Company Report

We maintain a BUY rating for KDH due to its solid backlog of deliveries valued at VND 3.8 tn (+40% compared to 2019) from the recurring projects of Lovera Vista and Safira, which will guarantee next year’s earnings growth. KDH possesses a clean landbank (650 ha) in HCMC, one of the largest compared to other listed developers in Southern Vietnam. With such strong potential, we revise up our 1-year target price by 7% since our last call to VND 29,800 (+21.4% upside) based on RNAV method, as we fully factor the potential value of 2 new projects of KDH (Amerna and Clarita). KDH also recently was included into the VN30 basket recently, and it will be a major factor to improve the stock’s trading volume and its performance in the future. 

Vinhomes reported 2Q20 NPATMI results of VND 3.76 tn, a decline by -48.6% YoY as the Company was operating off a high NPATMI base with recognition of a bulk sale in 2Q19, as well as from an extraordinary payment of VND 930 bn on termination of certain investment agreement for two residential projects of which development timelines were delayed. However, 1H20 NPATMI still increased by +7.6% YoY to VND 10.6 tn, fulfilling 34% of the full year target. Presales volume also rose +15.3% YoY, with a +21% YoY increase in value in 1H20. Volume performance was mainly driven by three megaprojects – Ocean Park, Smart City and Grand Park – with bulk sales driving momentum. A full 9,000 unit deliveries occurred in 1H2020, while another 21,000 are expected in 2H 2020, giving us increased confidence that VHM will achieve its 2020 guidance. VHM remains the leading developer in Vietnam, possessing the largest land bank in the country - approx. 20x the size of its nearest competitor. As many of its competitors have development projects which are bogged down procedurally, new project launches have been delayed. With several projects available for sale, VHM is the primary beneficiary of the current tight supply. As we believe the market is not effectively discounting the value of the Company’s massive 164 million sqm GFA development portfolio, we maintain a BUY rating for the shares with a VND 113,000/share price target, which implies a 42% upside. VHM is currently trading at a discounted P/E of 11.8x relative to local peers, and a respective regional peer average of 13.8x and 12.1x. 

Double hit by COVID-19 pandemic and the growing trend of deep seaports, VSC reported a 10.7% YoY drop in 1H 2020 revenue (reaching VND 801 bn) due to 20% decrease in port throughput volume. Net income, however, increased by +33.8% YoY to VND 141 bn in 1H 2020 due to better cost control and the absence of one-off expenses. While we like VSC for its stable dividend of 20% cash on par per year, equivalent to a 7% dividend yield, we suggest to watch 2 notable performance indicators in the coming quarters:  Firstly, we are concerned about VSC’s drop in handling volume at much higher scale than its competitors in Haiphong area in 1H2020 and we want to see if this situation could be improved in the coming quarters or not.   Secondly, we are positive on VSC’s ability to better control cost and improve corporate governance issue.  If we apply the 2019 gross margin for 1H2020, then according to our calculation the saving cost would approximate VND 14bn in 1H alone.  We expect that gross margin improvement could be maintained, especially when the handling volume resumes along with demand improvement after the Covid-19 is contained. VSC is trading at a 8.2x multiple of 2021 EPS. Applying a 2021 target P/E and P/B at the sector average of 9x and 1.1x, we arrive at 1-year target price of VND 36,700/share, which implies an upside of 13.6%. Our rating for the stock is MARKET PERFORM.

In 2Q2020, TCB continued to report resilient results, with TOI and PBT achieving VND 5.75 tn (+27.7% YoY) and VND 3.62 tn (+18.8% YoY). This was an impressive achievement given a modest credit growth of +3.5% YTD.  2Q earnings results were driven by both strong NIM (4.32%) and robust activities in corporate bonds and government bond. Net fee income in 2Q 2020 rose +23.4% YoY, driven primarily by bond services (+52.4% YoY). In the meantime, TCB posted VND 328 trillion from securities trading and investment gains in 2Q2020, more than double YoY. CASA balance rose to an absolute amount of VND 6.28 tn (+7.9% YTD), entirely thanks to retail customers. We maintain our 2020F and 2021F PBT forecast of VND 13.41 tn (at +4.5% YoY) and VND 14.26 tn (at +6.3% YoY) respectively. We also maintain our Outperform rating but revise down our 1Y target price to VND 22,200 per share, presenting investors with an upside of 12.1%. 

