Company Report

Despite the 4Q 2021 earnings underperformance, we are maintaining our Outperform rating on the shares of VPB with our 1Y TP of VND 44,500. With the upcoming private placement and gradual economic recovery, we believe that bank fundamentals will undergo a sea change in 2022. Pretax profit for 2022 is projected at VND 18.9 tn (+30% YoY), of which VND 16.7 tn (+18.9% YoY) is expected to be attributed to the parent bank with the remainder from FeCredit. Despite the expected 300%+ YoY PBT growth at FeCredit in 2022, the subsidiary’s returns will lower than pre-Covid levels (of over VND 4 tn). Our model has not been adjusted for the bank’s investment in a brokerage company, ASC, and its potential 2022 profit. While a PBT of VND 630 bn may be feasible considering capital of VND 8.7 tn, we do not reflect such in our model and will only do so if management provides clarity on their long-term vision for this investment. For the time being, we assume VND 8.7 tn for bank lending activities at an average asset yield of 8.2%.

We attended the MWG online analyst meeting, where management provided 2022 guidance of a 30% YoY increase in net income. As a result, we revise our 2022E revenue and net income to VND141.6tn (+15% YoY) and VND6.9tn (+40% YoY, -3.4% lower than our previous estimate). While we lower our SOTP-based 12-month target price to VND174,000 (from VND176,000), we are reiterating our BUY rating on the shares of MWG. The company did decide not to open BHX stores in 2022 and has instead opted to focus on improving the revenue of existing stores with the addition of SKUs and improving the quality of fresh food. Coupled with cost optimization measures, the grocery segment should break even sometime in late 2022. With respect to DMX and TGDD, a recovery in household income and market share gains should improve growth prospects. Downside risks: Possibility of store closures due to lockdown measures; the post-pandemic recovery in household income taking longer than expected.

We are initiating coverage on the shares of pre-IPO (February 2022) Nova Consumer Group Joint Stock Company (NCG) with our 1Y target price for the shares of NCG is VND 53,200/share, implying a 22% upside relative to the IPO starting price. NCG is a leader in the animal health, feed, and farm market segment, having long-established customer relationships with the ability to create a full “3F” supply chain. It also has the advantage of being a part of the Nova Group ecosystem (including Novaland, Nova Consumer Services and six other members), which should allow potential future synergies and sharing resources. There is also the potential for strong growth in the FMCG business, from both organic growth and M&A perspective (on-going transactions:  Anco Family Food, a well-established beverage company, and a nutrition company). From 2022, NCG is widely anticipated to consolidate the consumer business, including Anco Family Food (sausage), milk, energy drink and coffee. Excluding one-off items in 2021, NCG should post strong core profit growth of 109% YoY in 2022. Through 2021-2026, however, we estimate that NCG will continue to post a net profit CAGR of 26.8%.

We are upgrading our rating on BMP from Market Perform to Outperform, with a higher 1-year target price of VND 67,000/share (previously VND 52,700/share). Our upgrade reflects an improved earnings outlook for 2022, which we revise up by 27% to VND 439 bn (+105% YoY) on the back a 15% recovery in sales volume and a 9% increase in ASP. The company’s business recovered in 4Q21 with net profit arriving at VND 114 bn, significantly recovering from the VND 26 bn loss in 3Q21 driven by higher selling price and a correction in input prices between December and January.

4Q 2021 results exhibited a recovery, with rebounding credit growth and fee income of 7.6% (or +16.2% YTD) and +17.5% QoQ (or +84.1% YoY), respectively. As such, we are reiterating our Outperform rating on the shares of ACB, however, we finetune of our 1Y TP to VND 42,100 (from VND 41,750). Further, while Covid-impacted loans rose 27% QoQ to VND 17 tn (~ 4.7% of total loans), ACB has already fully provided for restructured loans in 2021 – leaving a wide berth for 2022 earnings growth.  For 2022, we expect ACB to achieve a VND 14.8 tn in pretax profit (+24% YoY), fueled by credit and deposit growth of 16% and 7%, respectively, NIM expansion of 14 bps, and a lower credit cost of 0.75%. Over the longer-term, ACB’s aggressive expansion in digitalization, new strategic client segments, and expansion to cities in northern Vietnam should also bear fruit.

