Company Report

After attending Sabeco’s AGM, we are downgrading our rating on SAB from OUTPERFORM to Market Perform due to several challenges that we see on the horizon, which include: (i) rising raw material prices; (ii) a potential COVID-19 resurgence; and (iii) higher SG&A spend in order to claw back lost market share. We are also lowering our 12-month target price for SAB to VND195,900/share (+15.4% upside potential) from VND214,000 - representing a total return of 17% (including a 2% dividend yield for 2021E). That said, off of the low 1H20 base, we do expect a strong recovery in 1H21E, and for all of 2021E we expect SAB to report net sales and net profit of VND34.1tn (+21.8% YoY) and VND5.7tn (+15% YoY), respectively. 

We attended the VNM 2021 AGM held on 26 April. The company set out a conservative 2021 plan, with net sales growth targeted at just 4.1% YoY (not including ASP hikes) and NPAT being flat YoY. We are downgrading our rating on the shares of VNM from Outperform to Market Perform, and lowering our 12-month target price to VND109,000/share (from VND121,000), based on P/E and DCF methodologies – as we trim our 2021E sales and NPAT by 1% and 1.3%, respectively, on the back of the weaker-than-expected 1Q21 results (net sales and NPAT decreases of 6.4% YoY and 6.5% YoY). Our new TP implies upside potential of 13.5%. Strong raw material input increases are also key contributing factors leading to their discouraging plan. Management did explain that the weak demand was the result of complications from the COVID-19 pandemic situation. Given that we expect very low earnings growth in 2021 with a modest growth outlook in the coming years, VNM is now lagging the growth expected at other listed companies. 

We attended PVS’AM held on 20th April. Based on 1Q 2021 prelim results and management discussion on PVS’ outlook, we maintain our forecast for the company as mentioned in our last report, with 2021 revenue and PBT estimated at VND 16 tn (-19.1% YoY) and VND 1 tn (-2.2% YoY), respectively. Our assumptions are predicated on a Brent oil price of USD 60/bbl (+37% YoY). YTD average Brent oil prices have hovered around USD 61.30/bbl. Thus, as our 2021F PBT estimate remains flat YoY, our 1Y TP remains VND 24,500/share and we reiterate our OP rating on the shares based on our stable oil price assumption of USD 60/bbl beyond 2021F. Please note that the 2020 dividend is expected at 10% of par, translating to a 4.8% dividend yield.

After attending the STB AGM on the 23rd of April, we have decided to upgrade our rating on the shares of STB to Outperform, along with our 1Y target price of VND 26,949/share (previously VND 24,300) - representing 20% potential upside. We came away from the meeting quite positive on STB’s pace of legacy asset debt settlement. The Chairman is confident that STB will clear all debt-challenged assets in 2022, which is three years ahead of the STB restructuring plan, and a year ahead of what the Chairman had initially anticipated at last year’s AGM. Meanwhile, the core business remains stable, with limited stress on asset quality (NPLs at 1.7%; restructured loans under Cir 01 amounting to 0.2%) and decent 2021E bottom line growth (+20% YoY). The worst looks to be behind STB, and the settlement of its underwater legacy assets has been moving in the right direction. 

The stock market has benefitted from the low-rate environment, and it is not surprising that brokerage companies are readily taking advantage of this market. For 2021, HCM targets a 68% YoY and 82% YoY respective growth in total revenue and PBT. This should be driven by all income streams, including brokerage fees (+67% YoY), margin lending (+77% YoY), prop trade (+53% YoY), and investment banking (112% YoY). 1Q 2021 business results were stunning, with PBT reaching VND 402 bn – increasing +219% YoY and fulfilling 33% of its annual plan. At VND 30,000 per share, HCM is trades at a 2021P P/E and P/B ratios of 15.0x and 1.96x, respectively. The 2021P dividend yield is 6.3%. Currently, we do not have a rating for this stock. 

STK held the AGM today with highlights being the positive results in Q1 2021 and the approval of the Unitex factory and its financing plan. The new factory will benefit the company tremendously in the long-term, where STK can expand sales by 50% from the period 2023-2024 onwards. In the short-term, we keep our estimates for STK that in 2021, net sales and net profit will reach VND 2.39 tn (+35.2% YoY) and VND 250 bn (+74.5% YoY). For 2022, we expect net sales of VND 2.6 tn (+8.7% YoY) and net profit of VND 295 bn (+17.9% YoY). At the current price of VND 33,800/share, STK is trading at 2021 and 2022 P/E of 9.2x and 7.8x. We derive our 1Y TP for STK of VND 34,800/share (+3% upside), using an unchanged target P/E of 9x. We downgrade STK from Outperform to Market perform, as the stock price has increased by 15% since our last call.