BID posted 2Q 2020 PBT of VND 2.64tn (up by 20.6% YoY). Results exceeded our expectations given the outperformance of trading and investment securities (VND 1.038 tn, + 500% YoY), and the reduction in provision expenses (-26.2% YoY). BID’s improvement was offset by a sharp decline in net interest income (-23.6%). We raise our 2020 PBT forecast by VND 1.15 tn to VND 8.693 trillion (still lower -19% YoY), mainly to reflect the positive results of 2Q 2020. We anticipate 2021 PBT to essentially meet previous expectations VND 12.89 trillion (+48.3% YoY). We are still worried about the potential impact of the second wave of the pandemic on loan quality, and assume COVID-19 affected loans will aggregate 5% of total BID loans – more than we had initially anticipated. As a consequence, we are revising down our target P/B to 2x (from 2.2x) and roll over our valuation basis to 2021. As a result, we lower our 1-year target price by 3.6% to VND 43,650/share (from VND 45,300/share) which represents +13% upside potential. We maintain our MARKET PERFORM recommendation on the shares of BID.

VNM’s Q2 results were virtually less affected by Covid-19, as it posted a consolidated net sales and net profit of   VND 14.50 tn (+6.1% YoY) and VND 3.08 tn (+6.2% YoY), respectively, in line with its guidance. The recent acquisition of GTN (Moc Chau Milk), in our view, has achieved initial results with the recently implemented material cost re-negotiation and synergy in distribution network. From a valuation perspective, VNM shares appear relatively cheap to us on a regional basis - trading at a 30% real-time P/E discount while the company can still achieve (single digit) earnings growth. We reiterate our price target of VND 135,000 for the shares of VNM, which when coupled with a divided yield of 4%, implies a total return of 22% - and good enough for us to reiterate our Outperform rating.  

HT1 revenue in 2Q20 dropped by -14% YoY to VND 2.035 tn, due to poor market demand. However, PBT was flat compared to 2Q19 at VND 257 bn. Excluding net abnormal expenses of VND 14 bn for sponsorship activities, PBT would have actually improved by 4.5% YoY. The improved operating result  is attributed to the significant improvement in gross margin on the back of reduced energy costs, and a reduction in outsourced volume.  As 2Q20 PBT is in line with our estimate, we maintain our PBT forecast for 2020 of VND 950 bn (+2% YoY). In 2021, we expect HT1’s earnings to improve 11% to VND 1.052 tn, due to our anticipation of a recovery in market demand and a reduction in financial expenses. We upgrade the rating for the stock from OUTPERFORM to BUY, with a 1-year target price of VND 16,000/share based on a target PE and EV/EBITDA of 8x and 4.5x, respectively. The dividend yield of 9.3% payable in Dec is also  supportive to the shares.  

SCS cargo volume took a hit by -24% YoY in 2Q 2020 due to the pandemic. International cargo was down by -27% YoY and domestic cargo was down by -14% YoY. Cargo for export, interestingly, saw less of an impact than import cargo. Revenue declined -23.7% YoY reflective of weaker cargo volume YoY while the impact to PBT was lessened due to cost cuts. We revise down our estimates for 2020 and 2021 to reflect new base case assumptions for the pandemic in the 2020-2021 period, with 2020 PBT estimated at VND 461 bn, -14.2%. We downgrade our rating to MARKET PERFORM, with a 1Y target price of VND 120,200/share

We hosted an online meeting with DGW management and discussed the distribution of Apple products in Vietnam. With 40% of iPhones in Vietnam being brought into the country outside of official import channels, there is an opportunity for authorized distributors like DGW to tap into this potential. We revise up 2020-2021 earnings by 8% and 6%, respectively after considering economic potential to be unlocked from the Apple contract. Although the contribution to earnings is relatively small, we believe that by distributing Apple products, DGW will gain brand awareness, hence enabling the company to obtain more contracts from reputable brands in the future. With an unchanged target P/E of 8.4x on our revised 2020-2021 financials, we derive a 1-year target price at VND 45,200 per share. We reiterate our OUTPERFORM rating. 

