Company Report

We revise down our forecast for CTG earnings to VND 9.22 tn, at -21.7% YoY to reflect more comprehensively the impact of Covid-19. For 2021, we expect CTG to achieve VND 13.42 tn of PBT, at +45.5% YoY. 2020E and 2021E ROAE is projected at 9.4% and 12.8% respectively.  At the current price of VND 23,050 per share, the stock is trading at a 2020E and 2021E P/B ratios of 1.06x and 0.98x respectively. Our 1Y target price of CTG is VND 27,200 per share. As the potential upside is +18.0%, we maintain our OUTPERFORM rating on this stock. 

In 2020, we expect company revenue to reduce by -7.1% YoY, reaching VND 695 bn, and NPAT to reach VND 438 bn, - 12.8% YoY. In 2021, we expect SCS revenue to increase by 14% YoY to VND 792 bn, and NPAT to grow by 20.6% YoY to VND 528 bn. At the current market price, SCS is trading at 2020F and 2021F P/E ratio of 13.7x and 11.3x respectively, which is in the lower range of its historical band (10-18x). In the short-term, 2Q2020 might be the lowest quarter as explained above. In the long-term, we think SCS is a safe investment case, complete with a net cash position, operation in a growing duopoly market, and paying a dividend yield of 7% at the current market price. We initate an OUTPERFORM rating for SCS, with a 1Y target price of VND 129,500/share (upside of 15%) based on a DCF model with a WACC of 14.89%, and a terminal growth rate of 3% (including 2% of long-term inflation and 1% of real growth rate).

At the current market price of VND 73,500/share, VHM is trading at 2020 P/E metrics of 9.4x which is lower than industry peers. The key downside risks to VHM mainly includes slower-than-expected cash flow from project sales and weaker-than-expected residential demand impacting home buyers’ affordability, both of which could occur in the case of a potential GDP slowdown caused by the prolonged Covid-19 outbreak. 

STB released its earnings results for 1Q 2020, with a +9.6% YoY growth in total operating income and a -6.9% YoY growth in pretax profit. Although much lower than 1Q 2019 at 5.6% YTD, credit growth in 1Q 2020 of STB was still decent (+3.5% YTD), and higher than the equivalent of the whole banking system (+1.3% YTD). However, slow growth in non-interest income and a VND 303 bn provisioning for receivables relating to legacy loans washed out all the growth in the bottom line. We reiterate our view that it is still not the right time to purchase STB stock. For legacy debt with a remaining balance of VND 55.7 tn, we believe that STB still needs at least 2 years to clear them, assuming favorable market conditions for this time horizon. For STB, the risk of increasing NPLs is apparent via the impact from Covid-19. Negative impacts on the operation of STB could also slow down the process of clearing legacy debt, as less resources to do so is currently available. The Bank set a pretax profit growth of +20% YoY for 2020, but might revise this down after 1H 2020 to reflect the impact of the pandemic. STB is trading at TTM P/B and P/E metrics of 0.57x and 6.87x.

As a result of this agreement, we revise our respective 2020E net sales and pretax profit to VND7,922bn (+3.1% YoY; from VND9,643bn) and VND870bn (+86% YoY, from VND578bn). Since September 2019, DPM’s share price has rallied by 11% despite weak market sentiment. At the current price of VND14,850/share, DPM trades at a 2020E PER of 10x, compared with its 2018-19 PER range of 15.1-16.2x. Despite unfavorable weather conditions this year, DPM will likely post a strong bottom line growth thanks to (1) a higher utilization rate of all plants compared to the low base last year, (2) less intense competition and (3) shallow gas input costs. In addition, DPM’s high cash position (net cash per share of VND7,081 as of 4Q19) and a decent dividend yield (10% on par value; effectively a 7% dividend yield) may attract investors during the weak market sentiment caused by COVID-19. Nevertheless, due to the adverse impact from the drought in the Mekong Delta, we lower our target PER, PBR, and EV/EBITDA multiples to 8x, 0.7x and 3.5x (from 9x, 0.8x, and 4.5x), respectively. With an equal weighting assigned to each valuation method and using our revised earnings for 2020E (from average 2019-20E), we derive our new 12-month TP of VND16,900/share (from VND15,500), which implies 14% upside potential. We thus maintain our OUTPERFORM rating. 

The 2020 AGM has approved the target of sales and pretax earnings of VND 8.3 tn (-2.6% YoY) and VND 765 bn (-50% YoY). 1Q20 reported sales amounted to VND 2.2 tn (30.7% YoY). And the reported NPAT recorded VND 135 bn (-44.3% YoY). If excluding the claim of FX loss in 1Q19, NPAT only descended by -11.8% YoY. With the closing price as of 17-Apr-2020, PPC is trading at a FY20 EV/EBITDA of 5.3x. Given the current price, PPC offers a FY20 dividend yield of 8.4% (based on a FY20 dividend of 20% par) vs. the regional average of 5.9%. At the end of FY20, net cash per share is estimated at VND 3,700/share, still quite affordable for the FY20 dividend payment thanks to being debt-free and possessing a stable cashflow. In the long term, the dividend payment might be lower because of saving up cash for capex in Pha Lai 3. We call for a MARKET PERFORM recommendation for PPC, with a 1Y target price of VND27,600/share, implying an upside of 16% vs. the closing price as of 17-Apr-2020.   

The company held its online AGM on 08-Apr-2020 via Cisco’s Webex platform. The 2020 approved guidance for sales and PBT were VND 32.45 tn (+17.1% YoY) & VND 5.51 tn (+18.1% YoY) respectively. However, the FY20 guidance targets had been set before the black swan outbreak of Covid-19 and it is necessary to have them re-adjusted by the BOD. Within our base case, we estimate VND 29.9 tn for total net sales (+8% YoY) and VND 5.1 tn (+8.7% YoY) for pretax earnings, implying a FY20 EPS growth of 8.2% YoY. Growth from outsourcing, for sales and PBT, is forecasted to ease back to a 14.3% YoY expansion rate in comparison with the previous projection of 25%-28% YoY. The escalated tension due to the pandemic in FPT’s overseas markets casts a shadow upon our expectation over the global IT spending budget in the short term - especially in Japan. In the long term though, we still believe that corporations overall would still spend on IT services and digitalization to improve their operating efficiency. For our base case, FY20 EPS growth is estimated to be 8.2%. According to the closing price as of April 8th, FPT traded at a FY20 P/E of 9.4x in comparison to a regional average of 20x. We reiterate our BUY recommendation, with a new target price of VND 64,000, offering a 37% upside potential. Our new target price was revised downwards by 10% vs. the previous target of VND 71,300 to factor in the impact of Covid-19.

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.