Company Report

At the starting price in the upcoming public auction of VND 25,000/share, APH is currently trading at a 2020 P/E forward of 10x, under the assumption that the company is to accomplish its net profit target of VND 650 bn, and successfully issue 20 mn new shares as planned. We think that given their long experience in producing plastic bags along with their shift in focus to biodegradable products, APH can find itself in a good position to take advantage of the growth potential of biodegradable products in the coming time. In addition, with their strategic JV with Vinfast, the company can also benefit from the government’s plan to boost the domestic automobile industry in the coming years. 

PNJ shares are now being traded at the price of VND 60,500 per share, equivalent to a 1Y forward P/E ratio of 14.72x, higher than the median of regional peers (14.28x). We maintain our target P/E for shares at 13.0x and use 1-year forward EPS (ending June 2021) for valuation. Our target price for the share arrives at VND 53,400 per share (-11.7% downside). Hence, we downgrade our ratings for PNJ shares to SELL from Market Perform.

Taking (i) the supporting package and flat rent reversion which will reflect in lower net operating income in 2020, and (ii) increased GFA secured in the pipeline we trim our 1Y target price by -11% to VND 39,000/share. Hence, we call for an OUTPERFORM rating for the stock at present. At the current share price of VND 27,900/share, VRE is trading at an EV/EBITDA of 13.1x, which is relatively lower than the regional peer average of 17.9x. While becoming less of a risk every day as Vietnam has passed 54 consecutive days without identified cases in the community thanks to strict control measures, we still feel the need to mention the tail-risk of another wave of Covid-19 in Vietnam causing another lockdown, which we emphasize is a slim tail-risk scenario. We would also consider the mall expansion plan falling behind schedule to be a possible associated tail- risk, though we have been more cautious than the company in terms of the timing of mall openings.

Given the current market price, VTP is trading at 2020F and 2021F P/E ratios of 17.7x and 13.1x respectively, which shows that 2020 growth prospects have been reflected quite fully into the current stock price. As the stock price has advanced recently, we change our recommendation to an OUTPERFORM rating, with a new 1Y target price of VND 160,000/share (17% upside) based on a new target PE of 18x (a switch from the old target of 20x due to higher short-term-risk from the pandemic). We still prize this stock when looking at its potential for long-term growth. We believe the pandemic has sped up the consumer transition in behavior toward e-commerce, and this benefits VTP. A downside tail risk from our call comes from the risk that COVID might come back in a 2nd wave, or that a new competitor might increase pricing pressure for VTP. Currently, barrier of entry is high for international companies in this sector, as foreign ownership limit for domestic transportation firm is 49%. Also, it takes very large capital and time in order to establish a nationwide network like that of VTP. 

We revise our 2020 net sales and net income to VND 116.823 tn (+14% YoY) and VND 3.365 tn (-12% YoY). For 2021, we expect net sales and net income to rebound to VND 149.172 tn (+28% YoY) and VND 4.437 tn (+32% YoY. We maintain our view that discretionary consumption in 2H20 will be weaker YoY. Nevertheless, thanks to MWG’s well-managed liquidity position as compared with other retailers, the company will likely be able to acquire more market share in 2020, and be poised to resume strong growth in 2021 (NPAT growth at 32% YoY).

In terms of earnings, considering the bulk sales transactions that have been concluded, we raised our 2020 PAT forecasts by 12% to VND 29.2 trillion (+20% YoY). Regarding valuation, our target price is also slightly raised from VND 110,200/share to VND 113,000/share mainly due to adjustment in sales progress at its mega projects. As for industrial portfolio, we believe the firm’s potential land bank for industrial park development may also add decent value for VHM in coming periods. However, we have yet factored in such portfolio into our current calculation since it is at initial stage of acquisition. At the current price, VHM is trading at TTM P/E metrics of 9.9x which is lower than regional peer average of 11.7x. As such, we recommend to BUY the stock. The key downside risk to our rating mainly includes weaker-than-expected residential demand could also occur in the case of GDP slowdown caused by the Covid-19 outbreak. 

VCB reported its 1Q2020 earnings, with TOI reaching VND12.29tn (+4.4% YoY) and a PBT of VND5.22tn (-11.1% YoY). The difference in the top line and the bottom line was because of the surge in provision expense of +42.9% YoY. In our base case where we expect Covid-19 pandemic to not return in winter, we forecast VCB to deliver 2020 & 2021 PBT of VND22.16tn and VND26.15tn, -4.2% YoY and +18% YoY, respectively due to lower growth in TOI and a strong upsurge in credit costs. We project 2020/2021 BVPS at VND 28,059/ VND 31,886, with the assumption that VCB will successfully issue 5.88% of post-money capital at VND 65,000 per share in 2020. At the current price, VCB is trading at 2020E P/B of 3.19x and 2021E P/B of 2.80x. We lower our 12-month target price to VND 89,900 (from VND92,700) and downgrade the stock to UNDERPERFORM (from Market Perform).

