13% YoY) and VND6.7tn (+37% YoY), respectively. The AGM pledged a maximum of 20% toward a capital raise to expand the grocery segment beginning 2023 - a positive catalyst for the shares, in our opinion. We, hence, raise our target PS for the grocery segment from 0.8x to 1.3x, which is decent compared with the PS of 2x based on the most recent stake sale of Wincommerce (a competitor grocery chain). We reiterate our BUY rating on the shares of MWG. Downside risk: possibility of store closures due to renewal of lockdown measures.

From our recent call in November 2021, HAX share price has increased 25% and reached our previous target, with better-than-expected growth in its 2021 earnings result. However, after attending recent 2022 AGM, we saw a possible peak in HAX earnings in Q2 & Q3 2022. We have also seen stricter requirements in terms of Mercedes’ dealer standards, which has pressured the company to raise significant equity for expansion, and dilute earnings growth in the near term. The impact of worsening chip shortage also causes us to lower 2022 and 2023 earnings forecast. Thus, we decided to rerate HAX to UNDERPERFORM, with a revised 1-yr target price at VND 32,000/share after taking into account the dilution impact, which equates to total return of -4% from capital gain of -6% and expected dividend yield of 2%. We expect 2022 total sales and net profit to reach VND 5.8 tn (+5% YoY) and VND 218 bn (+36% YoY), respectively.  Dilution ratio is 21% if the right issue is fully absorbed and recent convertible bonds is fully converted in 1-yr, in our estimate.

BID reported a 2021 profit before tax of VND13.6tn, and we raise our 12-month target price on BID to VND42,300 from VND41,100 (adjusted for dividends), based on an unchanged target PBR of 2.2x applied to our 2022E BVPS and assuming 5% in additional share issuance. With better-than expected safety indicators and with NPLs and LLCs at all-time highs of 0.98% and 219%, respectively, the CAR improved to nearly 9%. We believe that high provisioning in 2021 will reduce bad debt and help relax credit growth for 2022. We project pre-tax profit for 2022E at VND19.4tn (+42.4% YoY), primarily fueled by credit and deposit growth of 10% and 10.4% YoY, respectively, a NIM reduction of 12bps YoY, and a lower credit cost of 1.76%.  The capital raise plan set in 2020 is likely to be more favorable this year, when the impact of the COVID-19 pandemic has taken on a milder form. We maintain our MARKET PERFORM rating on the stock.

Despite the 4Q 2021 earnings underperformance, we are maintaining our Outperform rating on the shares of VPB with our 1Y TP of VND 44,500. With the upcoming private placement and gradual economic recovery, we believe that bank fundamentals will undergo a sea change in 2022. Pretax profit for 2022 is projected at VND 18.9 tn (+30% YoY), of which VND 16.7 tn (+18.9% YoY) is expected to be attributed to the parent bank with the remainder from FeCredit. Despite the expected 300%+ YoY PBT growth at FeCredit in 2022, the subsidiary’s returns will lower than pre-Covid levels (of over VND 4 tn). Our model has not been adjusted for the bank’s investment in a brokerage company, ASC, and its potential 2022 profit. While a PBT of VND 630 bn may be feasible considering capital of VND 8.7 tn, we do not reflect such in our model and will only do so if management provides clarity on their long-term vision for this investment. For the time being, we assume VND 8.7 tn for bank lending activities at an average asset yield of 8.2%.

Credit quality remained a challenge for CTG during 3Q 2021, with provisions remaining quite elevated. As a result, we are lowering our: (a) PBT forecast for 2021 and 2022 by 3% (to VND 17.7 tn, +3.6% YoY) and 14% (VND 21.6 tn, +22% YoY), respectively; (b) Target price on the shares to VND 39,700 (from VND 42,300) – implying 23% upside; and (c) Rating to OUTPERFORM from BUY. All three changes applied to the shares of CTG reflect our belief that the credit quality and restructured loans might be a challenge to profitability for CTG over the next couple of quarters. Downside risk: Higher-than-expected credit costs and NPL-formation. Upside potential: The divestment from Vietinbank Leasing and completion of the exclusive bancassurance contract with Manulife may support the bank’s profitability and its capital buffer.

As we roll forward our valuation basis to 2022, we increase our 1Y target price to VND 49,000/share (from the current VND 46,400/share), intimating just 14% potential upside. With such limited potential upside, we are lowering our rating on the shares of TPB from Buy to Market Perform, as the shares have risen 20% since our most recent upgrade in August. Although we remain positively pre-disposed to the shares of TPB, the shares have already priced-in the recent private placement and above peer earnings momentum. Pretax profit for 2021 and 2022 are projected at VND 5.8 tn (+33% YoY) and VND 7.2 tn (+23% YoY), respectively. Upside surprise: Stronger capitalization after the recent private placement (CAR improved to 14.63%), should be supportive for the bank to gain an even higher credit quota. Downside risk: Higher-than-expected NPL formation.

We maintain our Market Perform rating for the shares of BID, despite the increase in our 12-month TP to VND50,000 (from VND48,000). 3Q21 results exceeded expectations from a credit growth, NIM sustainability (at 2.97%), and bad debt perspective. The bank wrote off VND5.4tn in bad debt during 3Q21, on top of providing an additional VND7.5tn against problem loans. This caused PBT to inch lower by 1% YoY to VND2.7tn, although asset quality metrics have clearly stabilized. Through 9M21, pretax profit for BID reached VND10.7tn (+52% YoY), completing 79% of our in-house full-year estimate. As restructured loans have more than doubled in 3Q21, we still see some pressure on credit costs going forward which likely will impact the bottom line. We maintain our PBT estimates for 2021E and 2022E at VND13.5tn (+50% YoY), and VND15.5tn (+14% YoY), respectively. An upside risk to our call would be a better-than-expected recovery in restructured loans, as well as any firm progress in its new share issuance of 8.5% pre-money charter capital. Improved capital would enable the bank better growth potential. We also expect that the stock dividend will be finalized by December. Downside risks include macroeconomic weakness.