Company Report

Sales and PBT targets for the year are projected to be VND 8.4 tn (+9.4% YoY) and VND 1.1 tn (-28.7% YoY). PBT of soymilk and sugar are expected to settle at VND 1 tn (-20.6% YoY) and VND 20 bn (-78.5% YoY). Refined sugar (RS) volume is estimated at 80,000 tons, declining by -44% YoY but still slightly higher than the previous management’s estimate of 70,000 tons. Low profit targets are no surprise, as is traditionally the case with QNS conservatively estimating its annual performance. Indeed, we have observed often QNS setting up an extremely low PAT target (2018 target: VND 194 bn and actual: VND 1.24 tn; 2019 target: VND 199 bn and actual: VND 1.292 tn). While this year their profit targets became more pragmatic, they are still quite conservative nonetheless. The cash dividend for 2019 has been raised to 30% on par (the AGM 2019 plan having been 15% at least), of which 15% on par has already been paid and the remaining 15% which will be paid on May 8th, 2020 (record date: April 17th, 2020). The payout ratio for 2019 is equivalent to 68%. No stock dividend is issued this year, which is different from the company’s tradition of a 20-30% stock dividend each year for the last six years. No ESOP plan in 2020.

QNS shares are now trading at the price of VND 23,200 per share, equivalent to a 2020 P/E in our base case of 5.73x. We consider this to be rather attractive in our view, especially given the more clarified outlook for the sugar segment, backed by the Company’s strong financial position with a relatively sizable mountain of cash on hand (net cash of VND 1.2 tn as of the end of 2019). With our target P/E being revised down to 8.0x (formerly 9.0x) in response to a recent fall in market-wide valuation, accompanied with a -15% discount for: (1) being listed on UPCOM, (2) difficulties of the sugar segment in recent years and (3) ESOP history, our target price for QNS shares arrives at VND 27,500 per share, equivalent to an upside of 18.5%. We reiterate our OUTPERFORM rating for the shares. 

An Gia Investment (AGG) listed its 75mil shares on HOSE on 9 January.   AGG was established in 2008 as a private company specializing in providing brokerage and real estate services. Since 2014, the company has expanded into the real estate development sphere, and has become an active developer in mid-end segment primarily located in HCMC.  AGG’s products are highly favored by the middle-affluent class. In our opinion, AGG’s business model is agile, able to adapt to changes and evolutions in the competitive matrix of the real estate market. Outlook: Revenue earned from residential project handover is An Gia’s core business. Most projects launched by An Gia have been well-favored by its customers, with an average absorption rate of 80-90% after just 3 months. Currently, An Gia is executing some mid-end residential projects in HCMC and nearby provinces, such as: The Song project (1 ha) in Vung Tau, the New Tech (VND 1.3 ha) and the West Water Gate  (3.1 ha) In District 7, as well as two large potential projects ( D7 and BC  27, with a total site area ~ 32.4 ha) which are under process for license finalization with the local government. Based on the project pipeline schedule, we estimate An Gia 2020 revenue and net profit will strongly increase compare to its low base set in 2019, achieving nearly VND 2.77 trillion (+622.7% YoY) and VND 386 bn (+16% YoY) respectively from the handover of 2 sites (River Panorama 1 & 2). With the finalization of of the Sky89 unit blocks from the Lacasa project come 2021, we expect An Gia will continue to record positive growth of more than VND 4.4 tn in terms of revenue (+59.5% YoY), and a net profit of VND 668 bn (+73% YoY). In term of financing, the company maintains a healthy capital structure with a low debt/equity ratio all the while as it moves towards adding new plots to its landbank in Long An, Phan Thiet, and Binh Duong. This will be done in collaboration with foreign investors, such as Creed Group and Hossier. Valuation: At a current price of 26,350 VND /share, An Gia is trading at a 2019 and 2020 P/E level of 5.8x and 5.7x respectively which are lower than industry peers. Investment risks include: (1) Cyclical nature characteristics of the real estate industry, (2) Lack of clarity in legal framework (3) Developer competition (4 ) Lower pre-sales than expected (5) Possibility off tightened credit market conditions (6) Possibility of lacking additional capital for expansion. 

