Company Report

Despite the credit contraction (- 1.5% QoQ) during 3Q 2021 due to the pandemic, income streams at ACB remained robust (+27% YoY). This allowed ACB to accrue bonuses in advance for 4Q 2021, and provide an additional VND 820 bn (+406% YoY) against bad debt while maintaining relatively flat bottom-line YoY at VND 2.6 tn. Throughout 9M 2021, PBT was VND 9 tn (+40% YoY) - completing 85% of the AGM plan and 75% of our in-house estimate. With its prudent stance toward risk management, ACB’s credit cost are likely to remain elevated for the remainder of 2021 and 2022. However, we believe that the bank could be able to maintain its NIM at 4%, given gradual improvement in CASA, and the room to optimize liquidity ratios. Accordingly, PBT for 2021 and 2022 are projected at VND 11.8 tn (+23% YoY) and VND 14.7 tn (+24% YoY), respectively. Our rating for the shares of ACB is BUY, and our 1Y target price is VND 41,750/share.

VHC reported strong growth for 3Q21, with net sales of VND 2.2 tn (+24% YoY) and NPATMI of VND 255 bn (+46% YoY), respectively. Cumulatively, the company accomplished 74% and 93% of annual targets for net sales and PAT. VHC was the most profitable fishery exporter out of Q3 lockdown, benefited from strong demand from the US market coupled with a higher ASP. The company has been running at between 85%-90% capacity while implementing “three-on-the-spot” work-live on-site production and keeping administrative expense stable. As VHC has proven its position as a market leader from time to time, we believe that the shares deserve their re-rating over the past two years. We raise our target P/E for the key segments of VHC – 13x for wellness segment and SGC, and 10x for pangasius segment (previously 10x and 7.5x, respectively) and use mid-2022 TTM EPS as our base. Our new price target is VND 70.2k/share (up from VND 47k/share), implying an upside of 13.4% and a total ROI of 16.6%. We upgrade our rating for the shares from Market Perform to Outperform.

Viconship announced impressive prelim 3Q 2021 PBT results of VND 149.3 bn (+73.4% YoY), supported by superior volume growth relative to peers and enhanced profit margins post-management reshuffle. We observe marked improvement in company profit margins in 2Q21 and 3Q21. As a result, we increase our PBT forecasts to VND 474 bn (+41% YoY) and VND 604 bn (+27% YoY) in 2021 and 2022, respectively. We reiterate BUY rating on the shares of VSC on the back of higher earnings outlook and the potential strategy change into a growth company after several years of stable earnings, leading to our re-rating to 2022F target P/E ratio of 12x. Pre-money 1-year target price is VND 80,800/share (+26% upside), while post-money target price is VND 46,500/share (after 1:1 rights issuance in the coming time). VSC offers 1:1 rights issuance to all shareholders (ex-rights date on Oct 25), and short-term selling pressure could increase with some large shareholders registering to sell 1.5 mn shares over the near-term. Over the longer term, increased risks come from the new project pipeline which will require large capex with profit uncertanties. However, this also presents Viconship an opportunity to become more of a growth company.

With coal prices rising at a more accelerated pace than that of oil/gas, gas-based urea producers in Vietnam like DPM are key beneficiaries of this trend as they do not bear high coal prices while taking advantage high urea sales prices. NPK sales volume also have improved significantly over 2Q21. Combined with one-off items of VND 329 bn (recognized in 2Q21 and 3Q21), we increase our 2021 pretax profit to VND 2.099 tn (+148% YoY), while 2H21 pretax profit growth is estimated to increase 200% YoY. We believe that 2022 core earnings could increase another 9% YoY, but without the one-off income as prior, total pretax profit is estimated at VND 1.929 tn (-8% YoY). As the company benefits from the recent urea price uptrend, we increase target multiples and derive a new target price at VND 42,200 (from VND 32,000). With an ROI of 5% (dividend yield of 6%), we call for an MARKET PERFORM rating for DPM.  In the short term, DPM share price momentum may still be strong on the back of solid 2H21 earnings. 