Capacity expansion to spur long-term growth for Moc Chau Milk (MCM): In recent years, MCM revenue was constrained due to a lack of capacity: namely full factory utilization and limited dairy farms. After Vinamilk (VNM: HOSE) took over the controlling right indirectly via GTNfoods (GTN: HOSE) in MCM, it put forth an ambitious capex plan of VND 1.6 tn to develop a 4,000 head dairy farm and a new dairy factory in order to address these constraints. Capex is expected to be funded by an increase in charter capital. Post-deal, Vinamilk is anticipated to hold over a 51% stake in MCM  - up from its current indirect stake of 28.3%. In 2020, we forecast MCM to post VND 2.76 tn in revenue (+8% YoY) and VND 201 bn in net profit (+20.2%), which should translate into 2020 EPS of VND 3,003 pre-capital raise. Growth is likely to come from restructuring of MCM’s distribution network, and changes in sales mix. Moc Chau Milk is a household name in Northern Vietnam given its higher quality milk products.  Over the long-term, we are of the opinion that MCM could post stronger-than-industry growth (i.e double-digit bottom line growth) in the coming years thanks to capacity expansion and margin improvement in premium products and synergies with Vinamilk, especially in terms of market development. MCM expects to list on HOSE within 9 months.

Net profit for HSG in 3Q20 grew at a remarkable breakneck pace of +91% YoY to VND 307 bn, fueled by the drop in HRC input price versus a resilient output price. Sales volume in the quarter also increased positively by +5% YoY on the back of pent up demand from Feb-Mar period due to the Covid-19 epidemic, as well as from gradual stabilization in export volume. As results in 3Q20 exceeded our expectations, we revise up our net profit forecast for FY2020 from VND 670 bn (+85% YoY) to VND 841 bn (+133% YoY). For 2021, although we expect sales volume might increase by +4% YoY to 1.52 mn tons, net profit is expected to correct by -5.6% to VND 794 bn due to normalization in the gross margin. HSG shares are currently trading at P/E and EV/EBITDA 2021 levels of 6.5x and 4.2x, respectively. We maintain our Outperform rating for the stock, with a 1-year target of VND 13,700/share based on an unchanged composite target PE and EV/EBITDA of 7x and 5x, respectively – implying upside of 22%. 

On the back of a -9% YOY decline in 1H ’20 VCGM price – where we do not envision a recovery until mid-2021 when the COVID-19 pandemic is contained; and a downward-revised PPA price for PPC’s associate - Hai Phong Thermal Plant (HND) in 2021 which will negatively impact overall earnings and the company’s dividend; we revise downward our earnings forecast for 2020 by 3% and remain weak outlook for 2021. As such, we are forced to cut our price target by 5% to VND 26,000 – which presents investors with a meager 5% upside. The questionable dividend yield of 8% in FY20 causes us to maintain our Market Perform recommendation. Furthermore, by looking forward to FY21, we expect a lower dividend yield of 6% due to saving up cash for Pha Lai 3 coal-fired plant’s capex purposes. Pha Lai 3 is being debated & approved to add into the Power Development Plant VIII (construction pipeline: kick off from 2022-2023 and finish in 2027-2028).

Our current estimates for SAB are VND 27.96 tn (-26% YoY) in net sales and VND 4.25 tn (-21% YoY) in NPAT in 2020, which is a more generous outlook than the Company itself - implying 26% higher net sales and 31% higher net income vs. SAB’s plan. For 2021, we forecast net revenue of VND 35.1 tn (+25.6% YoY) and net income of VND 5.01 tn (+17.9% YoY), which means the pre-Covid level.   However, our forecasts are under review.because the demand after the social distancing period has recovered better than our expectation.  Our rating on the stock is Market Perform.  

We recently attended PLX ‘s online 2020 AGM. The Company set the PBT target for 2020 at VND 1.57 tn, which drops by -72% YoY. We think that the guidance justifiable given the significant impact of the Covid-19 epidemic on fuel demand, and the severe plunge in the oil price in the first half of the year. However, it is noteworthy that the guidance implied improving PBT in the last 3 quarter of 2020 at VND 3.27 tn, which drops by a lower rate of 20% YoY. If Covid-19 does not come back to Vietnam and the oil price stabilizes in the coming time, we believe the Company’s earnings can recover positively in 2021. At the current price, PLX is trading at a P/E for 2020 and 2021 of 43x and 16x. We will update to full estimates and valuation after the company releases its official financial reports for 2Q20.