VGC revenue and PBT ended 2019 with VND 10.116 tn and VND 970 bn respectively, both attaining encouraging growth of 15% YoY. Revenue and PBT exceeded company guidance by 9% and 2% respectively. At the current price, VGC is trading at 2020 PE forwards of 9.1x. We maintain the Outperform rating for the stock. Although business results of the company could get stung by the Covid-19 outbreak, in our base case, we believe the company can recover strongly from the second half of 2020 driven by the industrial park segment given a potential stronger foreign investment flow into Vietnam. In addition, the dividend yield of 7.8% at the current price can be a supportive catalyst for the stock.

PNJ reported strong recovery in Q4/2019, wherein net sales and net profit achieved VND 5.321 tn (+30.9% YoY) and VND 384.8 bn (+44.8% YoY). Cumulatively, the company achieved VND 17 tn (+16.7% YoY) of net sales and VND 1.194 tn (+24.4% YoY) of net profit, accomplishing 93% and 101% of its annual targets in respective order. While the crash in Q2 caused by the ERP system brought lower-than-expected sales, a higher-than-expected GPM (20.4% actual vs. 19.0% planned) was the key driver of growth in the bottom line. For 2020, we expect PNJ to open 30 new stores and post a net sales figure of VND 18.512 tn (+8.9% YoY) and net profit of VND 1.303 tn (+9.2% YoY), equivalent to 97% of the company’s annual targets. Major assumptions include a 9.2% YoY growth in retail sales of gold jewelry and 15% growth in sales of gold bars. The shares are now trading at VND 54,900 per share, equivalent to a 2020F P/E of 10.19x – the lowest since 2017. Our new target price arrives at VND 70,000 per share (target P/E of 13.0x), representing an upside of 27.5%. The dividend yield for 2020 is 3.3% at this price. Hence, we upgrade our recommendation for PNJ to BUY from Outperform.

Impacts of Covid-19: By the end of February 2020, credit growth outperformed the sector at +7% YoY compared to the cap for 11.75% YoY, much higher than the zero-growth at many peers, thanks to corporate loans in the staple consumer goods manufacturing sectors and retail mortgage loans. In our base case scenario, we assume that Covid-19 outbreak will be contained by end of 1H 2020. Demand for retail home and auto loans will gradually recovers in 2H 2020. For 2020, we forecast credit and deposit growth at 15.2% YoY and 13.7% YoY respectively, slowing down compared to 2019. Opinion: TPB has been a true pioneer in the rapidly-evolving space of digital banking deployment across Vietnam, and this trend is becoming increasingly more popular amidst Covid-19. TPB has completed cleaning-up its legacy VAMC bonds and is well-prepared for a take-up in retail banking including consumer finance and bancassurance, beside its traditional home and auto loans. 2020F PBT is estimated at VND 4.76 tn, at +23.1% YoY, highlighting the highest ROE of 25.5% across our banking coverage. TPB is trading respectively at a 2020E P/B and P/E of 1.07x and 4.73x respectively, compared to the industry average of 1.00x and 6.64x. Our 1Y target price is VND 25,800 per share, which is equivalent to an upside of 21.1% from the current price. Therefore, we maintain our OUTPERFORM rating for TPB.

Highlights. VIB posted a moderate pretax profit growth expansion of +14.2% in 4Q 2019, attaining VND 1.166 tn. This result appeared to be at odds with the sizzling earnings growth of +69.4% recorded in the first 9 months of the year. Such slower growth was mainly attributable to the fact that VIB recorded a non-recurring income VND 360 bn from its bancassurance contract with Prudential in 4Q 2018. Excluding this one-off item, growth would be +76.4% YoY and VIB would be able to continue its previous stellar growth trajectory. Credit and deposit growth tipped the scales at 34% and 46.8% YoY each, and financial ratios were improved across the board. For full year 2019, VIB recorded pretax profit of VND 4.082 tn (up by +48.8%), with universally robust growth across all income streams. Impact of Covid-19. We expect that the Covid-19 outbreak will sideline demand for home loans and auto loans in 2Q 2020. In our base case where the outbreak could be controlled by June, demand gradually recovers, and really regains its footing in 4Q 2020. Nevertheless, 2020 credit growth is forecast to be 13.2%, lower than our previous assumption of 17%. Opinion. We view VIB as an agile bank which has the largest exposure to retail lending by percentage in Vietnam. Loans to individuals accounted for more than 80% of VIB total loans, and the bank realized an impressive CAGR of +54.8% during 2016-2019. We expect growth to decelerate in 2020. Accordingly, VIB should record VND 4.85 tn in pretax profit, up by +18.8% YoY. The stock is trading at a forward P/B and P/E ratio of 0.84x and 3.6x, which is lower than the industry average of 1.07x and 7.16x. 

