Company Report

We like OCB’s strategy of targeting the niche micro-SME market, as well as the detail-oriented approach to risk management which effectively weeds out risks with small enterprises. Constant investment in digital banking has yielded tangible results, such as improved operating efficiency and a boost in retail CASA. As a small bank, room for growth remains significant. However, large exposure to construction and real estate (18%), hospitality (13%), and energy (10%) are a concern. A nearly full foreign ownership limit of the bank is a drawback for OCB as well. Our target price for the bank is VND 25,300 per share, representing 29% upside from the closing price as at 29 Jan 2021. Hence, we initiate coverage on the shares of OCB with a BUY rating.

Upgrade rating to BUY: With the increase to our NIM forecast and adjusting credit costs for 2020 and 2021, we are aggressively increasing our 2020F and 2021F PBT forecast to VND 10.8 tn (-8.1% YoY) and VND 15.5 tn (+43.1% YoY), respectively. Our 2020 and 2021 PBT forecasts are now +11.1% and +42.8% higher, respectively. Our forecast does account for the potential bancassurance deal being re-negotiated. We have our adjusted P/B target from 1.2x to 1.6x, which has resulted in 1Y target price for the shares of CTG to VND 38,700 (up from previous 27,200). Our revised share price target represents potential of 16.6% upside, plus the cash dividend yield of 1.5%. An ROI of this magnitude causes us to upgrade our rating on the shares of CTG from Outperform to BUY.

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.

Capacity expansion to spur long-term growth for Moc Chau Milk (MCM): In recent years, MCM revenue was constrained due to a lack of capacity: namely full factory utilization and limited dairy farms. After Vinamilk (VNM: HOSE) took over the controlling right indirectly via GTNfoods (GTN: HOSE) in MCM, it put forth an ambitious capex plan of VND 1.6 tn to develop a 4,000 head dairy farm and a new dairy factory in order to address these constraints. Capex is expected to be funded by an increase in charter capital. Post-deal, Vinamilk is anticipated to hold over a 51% stake in MCM  - up from its current indirect stake of 28.3%. In 2020, we forecast MCM to post VND 2.76 tn in revenue (+8% YoY) and VND 201 bn in net profit (+20.2%), which should translate into 2020 EPS of VND 3,003 pre-capital raise. Growth is likely to come from restructuring of MCM’s distribution network, and changes in sales mix. Moc Chau Milk is a household name in Northern Vietnam given its higher quality milk products.  Over the long-term, we are of the opinion that MCM could post stronger-than-industry growth (i.e double-digit bottom line growth) in the coming years thanks to capacity expansion and margin improvement in premium products and synergies with Vinamilk, especially in terms of market development. MCM expects to list on HOSE within 9 months.

The previous lockdown order in Vietnam coupled by unrecovered demand by way of pandemic-related lower income brought VEA profit down. Moreover, VEA is going to make a provision for uncollectible loans. Therefore, VEA might experience a contraction in consolidated profit for Q2. We consider reviewing our forecast after its 1H financial statement is announced. Until then, we maintain our previous forecast for VEA. Net sales is forecasted to come in at VND 4.508 tn (+0.3% YoY) and VND 4.811 tn (+6.7% YoY) in 2020 and 2021. Net income reached VND 6.633 tn (-9.4% YoY) in 2020 and VND 7.157 tn (+7.9% YoY) in 2021. We continue to provide a Market Perform rating for the stock, with a 1 year TP of VND 48,300 (+11% upside in capital again and +23% in total return including 12% dividend yield), and we reiterate our buy-the-dip recommendation. 

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. 

VCB reported its 1Q2020 earnings, with TOI reaching VND12.29tn (+4.4% YoY) and a PBT of VND5.22tn (-11.1% YoY). The difference in the top line and the bottom line was because of the surge in provision expense of +42.9% YoY. In our base case where we expect Covid-19 pandemic to not return in winter, we forecast VCB to deliver 2020 & 2021 PBT of VND22.16tn and VND26.15tn, -4.2% YoY and +18% YoY, respectively due to lower growth in TOI and a strong upsurge in credit costs. We project 2020/2021 BVPS at VND 28,059/ VND 31,886, with the assumption that VCB will successfully issue 5.88% of post-money capital at VND 65,000 per share in 2020. At the current price, VCB is trading at 2020E P/B of 3.19x and 2021E P/B of 2.80x. We lower our 12-month target price to VND 89,900 (from VND92,700) and downgrade the stock to UNDERPERFORM (from Market Perform).

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. 

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. 

