Company Report

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. 

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.