We are upgrading our rating on the shares of GAS from Market Perform to Outperform, reflecting our increased 12-month target price of 134,000/share (from VND 130,000/share) – implying 17% upside potential (based on a target P/E of 22x and DCF approach). Our optimism stems from (1) increasing our 2022E Brent oil price assumption to USD80/bbl (from previous assumption of USD75/bbl) and (2) a dry-gas volume recovery of 18.5% YoY to 8.5bcm, which is expected to be driven by strong demand recovery from power plants and increased gas volume sold to industrial users. As a result, we estimate that GAS’ parent company will report revenue of VND90tn (+17.5% YoY) and NPAT of VND11.6tn (+35.3% YoY) for 2022E.

We maintain our Market Perform rating on the shares of BVH and increase slightly our 1Y TP to VND 71,900/share (from VND 71,000). 3Q 2021 results were positive with improved underwriting profit. This was driven by an unprecedented low claim ratio given the higher level of non-reported incidents (lack of filing formal claims during the lockdown). BVH’s performance was in line with sector trends, as direct written premium decreased -4% YoY (to VND 9.3 tn) and PBT surged +85.4% YoY (to VND 543 bn). The claims and combined ratio improved to 26% and 102% (vs. 53% and 105% during 3Q 2020), respectively. We do expect a pullback in the shares for 4Q 2021 profit when the claim ratio returns to normal, and mathematical reserve expenses rise in-line with a recovery in NBP. As we anticipate a growth recovery in 2022, with pretax profit projected at VND 2.5 tn (+21.9% YoY), we would be buyers post-4Q 2021 result. Downside risk: A larger-than-expected decline in interest rates and VN government bond yields.Upside surprise: A stronger-than-expected uptick in VN government bond yields; SCIC divestment from BVH could create short-term positive sentiment.

HT1 recorded a before-tax loss of -51 bn VND in 3Q21, the first time since 2014. Revenue dropped by -48% YoY, as sales volume fell by 46% YoY due to the lockdown in 19 provinces in southern Vietnam from Jul to Sept. In addition, the increase in cost of raw materials, also had a negative impact on the company’s margin. Cumulatively, HT1 revenue and PBT posted at VND 5.04 tn (-12.4%YoY) and 375 bn (-35.9% YoY), respectively accomplishing 62% and 46% of annual guidance. Although we had previously expected and already priced into our estimates a tumble in 3Q21 earnings, we still revise our 2021 PBT forecast from 728 bn to VND 481 bn (-37% YoY), due to the high coal price.   However, we expect that business results will recover in 2022, with revenue and PBT increasing by 13% and 48% to VND 8 tn and 710 bn respectively on the back of the recovery in both sale volume and gross margin. At the current price, HT1 is trading at 2021 and 2022 P/E forwards of 28x and 19x, which is much higher than the historical 5-year average of 10x. We believe that the share price has more than reflected the potential earnings recovery in 2022. As a result, we maintain our Underperform rating for the stock, with a 1-year target of VND 17,500/share based on P/E and EV/EBITDA targets of 13x and 5.5x respectively. 

VPB’s 3Q 2021 PBT took a double hit from a sudden drop in NIM and weaker credit quality. While the latter had been expected, as VPB’s main client segments were heavily impacted by Covid-19, the NIM fell short of expectations due to the combination of a +141% surge in restructured loans, a loan rate cut, and loan mix evolving toward lower-risk loans. Asset quality remains our primary concern, as it should take more time for the mass client segment to fully recover and return to their normal repayment status, in our view. However, we believe that with the gradual improvement in funding costs and NIM rebound over time, the bank will have greater capacity to withstand higher provisioning. Accordingly, pretax profit for 2021 and 2022 are projected to be VND 15.9 tn (+22% YoY) an VND 19.6 tn (+ 23% YoY), respectively. We increase our target PB ratio for the parent bank to 1.7x (from 1.6x) but decrease our target PB ratio for FeCredit to 2x (from 2.2x) reflecting the different recovery pace and prospect between the two entities. Rolling our valuation basis to year-end 2022, we increase our 1Y TP to VND 44,530/share (from VND 39,300), representing potential upside of 13.6%. We call for Market Perform rating on VPB’s shares.

