Company Report

As of 11 March, Vietnam had 38 confirmed cases of Covid-19 infection. Although it is hard to exactly quantify the impact of the epidemic, we can easily observe that the epidemic along with Decree 100 have eroded beer demand significantly. In particular, on-premise sales have been hit due to the measures to contain the virus. People have increasingly opted to stay clear of public gatherings due to concerns about the virus spreading, and the tourism sector has been hit significantly as a result. In our previous report, we initially estimated a 3% YoY decline in SAB’s sales volume in 2020 as we partially took into account a potential ‘zero-tolerance’ driving law. Combined with the current coronavirus outbreak in Vietnam, we consider the adverse effect to be even more intense due to the global spread of the virus, combined with the expectation of a decline in disposable income later. Given the current situation, we would like to provide 3 scenarios for SAB. Our assumptions are principally based on the timing of when the epidemic is stamped out in Vietnam, and that consumers gradually adapt to the new drink-driving law. At the current price of VND152,000, SAB is trading at a 2020E P/E of 22.3x and 2021 P/E of 20.4x respectively, and a 2020E and 2021E EV/EBITDAs of 12.2x and 11.2x, respectively, on our base case forecasts. Applying a premium target P/E of 27x to our 2020 EPS, thanks to its better fundamentals compared to peers, we derive a new 12-month target price of VND183,800 (from VND214,400). Our TP offers a potential upside of 21%, leading us to upgrade our rating on SAB to OUTPERFORM (from Market Perform). 

In 2019, KBC posted net sales of VND 3.25 trillion, up 29.7% YoY. Such performance was mostly in line with our forecast. Accordingly, 2020 EPS is estimated at VND 2,078 (+14.2% YoY) given higher revenue from Nam Son Hap Linh IP and Phuc Ninh UA, an industrial park and urban area that KBC fully owns. At the current price of VND 14,900/share, KBC is being traded at 2020 P/E and P/B of 7.2x and 0.67x which is relatively lower than average multiples of listed IP developers with a P/E of 9.5x and 1.2x. Our 1Y target price is VND17,400/share deriving from a combination of target P/E of 9x and P/B of 0.7x, representing a 16.8% upside compared with the current price and our rating is Market Perform over the stock. 

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. 

Given the above estimates, EPS would likely attain VND 3,465 in 2020 after excluding the 12% bonus and welfare fund. IMP is being traded at a 2020 P/E of 16.2x at a market price of VND 56,100. The stock has increased by 16% YTD, partially thanks to good market sentiment for the pharma sector as well as IMP positive prospects. Based on a target P/E of 20x equivalent to the median of the comparable peers, we raise our target price for IMP in a one-year investment horizon to VND 69,300/share. We recommend an Outperform for the stock, complete with a 23.5% upside.

We downgrade our rating for the sector to Negative from Neutral due to the short-term impact of Coronavirus outbreak combined with the strict implementation of Decree 100. In Q4 2019, SAB recorded net sales and net profit of VND 9.7 tn (-6.5% YoY) and VND 1.1 tn (+18.7% YoY). Cumulatively, the company recorded net sales and net profit of VND 37.9 tn (+5.4% YoY) and VND 5.4 tn (+22% YoY) in 2019, having achieved 97% and 114% of its annual sales and net profit target for the year. Given the current uncertain situation, management emphasized further on slashing costs to compensate for the expected decline in sales for the short term. We currently forecast net sales and net profit to reach VND 37.3 tn (-2% YoY) and VND 5.64 tn (+5.1% YoY) in 2020. We also lower our target price for the stock to VND214,400 (+10.5% upside) using the industry’s current average P/E levels of 27x applied on our 2020F EPS of VND 7,940 (from a target PER of 33x applied on our 2019-20F EPS). As such, we maintain our Market Perform rating. In the next 3 months, the stock price will still likely be affected by unfavorable Q1 result forecasts. 

