Company Report

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.

We are revising down our 2020 forecast for VEA by 2%, which corresponds to a slower recovery in the motorcycle market than we had previously thought for Q2. In Q2 alone, Honda Vietnam published a 30% decline in retail sales volume. there is no pent-up demand as expected. Our revised 2020 EPS forecast includes weaker YoY JVs’ NPAT (-13.4% YoY) due to a -10% YoY contraction in Honda motorcycle volume – much of which will be reflected in Q2. Reflective of our anticipated decline in earnings, we are also cutting our price target by 6.0% to VND 45,500 per share. Lending support to the shares is VEA’s attractive dividend of VND 5,252 per share (~12% dividend yield along with being listed on the HNX or HOSE in the coming time. Maintaining a Market Perform rating; lowering TP 6.0% to VND 45,500.

Target for 2020 is set and approved at conservative level: total revenue is planned at VND 11.3 trillion, -38% YoY, and PBT is planned at VND 2 trillion, -80% YoY. 2Q2020 might see core loss of VND 400 bn (excluding the financial income), with about VND 120 bn loss in June. Long Thanh Airport project’s feasibility study is still under review process and not approved yet. Downgrade to OUTPERFORM rating which tracks our EPS downgrade. We do maintain our 1Y target price at VND 68,600/share, however. ACV still remains a great play on the long-term growth in Vietnam’s tourism sector.

In 2020, we expect handling volume of GMD ports to be flat at 1.7 million TEU in total, though revenue and profit from this segment might be contracted due to high competition. We also assume Gemalink will operate in the last 2 months of 2020 and make a small loss with expected utility of 10% capacity. We estimate GMD net sales and PBT to reach VND 2,372 bn (-10% YoY) and VND 537 bn (-24%) in 2020, translating to 1,273 VND (-20%) in EPS. Looking forward into 2021, we assume Gemalink might fulfill 50% its capacity in 2021, lower than the management expectation (60% capacity). At this level, Gemalink might make sizeable loss and drag down consolidated results of GMD to VND 567bn (+5% YoY) in PBT, estimated EPS is 1,345 VND in 2021. Combining 3 valuation methods including DCF, and PE and PB multiples, we arrive at target price of VND 22,300/share at the end of 2021. With 18% upside, we rate the stock OUTPERFORM.

No organic growth officially guided by VNM for 2020; we disagree: At the 2020 AGM, VNM set a revenue and earnings target of VND 59.6 tn (+5.7% YoY) and VND 10.69 tn (+1% YoY), respectively. The plan included GTN Foods (GTN: HOSE), which is starting to become consolidated to VNM from the beginning of 2020; excluding GTN, organic growth for VNM sales and net profit will be flat YoY. This is quite a conservative plan, in our view, especially when taking H1 results into account. As such, we maintain our current estimate of VND 61.5 tn in revenue (+9.1% YoY) and VND 11.35 tn in net profit (+7.6% YoY) for 2020. Positive Q2 results: Management disclosed that its interim H1 2020 results had sales advancing by 7% YoY, totaling VND 29.73 tn. Meanwhile, net profit slightly rose 3% YoY, reaching VND 5.87 tn. For Q2 2020 alone, net sales and net profit grew 6.7% YoY and 6.6% YoY. We reiterate our Outperform rating for VNM with a new 1-year target price at VND 135,000/share (from VND 116,000) based on our forward H2 2020 - H1 2021 EPS estimates and a target P/E of 23x (27% discount compared to peers), combined with the DCF method. 

AAA reported 1Q20 net profit of VND 63 bn, flattish when compared to the previous quarter - although declining significantly by -72% YoY due to the absence of new industrial park sales. We expect AAA’s consolidated revenue and net profit in 2020 to reach VND 7.49 tn (-19% YoY) and VND 451 bn (-10% YoY), respectively. Although the 2020 EPS is expected to drop by 36% YoY due to the dilution affect from the upcoming conversion of APH’s warrant, AAA net profit and EPS can recover by 7.6% in 2021 thanks to the interest expense saving from the new share issuance. We maintain our Outperform rating for the stock, with a target price of VND 15,100/share. The recovery in the company’s earnings on the back of the industrial park lease, attractive PE forward of 7.0x and 6.5x for 2020 and 2021 respectively, along with a cash dividend yield of 8%, can be a supportive catalyst for the stock price going forward.