.

We maintain our Market Perform rating on the shares of MSN, despite raising our SOTP-based 12-month target price by 12% to VND 172,000/share. Our higher TP reflects subsidiary-related factors, including the: (1) re-rating of WCM due to improved profitability; (2) higher estimates for MML (meat business) and MCH due to improved gross and EBITDA margins; and (3) spin-off and full divestment of its feed business. In 2022, we forecast MSN to maintain strong growth momentum in core NPAT of 65% YoY, as we expect profitability to continue to improve at WCM, MML, and Techcombank. Positive catalysts over time: (1) corporate actions, such as sales of stake in subsidiary/ies or a private placement at the group level or the listing of TCX; and (2) improved performance within its various business units, especially retail and/or mining businesses. 

3Q21 PLX revenue increased 26% due to an increase in petroleum prices; however, PBT was just VND 112 bn – declining -90%YoY as nearly all company segments (especially petroleum, transport, and petrochemicals) were negatively impacted by lockdown measures. However, we expect that PLX is poised to recover in 4Q21 due to both pent-up demand and the increase in oil prices. Our 2021 PBT forecast is VND 4.2 tn (+200% YoY), assuming that domestic petroleum sales volume drops -7% YoY to 8.4 mn m3/tons. For 2022, we expect revenue and PBT to further increase 10% and 30% YoY, respectively, to VND 177 tn and 5.4 tn on the back of 9% growth in petroleum sales volume and the recovery in other segments. We reiterate our Outperform rating on the shares of PLX, as well as our target price of VND 67,000/share.

FMC reported net sales of VND 1.6 tn (+0.3% YoY), and NPATMI of VND 56 bn (-19.6% YoY). NPATMI declined due to a combination of high shipping costs (+148% YoY) and the spin-off off its An San factory into a new subsidiary, Khang An Foods (KAF). As such, FMC completed 81% and 72% of its annual targets for net sales and PBT respectively. The company has reserved adequate materials for 4Q21 production and is unaffected by surging material prices, benefiting from improved ASP. FMC management believes that the company remains on track to meet (and even exceed) annual targets. The proposed private placement to C.P. Vietnam (11.11% of outstanding shares at VND 50k/share) will increase its stake in CP to 24.9% post-deal, and raise VND 327 bn for FMC’s capacity expansion. The shares of FMC have re-rated due to the company’s stable profit, which is quite rare in the volatile fishery industry. Our new target price for the shares of FMC is VND 61k/share (up from VND 41k/share), and implies upside of 22.7%. We reiterate our OUTPERFORM rating.

Credit quality remained a challenge for CTG during 3Q 2021, with provisions remaining quite elevated. As a result, we are lowering our: (a) PBT forecast for 2021 and 2022 by 3% (to VND 17.7 tn, +3.6% YoY) and 14% (VND 21.6 tn, +22% YoY), respectively; (b) Target price on the shares to VND 39,700 (from VND 42,300) – implying 23% upside; and (c) Rating to OUTPERFORM from BUY. All three changes applied to the shares of CTG reflect our belief that the credit quality and restructured loans might be a challenge to profitability for CTG over the next couple of quarters. Downside risk: Higher-than-expected credit costs and NPL-formation. Upside potential: The divestment from Vietinbank Leasing and completion of the exclusive bancassurance contract with Manulife may support the bank’s profitability and its capital buffer.

As we roll forward our valuation basis to 2022, we increase our 1Y target price to VND 49,000/share (from the current VND 46,400/share), intimating just 14% potential upside. With such limited potential upside, we are lowering our rating on the shares of TPB from Buy to Market Perform, as the shares have risen 20% since our most recent upgrade in August. Although we remain positively pre-disposed to the shares of TPB, the shares have already priced-in the recent private placement and above peer earnings momentum. Pretax profit for 2021 and 2022 are projected at VND 5.8 tn (+33% YoY) and VND 7.2 tn (+23% YoY), respectively. Upside surprise: Stronger capitalization after the recent private placement (CAR improved to 14.63%), should be supportive for the bank to gain an even higher credit quota. Downside risk: Higher-than-expected NPL formation.