The company set its FY20 targets for sales and NPAT at VND 7 tn (+20% YoY) and VND 469 bn (+25% YoY). In general, we think that it is quite aggressive given the negative impacts from Covid-19 upon the grid construction pipeline, compounded by unfavorable weather for the hydropower segment in the next 3-6 months. Management also shared that 1H20 prelim sales (+1.7% YoY) and NPAT (+6.4% YoY) fulfilled 44% and 54% of their respective targets. Although we are quite concerned about FY20 results given the unexpected nature of the Covid-19 pandemic, we believe that the company might still earn positive growth in FY21, and power through with strong double-digit growth in FY22: (1) In FY21, the grid construction sector might enjoy higher disbursement from the National Power Transmission Co. (EVNNPT) for transmission line projects on the back of Power Development Plan VIII being finalized in FY20. (2) In FY22, we estimate PC1 to achieve sales and NPAT growth at 11.2% YoY and 15.4% YoY, thanks to solid growth from the grid construction sector, coupled with full production coming online from the Lien Lap wind project.  Within our base case, we call for a  MARKET PERFORM recommendation, with a target price of VND 19,800. This offers a potential upside of 9% vs the 04-Jun-2020 closing price. As of the 04-Jun-2020 closing price at VND 18,200, PC1 P/E is traded for FY20/FY21/FY22 at 7.9x/7.6x/6.6x. Given the FY2020-2022 EPS CAGR of 9%, the current price may offer a 3Y PEG at 0.8x.

Amongst joint stock commercial banks, STB was the first to propose a planned contraction of its pretax profit target for 2020. Despite a +11.1% YoY credit growth, the bank targets VND 2.573 tn in pretax profit, down by -20% YoY. As explained by management, the decrease in the bottom line is primarily due to the support provided to corona-impacted clients. Up to May 2020, credit and deposit growth of STB in 2020 reached +4.8% YoY and +4.96% YoY. Total assets grew by +5.23% YoY. The bank has restructured VND 12 tn loans for 2,000 clients. Pretax profit reached VND 1.303 tn, which was already 51% of the annual plan. The overdue debt ratio and NPL ratio were 2.5% and 2% respectively. We maintain our view that the key to the STB investment thesis hinges upon the speed of its legacy debt resolution, which in turn depends on the legal status of its certain large assets (i.e., the wildcard). As no new progress was made, we believe it is still not the right time to purchase STB stock yet. STB is currently trading at TTM P/B and P/E metrics of 0.7x and 7.9x.

We finetuned our 2020 estimates for QNS in light of 1Q20 results and the recent post-lockdown situations. For 2020, we raise our RS sales volume forecast to 87k tons from 80k tons, and expect sales volume of soymilk to contract by -1% (previously -5%), expecting a net sales position of VND 8.186 tn (+6.6% YoY) and a PAT of VND 1.229 tn (-4.8% YoY). For 2021, we expect net sales of VND 9.924 tn (+21.2% YoY) and net profit of VND 1.448 tn (+17.8% YoY), backed by strong recovery of sugar sales, in both price (+5% YoY) and volume (+30% YoY). QNS shares are now trading at the price of VND 26,100 per share, equivalent to 2020 and 2021 P/E ratios of 6.44x and 5.46x. We maintain our target P/E of 8.0x for QNS. We apply a discount of 15% on the target price, but roll EPS over to the 2020-2021 average. Our target price for the shares thus arrives at VND 29,900 (a +15% upside). Hence, we maintain our Outperform rating for the shares. 

We maintain our BUY recommendation for TDM, with a target price of 28,100 VND/share, based on the expectation of recovering water consumption when social distancing ends. In our base case, sales volume at Di An water plant in 2020 is expected to grow by 10% YoY. TDM is also one of the companies with higher performance than the industry thanks to the lowest rate of water loss in Vietnam, at only 0.1% and investing into BWE and DNW to complete the value chain of the water industry, which will overall likely help stabilize raw water input.

At the price of VND 11,400/share, PVD is trading at a 2021 P/B ratio and an EV/EBITDA ratio of 0.35x and 4.17x for a base case scenario. This is comparatively lower than the respective regional peer ratios of 0.43x and 16.2x, and lower than the historical P/B and EV/EBITDA of 0.54x and 12.1x. Because of the uncertain workload in 2021 brought on from the risk of coronavirus affecting company operations, we set a 1-year target 2020 P/B ratio and EV/EBITDA ratio at 0.35x and 6.0x, equivalent to a 1-year target price at VND 12,700 per share for our base case scenario, equivalent to an upside of 11.4%.

At the current price, BID is trading at a 2020E P/B ratio of 2.12x and 2021E P/B ratio of 1.92x. BID is the largest bank in Vietnam, and has many advantages in the form of an optimal customer base that comes with its size. In addition, having taken the necessary actions to effect a drastic settlement of all of its VAMC bad debt in 2020, the bank is poised to fulfill its potential and create the momentum for growth in 2021 and beyond. We set a new target PBR of 2.2x (from 2.0x) on the average BVPS of 2020 and 2021, and derive a 1-year target price of VND 45,300. With upside potential of just 9.3%, we downgrade our rating on BID to MARKET PERFORM.