Company Report

In light of an improvement in new deals in late 2020 along with our expectations of an economic recovery in 2021, we raise our 2021 PBT forecast for FPT’s global IT services by 4.6% over our previous estimate.  PBT growth from the FPT technology segment is forecasted to rebound by 22% (+24% from the global IT services and +10% from domestic IT services). Overall we forecast FPT’s FY21 EPS to grow approximately 17%. As we are more confident about a 2021 growth recovery, we increase our P/E target for the FPT technology segment and raise our 1Y TP 16% to VND 72,500 – translating to 16% upside. With 19% total ROI (including 3% dividend yield), we maintain our BUY rating on the shares of FPT.

For 2020, we forecast the growth of total assets, customer deposits, and credit to reach 18.8%, 12.2%, and 26.8% YoY, respectively. NIM is forecast to improve to 3.29% from 2.47% last year, while NPL is expected to be decline to 1.95% from 2.04% in 2019. PBT is projected at VND 2.4 tn in 2020 (+86.3% YoY), translating to a ROAA and ROAE of 1.12% and 11.75%, respectively. In 2021, we forecast PBT to expand 30.5% YoY to VND 3.13 tn. EPS is expected to surge from VND 971 in 2019 to VND 1,634 in 2020 (+68.3% YoY) and to VND 2,123 in 2021 (+30% YoY). BVPS is VND 16,588 (+20% YoY) in 2020 and VND 18,598 (+12.1% YoY) in 2021. We estimate the fair value of MSB at VND 20,500 per share, equivalent to the targeted 2021F P/B metrics of 1.1x. This is equivalent to our OUTPERFORM recommendation, with an upside potential of 18.5%.

We arrive at target price on the shares of MCM of VND 77,500/share, based on 2021 EPS and a target P/E of 15x. We apply a discounted P/E for MCM compared to dairy peer, due to: (1) much more limited scale; and (2) the anticipated limited trading liquidity in the shares. This implies an impressive return on investment of 168% (including dividend yield of 8.3% for 2020). We initiate coverage on the shares of MCM with a BUY recommendation.  

We forecast 2021 EPS at VND 1,454 (+107% YoY) given higher revenue attributed to Nam Son Hap Linh IP and Phuc Ninh UA, an industrial park and urban development owned by KBC. At VND 16,150/share, KBC trades at 2021 P/E and P/B of 11x and 0.7x which is relatively lower than average multiples of listed IP developers with a P/E of 14.7x and P/B of 1.6x. We rate the shares of KBC as OUTPERFORM, given our 1Y target price of VND 18,700/share which is derived from a combination of a target P/E of 14x and P/B of 0.8x, and represents 15.8% upside. 

We reiterate our OUTPERFORM rating on the shares of QNS, as our TP is slightly recalibrated at 41,800 VND/share (-3% from previous TP, +19.8% upside). We have lowered our 2021F EPS target, as we trimmed numbers for the soymilk segment. The soymilk segment was more negatively impacted by local lockdowns while the sugar segment improved. The soymilk segment continues to be impacted by the storms and flooding in Q4 (late October-early November), resulting in soymilk sales declining between 7%-8% YoY in October. For 2021, we expect that the sugar and biomass segments to drive +27% YoY bottom-line growth at QNS. 

We upgrade our rating on the shares of STK to BUY from Market Perform. Via a stable P/E target of 7.0 applied to 2021F EPS, our target price for STK arrives at 21,400 VND per share (+32% from previous TP), representing an upside of 18.9%.  Our upgrades are predicated on the continued strong recovery since September. This is especially true for recycled yarn and value-added yarn – the two product lines which differentiate STK from most other local yarn producers.

We are upgrading the shares of VHC to OUTPERFORM from Market Perform, reflecting both a rollover to 2021 EPS forecasts and the application of our SoTP methodology. As such, we are raising our 1 year target price on the shares to VND 48,200 – which represents 16.1% upside. Our upgrade is also supported by the continued recovery in the pangasius segment, as well as the continued strength in VHC’s wellness segment – which has grown to 8.5% of the top-line through 9M20 (2019: 6.5% in top-line). Further, we find that VHC has outperformed peer during the 2020 pandemic chaos with quite stable Q3 net sales, as it remains on track to meet plan. 

