Company Report

Vietinbank has recently held an analyst meeting, and below are the key takeaways:

Strong earnings result in 2019 with separate PBT of VND 11.5 tn, at +83% YoY. This was driven by improved NIM thanks to retail segment and strong growth in Non-NII at +28% YoY. Although credit growth was only +7.2% YoY, SME and individual lending, which yield higher than other loans, rose by +23% YoY. CIR reduced significantly from 48.6% in 2018 to 37% in 2019.

Improved asset quality: NPL ratio reduced to less than 1.2% from 1.59% in 2018 while the loan-loss-coverage ratio surged to 128% from 93% in 2018. The bank completed book provision for 54% of the gross VAMC bond.

For 2020, the bank targets a PBT of VND 12.6 tn at a 10% YoY rise. Growth of total assets, credit, and deposits are targeted at 6-7% YoY, 8-10% YoY, and 10-12% YoY, respectively, based on the scenario that its capital will be raised by stock dividend. CIR is expected at less than 40%, while the NPL ratio will be less than 2%.

We arrive at a 1-year fair price for MSN of VND 59,000/share (from VND 86,000/share) via the SoTPs (Masan Consumer Holdings, VCM, MSR, MML, TCB and others), and apply a 15% conglomerate discount to take into account the short-term financial impact from consolidating VCM. As our target price implies only limited upside from the current market price, it falls to our Underweight rating range at the moment.  We will update our recommendation once there are material changes to the company business/structure/outlook in the coming time.

For the parent bank, as 2020 ROE is forecasted to reach 18%, we apply a target P/B of 1.20x and arrive at a book value of VND 50 tn, or VND 20,700/share. With FeCredit, we apply both P/B and the residual income method, resulting in a total book value of VND 30 tn or VND 34,000/share, which is equivalent to a forward P/B of 1.46x. Therefore, on a consolidated basis our 1Y target price for VPB stock is VND 25,200. As the burden of suffocating regulation elements that were considered adverse conditions to the bank's growth regulation were lifted, with the final version of the Circular much less restrictive than the Draft, FeCredit can breathe a sigh of relief. With this new tailwind behind the Bank, we recommend an OUTPERFORM rating for VPB stock. The forecast and valuation has not taken into account any possible impact related to the sale of FeCredit in the foreseeable future. 

At the current price of VND109,000 per share, MWG shares are trading at 2019E and 2020E P/E ratios of 12.8x and 10.0x, respectively. We continue to use the SOTP valuation method, 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). As such, we derive our new 12-month target price of VND192,800 (from VND160,300), implying 77% upside potential from the current price. We maintain our BUY rating on the stock.

At the current price, PLX is trading at 2019 and 2020 P/E forwards of 17.4x and 16.2x respectively. We use the regional peer’s P/E average of 19x as our target, which is adjusted down from 21x in the previous report due to the lower valuation of the peer group. This target PE is also close to the 2-year historical average of 19.1x of PLX share itself. Accordingly, our 1Y TP for the stock arrives at VND 70,100/share. As the TP implies an upside of 17% from the current price, our rating for the stock is Outperform. Although we have not factored in the one-time profit from the divestment from PG Bank in the TP, any confirmation about this deal can be a supportive catalyst for the stock in the next 6 months.

Based on the above estimates, EPS would likely reach VND 2,736 in 2019 and VND 3,148 in 2020 after excluding the 12% bonus and welfare fund. At the market price of VND 54,000, IMP is being traded at a 2019 and 2020 P/E of 19.7x and 17.6x. Based on a target P/E of 18x, average when compared to comparable peers, we recommend a Market Perform for the stock, with a 1-year TP of VND 56,600/share, a 5% upside. Annually, IMP often generally books about 10% of its PBT in administrative expenses for its R&D fund, as has been the case since 2012. The Company intends to not distribute this fund until the latest factory completely obtains the EU-GMP certification standard.  Hence, IMP perhaps may not record this expense next year, and may get higher growth in terms of its bottom line in 2020 that exceeds our estimates. At present, we have not opted to factor this assumption into our model.

HDB released its Q3 financial statements, where total operating income (TOI) and pre-tax profit (PBT) were VND 2.871 tn (+35.7% YoY) and VND 1.238 tn (+50.7% YoY). It’s worth noting that the growth rate, which appears impressive, actually came from a low base set back in Q3 ‘18. Cumulatively up to 9M2019, TOI and PBT grew at +18.6% YoY and +19.6% YoY reaching VND 8.044 tn and VND 3.448 tn respectively. This was fueled primarily by the 25.1% YoY growth in net interest income, as NIM of the parent bank expanded +55 bps at the cost of using short-term funding to finance longer term loans. Given the targeted P/B metrics of 1.3x for the parent bank and 3.0x for HD Saison, using 2020 book value, we arrive at the target price of VND 33,000. This is equivalent to a 2020E consolidated P/B ratio of 1.52x and an 1Y upside of +14.9%. Therefore, we issue a MARKET PERFORM rating for the stock.

