Company Report

Impacts of Covid-19: By the end of February 2020, credit growth outperformed the sector at +7% YoY compared to the cap for 11.75% YoY, much higher than the zero-growth at many peers, thanks to corporate loans in the staple consumer goods manufacturing sectors and retail mortgage loans. In our base case scenario, we assume that Covid-19 outbreak will be contained by end of 1H 2020. Demand for retail home and auto loans will gradually recovers in 2H 2020. For 2020, we forecast credit and deposit growth at 15.2% YoY and 13.7% YoY respectively, slowing down compared to 2019. Opinion: TPB has been a true pioneer in the rapidly-evolving space of digital banking deployment across Vietnam, and this trend is becoming increasingly more popular amidst Covid-19. TPB has completed cleaning-up its legacy VAMC bonds and is well-prepared for a take-up in retail banking including consumer finance and bancassurance, beside its traditional home and auto loans. 2020F PBT is estimated at VND 4.76 tn, at +23.1% YoY, highlighting the highest ROE of 25.5% across our banking coverage. TPB is trading respectively at a 2020E P/B and P/E of 1.07x and 4.73x respectively, compared to the industry average of 1.00x and 6.64x. Our 1Y target price is VND 25,800 per share, which is equivalent to an upside of 21.1% from the current price. Therefore, we maintain our OUTPERFORM rating for TPB.

Highlights. VIB posted a moderate pretax profit growth expansion of +14.2% in 4Q 2019, attaining VND 1.166 tn. This result appeared to be at odds with the sizzling earnings growth of +69.4% recorded in the first 9 months of the year. Such slower growth was mainly attributable to the fact that VIB recorded a non-recurring income VND 360 bn from its bancassurance contract with Prudential in 4Q 2018. Excluding this one-off item, growth would be +76.4% YoY and VIB would be able to continue its previous stellar growth trajectory. Credit and deposit growth tipped the scales at 34% and 46.8% YoY each, and financial ratios were improved across the board. For full year 2019, VIB recorded pretax profit of VND 4.082 tn (up by +48.8%), with universally robust growth across all income streams. Impact of Covid-19. We expect that the Covid-19 outbreak will sideline demand for home loans and auto loans in 2Q 2020. In our base case where the outbreak could be controlled by June, demand gradually recovers, and really regains its footing in 4Q 2020. Nevertheless, 2020 credit growth is forecast to be 13.2%, lower than our previous assumption of 17%. Opinion. We view VIB as an agile bank which has the largest exposure to retail lending by percentage in Vietnam. Loans to individuals accounted for more than 80% of VIB total loans, and the bank realized an impressive CAGR of +54.8% during 2016-2019. We expect growth to decelerate in 2020. Accordingly, VIB should record VND 4.85 tn in pretax profit, up by +18.8% YoY. The stock is trading at a forward P/B and P/E ratio of 0.84x and 3.6x, which is lower than the industry average of 1.07x and 7.16x. 

As of 11 March, Vietnam had 38 confirmed cases of Covid-19 infection. Although it is hard to exactly quantify the impact of the epidemic, we can easily observe that the epidemic along with Decree 100 have eroded beer demand significantly. In particular, on-premise sales have been hit due to the measures to contain the virus. People have increasingly opted to stay clear of public gatherings due to concerns about the virus spreading, and the tourism sector has been hit significantly as a result. In our previous report, we initially estimated a 3% YoY decline in SAB’s sales volume in 2020 as we partially took into account a potential ‘zero-tolerance’ driving law. Combined with the current coronavirus outbreak in Vietnam, we consider the adverse effect to be even more intense due to the global spread of the virus, combined with the expectation of a decline in disposable income later. Given the current situation, we would like to provide 3 scenarios for SAB. Our assumptions are principally based on the timing of when the epidemic is stamped out in Vietnam, and that consumers gradually adapt to the new drink-driving law. At the current price of VND152,000, SAB is trading at a 2020E P/E of 22.3x and 2021 P/E of 20.4x respectively, and a 2020E and 2021E EV/EBITDAs of 12.2x and 11.2x, respectively, on our base case forecasts. Applying a premium target P/E of 27x to our 2020 EPS, thanks to its better fundamentals compared to peers, we derive a new 12-month target price of VND183,800 (from VND214,400). Our TP offers a potential upside of 21%, leading us to upgrade our rating on SAB to OUTPERFORM (from Market Perform). 

