Company Report

Dabaco held its analyst meeting recently to update about its impressive 2020 results, as well as providing details for the business plan in 2021. Overall, we had some positive takeaways from the meeting. Fruitful results in 2020 represented the Group’s long-term strategy to invest in its core business and expand the farming capacity and sow herd, even during difficult years in 2016-2018. DBC plans to expand aggressively in terms of sales volume in 2021 by raising the utilization rate of its current factory, as well as contract farming. A high and stable hog price is expected in 2021, which will still support its core business tremendously. In the period 2022-2023, new breeding and farming projects are in the pipeline, which will help expand the scale even further. With its currently strong financial position, the Group is at an advantage to exploit its HORECA and real estate segments to earn extraordinary profits in 2021, very likely to exceed management’s prudent net profit plan for the year. In 2021, we estimate net revenue and net profit to reach VND 11.9 tn (+18.9% YoY) and VND 980 bn (-30% YoY) respectively. At the current price of VND 60,900/share, DBC is being traded at 2021F P/E of 6.9x and EV/EBITDA of 5.1x, which is lower than peers’ average P/E of 10x and EV/EBITDA of 6x. We applied an unchanged target P/E of 8x to 2021F EPS of VND 8,797, to arrive at a 1Y-target price of VND 70,400/share (15.6% upside). As such, our rating for the stock is OUTPERFORM. 

We raise our PBT forecast to VND 3.5 tn (+39.2% YoY), driven by credit growth of 22.9% YoY, NIM improvement of +10 bps YoY to 3.47%, and 15.3% YoY growth in non-interest income. The bank has sold all of its 56 mn MBB shares, recording VND 400 bn of relevant gain in 1Q2021. We assume that the bank will book ~VND 600 bn of upfront fees in 2021, CIR to decrease further to 49.5%, and provisions to increase +5.5% at the bank while the NPL ratio declines to 1.7% and LLC increases to 93%. At VND 21,900 per share, MSB is trading at a 2021F P/E and P/B of 9.2x and 1.3x, respectively. Given that profitability and asset quality are both improving, we increase our targeted P/B ratio from 1.1x to 1.4x, which brings our 1Y target price to VND 23,500 per share (from VND 19,714 per share after dilution). With implied upside of just 7.3%, we lower our recommendation on the shares of MSB from Outperform to Market Perform. 

We reiterate Outperform rating on the shares of QNS with a new target price of VND 50,600/share (from VND 41,800/share) or 19% upside from the current market price.  We are of the opinion that QNS financial results will turn around in 2021, led by the sugar business. Taking a broader view, we see that the implementation of the anti-dumping tax on Thai sugar will help protect domestic sugar from cheap imported sugar, as well as smuggled sugar and boost domestic sugar industry in the long-term for the food security purpose. Should the anti-dumping tax be officially imposed (now it is just temporarily in place, for a 120 day period), this would be a gamechanger for the Vietnamese sugar industry, and QNS as the second largest one will be amongst the top beneficiaries. Strong sugar price recovery and volume growth should help spur sugar and biomass performance this year, from a loss (-35 bn) in 2020 to a PBT of c.300 bn VND in 2021. Overall, we look for 24% NPAT growth for the company in 2021. 

Our revenue estimates for 2021 and 2022 are VND 9.3 tn (+11.7% YoY) and VND 10.4 tn (+12% YoY), respectively, while we anticipate NPATMI of VND 2.64 tn (+11% YoY) and VND 3.1 tn (+17.8% YoY) over the same time periods. Improvement in the current leasing portfolio along with new mall openings could be key growth drivers. Assuming a slower expansion plan between the 2022-2026 period, we lower our 1Y target price on the shares to VND 37,300/share. At the current share price of VND 34,100, VRE is trading at an EV/EBITDA of 17.1x, which is relatively lower than the regional peer average of 21.5x. With upside of 9% compared with the current share price, we reiterate our OUTPERFORM rating for the stock at present. 

2020 earnings was -1.8% below our estimates, due to higher-than-expected provision costs. Despite a 21% TOI growth, PBT increased   just +15.9% YoY to  VND 5.8 tn, as credit costs rose from 0.96% in 2019 to 1.1% in 2020. After an aggressive write-off of VND 1.4 tn (+63% YoY), asset quality ratios were in pretty good shape. NPLs declined to 1.32% (from 1.36% in 2019), and LLCR  improved to 82% (from 81% in 2019). The limelight for this year’s result is the increase in NFI to TOI to 7% (vs. 5% in 2019), as  bancassurance sales began accelerating in 4Q 2020.