At the current market price of VND 98,700/share, VHM is being traded at 2019 P/E and 2020 P/E metrics of 17.5x and 14.4x, which is relatively lower than industry peers. Regarding valuation, given the above-mentioned adjustment, our target price is raised to VND 110,200/share using RNAV approach, implying an upside of 13% compared with the current market price. Hence, we reiterate our OUTPERFORM rating for the stock at present. In the short-term, the share buyback plan of up to 60 million shares (equivalent to 1.79% of total charter capital) is expected to have a positive impact on the share price. In our opinion, VHM has ample financial resources to execute this deal considering its debt/equity ratio of 0.46x, and its 9.4 trillion VND cash and cash equivalent balance for Q3.

At the current share price of VND 34,700/share, VRE is trading at an EV/EBITDA of 17.5x which is relatively lower than the regional peer average of 19.8x. On a growth perspective, VRE is attractive with its valuation trading at a discount vs peers while it boasts stronger projected growth for the medium term.  As such, with 26.2% upside compared with current price, we recommend to BUY the stock. 

At the current price, HT1 is trading at 2019 and 2020 P/E forwards of 8.5x and 7.1x respectively. We upgrade our rating from Market perform to Outperform, with a 1-year TP of VND 17,600/share (after adjusted for the TP from the ex-dividend date on Nov 11 2019) with target PE and EV/EBITDA of 8x and 5x respectively. In the next 3-6 months, the expectation of gross margin improvement and on the company’s positive earnings growth in 2020 can be a supportive catalyst for the company’s business results and stock price going forward.

At the current price of VND 18,600/share, STK is trading at 2019 and 2020 P/E levels of 6.2x and 5.5x respectively, which is rather attractive. Our 1Y target price is VND 21,400 (+15 % upside) based on the target P/E of 6.3x (current industry average P/E), equivalent to an OUTPERFORM recommendation. Downside risk to our call includes the possibility of Chinese firms dumping even lower prices than expected into the market, which will be more detrimental to the volume and ASP of virgin-type yarn, impacting the results of STK in 4Q 18 and 1Q 19. As such, this uncertainty will negatively affect the stock price in the next 3-6 months. 

In Q3, PVD posted VND 1.07 tn in net sales (-20% YoY), and a net profit post MI of VND 27 bn (-76% YoY). Excluding the impacts of depreciation methodology change, provision reversals, and impact of lower JV profit, Q3 2019 operating profit would have theoretically decreased by -60% YoY. We maintain our 1-year target price of VND 18,200 (+11% from current market price) based on target unchanged P/B of 0.55x and reiterate Market perform recommendation for the time-being. Based on our estimate, we expect PVD to post a NPATMI of VND 33 bn in Q4 2019; much lower than VND 386 bn in Q4 2018. The high base from Q4 2019 was mostly from changes in depreciation methodology as mentioned above, and PVD did not retrospectively apply for the first 3 quarters of 2018, and recorded in Q4 instead. Besides earnings, the PVD price movement is largely correlated with the oil price, which is under pressure of expected weak demand caused by a global economy slowdown as well as the rising trend of using renewable energy in the future. The Brent crude-oil consensus forecast (Bloomberg polls, EIA, Goldman Sachs) is $60 USD/bbl (-6% YoY).

With the current hog supply shortages running up to Tet holiday as well as the recent rapid hog price increase since October 2019, we expect the company’s net profit to turn around, at least in the next 2 quarters. DBC share price has also recently recovered by ~6.7% since early October, in line with the hog price increase. At the current price of VND 23,700/share, DBC is trading at 2019 and 2020 P/E ratio of 9x and 7x respectively. In 2019, we estimate that net sales and net profit might reach VND 7.6 tn (+13.3% YoY) and VND 256 bn (-28.9% YoY). In 2020, we estimate net sales and net profit might reach VND 8.1 tn (+7.7% YoY) and VND 332 bn (+29.7% YoY). Our forecasts have not taken into account any additional real estate revenue that might already be booked. Our 1Y target price for the stock is VND 27,300 (+15.1% upside), equivalent to an OUTPERFORM rating.

At the current price, VGC is trading at 2019 and 2020 PER levels of 12.6x and 10.5x respectively. Given the above information, our rating for the stock is Outperform with a 1-year target of 23,050 VND/share, implying an upside of 19% from the current price. Besides the encouraging earnings growth thanks to the strong performance of industrial park and the potential recovery of sanitary wares in 2020, the coming state divestment and a cash dividend yield of 5.5% can also be supportive catalysts for the stock over the next 12 months.