We briskly state two possible alternatives regarding the path and outcome of the Covid-19 outbreak and its impact upon the economic performance of PNJ. We expect the virus to be contained by the end of Q2/2020 for the base case, and not to be contained within 2020 for the worst case. At a glance, we consequently expect PNJ to grow its net sales/net profit by 8.9%/10.5% YoY in our base case and by 5%/-2.8% in the worst case. It should be noted that in the worst case, we expect retail sales of gold jewelry to decrease by -5% YoY, yet gold bar sales are expected to increase by 30% YoY. This mix is  likely to drive down PNJ profitability and result in a possible -2.8% drop in the bottom line. The PNJ share price has fallen sharply to as low as VND 63,800 per share, equivalent to a forward P/E of 11.92x in the base case and 13.74x in the worst case. We also have noticed a recent decline in the P/E ratio of regional peers. Thus, we reduce our target P/E accordingly to 15 (previously 16.5) in the base case and 13.5 in the worst case, and arrive at target price of VND 80,200 per share (+25.7% base-case) and VND 62,700 per share (-1.7% worst-case). We will update more details in a full report released soon.  

Highlights: Recently BVH posted its 4Q 2019 financial statements with pretax profit of VND 128 bn. For full year 2019, pretax profit attained VND 1.392 tn, which was relatively flat as compared to 2018 despite a -23% YoY drop in financial income. For 2020, we expect that BVH records VND 1.255 tn NPAT-MI, up by +15.3% YoY, with the assumption that the life and non-life insurance premium segments post a respective of 17% YoY and 11% YoY growth. We also expect the technical reserve rate to be further reduced by -5 bps. This is -18% lower than our previous estimate, given the total change in technical rate assumption of -13 bps for 2019 and 2020. The technical rate we use for 2019 is 3.37% (vs. the previous 3.45%) and for 2020 is 3.32% (also previously 3.45%). As for Covid-19, we view this situation as a positive net impact to BVH in the long-term. Opinion: The stock price of life insurance companies in Asia Pacific experienced a plunge of -20% from Jan 2019 to date in the midst of a low interest rate environment. For BVH, the fall was -34.3%. As we expect the interest rate to remain low in 2020, we revise our target P/B to 2.5x and attain a target price for BVH stock of 65,900 VND, which is equivalent to a rating of Outperform. The new target P/B ratio is lower than our previous target of 3.3x (5-year average P/B) as well as the 10 year average P/B of BVH of 2.81x, as we made a further discount for the current perplexing mismatch situation when analyzing the Company’s duration gap. Even in the worst case under our scenario analysis where the technical rate is theoretically adjusted downward 65 bps, the downside for BVH stock is limited from the current price. Meanwhile, we see more upside potential for the stock, as new business premiums are expected to outgrow assumptions of +10% YoY.

Our analysis may be a bit contrarian given the current jitters in global markets. Overall, at the current market price, we discover through our analysis the downside risk is actually not that much, even for our worst case (-9% downside), while the base case and best case upsides are high. In the long-term, after COVID-19 fades away into the distance, ACV is still the main beneficiary of the expanding passenger growth of Vietnam, and thus still makes for a good long-term investment. At the current market price, we think it represents a good opportunity to acquire ACV for long-term investors. Using our base-case estimates and valuation, we upgrade our rating from OUTPERFORM to BUY, with a lower 12-month target price of VND68,600/share (from VND100,500), which offers 29% potential upside. Note that our valuation has not taken into consideration income from landing area prospects.

PVD released its 2019 earnings results, in which net revenue, gross profit, and NPATMI recorded VND 4.369 tn (-20.6% YoY), VND 449 bn (+13.1% YoY), and VND 189 bn (-3.9% YoY) respectively. PVD exceeded its revenue target by 14%, and recorded a profit that far exceeds the net-neutral target it set for 2019. For 2020, we estimate PVD net revenue and NPATMI can achieve VND 5.237 tn (+19.9% YoY) and VND 236 bn (+24.7% YoY) respectively. At a price of VND 12,100 per share, PVD is trading at 2020 and 2021 P/E ratio of 21.6x and 16.3x respectively. P/E ratio will have positive improvement thanks to the growth of earnings. Its 2020 P/B ratio is at 0.36x, which is lower than the 3-years historical P/B and regional peer P/B of 0.50x. We set our target 2020 P/B to be 0.45x, thus arriving at the target price of VND 15,000 per share (23.9% upside). We accordingly have a BUY rating for the stock for the time being. 

