Company Report

VRE reported its Q3 results, which included a net revenue of VND 1.8 tn (-20.3% YoY) and a NPATMI of VND 572 bn (-20.3% YoY). The declines were largely attributed to: (1) -11.1% YoY decline in leasing revenue, due to a support package of VND 145 bn offered to selected tenants which were most impacted by Covid-19;  (2) -68.5% YoY decline in sales in inventory due to timing of unit deliveries; and  (3) -25.5% YoY decline in other revenue, as the entertainment business and operation of Condotel Da Nang was heavily impacted by the Covid-19. Our current rating is OUTPERFORM for the shares of VRE. 

Vinhomes JSC posted its results up to 9M 2020, with net sales of VND 49.4 tn (+31.2% YoY) and NPATMI of VND 16.3 tn (+6.6% YoY). The key driver for positive performance came from deliveries of the three megaprojects (Vinhomes Ocean Park, Grand Park and Smart City), Vinhomes Marina (Haiphong) and recognition of the sale of the office complex at Vinhomes Metropolis. As a result, revenue from sale of properties achieved VND 46.8 tn, increasing by 33.8% YoY. We reiterate our BUY rating on the shares of VHM.

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. 

We are upgrading the shares of PNJ to OUTPERFORM from UNDERPERFORM, as we raise our target price to VND 78,100 per share (up 36% from our previous TP) which represent upside of 13.2%.  We believe that September marked the turnaround for PNJ, with SSSG bouncing back to low-teens growth after falling into negative territory  in August. Although the retail sales growth was achieved mostly because of larger ticket size (which possibly was a result of higher gold price this year); transaction volume has recovered to flat growth during the month, according to the management, showing a good sign of demand recovery. We believe that the demand recovery occurred due to: i) PNJ’s target customer group (middle-income class) being less affected by the pandemic than expected; and (ii) PNJ’s adaptation to new market conditions and new preparedness to capture the demand recovery post-pandemic. 

VIB posted envious earnings results for 3Q 2020, with a PBT of VND 1.7 tn (+52.3% YoY) due to strength in TOI (+55.6% YoY) to both provisional expenses (+19.7% YoY) and OPEX (+23% YoY). The overdue loan ratio was showing improvement as compared to the end of June 2020 (3.8% vs. 4.6%) as credit growth recovered. However, the weak provision buffer is a real challenge for VIB. Despite VIB’s positive narrative, loss provisioning pressures is very likely over the near-term. We rate the shares of VIB as Underperform, and reiterate our target price of VND 28,800/share.

We reiterate our MARKET PERFORM rating on the shares of SHB and maintain our 1Y target price of VND 16,950 (+6.6% upside). SHB relies heavily on wholesale lending channels, and as a result is substantially more sensitive to market movements. The downtrend in interest rates should continue to act as a major supportive factor for SHB earnings, as it now has a better ability to more aggressively offset losses associated with problem assets. 

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.

By lowering our CGM price assumption, we lower our 2021 pretax earnings forecast 6% which causes us to reduce our 1Y TP to VND 23,000 on the shares of NT2. As a defensive yield play with a FY20 dividend yield of 8.7% - still more attractive than the 6-12 month deposit rate of 5.3% and 10Y government bond yield of 2.6% - we maintain a Market Perform rating on the shares of NT2. 

HPG posted preliminary 3Q20 record high revenue and net profit of VND 24,900 bn and VND 3,785 bn, respectively, achieving remarkable growth YoY rates of 62% and 110%. The net margin improved from 11.6% in 3Q19 to 15.2% in 3Q20, which is also the highest level since 4Q18 given the full utilization of the current furnace. Cumulatively, HPG’s revenue and net profit in 9M20 amounted to VND 65 tn and VND 8,845 bn, respectively, surging by 40% and 56% YoY. At the current price, HPG is trading at attractive 2020E and 2021E PE of 8x and 6.8x respectively. Given the aforementioned longer-term momentum in revenue and net profit, we are raising our 12-month price target to VND39,300/share (previously VND32,400/share before adjustment for 2019 dividend paid in Jul). As such, we also reiterate our BUY rating on the shares of HPG. 

We reiterate our Market perform rating on the shares of PVD, and keep our target price of VND 11,450/share (applying P/B of 0.35x) steady. Management appears to be navigating PVD well through this double set of headwinds of Covid-19 and low oil prices in order to achieve profit in 2020. PVD has an efficient and transparent cost structure and lower gearing than offshore drilling peers. However, the expected low E&P activities due to Covid-19 and low oil price, at least in H1 2021 will be a key risk for now. 

ASG is listed on September 24th at a reference price of VND 30,000/share, which is equivalent to a 2019 P/E of 11x. The 2019 dividend has been set at 15% on par. ASG is a way to gain exposure by proxy to the Vietnamese FDI growth megatrend over the long-term, especially as it relates to the shift in manufacturing considerations, such as smartphone manufacturing, in Vietnam. ASG owns Thai Nguyen off-airport terminal (located next to Hanoi only ~60 km away) and has a very strong relationship with Samsung - accounting for 60% of total revenue. For further growth, ASG plans to expand its business into 2 new business lines: Industrial park development and Distribution centre, with investment starting around 2021-2022. 

Given the protectionist measures expected to be implemented which should positively impact domestic sugar consumption along with the return to profitability for the biomass segment in 2021, we are increasing our share price target on the shares of QNS to VND 43,100 per share – representing 28.7% upside and an ROI of 37.6% when the dividend yield is included.   In addition, our OUTPERFORM rating on the shares is supported by: i) soymilk sales exceed industry average; ii) in 2021, both sugar and biomass segments are anticipated to benefit from a higher sugarcane yield and higher ASP troughing during the COVID-19 pandemic; iii) the completion of an enormous CAPEX plan for sugar/biomass.

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. 

DMX supermini will be able to command a higher profit margin given: 1) sales of more high-margin products (kitchenware and home appliances); 2) lower rental and staff costs; and 3) the levering of existing well-entrenched distribution hubs.   Assuming a monthly revenue per store of VND 1.1 bn, and that the company will have 1,000 stores by 2021 year end, these stores will generate VND 13,200 bn per year. As such, we estimate that MWG will be able to raise market share by ~10%. We shall closely watch the store opening speed and the monthly revenue per store of DMX supermini. Earnings are under review.