Company Report

PVD reported a profitable bottom line figure after 3 consecutive loss quarters, with NPATMI reaching VND 54 bn in 4Q 2022. Our prediction held true that there would be a turnaround in PVD performance from the end of 2022, as we continue to see higher day rate and utilization rate for its Jack-up (JU) fleet, and no more impact from forex loss. The company finished 2022 with consolidated revenue of VND 5.4 trillion (+34% YoY) and NPATMI of VND -99 bn (compared with a profit of VND 19 bn in 2021)

During 4Q22, ACB posted a pretax profit of over VND 3.6 tn (+19.2% YoY), which helped the bank achieve PBT for 2022 over VND 17.1 tn (+42.6% YoY). ACB’s profit has exceeded its AGM-set profit target by 14%, amid difficult market conditions. The strong results were supported by strong interest income (+34.6% YoY); robust FX trading income (+111.8% YoY); and a significant decline in loss provisions (-52.2% YoY). The 4Q22 NIM did expand, albeit at a slower pace of 6 bp linked quarter to 4.6%. A notable improvement in NPLs was another key highlight for 4Q22, due to a large bad debt item having been written off. Despite a huge provision reversal during 2022 due to a significant reduction of Covid-era restructured loans (-25% QoQ), ACB still maintained a strong credit buffer, which should enable it to withstand the volatility in the current operating environment.

Being foreign debt-free could allow NT2 to avoid the impact of rising lending rates and FX risks that competitors are facing. A stable dividend yield play is what we are looking forward to, rather than earnings growth. A price correction could offer a more attractive dividend yield. As of the 10-Feb-2023 closing price, NT2 traded at a 5.2x FY23R EV/EBITDA and a 8.9% dividend yield. Compared to deposit rates offered by banks, it would be attractive if the current dividend yield NT2 pays out could deliver more than 10%. Dividend payment in beginning of 2Q23 could be catalyst after the 2023 AGM decision which could offer an outperformance in short-term. With a 1Y TP of VND 30,880 with a projected 9.9% upside, we call for a Market Perform rating for the stock.

We attended SAB’s analyst meeting on February 9 to discuss 4Q22 results and the 2023 outlook. For 4Q22, SAB posted net sales and net profit of VND 10 tn (+11.4% YoY) and VND 1.1 tn (-23% YoY), respectively. This fell short of our estimates, due to higher-than-expected raw material, advertising, and promotion expenses. Going forward, management believes that input costs will reach their peak during 2023 and should start to level off during 2024. Meanwhile, SAB continued to cut its production costs aggressively, and improved its product mix to maintain healthy margins. The approved M&A plan to increase the stake in two associates and turn them into subsidiaries should be beneficial for SAB over the long-term, given its expansion in product portfolio, distribution networks, and direct control of quality as well as production efficiency. 

VNG Corporation (UPCOM: VNZ) was established in 2004 by founder Le Hong Minh. VNG Corporation has been a large player in game publishing and developing for 18 years. VNG Corp. has also tapped into the cloud/data center segment during the 2006-2007 period and the Zalo social networking platform during 2012. The ZaloPay e-payment platform was created during 2016. VNG Corporation has been listed on UPCOM since Jan 5, 2023. Positive single digit growth is expected for the gaming sector. Revenue growth for gaming could be improved due to the higher quality gaming experience, content, graphics, and design. It’s noted that high revenue growth from Vietnam game sales during 2011-2022 was led by mobile game on back of booming internet/3G,4G/smartphone penetration. Notably game sales growth peaked in 2020-2021 due to covid. However, the internet/3G,4G/smartphone penetration is now quite high and set to limited expansion and the expectation of any big change could be less likely under our concerns. We thus think that Vietnam game sector’s sales growth could be softened to single digit rate.

GMD announced the full divestment of the Nam Hai Dinh Vu port, which we view as positive for the shares of GMD, given the significant one-off profit for 2023 and the potential more rapid ramp-up of the Nam Dinh Vu Phase 2 project. Despite a weak outlook for the seaport sector in 2023, GMD could find a way to maintain volume growth, restructure its business in the highly competitive Haiphong port cluster area by giving more focus to Nam Dinh Vu port, and use the sale proceeds for new project investment to reduce its financial burden in the midst of a high interest rate environment. We estimate that 2023 PBT will increase 85% YoY to VND 2.4 tn under our base case. We rate the shares of GMD a BUY, and increase our 1Y-TP of VND 57,400/share (from VND 45,200/share), implying 26% upside.