An Gia Investment (AGG) listed its 75mil shares on HOSE on 9 January.   AGG was established in 2008 as a private company specializing in providing brokerage and real estate services. Since 2014, the company has expanded into the real estate development sphere, and has become an active developer in mid-end segment primarily located in HCMC.  AGG’s products are highly favored by the middle-affluent class. In our opinion, AGG’s business model is agile, able to adapt to changes and evolutions in the competitive matrix of the real estate market. Outlook: Revenue earned from residential project handover is An Gia’s core business. Most projects launched by An Gia have been well-favored by its customers, with an average absorption rate of 80-90% after just 3 months. Currently, An Gia is executing some mid-end residential projects in HCMC and nearby provinces, such as: The Song project (1 ha) in Vung Tau, the New Tech (VND 1.3 ha) and the West Water Gate  (3.1 ha) In District 7, as well as two large potential projects ( D7 and BC  27, with a total site area ~ 32.4 ha) which are under process for license finalization with the local government. Based on the project pipeline schedule, we estimate An Gia 2020 revenue and net profit will strongly increase compare to its low base set in 2019, achieving nearly VND 2.77 trillion (+622.7% YoY) and VND 386 bn (+16% YoY) respectively from the handover of 2 sites (River Panorama 1 & 2). With the finalization of of the Sky89 unit blocks from the Lacasa project come 2021, we expect An Gia will continue to record positive growth of more than VND 4.4 tn in terms of revenue (+59.5% YoY), and a net profit of VND 668 bn (+73% YoY). In term of financing, the company maintains a healthy capital structure with a low debt/equity ratio all the while as it moves towards adding new plots to its landbank in Long An, Phan Thiet, and Binh Duong. This will be done in collaboration with foreign investors, such as Creed Group and Hossier. Valuation: At a current price of 26,350 VND /share, An Gia is trading at a 2019 and 2020 P/E level of 5.8x and 5.7x respectively which are lower than industry peers. Investment risks include: (1) Cyclical nature characteristics of the real estate industry, (2) Lack of clarity in legal framework (3) Developer competition (4 ) Lower pre-sales than expected (5) Possibility off tightened credit market conditions (6) Possibility of lacking additional capital for expansion. 

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.

In 2019, net sales totaled VND 5.842 tn (+14.9% YoY), fulfilling 97% of guidance while NPAT posted VND 375 bn (-23.7% YoY), only fulfilling 88% of guidance. Overall, the significant drop of net earnings was mostly due to lack of property projects in 2019, while the 2018 real estate sector was backed by My Dinh Plaza 2 and My Dinh 1.  We estimate the top and bottom line to both be brighter at VND 6.746 tn (+15.5% YoY) & VND 457 bn (+22.0% YoY), compared to company guidance of VND 7.222 tn and VND 501 bn. PC1 is trading at FY20 P/E of 5.3x and a compelling PEG ratio of 0.3x (given 2020-2021 EPS growth at 19.7%). We see some earnings drivers in 2020, including (1) recognition of Thanh Xuan real estate project in 2Q 2020 and Vinh Hung in 2021; (2) new online production from 3 hydropower plants (Mong An, Bao Lac B & Song Nhiem 4). But our projection hasn’t been factored in the other two new wind power projects recently disclosed on 12 Feb 2020 (as discussed above), and we will provide detailed a recommendation in coming research reports. 

MBB has recently released its 4Q 2019 earning results, featuring total operating income and pretax profit of VND 6.7 tn and VND 2.4 tn. This was a welcome rise upwards by +17.1% YoY and +38.1% YoY respectively. For full year 2019, pretax profit reached VND 10.036 tn (+29.2% YoY), surpassing the goal of the annual plan, at 106%. While great performance, this was -2% below our forecast, as actual provision expenses for 2019 escalated to VND 4.89 tn (vs. our forecast of VND 4.25 tn). For 2020, we expect MBB to post a respective VND 28.5 tn and VND 12.1 tn in total operating income and pretax profit, which is equivalent to a growth rate of +15.7% YoY and +20.6 % YoY. As the result of the capital raise to the present date has been lower than initially planned, we made an adjustment to the total equity of the bank. We therefore account for only the sales of 21.43 mn treasury shares and the new isssuance of 64.3 mn shares (instead of 47 million treasury shares and 141 mn new shares). Through this adjustment, the BVPS of MBB nudged to VND 19,641 (-2% compared to our previous estimate), and the target price for MBB was slightly adjusted to VND 29,460, which is still +43.7% higher than the current market price. We therefore maintain our BUY recommendation for MBB stock.