For FY2019, DRC delivered VND 3.858 tn in net sales (+8.6% YoY) and VND 313 bn in pretax profit (+76% YoY), having accomplishing 94% and 199% of the 2019 targets respectively. The gross profit margin expanded from 12.1% in 2018 to 14.8% in 2019. This was mainly due to the downtrend in raw material prices, such as synthetic rubber, chemicals, and black coal, while the natural rubber price remained flat. Also, a higher utilization rate from the radial factory helped improve GPM.  At the current price of VND 22,800 per share, DRC is being traded at a 2020 P/E of 10.2x and EV/EBITDA of 4.4x, which is lower than the peer average P/E of 11.3x and EV/EBITDA of 5.8x. Strong bottom line growth (78% YoY) in 2019 is to be followed by an expected moderate growth of 15% YoY in 2020, which has made DRC valuation much more reasonable than in the past (19x in 2017 and 20x in 2018).  However, a key risk to our call is the trend to switch from bias to radial tires, which may intensify compared with our base case decrease of -5% in bias sales volume. We therefore apply a discount of 15% on P/E and EV/EBITDA peer average of and 11.3x and 5.8x respectively to calculate target multiples. With a target P/E and EV/EBITDA of 9.5x and 5x on average 2020 financials, we derive our 2020 year end target price at VND 23,900, equivalent to a MARKET PERFORM rating. 

MWG held an analyst meeting on 21 February 2020. January 2020 performance: net sales and net income were VND 12.56 tn (+21% YoY) and VND 553 bn (+22%YoY), accomplishing 10% and 11% of the 2020 target, respectively. The company focused more on sales in preparation for Tet-holiday rather than store openings. As a result, all three chain outlets witnessed an increase in daily revenue per store, despite lower working days. 2020 company guidance: despite the concern over consumption of discretionary products amid the coronavirus outbreak, management still kept its 2020 target unchanged, with a net sales and net income at VND 122.445 tn (+20% YoY) and VND 4.835 tn (+26% YoY), respectively. Other discussions were focused on the impact of coronavirus outbreak, competition with e-commerce players, mobile phone industry growth prospects on 5G launch and discontinuing of 2G, and 2022 market share target for mobile phone (55%) and consumer electronics (50%). At the current price of VND 106,200 per share, MWG is trading at a 2020F P/E of 9.8x. We maintain our BUY recommendation, with an unchanged target price of VND 192,800 per share, implying 81% upside potential from current levels. We continue to use the SOTP valuation method to derive the target price, with a target P/E of 14x for the ICT segment (down from 16x due to the shrinking of mobile phone industry growth) and a target P/S of 0.53x (unchanged) on 2020E financials (rolled over from average 2019-20E). Key downside risks: possible negative growth in mobile industry, affecting MWG’s mobile phone segment and fierce competition in the e-commerce segment

VHC released its Q4 earnings results, in which net sales and PAT reached VND 2.171 tn (-19.7% YoY, yet +15.3% QoQ) and VND 199 bn (-50.9% YoY and -21.5% QoQ). Cumulatively, net sales and PAT of 2019 reached VND 7.867 tn (-15.1% YoY) and VND 1.180 tn (-18.2% YoY), having achieved 78% and 94% of the Company’s annual targets and slightly below our estimate of VND 1.254 tn for PAT. For 2020, we expect net sales and net profit to achieve VND 8.476 tn (7.7% YoY) and VND 831.9 bn (-29.5% YoY). In our assumption, ASP will pick up gradually towards year-end on warming demand, and 2020 ASP may stand at $3.30 USD per kg (-18.1% YoY). Total export volume of fish fillet may recover by 25%, as demand in the US may resume itself to normal levels. Sales of collagen & gelatin may surge by 40%, owing to an increase in designed capacity, from 2,000 tons to 3,500 tons in 2H 2020. Despite the company's efforts towards improving productivity, a stable price at the current low levels may still translate into a lower profit margin nonetheless. VHC shares are now trading at a price of VND 31,450 per share, which is equivalent to a 2020F P/E forward ratio of 7.0x – quite fair in our view. We maintain our target P/E ratio for VHC at 7.5x, thus arriving at the target price of VND 33,550 per share (+6.7% upside). We consequently maintain our rating Market perform for the share.

