Company Report

We maintain our BUY rating on the stock, with a 12-month target price of VND 29,300/share (previously VND 29,500), based on unchanged P/E and EV/EBITDA targets of 9x and 6.5x respectively. We believe that deteriorating market conditions in the short term can be an opportunity for HPG to gain more market share, thereby attaining higher growth in the long term when the market recovers. In addition, the expected boost for public investment in the latter half of the year can also help to support steel demand. Key risks: Lower ASP and higher input costs than our assumptions; further delay in the Dung Quat Integrated Steel Complex.

We remain positive in our view toward NLG, with a revised target price of VND 33,400/ share by RNAV method (+49% upside), and with a FY2020 P/E of 6.0x.  This target price is 13% lower than the target price in our previous report dated 25 Feb 2020, as we have updated our estimates, and apply a discount rate to reflect uncertainty of cashflow in the future.

For 2020, HT1 set its sales volume target of cement to flatline at 7.28mn tons. Revenue and PBT are targeted more conservatively at VND8.839tn (-2.9% YoY) and 830bn (-10.6% YoY). At the current price, HT1 is trading at a 2020 PE and EV/EBITDA of 7.1x and 4.0x respectively. We maintain our OUTPERFORM rating for the stock, with a 1-year target price of VND15,600/share based on a target PE and EV/EBITDA of 8x and 5x respectively. In addition to a minor growth outlook, a stable cash flow, a healthy balance sheet, and a dividend yield of 9% can be a supportive catalysts for the stock. 

At the current market price of VND 15,500/share, PLC is traded at 2020/2021 P/E of 10.3x and 6.2x based on our estimate. We arrive at 1-yr target price for PLC at VND 18,600/share using H2 2020 - H1 2021 EPS and applying an 8x P/E multiple (equivalent to PLC average P/E in 2014-2019) and the DCF approach. It should be noted that as PLC has almost completed its investment in future production output capacity for both lubricants and the asphalt businesses, we expect no high capex in the coming years. Traditionally, the pay- out ratio is high (above 80%). 2019 dividend yield is at 8.8% based on the current market price (ex-right date is normally in June). As our target price represents 20% upside from current market price, we recommend to Overweight the stock at current market price.

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.

Sales and PBT targets for the year are projected to be VND 8.4 tn (+9.4% YoY) and VND 1.1 tn (-28.7% YoY). PBT of soymilk and sugar are expected to settle at VND 1 tn (-20.6% YoY) and VND 20 bn (-78.5% YoY). Refined sugar (RS) volume is estimated at 80,000 tons, declining by -44% YoY but still slightly higher than the previous management’s estimate of 70,000 tons. Low profit targets are no surprise, as is traditionally the case with QNS conservatively estimating its annual performance. Indeed, we have observed often QNS setting up an extremely low PAT target (2018 target: VND 194 bn and actual: VND 1.24 tn; 2019 target: VND 199 bn and actual: VND 1.292 tn). While this year their profit targets became more pragmatic, they are still quite conservative nonetheless. The cash dividend for 2019 has been raised to 30% on par (the AGM 2019 plan having been 15% at least), of which 15% on par has already been paid and the remaining 15% which will be paid on May 8th, 2020 (record date: April 17th, 2020). The payout ratio for 2019 is equivalent to 68%. No stock dividend is issued this year, which is different from the company’s tradition of a 20-30% stock dividend each year for the last six years. No ESOP plan in 2020.

QNS shares are now trading at the price of VND 23,200 per share, equivalent to a 2020 P/E in our base case of 5.73x. We consider this to be rather attractive in our view, especially given the more clarified outlook for the sugar segment, backed by the Company’s strong financial position with a relatively sizable mountain of cash on hand (net cash of VND 1.2 tn as of the end of 2019). With our target P/E being revised down to 8.0x (formerly 9.0x) in response to a recent fall in market-wide valuation, accompanied with a -15% discount for: (1) being listed on UPCOM, (2) difficulties of the sugar segment in recent years and (3) ESOP history, our target price for QNS shares arrives at VND 27,500 per share, equivalent to an upside of 18.5%. We reiterate our OUTPERFORM rating for the shares. 