HDB is amongst the very few banks which still has available room for foreign investors, and a potential exclusive bancassurance deal. We think the Bank’s diversification of income streams in 2020 is the way to go, which opens greater possibilities for strong TOI growth in 2021. A good track record of bancassurance sales may also prove its sales capability, as well as a bargaining power in negotiating an exclusive bancassurance contract in the future. Our 1Y target price for the shares of HDB is VND 29,500/share, representing an upside of 13.7% - allowing us to upgrade the shares to an Outperform rating.  

We reiterate our Outperform rating on the shares of PVS, particularly given the oil price outlook. Brent crude reached the USD 65/bbl threshold in recent days due OPEC+ deep supply cut, a sudden decrease in shale oil production in the US (due to an unlikely winter storm in Texas), and gradual demand recovery on the back of vaccine availability. Accordingly, we lift our oil price assumption for Brent in 2021 from USD 52/bbl to USD 60/bbl (+40% YoY).  As a result, we are increasing our target price on the shares of PVS from VND 20,800/share to VND VND 24,500/share, implying 5% upside or 10% inclusive of the dividend yield from current market price. Our 2021 earnings forecast is VND 704 bn (+8.6% YoY), which is 12.6% higher than our previous forecast. M&C revenue from the confirmed backlog (-42% YoY) and improved earnings from JVs (additional profit from FSO Sao Vang, and no more expenses for MV12) should support the bottom line. Expectations of a strong oil price recovery in 2021 (+40% YoY), should also enhance revenue and margin of other segments. Please note that we only account for remaining contract value from ongoing projects such as LNG Thi Vai and Dai Nguyet WHP in our 2021 estimates, intimating that there could be potential upside to our 2021 forecast if PVS can win the new EPC contracts that are being bid for.

During 4Q 2020, BID’s NIM expanded by 33 bps (QoQ), pushing NII and TOI to increase 10.3% and 11.7% YoY, respectively. However, 4Q 2020 PBT plunged to VND 2.2 tn (-42% YoY) driven by a +93% surge in credit provisions. PBT in 2020 was only VND 9.21 tn (-14.1% YoY), and ROE declined to a 15-year low of 9.45%. The increase in provisioning and bad debt write-offs had quite a positive impact on BID’s asset quality, as the NPL (including VAMC bonds) and LLC ratios were each at their strong levels over the past six years. For 2021, we have increased our pretax profit forecast by 2.2% to VND 13.5 tn (+46.4% YoY). Our 2021 earnings forecast has not changed significantly, the cash dividend payment of 8% was higher than our expectation of 5%. This higher dividend negatively impacts our 2021 BVPS estimate. As a result, we lower our 1-year target price by 1.5% to VND 46,430/share, based on an unchanged P/B target multiple of 2.2x applied to our 2021F BVPS. Although earnings may surge in 2021, the possibility of growth beyond 2021 depends on the ability to raise capital and it will be the key upside catalyst for the stock. Our new price target on the shares of BID implies upside of +5.5%, and we recommend a MARKET PERFORM rating.

Stronger provisioning buffer to allow robust earnings growth in 2021. Despite a +15% YoY increase in TOI during 4Q 2020, MBB’s pretax profit grew +5.6% YoY - reaching VND 2.6 tn during the period. This comes as the bank had aggressively provided against problem loans. For 2020, the Bank achieved a VND 10.7 tn PBT (+6.5% YoY). At the end of 2020, NPLs fell to 1.09%, lowest level seen in 13 years whilst the LLCR stood at an all-time high of 134%. Restructured loans also dropped from VND 7 tn (2.7% of total loans) at the end of June 2020 to VND 2.5 tn (0.8% of total loans) at the end of Dec 2020. Given the Bank’s efforts to resolve problem assets in 4Q 2020, we’d anticipate loss provisioning to be lighter in the coming year with the bank expected to achieve VND 13.6 tn in pretax profit (+27.5% YoY) in 2021. With consistently improved fundamentals in recent quarters and a 2021 ROE of 21%, we believe that MBB deserves a higher target P/B ratio of 1.6x (from the current 1.4x). Hence, we increase our target price on the shares of MBB by 14.7% to VND 31,900/share (+19% upside), and reiterate our Buy recommendation.