BIDV recently released its 2019 financial statements, with 2019 consolidated TOI and PBT of VND48.2tn and VND10.876tn, respectively, which grew by 8.8% YoY and 15.8% YoY, respectively. The results fulfilled 105.6% of management’s annual plan. There was also decent credit expansion towards retail lending: total credit increased by 12.4% YoY (vs. +13.56% YoY of the sector), with individual and SME loans up by 21.5% YoY and 18% YoY, respectively, and corporate bonds (which are counted as credit according to regulations in Vietnam) down by 11.3% YoY in 2019. We revise down our 2020E earnings by 15%, mainly to factor in the negative impact of the coronavirus outbreak and our more prudent assumptions on higher new NPL formation as well as higher-than-expected provision costs for VAMC bonds in the year. For 2020E, we forecast PBT of VND14.01tn, up 28.8% YoY. We estimate ROAA and ROAE at 0.6% and 13.6%, respectively, and our 2020E BVPS is at VND20,088 (before charter-capital increase). In 2020, the bank plans to issue an additional 5% of shares to increase its charter capital (post-money). Although we don’t include the additional capital plan in our model, we include it in our valuation. As we assume an issuance price of VND45,000 per share and with our new target PBR of 2.5x (from 2.0x), we derive a higher 12-month target price of VND53,300 (previously VND42,900). With upside potential of 2.5%, we downgrade our rating on the stock to Market Perform (from Outperform). Downside risk: higher-than-expected NPL formation; upside risk: faster-than-expected divestment of BIDV MetLife Insurance.

As we project the parent bank’s earning result for 2020 to be brighter than our previous forecast given the expectation of higher credit growth and a possibility in NIM expansion, we apply a target P/B ratio of 1.25x (vs. 1.20x in our previous report) in tandem with an expected ROE of 18.5%. For FeCredit, the residual income model and P/B method resulted in a valuation equivalent to a P/B ratio of 1.83x. On a consolidated basis, our target price for VPB stock for 2020 and 2021 are VND 28,900 and VND 33,200. As the stock price has increased significantly since the date of our previous report (+42%) and is now 5.5% below our 2020 target price, we change our recommendation to MARKET PERFORM for VPB stock. The above forecast and valuation has not taken into account any possible impact related to the sale of FeCredit in the foreseeable future. Assuming the sale of FeCredit would be done at P/B ratio from 2 to 4x, the target price of VPB could be at a 1-30% range higher than our current target price. 

Given the above estimates, EPS would likely attain VND 3,465 in 2020 after excluding the 12% bonus and welfare fund. IMP is being traded at a 2020 P/E of 16.2x at a market price of VND 56,100. The stock has increased by 16% YTD, partially thanks to good market sentiment for the pharma sector as well as IMP positive prospects. Based on a target P/E of 20x equivalent to the median of the comparable peers, we raise our target price for IMP in a one-year investment horizon to VND 69,300/share. We recommend an Outperform for the stock, complete with a 23.5% upside.

In 4Q19, total sales expanded by 16.6% YoY to VND 9.182 tn, but NPAT decreased by -13.2% YoY due to significantly higher G&A expenses. According to POW, provision expenses for account receivables (EPTC/EVN) incurred approx. VND 400 bn, which led in turn to higher G&A expenses. And 4Q19 NPAT would rise by 74% YoY if excluding this one-off provision expense. The stock is trading at an EV/EBITDA 2020 of 5.2x. At the moment, we call for a BUY recommendation, with a current target price for POW is VND 13,100/share, implying a 33% upside vs. the closing price as of 11 Feb 2020. The target EV/EBITDA is assumed at 6.5x vs. the domestic average of 8x and regional average of 9.5x, given low earnings prospect in 2020. 

We downgrade our rating for the sector to Negative from Neutral due to the short-term impact of Coronavirus outbreak combined with the strict implementation of Decree 100. In Q4 2019, SAB recorded net sales and net profit of VND 9.7 tn (-6.5% YoY) and VND 1.1 tn (+18.7% YoY). Cumulatively, the company recorded net sales and net profit of VND 37.9 tn (+5.4% YoY) and VND 5.4 tn (+22% YoY) in 2019, having achieved 97% and 114% of its annual sales and net profit target for the year. Given the current uncertain situation, management emphasized further on slashing costs to compensate for the expected decline in sales for the short term. We currently forecast net sales and net profit to reach VND 37.3 tn (-2% YoY) and VND 5.64 tn (+5.1% YoY) in 2020. We also lower our target price for the stock to VND214,400 (+10.5% upside) using the industry’s current average P/E levels of 27x applied on our 2020F EPS of VND 7,940 (from a target PER of 33x applied on our 2019-20F EPS). As such, we maintain our Market Perform rating. In the next 3 months, the stock price will still likely be affected by unfavorable Q1 result forecasts.