For 2021, we lower our gas volume estimate from 8.15 bcm to 7.75 bcm to reflect the impact of the strict Q3 lockdown on dry gas consumption by industrial and power plant users. Any recovery in Q4 will be gradual in nature.  Nevertheless, higher oil prices likely will offset this volume cut. Our 2021 revenue and NPAT forecast of VND 73.7 tn (+19.5% YoY) and VND 8.8 tn (+8.6% YoY), respectively, remains largely unchanged from our previous estimates. For 2022, we are looking top and bottom line growth of 23.6% and 25.2% YoY, respectively, driven by a strong gas volume recovery (25% YoY to 9.6 bcm, about 3% lower compared to post-Covid-19 levels) on the back of more robust business activity.  On our higher 2022E EPS, we raise our 12-month TP price for GAS to VND118,500/share (from VND101,500), based on an equal blend of a target PER of 19x and EV/EBITDA of 11x, and 2022E earnings. We reaffirm our Outperform call on GAS. Downside risks: weaker-than-expected dry-gas volumes and lower-than-expected fuel-oil prices.

We are upgrading the shares of DCM to OUTPERFORM from MARKET PERFORM, as we increase our one-year target price 26% to VND 31,500. As gas-based urea producers are well positioned to benefit from the rise in coal prices and the coal shortage in China associated with decarbonization target, heavily flood and coal mine accidents, we are also increasing our 2021 and 2022 earnings estimates by 0.5% and 7%, respectively. As DCM is a gas-based urea producer its profit margin will benefit when coal prices rise at a more accelerated pace than that of oil/gas, as DCM does not bear the increase in coal price - enjoying the benefit of higher urea sales prices. Also, as DCM’s net cash balance continues to improve (net cash per share of VND 6,921 at 2Q21 vs VND 1,645 at 2Q20), we expect that DCM will increase its 2021-2022 dividend to 12% on par value (vs 2020 dividend of 8% on par value), equivalent to 2021-2022 payout ratio of 82%-76% (vs 2020 payout ratio of 79%). The urea plant of DCM will be fully depreciated around 2023 year end, raising net income and hence dividend payment significantly afterwards.

Investment summary: We are upgrading the shares of FPT from Market Perform to BUY, as we roll over our valuation to reflect 2022 estimates. This pushes our 1Y TP for the shares to VND 112,500 (vs. previous TP of VND 93,000) - implying a 23% ROI. Our upgrade of FPT’s shares is supported by strong growth in the Technology segment. We estimate YoY PBT growth of +26.9% in 2022 within the Technology segment, driven by both global and domestic IT services, and exceeding the global IT peer average of +15% (Bloomberg).  Further, despite a forecasted FY22 earnings growth rate of 22% YoY (global IT peers of 15% YoY), FPT (FY22E P/E 17.5x) trades at a 1.7x P/E multiple discount to global IT peers – further supporting our upgrade.  

Given the strength of the recent increase in yellow phosphorus prices and consequent improvement in GPM, we are raising our earnings forecast for DGC by 32% and 49% for 2021 and 2022, respectively, to VND 1,758 bn (+86% YoY) and VND 2,593 bn (+48% YoY). As such, we expect 2H21 net income to increase by 136% YoY, much stronger than 33% YoY in 1H21. We raise target P/E from 12x to 13x thanks to a much higher earnings forecast for both 2021 and 2022. Our price target now increases 62% to VND 177,000 per share (from VND 109,000), and we upgrade the shares of DGC to BUY from OUTPERFORM – representing and ROI of 26% (including 1% dividend yield). The recent rally in yellow phosphorus prices is explained by Yunnan (the key phosphate production region in China) attempting to cut yellow phosphorus production between September – December 2021. For 2022, we expect the prices to continue to rise, as the shortage of semiconductors prompt producers to add capacity - increasing the demand for yellow phosphorus and downstream products. 