We are upgrading the shares of VCB from Underperform to MARKET PERFORM, as the share price has declined by approximately -8% over the past three months (-1.2% decline in HOSE over that period). Supportive of our call, VCB’s 2H2020 and 2021 TOI outlook has become even more compelling given its renewed focus on mortgage lending and bancassurance, and impressive credit growth – exceeding that of peer - given the impact of Covid-19. VCB is also planning on issuing 6.5% additional shares. Although this share issuance will be modestly EPS dilutive, we estimate it will be BVPS accretive by 10.9% (expected issuance price VND 70,000 per share while pre-money BVPS around VND 25,275 per share) which is important as the shares trade more on a BV basis than EPS. That said, we lower our 12-month target price to VND 89,200 (from VND 89,900) due to lower forecast for 2020F and 2021F earnings as a result of higher Covid-driven newly formed NPL and restructured loans. 

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.

During 2Q20, net sales and pretax profit fell -28% YoY and -39% YoY, respectively, as both domestic and export sales volume underperformed. However, July exhibited early signs of recovery in exports, while the 50% reduction in registration fees for locally assembled vehicles appears to have increased domestic tire sales. Nevertheless, we still anticipate that 2020 performance will be weak YoY, as net sales and pretax profit are expected to decline -17% each. For 2021, we expect net sales to increase +4.5% YoY as transportation recovers slowly post COVID-19, and pretax profit to jump +49% YoY as depreciation expenses associated with the Radial I factory substantially declines. Given the strong EPS growth of 49% YoY in 2021, the shares of DRC now trade at 2021 PE and EV/EBITDA of 7.1x and 3.5x, respectively, which is well below the 2018-2019 averages of 16x and 6.2x. While we recently lowered our 2020/2021 EPS and EBITDA forecasts by -7%/-8% and -4%/-6%, respectively, which translates into a lower one year price target of VND 19,400 per share (down -7%), we call for an OUTPERFORM rating given the near 14% ROI – inclusive of the 8.8% dividend yield. 

We reiterate Outperform rating for PLC, with an ROI of 20.5% (7.4% dividend yield) as we revise our target price to VND 23,700 per share (previously VND 18,600 per share). Our new target price is derived from improved 2020/2021 earnings growth outlook post-Q2 bottom-line performance. In Q2 we witnessed +46.7% YoY NPAT improvement or the achievement of 74% of PLC’s annual profit target which were boosted by the resilience of both the lubricant segment and Vietnam Dong forcing us to upgrade our EPS forecast by 23% and 5% for 2020 and 2021, respectively. Coupled with PLC’s positive 2021 (and beyond) outlook driven by a new cycle of public investment, the shares have advanced 36% since our April 29, 2020 upgrade. Considering the current operating environment of aggressive public investment, not to mention about weaker USD, we believe that PLC’s outperformance will continue.  

Double hit by COVID-19 pandemic and the growing trend of deep seaports, VSC reported a 10.7% YoY drop in 1H 2020 revenue (reaching VND 801 bn) due to 20% decrease in port throughput volume. Net income, however, increased by +33.8% YoY to VND 141 bn in 1H 2020 due to better cost control and the absence of one-off expenses. While we like VSC for its stable dividend of 20% cash on par per year, equivalent to a 7% dividend yield, we suggest to watch 2 notable performance indicators in the coming quarters:  Firstly, we are concerned about VSC’s drop in handling volume at much higher scale than its competitors in Haiphong area in 1H2020 and we want to see if this situation could be improved in the coming quarters or not.   Secondly, we are positive on VSC’s ability to better control cost and improve corporate governance issue.  If we apply the 2019 gross margin for 1H2020, then according to our calculation the saving cost would approximate VND 14bn in 1H alone.  We expect that gross margin improvement could be maintained, especially when the handling volume resumes along with demand improvement after the Covid-19 is contained. VSC is trading at a 8.2x multiple of 2021 EPS. Applying a 2021 target P/E and P/B at the sector average of 9x and 1.1x, we arrive at 1-year target price of VND 36,700/share, which implies an upside of 13.6%. Our rating for the stock is MARKET PERFORM.

HPG’s 2Q20 revenue and net profit were strong at VND20,422tn and VND2.756tn, up 35% and 34% YoY, respectively. Performance was led by steel volume growth, high pork prices, and a reversal of F/X losses. Results were also close to HPG’s estimate from its recent AGM, and in line with our forecast. Our going-in 2020E called for VND79.9tn (+26% YoY) in revenue and VND9.27tn (+22% YoY) in net income. We lift our revenue to VND80.1tn (+26% YoY) and net income to VND9.51tn (+26% YoY). We reaffirm our BUY call with a new 12-month TP of VND32,400/share (previously VND29,300), based on unchanged respective P/E and EV/EBITDA targets of 9x and 6.5x, and 2H20-1H21E earnings. Our EPS forecasts and TP do not take into account the 2019 dividend, including 5% cash (VND 500/share) and 20% stock dividend. The ex-dividend date is 29 July 2020.