Company Report

DRC’s share price has recently declined due to negative market sentiment due to the resurgence of COVID-19 in the Southern region of Vietnam. We believe that the recent wave of the pandemic may not affect Danang (where DRC’s factory is located) as people from the South are restricted from travelling to other provinces since early of July. In May 2021, the US announced to impose countervailing duty (6.23% - 7.89%) and antidumping tax (22.3%) on some light truck tires producers in Vietnam. This raised a concern that the US may impose antidumping tax on DRC in the future. In our view, DRC’s selling price is quite high compared with other exporters, so it may not be subject to antidumping tax. At VND 28,300 per share, the shares of DRC are trading at a P/E and EV/EBIBTDA of 9.8x and 5.2x, respectively, and we believe that 2021 earnings growth is now been priced in. Meanwhile, 2022 P/E and EV/EBITDA metrics remain attractive at 8.5x and 4.2x, respectively. By applying our unchanged target P/E and EV/EBIBTDA of 10x and 5x to 2022 metrics, respectively, we increase our target price to VND 33,400 (from our previous TP of VND 27,900). With an upside potential of 17% from the current share price (including the 5% dividend yield), we upgrade our call to OUTPERFORM rating. 

Gemalink port is due to become profitable in its first year of operation, which is in line with our expectation. On the other hand, GMD’s Haiphong area ports are recovering well, and have exceeded our expectation. Both Gemalink and Nam Dinh Vu port are expected to run at full capacity since 2H, which will fuel growth for GMD. We estimate 2021 PBT of VND 762 bn (+49%) and 2022 PBT of VND 1.1 tn (+39%), representing an 11% and 25% increase over our previous forecasts, respectively. We arrive at our new 1Y TP of VND 50,300/share (21% higher than previous TP), implying 13% upside in the shares of GMD. We recommend OUTPERFORM rating on the shares of GMD as the company is among main beneficiaries of the growing trend of Vietnamese trades activities in the next few years.

HAH represents a good investment into Vietnam logistics sector, with integrated business model (port-shipping-warehousing-logistics) and good management capability. The shipping segment has been the main growth driver for HAH in recent years. The company has largest container vessel fleet in Vietnam, invested with low capex during the trough of the shipping industry cycle, and are well positioned to benefit from the upswing of the industry and the increasing demand of container shipping in domestic market. 2021 and 2022 core PBT growth are estimated at 54% YoY and 35% YoY, driven by capacity expansion of the shipping segment volume and higher freight rates in favourable market conditions. Over the short term, rising oil prices remain the largest risk for HAH, however, we believe that higher freight rates and strong volume growth could keep HAH on a growth trajectory despite the margin squeeze. Looking forward, the container shipping industry is facing a key risk of downward pricing as port congestion starts to ease and further exacerbated by additional capacity since 2023. However, this downside is not significant in domestic market as freight rates have increased at a much lower pace. We recommend a BUY rating on the shares of HAH with a 1Y TP of VND 43,800/share, implying 36.4% upside, resting our call on the company’s strong financial position, good management capability, solid integrated business model and good growth prospects in the next 2 years.  

The first gas extraction from Su Tu Trang (White Lion) field phase 2A (located in Block 15.1) was achieved on 18 June 2021. The 2A phase of Su Tu Trang field includes three wells, with total natural gas reserves of 5.5 bcm and 63 mn bbls of condensate slated for extraction between 2021-2025. Recall that oil & gas exploration contract of Block 15.1 was signed by PetroVietnam, PVEP, Perenco, KNOC, SK, and Geopetrol, and operated by Cuu Long JOC. Gas from Su Tu Trang phase 2, Sao Vang, Dai Nguyet, Thien Ung, Dai Hung fields are designed to flow through Nam Con Son 2 phase 2 pipeline, and combined should fill pipeline capacity of 7 bcm per annum. The Su Tu Trang phase 2B is expected to come on line in 2024 at the earliest with annual volume of 2bcm within 10 years. We raise our fuel oil assumption from USD 330/ton to USD 360/ton for the 2021-2022 period. However, due to weaker than expected demand from power plants, we trim our gas volume estimate from 9.1 bcm to 8.9 bcm for 2021. For 2022, we factor in a new gas source from Su Tu Trang phase 2A into our estimate, and expect demand from power plants to recover. We also expect demand from industrial users to grow strongly in 2022 due to the quick development of new industrial parks in southern Vietnam. Accordingly, we estimate NPATMI growth of 18.3% for 2021 and 19.2% for 2022. We raise our 1-year TP on the shares of GAS from VND 97,500/share to VND105,000/share, which is predicated on our unchanged P/E target of 19x and roll our forecast forward to mid-2022. We reiterate Outperform rating in the shares of GAS given our expected total return of 13%. The key downside risks to our call would be lower dry-gas volumes, lower fuel-oil prices, and unpredictable one-off expenses.

We maintain our Market Perform rating on the shares of MSB on the back of our 1Y target price increase of 25.1% to VND 29,400/share, which implies 7.7% upside. Provided MSB can dispose of at least 50% of FCCOM for VND 1 tn or more, which doesn’t appear to be a stretch, our 1Y target price could increase further. Post-strong 1Q21 earnings results, we raise our PBT forecast +10.3% for MSB 2021F to VND 3.86 tn (+53% YoY). During the quarter, PBT amounted to VND 1.2 tn (+296% YoY), fulfilling 35% of 2021F full-year guidance (VND 3.3 tn). Excluding one-off income of VND 200 bn from an equity divestment, MSB’s core business rocketed +227% YoY driven by solid net interest income (NII) growth (+58.8% YoY), non-interest income growth (+20.4% YoY) and the sharp fall in CIR. Further, MSB now sits atop the Top 3 for credit growth over the past three years, and we see no change in its growth trajectory. MSB has also cleared its VAMC bonds last year, enabling long-term credit costs to be in a downtrend. 