An Gia Investment (AGG) listed its 75mil shares on HOSE on 9 January.   AGG was established in 2008 as a private company specializing in providing brokerage and real estate services. Since 2014, the company has expanded into the real estate development sphere, and has become an active developer in mid-end segment primarily located in HCMC.  AGG’s products are highly favored by the middle-affluent class. In our opinion, AGG’s business model is agile, able to adapt to changes and evolutions in the competitive matrix of the real estate market. Outlook: Revenue earned from residential project handover is An Gia’s core business. Most projects launched by An Gia have been well-favored by its customers, with an average absorption rate of 80-90% after just 3 months. Currently, An Gia is executing some mid-end residential projects in HCMC and nearby provinces, such as: The Song project (1 ha) in Vung Tau, the New Tech (VND 1.3 ha) and the West Water Gate  (3.1 ha) In District 7, as well as two large potential projects ( D7 and BC  27, with a total site area ~ 32.4 ha) which are under process for license finalization with the local government. Based on the project pipeline schedule, we estimate An Gia 2020 revenue and net profit will strongly increase compare to its low base set in 2019, achieving nearly VND 2.77 trillion (+622.7% YoY) and VND 386 bn (+16% YoY) respectively from the handover of 2 sites (River Panorama 1 & 2). With the finalization of of the Sky89 unit blocks from the Lacasa project come 2021, we expect An Gia will continue to record positive growth of more than VND 4.4 tn in terms of revenue (+59.5% YoY), and a net profit of VND 668 bn (+73% YoY). In term of financing, the company maintains a healthy capital structure with a low debt/equity ratio all the while as it moves towards adding new plots to its landbank in Long An, Phan Thiet, and Binh Duong. This will be done in collaboration with foreign investors, such as Creed Group and Hossier. Valuation: At a current price of 26,350 VND /share, An Gia is trading at a 2019 and 2020 P/E level of 5.8x and 5.7x respectively which are lower than industry peers. Investment risks include: (1) Cyclical nature characteristics of the real estate industry, (2) Lack of clarity in legal framework (3) Developer competition (4 ) Lower pre-sales than expected (5) Possibility off tightened credit market conditions (6) Possibility of lacking additional capital for expansion. 

PNJ reported strong recovery in Q4/2019, wherein net sales and net profit achieved VND 5.321 tn (+30.9% YoY) and VND 384.8 bn (+44.8% YoY). Cumulatively, the company achieved VND 17 tn (+16.7% YoY) of net sales and VND 1.194 tn (+24.4% YoY) of net profit, accomplishing 93% and 101% of its annual targets in respective order. While the crash in Q2 caused by the ERP system brought lower-than-expected sales, a higher-than-expected GPM (20.4% actual vs. 19.0% planned) was the key driver of growth in the bottom line. For 2020, we expect PNJ to open 30 new stores and post a net sales figure of VND 18.512 tn (+8.9% YoY) and net profit of VND 1.303 tn (+9.2% YoY), equivalent to 97% of the company’s annual targets. Major assumptions include a 9.2% YoY growth in retail sales of gold jewelry and 15% growth in sales of gold bars. The shares are now trading at VND 54,900 per share, equivalent to a 2020F P/E of 10.19x – the lowest since 2017. Our new target price arrives at VND 70,000 per share (target P/E of 13.0x), representing an upside of 27.5%. The dividend yield for 2020 is 3.3% at this price. Hence, we upgrade our recommendation for PNJ to BUY from Outperform.

We lower our SOTP-based 12-month target price from VND192,800 to VND129,560 (previously VND192,800), with a target P/E of 9x for the ICT segment (previously 14x) and a target P/S of 0.3x for the grocery segment (previously 0.53x) applied to our revised 2020E earnings. Nonetheless, we reiterate our BUY rating given the 70% upside potential to our new TP. Key downside risks: possible negative growth in the mobile industry, affecting MWG’s mobile phone segment, and fierce competition in the e-commerce segment.  

We accordingly lower our 12-month TP for GAS to VND64,500 (from VND96,000) based on our lower 2020E EPS and lower target valuation multiples (lower P/E from 17x to 14.5x and lower EV/EBITDA from 10.5x to 9x), in line with regional peers. As the share price has retreated sharply by 26% over the past one week following the oil price movement, we are of the opinion that the deteriorated 2020 earnings outlook from the oil price tumble has been largely priced in. We therefore keep Market Perform rating on GAS.

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.