Company Report

We are initiating coverage of HDG starting off with a Market Perform rating, and are establishing a 1Y target price of VND 25,000/per share (upside +1.2%), predicated via SOTP valuation methodology. HDG is entering a new era, as it gradually transforms itself from a real estate developer into a company which emphasizes renewable energy. The Company relies upon an attractive FIT price, coupled with being a beneficiary of current government policy that the Company can leverage upon to develop new power sources. The segment has real potential of generating solid earnings and stable cashflow, a necessary earnings component that is needed to compensate for the cyclical risk characteristics of the real estate business arm of the Company. At the current price of 24,700 VND, HDG is now trading at 2020F and 2021 P/E levels of 4.4x and 3.6x respectively, significantly lower than average p/E 6.5x of peers with similar business activities (DPG, REE, and PC1). For upcoming years, HDG will maintain its dividend policy of 10% for cash dividends, plus 20-30% of stock dividends. 

We lower our 1-yr target price for MSN to VND 60,500 (from VND 64,900) - which represents 9% upside potential - after accounting for the recent acquisition of a 12.6% stake in The CrownX (TCX). Nevertheless, we retain our Market Perform stance on the shares, as we believe that the likely significant earnings decline for 2020-2021 associated with the VCM consolidation is mostly priced in. The likely decent performance of the consumer and banking segments would be a plus, while we expect a recovery from H2 2020 in the feed business of MML. On the negative side, MSN faces significant challenges: a) its consumer retail business has yet to reach break-even EBITDA; b) the impact of low commodity prices on its mining business; and c) increased leverage which will act as a drag on the 2020-2021 earnings. 

BVH posted a surprising VND 617 bn in pretax profit in 2Q 2020, up by +98.6% YoY. Such stellar results were driven by trading gains via its government bond portfolio when market yields were low, leading to a surge of +86.8% YoY in financial income to VND 2.6 tn. As the Company’s duration gap was already large, we did not expect the company to sell part of its bonds during the period. Meanwhile, underwriting profit swung the other way, facing significant pressure (-67% YoY) during this persistently low interest environment. While Q2 was positive for BVH, the market environment likely will remain to be challenging, particularly as Vietnamese government bond yields are likely to remain at a low level. As such, we believe BVH earnings results will remain heavily dependent on tactical trading opportunities. Factoring in this headwind, our revised NPAT-MI estimates for 2020 and 2021 are VND 1.177 tn (-0.9% YoY) and VND 1.317 tn (+11.8% YoY), respectively, down -2% and -12% vs. previous estimates. Given our revised estimates, our target price was adjusted downward accordingly to VND 60,000 (-4% decline from our previous report), representing an upside of 15.8%. Hence, we downgrade BVH to an Outperform rating. 

We are initiating coverage on the shares of BCM with a SELL rating with a target price of VND 40,600 per share, representing a 13.6% downside. BCM is one of the five largest industrial park developers in Vietnam with an ecosystem that includes industrial park services and residential areas. Its real estate inventory had a value of VND 22.895 tn (53% of total assets), with VND 2.85 tn (12.4% of total assets) located in Binh Duong New City - representing a substantial opportunity for BCM. Upon the completion of the metro (subway) between Binh Duong and HCMC, we anticipate that the demand for real estate in Binh Duong will intensify - and BCM is well positioned to benefit from this demand shift. We estimate that land transfer revenue in Binh Duong New City in the 2021-2023 period to be around VND 1.5 trillion each year, growing to approximately 16.2% of BCM’s current revenue. Further, new industrial parks should enable BCM to lease 120-150 ha/year with an average rate of $80-90 USD/sqm/term. This is equivalent to annual revenue of between VND 2.5 – 3.0 tn between 2021-2025. While excited about BCM’s long-term prospects, BCM is increasing its charter capital via a 5:1 rights issuance (4Q20) and and a private placement of up to 758 mn shares (37.9% of outstanding) (2021) which should cause EPS dilution of 36.5% - hampering upside for the shares.  Other risks to our call include low liquidity concerns of real estate projects in Binh Duong New City, temporarily weakened demand for industrial park rental from new clients as affected by Covid-19, slow legal procedures in new industrial park such as Cay Truong and Lai Hung and debt payment pressure. These factors are expected to negatively affect the company's earnings in 2H2020 and might prolong through 2021.