At the current price of VND 27,400 per share, FRT is traded at a 2019-2020 P/E of 6.8x and 6.4x respectively, much lower than the regional average of 15.3x. With a target P/E ratio of 7.5x (down from 10x) on a 2020 diluted EPS of VND 4,234, we derive a 1-year target price at VND 31,800 per share, giving an upside of 16% from the current price. Our rating for the stock is MARKET PERFORM. 

Accordingly, 2019 and 2020 EPS are estimated at VND 1,937 and VND 2,579 respectively. At the current price of VND 14,900/share, KBC is being traded at 2019 P/E and P/B of 7.7x and 0.76x, and a 2020 P/E and P/B of 5.7x and 0.65x. Our1Y target price is VND 18,250/share, representing a 22.4% upside compared with the current price and reiterate our OUTPERFORM rating.

Based on the above estimates, EPS would likely reach VND 2,736 in 2019 and VND 3,148 in 2020 after excluding the 12% bonus and welfare fund. At the market price of VND 54,000, IMP is being traded at a 2019 and 2020 P/E of 19.7x and 17.6x. Based on a target P/E of 18x, average when compared to comparable peers, we recommend a Market Perform for the stock, with a 1-year TP of VND 56,600/share, a 5% upside. Annually, IMP often generally books about 10% of its PBT in administrative expenses for its R&D fund, as has been the case since 2012. The Company intends to not distribute this fund until the latest factory completely obtains the EU-GMP certification standard.  Hence, IMP perhaps may not record this expense next year, and may get higher growth in terms of its bottom line in 2020 that exceeds our estimates. At present, we have not opted to factor this assumption into our model.

VNM shares are trading at a 2019E PER of 23x and an EV/EBITDA of 14.3x, and a PER of 21.5x and EV/EBITDA of 13.2x for 2020E. We believe these levels, while not expensive, are nevertheless not yet attractive given VNM’s unexciting growth outlook (our 2018-23E net profit CAGR is just 6.5%). However, we raise our 12-month TP for VNM to VND139,000 (from VND130,000) as we roll over our valuation basis to 2020E EPS (from 2019E) and apply an unchanged target PER of 23x, set at a c.15% discount to the regional peer average. We plan to only raise our target P/E for VNM when we see early signs of strong fundamental catalysts. Thus, we maintain our MARKET PERFORM rating on the stock.

PetroVietnam Gas (GAS) has released its Q3 2019 results: net sales totaled VND 19.04 tn (+3.3% YoY) and net profit dropped -10% YoY to VND 2.88 tn as a result of decreases in the fuel oil price (-14% YoY) and LPG price (-30% YoY). Compared to preliminary results, the reported number came in slightly higher, as GAS has not recorded a decommissioning expense of approximately VND 200 bn in Q3, and instead it will book an amount of c. VND 400 bn of that expense in Q4. We revised our 1-year target price to VND 109,000 (from VND 114,500), based on an unchanged target P/E of 17x (on our lower EPS estimate) and EV/EBITDA of 11x as we roll over our valuation basis to 2020F. Given only 6.7% upside from the current market price, we change our recommendation from Outperform to Market Perform.

At the current price and estimates, the stock is trading at 2019 and 2020 P/E ratios of 8.3x and 6.3x respectively. We maintain our target price of VND 21,090/share as per our last report, based on a P/E target of 7.5x applied to our 2019 and 2020 average EPS of VND 2,812. Since the stock price has increased by 11.5% since our last call, we change our recommendation to Market Perform for the stock.

Based on the annual plan of NLG, we estimate that 2019F EPS and 2019F BVPS is equivalent to VND 3,798/share and VND 19,275/share. At the current price of VND 27,500/share, NLG is trading at a 2019 PER level of 7.9x and PBR level of 1.4x. Our fair value estimated by RNAV methodology is VND 46,300/share. This is 19% higher than our previous valuation, mainly due to the premium paid to Paragon Dai Phuoc project, as well as a higher sales price of most projects.