NT2 is currently traded at FY20 EV/EVBITDA at 4.0x (compared to the regional avg. at 7.7x). At the current market price, NT2 will likely offer an attractive FY20 dividend yield of 15% (with an expected FY20 dividend rate at 23% on par) which is quite attractive vs. regional peers avg. of 6.3%. At the end of 2020-2021 and after dividend & debts paid, net cash per share is expected at VND 780 and VND 1,073; coupled with a 2020-2021 average dividend coverage ratio at 1.1x. We reiterate a BUY recommendation, with a new target price of VND 22,000 that offers a potential upside of 29% versus the closing price as of 18-Mar-2020. We apply 40% discount to regional peers to arrive at 2020 target EV/EBITDA at 4.5x to factor in the company’s small business scale and limited capacity expansion versus regional peers. Along with attractive valuation and a high dividend yield, we see some positive catalysts from a lower gas price in the short-term; being debt-free from 2021 will render a more stable cashflow and solid future dividend payment. 

We lower our SOTP-based 12-month target price from VND192,800 to VND129,560 (previously VND192,800), with a target P/E of 9x for the ICT segment (previously 14x) and a target P/S of 0.3x for the grocery segment (previously 0.53x) applied to our revised 2020E earnings. Nonetheless, we reiterate our BUY rating given the 70% upside potential to our new TP. Key downside risks: possible negative growth in the mobile industry, affecting MWG’s mobile phone segment, and fierce competition in the e-commerce segment.  

We accordingly lower our 12-month TP for GAS to VND64,500 (from VND96,000) based on our lower 2020E EPS and lower target valuation multiples (lower P/E from 17x to 14.5x and lower EV/EBITDA from 10.5x to 9x), in line with regional peers. As the share price has retreated sharply by 26% over the past one week following the oil price movement, we are of the opinion that the deteriorated 2020 earnings outlook from the oil price tumble has been largely priced in. We therefore keep Market Perform rating on GAS.

As of 11 March, Vietnam had 38 confirmed cases of Covid-19 infection. Although it is hard to exactly quantify the impact of the epidemic, we can easily observe that the epidemic along with Decree 100 have eroded beer demand significantly. In particular, on-premise sales have been hit due to the measures to contain the virus. People have increasingly opted to stay clear of public gatherings due to concerns about the virus spreading, and the tourism sector has been hit significantly as a result. In our previous report, we initially estimated a 3% YoY decline in SAB’s sales volume in 2020 as we partially took into account a potential ‘zero-tolerance’ driving law. Combined with the current coronavirus outbreak in Vietnam, we consider the adverse effect to be even more intense due to the global spread of the virus, combined with the expectation of a decline in disposable income later. Given the current situation, we would like to provide 3 scenarios for SAB. Our assumptions are principally based on the timing of when the epidemic is stamped out in Vietnam, and that consumers gradually adapt to the new drink-driving law. At the current price of VND152,000, SAB is trading at a 2020E P/E of 22.3x and 2021 P/E of 20.4x respectively, and a 2020E and 2021E EV/EBITDAs of 12.2x and 11.2x, respectively, on our base case forecasts. Applying a premium target P/E of 27x to our 2020 EPS, thanks to its better fundamentals compared to peers, we derive a new 12-month target price of VND183,800 (from VND214,400). Our TP offers a potential upside of 21%, leading us to upgrade our rating on SAB to OUTPERFORM (from Market Perform). 