TCB reported solid 4Q20 earnings results with TOI and PBT attaining VND 7.8 tn (+17.1% YoY) and VND 5.1 tn (at +27.9% YoY), respectively. For 2020, consolidated TOI and PBT achieved VND 27.0 tn (+28.4% YoY) and VND 15.8 tn (23.1% YoY), respectively. Robust revenues enable TCB to be aggressive with its provisioning effort to the point that credit quality is the sector’s best with highly robust reserve cover. The lower for longer interest rate environment has boost TCB’s fixed income business. At the same time, the digitalization strategy enabled TCB to improve its CASA ratio and transform into more of a transaction banking model. We maintain our 2021 PBT forecast of VND 18.5 tn (+17.1% YoY), although we raise our 1Y target price to VND 43,000 (from VND 38,200) as we raise our target P/B ratio from 1.5x to 1.7x. We maintain our OUTPERFORM rating on the shares of TCB.

We are reiterating our BUY rating for IMP with the target price of VND 73,000/share, an upside of 30% from current price in Feb 5^th, 2021. We see strong improvement in IMP 4Q20 earnings, combined with a potential for substantial increase in revenue and profit in 2021 due to (1) low base of revenue in FY20, which were affected by the pandemic situation and (2) profitability improvement in FY21 as IMP upgrade its bidding drugs onto higher value categories. We expect IMP total revenue and core NPAT (excluding R&D) for FY21 to reach VND 1.9 trillion (+35.4% YoY) and VND 296 billion (+40.9% YoY), respectively.

We reiterate our Outperform rating on the shares of SAB and trim our 12-month target price to VND214,000/share (implied 18% upside potential). At a 2021E P/E of 22.8x, SAB now trades at a lower valuation to its 2016-20 average of above 30x. In 2020, SAB delivered an encouraging profit despite the challenges of both Decree 100 and the pandemic. An impressive expansion in the gross margin was a nice surprise, especially considering the 26% decline in sales. We believe that SAB is prepared for a comeback in 2021 (provided that COVID-19 is controlled by 1H21). For 2021, we forecast the company to post 21.8% revenue growth and 14.9% NPAT growth. While revenue would still be lower compared to pre-Covid levels, earnings are likely to surpass that of 2019. 

We recently joined an analyst meeting with the management of DGW. During the meeting, management reviewed 4Q20 financial results and discussed its 2021 earnings growth outlook. Following our meeting, we are increasing our 2021 net sales forecast to VND 15.6 tn (+24% YoY, 27% higher our previous estimates) and net income at VND 313 bn (+24% YoY, 23% higher than our previous estimates). At VND 79,400 per share, DGW trades at 2021 P/E level of 11.1x. We do, however, believe that the shares of DGW deserve an upward re-rating due to: (1) increased brand awareness after becoming an authorized Apple distributor; and (2) a beneficiary of the long term upgrade to 5G, as 2G becomes obsolete. As such, we raise our target P/E for DGW from 8.4x to 11x, and increase our target price to VND 80,800 - implying an ROI of 24% (including the dividend yield of 1.4%). We call for a MARKET PERFORMANCE rating.

We like OCB’s strategy of targeting the niche micro-SME market, as well as the detail-oriented approach to risk management which effectively weeds out risks with small enterprises. Constant investment in digital banking has yielded tangible results, such as improved operating efficiency and a boost in retail CASA. As a small bank, room for growth remains significant. However, large exposure to construction and real estate (18%), hospitality (13%), and energy (10%) are a concern. A nearly full foreign ownership limit of the bank is a drawback for OCB as well. Our target price for the bank is VND 25,300 per share, representing 29% upside from the closing price as at 29 Jan 2021. Hence, we initiate coverage on the shares of OCB with a BUY rating.

In light of an improvement in new deals in late 2020 along with our expectations of an economic recovery in 2021, we raise our 2021 PBT forecast for FPT’s global IT services by 4.6% over our previous estimate.  PBT growth from the FPT technology segment is forecasted to rebound by 22% (+24% from the global IT services and +10% from domestic IT services). Overall we forecast FPT’s FY21 EPS to grow approximately 17%. As we are more confident about a 2021 growth recovery, we increase our P/E target for the FPT technology segment and raise our 1Y TP 16% to VND 72,500 – translating to 16% upside. With 19% total ROI (including 3% dividend yield), we maintain our BUY rating on the shares of FPT.