We initiate coverage on the shares of STB with an OUTPERFORM rating with 1Y target price of VND 13,830/share, which represents upside of 22%. Unlike most names in our coverage universe, STB is considered to be a troubled financial institution. The bank faces headwinds due to legacy problem assests and its acquisition of Phuong Nam Bank in late 2015. Valuing STB from a P/BV and/or P/E basis would seem a rather moot point – as neither would be entirely accurate. Nevertheless, STB has relatively well-earned reputation for its retail banking business with largest branch network and highest client deposits balance amongst JoCBs. As a result, we believe that valuing STB from a deposit premium perspective is likely the most realistic for an organization in STB’s position. By our calculation, the average listed private bank deposit premium in Vietnam is 3.6%. As we find ACB to have the closest deposit mix to STB, we apply the ACB deposit premium (4.5%) to STB. 

MWG continues to be adversely affected by the decline in discretionary consumer spend. That said, MWG is likely to be the primary beneficiary of other retailers exiting the market as it continues to absorb market share. MWG is well-poised to quickly resume strong growth when the pandemic no longer poses public health risks, which SSI believes will occur by mid-2021. We also find that a more deliberate grocery store openings pace by BHX (ie, slow down opening speed and only open stores in provinces where it has an existing footprint) will aid in its ability to break even on a pre-general and administrative expense basis by year-end 2020. A substantially more efficient grocery operation should enable MWG to be a beneficiary of the long-term shift in consumer shopping habits from wet markets to the more modern trade grocery stores. In addition, our constructive view on the shares is supported by our new price target of VND 113,700 (from VND 129,560) which implies upside of 30%. Our TP is predicated on combination of a target P/E of 9x per average 2020-2021 ICT financials estimates, as well as on a target P/S of 0.3x on average 2020-2021 estimates for grocery financials (unchanged multiples on our new estimates detailed on page 6; previously on 2020E).  

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. 

Vietinbank (CTG) posted an outstanding set of 2Q 2020 earnings results. PBT achieved a 106% increase YoY, the strongest amongst the listed banks, despite huge foregone interest income originated from interest rate cuts. Major drivers included non-interest income (+27.1% YoY), well-managed operational costs (-9.3% YoY), and less provisioning (-46.7% YoY). However, combined NPL ratio picked up +21 bps to 2.1% while the amount of restructured loans was at a very low level (0.9% of loan book) compared to peers. We revise up our forecast for the bank’s 2020F PBT to VND 9.75 tn (-17.2% YoY) from VND 9.22 tn but revise down 2021F PBT forecast to VND 10.86 tn (+11.3% YoY), primarily to reflect interest income reversal and higher provisioning cost post-Covid. We maintain our Outperform rating on the stock with unchanged 1Y target price of VND 27,200 per share and upside potential of +12%. Potential short-term catalyst is the exclusive bancassurance deal currently being re-negotiated. 

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%. 

Despite 1H 2020 results having been hit by the COVID-19 pandemic, performance was still in line with our FY 2020 estimates, with core business performing under our expectation and a surge in non-core trading activities making up for that.  The 1H semi-annual result (usually the low season) achieved 43% of our FY2020 NPAT estimates due to higher revenue from trading activities. Given multiple factors such as the new Viettel Telecom outlets which serve as new point of sales locations that now offer VTP products and services, and the likely longer than expected COVID-19 pandemic, we revise our estimates accordingly with a 2020 NPAT growth of 23% YoY and 2021 NPAT growth of 45% YoY. Upgrade to BUY. New 1Y target price of VND 157,000/share, upside 23%, based on P/E target of 18x (from our previous OUTPERFORM rating and previous TP of 160,000/shares). Our BUY call mainly lies on the prospects that current VTP stock price is reflecting a low base of core earnings this year, and next year’s strong core recovery prospect will be a strong catalyst for the stock price.  

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.

We maintain our BUY recommendation on the shares of NLG, and our 1Y target price of VND 33,400/per share (upside +26%) which us predicated on our RNAV valuation methodology. With the total booking of more than VND 7.5 tn related to various project (Akari/Mizuki/Waterpoint) plus other income from project divestment, we expect NLG’s business results between 2021-2022 are expected to be quite positive. NLG ‘s total clean land bank of 681 ha provide it a development advantage relative to other developers in the South. With competitive pricing and a well-thought out product development strategy for the mid end segment, the Company is among few capable developers that can launch the highly sought-after township model (>100 ha/project) in second tier market locations. 

While our 2020/2021 forecasts are kept almost unchanged, we upgrade our recommendation for GAS from Market Perform to Outperform based on an attractive upside. Since the share price has fallen recently along with the sharp market correction due to the new coronavirus cases in Vietnam, the current entry point appears to be quite attractive. Further, as we roll over our valuation basis to 2021, we increase our 1-yr target price to VND 74,000/share (from VND 71,000/share) which is predicated on an unchanged target P/E of 16x combined with the DCF approach. Our new share price represents 13% upside and including dividend yield, total return for the shares is estimated at 18%.