PNJ shares are now being traded at the price of VND 60,500 per share, equivalent to a 1Y forward P/E ratio of 14.72x, higher than the median of regional peers (14.28x). We maintain our target P/E for shares at 13.0x and use 1-year forward EPS (ending June 2021) for valuation. Our target price for the share arrives at VND 53,400 per share (-11.7% downside). Hence, we downgrade our ratings for PNJ shares to SELL from Market Perform.

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.

We finetuned our 2020 estimates for QNS in light of 1Q20 results and the recent post-lockdown situations. For 2020, we raise our RS sales volume forecast to 87k tons from 80k tons, and expect sales volume of soymilk to contract by -1% (previously -5%), expecting a net sales position of VND 8.186 tn (+6.6% YoY) and a PAT of VND 1.229 tn (-4.8% YoY). For 2021, we expect net sales of VND 9.924 tn (+21.2% YoY) and net profit of VND 1.448 tn (+17.8% YoY), backed by strong recovery of sugar sales, in both price (+5% YoY) and volume (+30% YoY). QNS shares are now trading at the price of VND 26,100 per share, equivalent to 2020 and 2021 P/E ratios of 6.44x and 5.46x. We maintain our target P/E of 8.0x for QNS. We apply a discount of 15% on the target price, but roll EPS over to the 2020-2021 average. Our target price for the shares thus arrives at VND 29,900 (a +15% upside). Hence, we maintain our Outperform rating for the shares. 

PNJ shares are now trading at VND 64,000 per share, equivalent to a 2020F P/E of 14.7x, lower than the median 2020E P/E of regional peers of 17.2x. With the target P/E remaining at 13x and projected EPS rolled over to the TTM ending at the June 2021 period, our target price for the share stands at VND 69,500 per share (+8.6% upside). Hence, we downgrade our recommendation for PNJ from BUY to Market Perform. 

For 2020, we expect net sales of VND 8.357 tn (+6.2% YoY) and net profit of VND 922.6 bn (-21.8% YoY). Our assumptions are more prudent than the Company’s plans, as we remain concerned about price recovery prospects in the US as well as demand for collagen & gelatin given a weaker appetite for consumption of non-necessity products. For 2021, we expect net sales of VND 8.887 tn (+6.3% YoY) and net profit of VND 946.5 bn (+2.6% YoY). We maintain our Market Perform rating for VHC share with a new target price of VND 36,100 per share (+5.9% upside), using a target P/E ratio of 7.5x and an average EPS 2020-2021 of VND 4,812.

At the current market price of VND 15,500/share, PLC is traded at 2020/2021 P/E of 10.3x and 6.2x based on our estimate. We arrive at 1-yr target price for PLC at VND 18,600/share using H2 2020 - H1 2021 EPS and applying an 8x P/E multiple (equivalent to PLC average P/E in 2014-2019) and the DCF approach. It should be noted that as PLC has almost completed its investment in future production output capacity for both lubricants and the asphalt businesses, we expect no high capex in the coming years. Traditionally, the pay- out ratio is high (above 80%). 2019 dividend yield is at 8.8% based on the current market price (ex-right date is normally in June). As our target price represents 20% upside from current market price, we recommend to Overweight the stock at current market price.

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.

We accordingly lower our 12-month TP for GAS to VND64,500 (from VND96,000) based on our lower 2020E EPS and lower target valuation multiples (lower P/E from 17x to 14.5x and lower EV/EBITDA from 10.5x to 9x), in line with regional peers. As the share price has retreated sharply by 26% over the past one week following the oil price movement, we are of the opinion that the deteriorated 2020 earnings outlook from the oil price tumble has been largely priced in. We therefore keep Market Perform rating on GAS.