We fine-tune our estimate for HT1 2021 sales volume at from 7.0 mn to 7.1 mn tons, an increase of 6.5% YoY. However, we slightly lower our ASP forecast 0.6% to VND 1.1 mn/ton (-2% YoY). Accordingly, we revenue and PBT is fine-tuned for 2021 at VND 8.3 tn (+4.1% YoY) and VND 750 bn (-2.3% YoY), respectively. For 2022, we expect PBT to recover 9.3% YoY to VND 819 bn on the back of organic sales volume growth of 4%, as well as a slight rebound in cement pricing and lower interest expense. At VND 15,800 per share, HT1 trades at 2021 and 2022 PE of 11.6x and 10.5x, respectively. We maintain a Market Perform rating on the shares with 1-year target price of VND 16,400/share based on a target P/E and EV/EBITDA of 10x and 5x, respectively. 

Our 2021 DXG estimates are VND 7.5 trillion (+158% YoY) for revenue and VND 1.3 trillion for NPATMI (vs. the loss of -VND 496 bn in FY2020) with major revenue streams from Gem Skyworld and Opal Boulevard; and brokerage and secondary investments. For 2022, we expect that Gem Skyworld, Opal Boulevard and St Moritz will be key performance drivers given the full unit handovers, while the brokerage segment maintains its stable growth. Our 2022 estimates are VND 8 trillion (+6.6% YoY) for revenue and VND 1.6 trillion (+18.7% YoY) for NPATMI. At VND 27,800/share, DXG trades at a 2021 P/E and P/B of 11.1x and 1.9x respectively, and a 2022 P/E and P/B of 9.4x and 1.6x – pre-share issuances. Our target price is VND 32,300/share, which represents 16% upside affirming our OUTPERFORM rating on the shares of DXG. The key upside surprise to our call  is faster-than-expected legal approvals for projects in HCMC, and better-than-expected performance of DXS shares upon listing, which may potentially trigger upside catalyst for DXG stocks. On the other hand, a key downside risk would be longer-than-expected legal approvals for upcoming projects, which may cause launch delays. 

We reiterate our Outperform rating for Nam Long Group (NLG) and raise our target price 23% to VND 47,000/share using RNAV valuation method (+17% potential upside), given the strength in forecasted earnings coming from higher average sales prices of the Mizuki Park project, as well as due to the changes made in effective ownership and valuation (Waterfront- Izumi City) from 35% to 65%. Our valuation also reflects the favorable real estate market conditions which should benefit NLG’s large land bank with cleared land plots, and project pipeline. In addition, we also believe that a 60 mn share private placement plan (equivalent to 20% of total outstanding shares) should act as a catalyst for the shares, as this will provide the additional financial resources for NLG’s expansion. 

Meanwhile, revenue in Q1/ 2021 dropped to VND 236 bn (- 43.3% YoY), but the profit after tax increase to VND 365 billion (+ 231% YoY) thank to other income booking.  In which, the real estate business was negligible, with revenue of just VND 43.9 bn (- 69.4% year on year) as 22 low rise units were handed over from completed projects in Ho Chi Minh City. Revenue from other segments (including consulting services, construction, office leasing, and project transfer) amounted to VND 192 bn (-39% YoY). Also, NLG recorded a profit of VND 429 bn (compared to only VND 11.4 bn in Q1 / 2020), arising from the non-cash valuation of the Waterfront project in Dong Nai. For 2021, we expect NLG revenue/ NPATMI to remain unchanged due to the handover backlog of the Akari and Waterpoint projects. This represents VND 4.19 tn of revenue (+ 89% YoY) and VND 1.1 tn of NPAT-MI (+ 28% YoY). NLG trades at a 2021F P/E of 10.6x and P/B of 1.6x. 

SHB announced strong 1Q21 earnings, with TOI and PBT respectively delivering VND 2.6 tn (+38% YoY) and VND 1.7 tn (at +113.5% YoY). PBT fulfilled 28.6% of 2021 full-year guidance (VND 5.83 tn). SHB fulfilled 28.6% of 2021 full-year PBT guidance – driven by strong NII growth (+32% YoY), non-interest income growth (+98% YoY), and a sharp decline in CIR to just 34.9% from 58% in 1Q20.We forecast SHB to achieve VND 6.06 tn in pretax profit (+85.5% YoY, completing 104% of the AGM plan) for 2021. For 2022, PBT is expected to reach 7.4 tn (+22.6% YoY). The burden of bad debt is gradually lightening and the strong growth of equity helps SHB able to accelerate in terms of operating scale and profit, the ROE has been improved to 15-16% (from 10-13% of previous years). We adjust our target P/B ratio to 1.6x from 1.4x and using the average BVPS of 2021F and 2022F, our 1Y target price is VND 25,050/share, implying a -19% downside from the current market price, so we downgrade our recommendation from MARKET PERFORM to UNDERPERFORM for SHB.