In 9M 2022, PVS posted consolidated revenue of VND 11 tn, +14.8% YoY and NPATMI of VND 415 bn, -19.8% YoY. The key culprit for the fall in gross margin is from lower margin of EPC/EPCI segment, as its margin contracted signifcantly from 3.7% in 9M 2021 to 0.4% this year. The O&M segment also saw a significant margin cut, to nearly the breakeven point. Significantly higher material and input costs (65%) is the main reason so far. Recently, Vietnam National Assembly has passed the Revised Oil & Gas Law, which is supposed to create a clearer legal framework for oil & gas activities, including new investments in E&P projects. As the outlook for Vietnam oil & gas E&P sector can be improved marginally in 2023 and more positively from 2024, we expect PVS to continue to rely on the international market for large EPC contracts in 2023.

The container shipping market (including the spot market, charter market, and second-hand market) had considerably shrunk during 2022. Though the downcycle might continue into 2023 and even 2024 due to increasing supply, we think that further downside risks are limited in scope, especially in the case of the charter market. The potential reopening of the Chinese economy could act as a key supporting factor for shipping demand in 2H 2023 and could reinflate the sector, a time when inventory destocking might reach completion by 1H 2023, of which we could see a promising reflation in output as well. In our view, the HAH stock price has reflected the worst case scenario, as 2022 P/E is only at a shockingly low 2.8x at current price. We thus expect a re-rating for the stock in 2023, when shipping demand starts to recover. Given our expectation that 2024 will be the worst year for HAH earnings, we use our fine-tuned estimated 2024 EPS of VND 8,558 and a P/E ratio of 5x (historical average P/E in the last cycle under normal conditions) to derive a new target price of VND 42,800/share, implying a 30% upside. We upgrade our rating to BUY.

During its recent analyst meeting, MWG’s management laid out that 4Q22 financial performance will be hit by poor discretionary spending, interest rate hikes and FX losses. For October 2022, total revenue may reach VND 10.9 tn (-11% YoY), of which ICT & CE revenue declined by -18% YoY to VND 8.3 tn, while the grocery revenue rose by 22% YoY to VND 2.37 tn. The management expects 2022 net income to decline by -10% YoY, equivalent to 4Q22 net income growth of -40% YoY. For 2023, the company expects earnings of the ICT & CE business to improve only from 2H. Meanwhile, the profitability of the grocery business is improving, and the segment posted positive EBITDA at the company level in October. Capital raising for BHX is still on track, and expected to be completed in 1Q23. We cut 2022-2023 net income of MWG by 15% and 19% to VND 4.37 tn (-11% YoY) and VND 4.74 tn (+8.4% YoY) respectively. Even though earnings of the ICT & CE segment may decline in 2023, the improvement in profitability of the grocery segment and the absence of one-off restructuring expenses should help MWG to post positive net income growth in 2023. 

ACB posted a pretax profit of VND 4.5 tn (+71.1% YoY) in 3Q22, fueled by solid credit growth (+11.1%), strong interest income growth (+33.4% YoY), robust fee income (+36.4% YoY), and the reduction in loss provisions (-89% YoY). Notably, the NIM kept heading upward without interruption. Despite modestly weaker asset quality having in 3Q22, ACB has maintained a very robust credit buffer which eased pressure for credit provision expenses and facilitated stellar earnings growth momentum. Restructured loans declined -13.9% QoQ (approx. VND 11.2 tn), and a total lack of corporate bond balance enabled ACB to be less impacted by current market condition. Despite major headwinds being included our assumption and a reduction in our 1Y TP to VND 26,300 per share (from VND 34,400), we reiterate our BUY rating on the shares of ACB given the upside of 29.2%.

