Company Report

On the back of a -9% YOY decline in 1H ’20 VCGM price – where we do not envision a recovery until mid-2021 when the COVID-19 pandemic is contained; and a downward-revised PPA price for PPC’s associate - Hai Phong Thermal Plant (HND) in 2021 which will negatively impact overall earnings and the company’s dividend; we revise downward our earnings forecast for 2020 by 3% and remain weak outlook for 2021. As such, we are forced to cut our price target by 5% to VND 26,000 – which presents investors with a meager 5% upside. The questionable dividend yield of 8% in FY20 causes us to maintain our Market Perform recommendation. Furthermore, by looking forward to FY21, we expect a lower dividend yield of 6% due to saving up cash for Pha Lai 3 coal-fired plant’s capex purposes. Pha Lai 3 is being debated & approved to add into the Power Development Plant VIII (construction pipeline: kick off from 2022-2023 and finish in 2027-2028).

We are revising down our 2020 forecast for VEA by 2%, which corresponds to a slower recovery in the motorcycle market than we had previously thought for Q2. In Q2 alone, Honda Vietnam published a 30% decline in retail sales volume. there is no pent-up demand as expected. Our revised 2020 EPS forecast includes weaker YoY JVs’ NPAT (-13.4% YoY) due to a -10% YoY contraction in Honda motorcycle volume – much of which will be reflected in Q2. Reflective of our anticipated decline in earnings, we are also cutting our price target by 6.0% to VND 45,500 per share. Lending support to the shares is VEA’s attractive dividend of VND 5,252 per share (~12% dividend yield along with being listed on the HNX or HOSE in the coming time. Maintaining a Market Perform rating; lowering TP 6.0% to VND 45,500.

Our current estimates for SAB are VND 27.96 tn (-26% YoY) in net sales and VND 4.25 tn (-21% YoY) in NPAT in 2020, which is a more generous outlook than the Company itself - implying 26% higher net sales and 31% higher net income vs. SAB’s plan. For 2021, we forecast net revenue of VND 35.1 tn (+25.6% YoY) and net income of VND 5.01 tn (+17.9% YoY), which means the pre-Covid level.   However, our forecasts are under review.because the demand after the social distancing period has recovered better than our expectation.  Our rating on the stock is Market Perform.  

We recently attended PLX ‘s online 2020 AGM. The Company set the PBT target for 2020 at VND 1.57 tn, which drops by -72% YoY. We think that the guidance justifiable given the significant impact of the Covid-19 epidemic on fuel demand, and the severe plunge in the oil price in the first half of the year. However, it is noteworthy that the guidance implied improving PBT in the last 3 quarter of 2020 at VND 3.27 tn, which drops by a lower rate of 20% YoY. If Covid-19 does not come back to Vietnam and the oil price stabilizes in the coming time, we believe the Company’s earnings can recover positively in 2021. At the current price, PLX is trading at a P/E for 2020 and 2021 of 43x and 16x. We will update to full estimates and valuation after the company releases its official financial reports for 2Q20.

We maintain our Market Perform rating on MSN: At the current market price, MSN shares trade at a 2020E P/E of 71.1x and EV/EBITDA of 9.2x, respectively. We maintain our Market Perform view on MSN, with a 12-month target price of VND64,900/share before dilution, or VND59,000/share after dilution should we take the private placement plan into account, though we would also have to evaluate the impact of the above-mentioned M&A deal. Downside risk: lower-than-expected domestic demand for packaged foods and meat products; upside risk: higher-than-expected VCM revenue growth. 

The previous lockdown order in Vietnam coupled by unrecovered demand by way of pandemic-related lower income brought VEA profit down. Moreover, VEA is going to make a provision for uncollectible loans. Therefore, VEA might experience a contraction in consolidated profit for Q2. We consider reviewing our forecast after its 1H financial statement is announced. Until then, we maintain our previous forecast for VEA. Net sales is forecasted to come in at VND 4.508 tn (+0.3% YoY) and VND 4.811 tn (+6.7% YoY) in 2020 and 2021. Net income reached VND 6.633 tn (-9.4% YoY) in 2020 and VND 7.157 tn (+7.9% YoY) in 2021. We continue to provide a Market Perform rating for the stock, with a 1 year TP of VND 48,300 (+11% upside in capital again and +23% in total return including 12% dividend yield), and we reiterate our buy-the-dip recommendation. 

Target for 2020 is set and approved at conservative level: total revenue is planned at VND 11.3 trillion, -38% YoY, and PBT is planned at VND 2 trillion, -80% YoY. 2Q2020 might see core loss of VND 400 bn (excluding the financial income), with about VND 120 bn loss in June. Long Thanh Airport project’s feasibility study is still under review process and not approved yet. Downgrade to OUTPERFORM rating which tracks our EPS downgrade. We do maintain our 1Y target price at VND 68,600/share, however. ACV still remains a great play on the long-term growth in Vietnam’s tourism sector.

2020 consolidated revenue is planned at VND 6.2 trillion, -23% YoY, and pretax profit is conservatively planned to decline by -45.8% YoY. 1H2020 PBT is estimated at VND 350 bn, -33% YoY, due to lower demand for petroleum products and lower volume from BSR.  The company’s CAPEX plan for 2020 is rather aggressive, at about $300 million USD, with a debt/ equity ratio of 2.3x. This consists of about 4 new vessels at the parent company, and 8 new vessels at subsidiaries. Besides investing in used vessels, PVT is also considering investing in some brand new vessels through BCC collaboration contracts with international partners, as new vessels will have more suitable specifications for newer market situation (like low-sulfur-fuel compatible…). PVT is also in the midst of an investment cycle (2018-2020) which suggests a much longer plank to become profitable. Case in point, PVT’s capex plan for 2020 is and aggressive $300 million USD, as the company aims to rejuvenate and expand its fleet in order to more effectively compete internationally. Coupled with weaker global oil demand, both factors have weighed substantially on PVT’s share price performance of late. 