We initiate coverage on the shares of TNH with a BUY recommendation, with a 1-year target price of VND 51,800/share. This equates to a total return of 26% from the price as of Sep 1st, 2021. TNH currently possesses the following advantages: (1) a fully-owned favorable location, acquired with low initial investment & run under tight budget control, (2) targeted for capacity expansion and the opening of specialized medical services, (3) the beneficiary of a high growth Vietnamese healthcare market over the next several decades. TNH is one of few listed hospitals in Vietnam, with a good profitable operation and a forward P/E trading at 29% discount compared to regional peers. We expect TNH gross revenue to reach VND 407 bn (+21% YoY) in 2021 and VND 471 bn (+16% YoY) in 2022. For net profit, we expect growth to VND 112 bn (+3% YoY) in 2021 and VND 121 bn (+9% YoY) in 2022. For the next 5 years onwards, we expect TNH gross revenue and net profit CAGR at 22% and 26% respectively. Our forecast has factored in the current pandemic and lockdown impact in relation to the frequency of hospital visits, possible reopening scenario in 2022, and also the company’s upcoming expansion plan.

2Q21 PBT increased strongly by +188% YoY to VND 1.97 tn, thanks to stellar growth of TOI (+87.3% YoY), while CIR decreased & provision expenses also decreased by -41% YoY. 1H 2021 PBT delivered VND 3.12 tn (+220% YoY), fulfilling 95% of the full year plan of VND 3.28 tn.We increase our 2021F PBT forecast by 6% to VND 4.23 tn (+67.8% YoY), while we reduce our 2022F PBT forecast by -9.3% to VND 4.43 tn (+4.6% YoY). Our forecast adjustment is influenced by our downward revision of NIM for both years, given prolonged low lending interest rates. MSB booked about VND 1.6 tn of upfront fee into income in 2Q2021, and we assume that MSB will continue to book VND 400 bn of the bancassurance upfront fee into fee income in 2022F. Provision expenses are revised up +5.8% to VND 1.1 tn (+6.7% YoY) in 2021F. We reduce our 1Y share price target for MSB to VND 29,600 (down from VND 31,400), using an average BVPS of 2021F and 2022F and unchanged P/B ratio of 1.5x. As this implies an upside of 2.4%, we subsequently maintain our Market Perform rating for MSB.

HAH has approved an aggressive expansion plan of their containership fleet between 2021 – 2024, which will increase its fleet capacity 55%. This is a noticeable shift in their strategy, which will emphasize shipping segment expansion to take advantage of increasingly attractive market conditions. Having said that, the success of this plan is a big question for investors. Over the near-term, the 2022-23 outlook is bright, as HAH managed to lock in high rates on time charter contracts. Despite the resurgence of COVID-19 and its huge impact on the Vietnamese economy, HAH has found ways to navigate the storm by sending its fleet to the international market. In light of this, we increase our NPATMI estimates to VND 330 bn (+139% YoY) for 2021 and VND 566 bn (+71% YoY) for 2022, which is 18% and 67% higher than our previous estimates, respectively. We reiterate our BUY rating on the shares of HAH, yet increase our 1Y target price 40% to VND 78,400/share. We base our call on a lower target P/E of 8x to reflect the currently unsustainable level of freight rates.

Given the resurgence of the COVID-19 pandemic in Vietnam during 3Q21, we lower our 2021E and 2022E earnings for GAS by 9% and 10%, respectively. Despite our earnings cuts, we are of the opinion that demand for dry gas will return next year, driven by a strong economic recovery and higher gas-fired electricity mobilization. Thus, we reaffirm our Outperform rating for GAS, with a new 12-month target price of VND101,500/share (previously VND105,000/share) based on an unchanged target P/E of 19x and EV/EBITDA of 11x on our 2022E earnings. Our target price implies 14.6% upside potential.  

Despite HT1’s encouraging 2Q21 business result, we are cutting our rating on the shares from Market Perform to Underperform with 1-year target price of VND 17,600/share, as the recent advance in share price seems to over-react to the potential impact of infrastructure investment on future bottom-line performance.  Further, we do anticipate that sales volume to significantly decline by over -40% YoY in 3Q21 due to the strict social distancing measures in southern Vietnam, which pushes us to lower our 2021 revenue and PBT forecast to VND 7.6 tn (-4.4% YoY) and VND 728 bn (-5.1% YoY), respectively.  However, as HT1 earnings are likely to post solid growth of 21% YoY in 2022 on the back of sales volume growth of 11% and falling interest expense, we suggest a re-enty post 3Q21 results when the shares have a more attractive price.