Company Report

After the resilient 3Q20 results, we raise our 2020-21E net income by 15-37%. Our 2020E net sales and net income now rise to VND112.4tn (+10% YoY) and VND3.872tn (+1% YoY), respectively. For 2021E, we are raising our top line to VND140.8tn (+25% YoY), while we expect strong net income, up by 36% YoY to VND5.3tn, to be driven by: (1) the recovery in discretionary spending; (2) additional market share gained in the ICT segment during the pandemic; and (3) continuous improvement in profitability of the grocery segment. At the current price of VND106,800, MWG trades at 2020-21E PERs of 12.3x and 9.3 x, respectively, which we consider attractive. Using unchanged target multiples (PER of 9x for the ICT segment and P/S of 0.3x for grocery segment), and rolling over our valuation basis to 2021E earnings, we derive our new SOTP-based 12-month target price of VND147,000 (previously VND113,700), which implies 38% upside potential. Hence, we are reiterating our BUY rating on the shares.

Earnings beat. Profit through Q3 amounted to VND 6.4 tn, increasing +15% YoY. This translates into a robust Q3 PBT growth of +34% YoY to VND 2.6 tn. This impressive result was led by YTD increases of +10.6% and +8.5%, respectively, in credit and deposit growth. The NIM also expanded 28 bps QoQ to 3.7% and was disciplined with expenses. We are, however, concerned that ACB’s over the LLCR decline from 175% to 113% since 2019. PBT revised upwards by 3.7% and 4.3% for 2020 and 2021 to VND 8.2 tn and VND 9.5 tn. Rationale for such revision include credit growth acceleration of 300 bps to 14.75% (the new credit growth quota granted by the SBV). Further, the NIM was fine-tuned 20 bps to 3.58% due to better-than-expected savings in funding costs YTD. Upgrading to Buy. An exclusive bancassurance deal is currently under negotiation, and we are incorporating upfront fees paid which should boost equity during 2021. We also increase our target P/B multiple from 1.3x to 1.5x, given the drop in market interest rates. Accordingly, the target price for ACB is VND 30,800/share, which is equivalent to a Buy rating.

The increase in our 2021E pre-tax earnings by 3% coupled with a P/E target re-rating in the technology segment from 13x to 14x causes us to increase our 12-month TP by 12% to VND62,600. The latest FPT deal wins in 3Q20 should add to 4Q20 earnings growth and beyond. We also see attractive earnings growth over 2020-21 relative to its peers. Forward-facing momentum is further fueled by a large net cash balance which can be used to finance M&A deals. Thus, with 22% upside potential to our new TP, we issue our BUY rating on the shares of FPT. 

HT1 PBT fell significantly by 33% YoY in 3Q20 to VND 188 bn, due to a decline cement prices amid weak domestic consumption, as well as the absence of higher financial income. As a result, we lower our 2020 PBT estimates for HT1 -14% to VND 814 bn (-12.5% YoY) given sluggish demand and the recent price cut; and assume that 2020 sales volume will drop -9% to 6.65 mn ton with ASP falling -3% YoY.  However, we expect that 2021 PBT will recover 14% to VND 932 bn due to an acceleration in public investment and lower interest expense. We increase our PE and EV/EBITDA target from 8x and 4.5x, respectively, to 9x and 5x given the drop in market interest rates. Accordingly, we revise our target price to VND 16,900 (from VND 16,000 previously). However, as the stock price has increased by 24% since our last Call, we change our rating for the share from BUY to MARKET PERFORM.

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. 

During 2Q20, net sales and pretax profit fell -28% YoY and -39% YoY, respectively, as both domestic and export sales volume underperformed. However, July exhibited early signs of recovery in exports, while the 50% reduction in registration fees for locally assembled vehicles appears to have increased domestic tire sales. Nevertheless, we still anticipate that 2020 performance will be weak YoY, as net sales and pretax profit are expected to decline -17% each. For 2021, we expect net sales to increase +4.5% YoY as transportation recovers slowly post COVID-19, and pretax profit to jump +49% YoY as depreciation expenses associated with the Radial I factory substantially declines. Given the strong EPS growth of 49% YoY in 2021, the shares of DRC now trade at 2021 PE and EV/EBITDA of 7.1x and 3.5x, respectively, which is well below the 2018-2019 averages of 16x and 6.2x. While we recently lowered our 2020/2021 EPS and EBITDA forecasts by -7%/-8% and -4%/-6%, respectively, which translates into a lower one year price target of VND 19,400 per share (down -7%), we call for an OUTPERFORM rating given the near 14% ROI – inclusive of the 8.8% dividend yield. 

We reiterate Outperform rating for PLC, with an ROI of 20.5% (7.4% dividend yield) as we revise our target price to VND 23,700 per share (previously VND 18,600 per share). Our new target price is derived from improved 2020/2021 earnings growth outlook post-Q2 bottom-line performance. In Q2 we witnessed +46.7% YoY NPAT improvement or the achievement of 74% of PLC’s annual profit target which were boosted by the resilience of both the lubricant segment and Vietnam Dong forcing us to upgrade our EPS forecast by 23% and 5% for 2020 and 2021, respectively. Coupled with PLC’s positive 2021 (and beyond) outlook driven by a new cycle of public investment, the shares have advanced 36% since our April 29, 2020 upgrade. Considering the current operating environment of aggressive public investment, not to mention about weaker USD, we believe that PLC’s outperformance will continue.  

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. 

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.

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.  

We maintain our Market Perform rating for VPB shares with our 1Y target price of VND 25,000/share even though VPB posted a 51.6% YoY increase in 1H 2020’s bottom-line. While management contends that VPB could exceed the initial 2020 plan by 10-15%, we are not nearly as optimistic on VPB’s overall outlook. We are not big fans of reserve bleed and cutting loss provisions in order to remain on the earnings growth treadmill as fundamentals deteriorate. Our revised estimates for 2020 and 2021 PBT are VND 10.9 tn (+5.7% YoY) and VND 11.6 tn (+6.6% YoY), respectively.