We briskly state two possible alternatives regarding the path and outcome of the Covid-19 outbreak and its impact upon the economic performance of PNJ. We expect the virus to be contained by the end of Q2/2020 for the base case, and not to be contained within 2020 for the worst case. At a glance, we consequently expect PNJ to grow its net sales/net profit by 8.9%/10.5% YoY in our base case and by 5%/-2.8% in the worst case. It should be noted that in the worst case, we expect retail sales of gold jewelry to decrease by -5% YoY, yet gold bar sales are expected to increase by 30% YoY. This mix is  likely to drive down PNJ profitability and result in a possible -2.8% drop in the bottom line. The PNJ share price has fallen sharply to as low as VND 63,800 per share, equivalent to a forward P/E of 11.92x in the base case and 13.74x in the worst case. We also have noticed a recent decline in the P/E ratio of regional peers. Thus, we reduce our target P/E accordingly to 15 (previously 16.5) in the base case and 13.5 in the worst case, and arrive at target price of VND 80,200 per share (+25.7% base-case) and VND 62,700 per share (-1.7% worst-case). We will update more details in a full report released soon.  

Highlights: Recently BVH posted its 4Q 2019 financial statements with pretax profit of VND 128 bn. For full year 2019, pretax profit attained VND 1.392 tn, which was relatively flat as compared to 2018 despite a -23% YoY drop in financial income. For 2020, we expect that BVH records VND 1.255 tn NPAT-MI, up by +15.3% YoY, with the assumption that the life and non-life insurance premium segments post a respective of 17% YoY and 11% YoY growth. We also expect the technical reserve rate to be further reduced by -5 bps. This is -18% lower than our previous estimate, given the total change in technical rate assumption of -13 bps for 2019 and 2020. The technical rate we use for 2019 is 3.37% (vs. the previous 3.45%) and for 2020 is 3.32% (also previously 3.45%). As for Covid-19, we view this situation as a positive net impact to BVH in the long-term. Opinion: The stock price of life insurance companies in Asia Pacific experienced a plunge of -20% from Jan 2019 to date in the midst of a low interest rate environment. For BVH, the fall was -34.3%. As we expect the interest rate to remain low in 2020, we revise our target P/B to 2.5x and attain a target price for BVH stock of 65,900 VND, which is equivalent to a rating of Outperform. The new target P/B ratio is lower than our previous target of 3.3x (5-year average P/B) as well as the 10 year average P/B of BVH of 2.81x, as we made a further discount for the current perplexing mismatch situation when analyzing the Company’s duration gap. Even in the worst case under our scenario analysis where the technical rate is theoretically adjusted downward 65 bps, the downside for BVH stock is limited from the current price. Meanwhile, we see more upside potential for the stock, as new business premiums are expected to outgrow assumptions of +10% YoY.

In 2019, KBC posted net sales of VND 3.25 trillion, up 29.7% YoY. Such performance was mostly in line with our forecast. Accordingly, 2020 EPS is estimated at VND 2,078 (+14.2% YoY) given higher revenue from Nam Son Hap Linh IP and Phuc Ninh UA, an industrial park and urban area that KBC fully owns. At the current price of VND 14,900/share, KBC is being traded at 2020 P/E and P/B of 7.2x and 0.67x which is relatively lower than average multiples of listed IP developers with a P/E of 9.5x and 1.2x. Our 1Y target price is VND17,400/share deriving from a combination of target P/E of 9x and P/B of 0.7x, representing a 16.8% upside compared with the current price and our rating is Market Perform over the stock. 

Our analysis may be a bit contrarian given the current jitters in global markets. Overall, at the current market price, we discover through our analysis the downside risk is actually not that much, even for our worst case (-9% downside), while the base case and best case upsides are high. In the long-term, after COVID-19 fades away into the distance, ACV is still the main beneficiary of the expanding passenger growth of Vietnam, and thus still makes for a good long-term investment. At the current market price, we think it represents a good opportunity to acquire ACV for long-term investors. Using our base-case estimates and valuation, we upgrade our rating from OUTPERFORM to BUY, with a lower 12-month target price of VND68,600/share (from VND100,500), which offers 29% potential upside. Note that our valuation has not taken into consideration income from landing area prospects.