In 2020, we expect handling volume of GMD ports to be flat at 1.7 million TEU in total, though revenue and profit from this segment might be contracted due to high competition. We also assume Gemalink will operate in the last 2 months of 2020 and make a small loss with expected utility of 10% capacity. We estimate GMD net sales and PBT to reach VND 2,372 bn (-10% YoY) and VND 537 bn (-24%) in 2020, translating to 1,273 VND (-20%) in EPS. Looking forward into 2021, we assume Gemalink might fulfill 50% its capacity in 2021, lower than the management expectation (60% capacity). At this level, Gemalink might make sizeable loss and drag down consolidated results of GMD to VND 567bn (+5% YoY) in PBT, estimated EPS is 1,345 VND in 2021. Combining 3 valuation methods including DCF, and PE and PB multiples, we arrive at target price of VND 22,300/share at the end of 2021. With 18% upside, we rate the stock OUTPERFORM.

No organic growth officially guided by VNM for 2020; we disagree: At the 2020 AGM, VNM set a revenue and earnings target of VND 59.6 tn (+5.7% YoY) and VND 10.69 tn (+1% YoY), respectively. The plan included GTN Foods (GTN: HOSE), which is starting to become consolidated to VNM from the beginning of 2020; excluding GTN, organic growth for VNM sales and net profit will be flat YoY. This is quite a conservative plan, in our view, especially when taking H1 results into account. As such, we maintain our current estimate of VND 61.5 tn in revenue (+9.1% YoY) and VND 11.35 tn in net profit (+7.6% YoY) for 2020. Positive Q2 results: Management disclosed that its interim H1 2020 results had sales advancing by 7% YoY, totaling VND 29.73 tn. Meanwhile, net profit slightly rose 3% YoY, reaching VND 5.87 tn. For Q2 2020 alone, net sales and net profit grew 6.7% YoY and 6.6% YoY. We reiterate our Outperform rating for VNM with a new 1-year target price at VND 135,000/share (from VND 116,000) based on our forward H2 2020 - H1 2021 EPS estimates and a target P/E of 23x (27% discount compared to peers), combined with the DCF method. 

At the current price of VND 19,400 per share, DRC is trading at a 2020 PE and EV/EBITDA of 11.3x and 4.4x. Nevertheless, considering 2021 strong growth on the back of fully depreciated radial I factory, the stock is traded at 2021 PE and EV/EBITDA of 7.5x and 3.86x. With a target PE and EV/EBITDA of 9x and 4.5x on average 2020-2021 financials, we derive a 1-year target price at VND 21,800 per share (including a dividend yield of 7.7%), offering a total return of 12% from the current price. We hence maintain our MARKET PERFORM rating. 2019 bonus and welfare fund is approved at 9% of 2019 net income, while the cash dividend was decided to be at 15% on par value (7.7% dividend yield).

We recently attended the BMP 2020 AGM, where the Company set an encouraging target for 2020 revenue and net profit to increase by 5% and 10%, respectively. We are even more optimistic on BMP earnings prospects than management as our resin input price assumptions are predicated on the current realities of the market versus substantially the higher pre-COVID-19 assumptions of BMP. As such, we maintain our net profit forecast of VND 523 bn (+23.6% YoY), which exceeds the Company’s annual guidance (VND 465 bn) by 12.4%. In fact, net profit up to 5M20 this year has shown a positive bump of 18% YoY, and surpassing the earlier guidance on a Jan-May comparative basis by +15%. At the current price, BMP is trading at 2020 PE forward of 8.5x, which is quite fair in our view. However, strong net profit growth 2020 on the back of low input costs can still support the stock price in the short term. 

Given PVD’s updates on the PV Drilling rig workload, our expected JU-rig’s utilization rate decline to 73% in 2020 (vs. our previous estimate of 91% and the 2019 rate of 90%). We revise down our 2020 forecasts for PVD, where revenue and NPATMI equate to VND 5.05 bn (+15.6% YoY) and VND 54 bn (-70.5% YoY) - lower than our previous estimates of 7.0% and 58.4%, respectively. At the price of VND 10,450/share, PVD is trading at a 2020 P/B and an EV/EBITDA of 0.32x and 7.9x. We therefore maintain our MARKET PERFORM rating for the stock but lower our 1-year target price to VND 11,300 per share (vs. our previous target price of VND 12,700 per share, because of new changes in earnings results).

AAA reported 1Q20 net profit of VND 63 bn, flattish when compared to the previous quarter - although declining significantly by -72% YoY due to the absence of new industrial park sales. We expect AAA’s consolidated revenue and net profit in 2020 to reach VND 7.49 tn (-19% YoY) and VND 451 bn (-10% YoY), respectively. Although the 2020 EPS is expected to drop by 36% YoY due to the dilution affect from the upcoming conversion of APH’s warrant, AAA net profit and EPS can recover by 7.6% in 2021 thanks to the interest expense saving from the new share issuance. We maintain our Outperform rating for the stock, with a target price of VND 15,100/share. The recovery in the company’s earnings on the back of the industrial park lease, attractive PE forward of 7.0x and 6.5x for 2020 and 2021 respectively, along with a cash dividend yield of 8%, can be a supportive catalyst for the stock price going forward.