Given the weak demand from gas-fired plants in 1Q21, we trim our full-year forecast for dry-gas volume from 9.4bcm to 9.1bcm in 2021E. In contrast, we raise our assumption for fuel-oil prices from USD300/ton to USD330/ton (presently at USD361/ton). Accordingly, we fine-tune down our 2021E net profit by 3%. Our forecasts reveal 18.4% y-y top-line growth and 20.9% y-y growth in NPAT for GAS in 2021E. We trim our 12-month target price for GAS to VND97,500/share (from VND98,000/share), based on an unchanged 2021E PER of 19x, EV/EBITDA of 11x and DCF approach. Our TP implies 12% upside potential from the current market price. We reiterate our Outperform rating on the shares of GAS.

BMP recently announced its 1Q21 earnings, which declined 18% YoY due to higher plastic resin input prices. For 2021, the company has set a flat net profit target of VND 523 bn. However, our net profit forecast is more conservative than the Company’s, as we envisage VND 418 bn or a 20% YoY decline due to soaring input costs. BMP is currently trading at 2021 P/E of 12x. We rate the shares of BMP as Market Perform, with a 1-year target of VND 55,300/share based on a target P/E of 11x. Despite the expected drop in 2021 earnings, the cash dividend yield of 8% can help to support the share price. 

TPB reported respectable 2020 earnings results, with TOI and PBT amounting to VND 10.4 tn (+22.4% YoY) and VND 4.5 tn (at +13.5% YoY), respectively. This was driven by strong credit growth (+30.4% YoY) and NIM improvement (+16 bps YoY). We forecast TPB to achieve a 2021 PBT of VND 5.5 tn, increasing +24.7% YoY due to robust growth in both net interest income and bancassurance. With strong business results recorded in 2020 and ROE improvement expected to continue beyond 2021, we raise our 1Y share price target to VND 32,000 (from VND 28,200) – representing 10% upside potential. We reiterate our OUTPERFORM rating on the shares of TPB. 

We recently attended DGW’s AGM and we came away substantially more bullish on the shares. Although management set a very conservative 2021 net income growth target of just 19% YoY (despite the 1Q21 +113% YoY earnings increase), we are raising our 2021 earnings forecast 25% to VND 391 bn (+54% YoY). For 2022, we estimate net income will increase another 31%. With a further market share gain by Xiaomi, long term potential from implementation of 5G, and positive market sentiment in terms of the stock option, we rerate our target P/E from 11x to 14x. By using revised 2021-2022 estimates and a re-rated P/E of 14x (from 11x), we derive a new target price at VND 139,000, equivalent to a ROI of 14% (inclusive of a dividend yield of 0.8%). We call for OUTPERFORMANCE rating. Risks to our call include DGW’s over-reliance on Xiaomi and short term profit taking pressure.

After taking a big hit to its bottom line in 2020 due to the acquisition of VCM, MSN’s outlook appears to be significantly improved. For 2021, the group targets between VND92-102tn in revenue (+19-32% YoY) and NPAT of VND2.5-4tn (+103-225 % YoY). We believe that MSN can end up scoring somewhere in the mid-point. We anticipate MCH and TCB to continue to post impressive growth; with VCM’s restructuring exhibiting positive initial results (2020 sales growth of 15%, despite more than 700 store closures). MML’s feed business is expected to rebound while achieving strong growth in meat + farm. MSR should also a benefit from strong rallies in metal prices. As such, we look for the group to post VND97bn in revenue (+25.8% YoY) and VND3.79tn (+207% YoY) in NPATMI, respectively. Of note, in order to finance its acquisition of VCM and TCX, MSN aggressively added leverage to the tune of VND54tn in net debt (+140% YoY) at end-2020. As such, deleveraging progress will be a key focus going forward. According to a corporate release, SK Group will invest USD410mn to acquire a 16.26% stake in VCM. The transaction thus values VCM at USD2.5bn. Prior to the transaction, MSN held an 80.1% economic interest in VCM and would sell a 10% stake in VCM to SK in this deal and receive USD225mn in cash proceeds (SK Group would purchase the remaining 6.3% from a 3rd party). We view this transaction as a positive move for the group as it would help to reduce some debt for the group. At VND93,000/share, MSN shares are trading at a respective 2021E P/E and EV/EBITDA of 28.9x and 12.1x. Our new 12-month target price of VND104,000/share is based on the SOTP method. As our new target price offers 12% upside from the current market price, we maintain our Market Perform rating on the shares of MSN.