GMD maintained strong business results through 3Q22, with an 80% YoY growth in PBT. However, downside risks have been building since 4Q22 as shipping demand is deteriorating rapidly due to weak consumption demand and high inventories. Over the next 3-6 months, we are concerned that there would be little upside catalysts for the stock as earnings growth could reduce significantly in 4Q22 and 2023, and new project volume ramp-ups during 2023 will be impacted while depreciation cost burden rises. We estimate 2022 and 2023 PBT to reach VND 1.3 tn (+61% YoY) and VND 1.33 tn (+3% YoY), respectively. Earnings growth is expected to recover from 2024 when demand improves. We combine our DCF valuation model and PE valuation (target PE of 12x) to reflect recent market valuation, we lower our 1Y-TP to VND 45,200/share (from VND 55,600/share). We downgrade the share from OUTPERFORM to MARKET PERFORM.

In 3Q22, VNM posted revenue and net profit of VND16.0tn (-0.7% YoY, +7.7% QoQ) and VND2.3tn (-21.5% YoY, +10.5% QoQ), respectively. For 9M22, the company delivered revenue of VND44.9tn (flat YoY) and NPAT of VND6.7tn (-20.2% YoY). Given the performance over 9M22, we cut our NPAT for 2022F by 4.2% to VND9.0tn (-15.3% YoY) and leave that for 2023F largely unchanged. For 2023F, we expect 6.4% and 15.7% YoY growth for the top and bottom-lines, respectively; with the higher growth on the bottom line due primarily to lower input costs. As a dairy company with management’s prudent style, VNM has limited to no direct risk to the existing headwinds in the property and corporate bond markets. Further, with a net cash position of VND13tn (c.USD52mn) as at end-3Q22, the company should benefit from rising interest rates to a degree. With an improving earnings outlook from 4Q22 onward, VNM should post better performance, as it could exit the period of earnings decline in 2021-2022.

MWG reported revenue of VND32tn (+32% YoY, -7% QoQ) and net income of VND907bn (+15% YoY, -20% QoQ) for 3Q22. Given the 3Q21 low base when the company suffered from lockdown activities in provinces within Southern Vietnam, 3Q22 net income growth of 15% YoY was below our expectations. This could be attributed to the increase in financial and one-off expenses related to the closing of non-performing BHX stores. We expect financial expenses to rise in 4Q22 due to the: (1) trend of higher interest rates, (2) debt restructuring to longer maturity, and (3) VND depreciation. We forecast 4Q22F net income at VND1.67tn (+7% YoY). As such, we reduce our 2022F net income by 6% to VND5.16tn (+5% YoY, from VND5.48tn) and that for 2023F by 18% to VND5.86 (+14% YoY, from VND7.19tn). While earnings of the ICT & CE segments will likely be hurt next year, improvement in the grocery segment (due to the increase in sales and absence of one-off expenses) and smaller FX losses should secure decent earnings growth for 2023F. Despite rolling over our basis to 2023F (from average 2022-23F), we lower our SOTP-based 12-month TP to VND61,000 (from VND87,800) to reflect the cuts to our earnings and target multiples. With 44% upside potential to our new TP, we recommend investors to accumulate the stock despite possible periods of price weakness.  

FPT trades at an attractive FY22E and FY23E P/E of 15x and 12.7x, respectively, on the back of 22%  and 18%  EPS growth under our base case. Meanwhile, peers with an average of 6%  and 15%  EPS growth in 2022 and 2023, respectively, are trading at an average FY22E and FY23E P/E of 17x and 15x. While the IT spending weakness need to be monitored, in light of FPT’s low cost advantage, having the lowest exposure to the EU market compared to peers, a healthy interest coverage ratio, and an abundant net cash position, we remain positive on the stock. We call for Outperform rating on FPT with 12-month SOTP-based TP of VND95,400 representing 31% upside potential. Key risks: extreme recession could negatively impact the domestic & global IT services sector, as well as digital advertising segments.

The container shipping market has reverted to a down cycle after an unprecedented boom, and earnings levels of shipping companies are set to normalize. HAH may not escape this negative trend, as we expect NPATMI to slide through 2024. However, we estimate that the normalized earnings could be 5x higher than pre-Covid levels given the significant capacity expansion. The recent price correction has sent the shares of HAH to below its book value, which we believe to be an interesting entry point for a long-term investment. However, near-term upside would appear to be capped with few catalysts for the shares over the short term. As such, we lower our rating on the shares of HAH to MARKET PERFORM, with a 1Y-TP of VND 38,500/share (target P/E of 4x), implying only 16.8% upside.